As filed with the Securities and Exchange Commission on December 1, 2004
Registration No. 333-105564
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CALIFORNIA SERVICE STATIONS, INC.
(Name of small business issuer as specified in its charter)
Delaware 5500 33-0619524
(State or Jurisdiction of Primary SIC Code (IRS Employer
incorporation or organization) Identification No.)
24351 Pasto Road, Suite B Jehu Hand, CFO
Dana Point, California 92629 24351 Pasto Road, Suite B
(949) 489-2400 Dana Point, California 92629
(949) 489-2400
(Address, including zip code, and telephone number, including area code
of Registrant's principal executive offices) (Name, address, including zip code
and telephone number, including
area code, of agent for service
Copy to:
Jehu Hand, Esq.
Hand & Hand, a professional corporation
24351 Pasto Road Suite B
Dana Point, California 92629
(949) 489-2400
Facsimile (949) 489 0034
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Share(1) Offering Price Registration Fee
Common Stock offered by
Selling Shareholders.....................1,000,000.............$...01.........$........10,000.....$......1.27
Total......................................1,000,000............................$........10,000.....$......1.27(2)
(1) Estimated solely for purposes of calculating the registration fee.
The proposed maximum offering price per share is based upon the
expected public offering price of $.01 per share pursuant to Rule
457(a). The common stock is not traded on any market and the
Registrant makes no representation hereby as to the price at which
its common stock shall trade.
(2) Filing fee of $1.27 paid with initial filing.
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.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
CALIFORNIA SERVICE STATIONS, INC.
1,000,000 Shares of Common Stock
The 1,000,000 shares of common stock of California Service Stations, Inc.,
a Delaware corporation ("California Service Stations") are offered by the
selling stockholders. The expenses of the offering, estimated at $8,000, will be
paid by California Service Stations. California Service Stations will not
receive any proceeds from the sale of shares by the selling stockholders. There
is currently no trading market for the common stock. Certain of the selling
stockholders which were promoters or affiliates of California Service Stations
are deemed underwriters. This is a blank check offering subject to Rule 419.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed on the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Purchase of these securities involves risks. See "Risk Factors" on page 3.
Offering Price (1) Sales Commissions Total to Selling Stockholders
Per share $.01 (2) $.01
Total $10,000 (2) $10,000
(1) The Offering Price of $.01 was determined by negotiations
between California Service Stations,
Inc. and Jehu Hand, the principal selling stockholder.
(2) California Service Stations will not receive any proceeds from
this offering. No person has agreed to underwrite or take down
any of the securities. For sales on any trading market, sales
commissions will be limited to those paid in similar market
transactions. For private sale transactions, no sales
commission can be paid. There is no minimum amount of
securities which may be sold.
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 there 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.
The date of this prospectus is December __, 2004.
PROSPECTUS SUMMARY
The following is intended to be a summary of the most important aspects of
our business.
California Service Stations
California Service Stations seeks to acquire at least one and if possible
up to 50 service stations in southern California. We have $383,017 cash on hand
as of September 30, 2004, which is sufficient to acquire one service station
under escrow at an estimated price of $330,000 and for $53,000 for working
capital related to that station. The station is located in West Covina,
California. We plan to fund future acquisitions from the proceeds of shareholder
loans, or from equity placements or debt financings. We have entered into
negotiations to purchase another station in West Covina, but have no other
arrangements in place for future acquisitions other than the service station
located in West Covina which is in escrow at this time. The acquisition of this
station is subject to approval of the supplier, which has not yet been obtained
as of the date of this Prospectus. Our cumulative losses through September 30,
2004 were $41,459. We have not had any operations as of the date of this
Prospectus.
Our address is 24351 Pasto Road, Suite B, Dana Point, California 92629 and
our telephone number is (949) 489-2400.
The Offering
The offering is being made by the selling stockholders, who are offering
all of the shares owned by them. Because we intend to acquire unidentified
acquisition targets; this offering is subject to Rule 419, which requires an
escrow of shares sold by the issuer as well as the sales proceeds from the sale
of such shares until such time as an acquisition is effected. California Service
Stations is not selling any securities in this offering and therefore no escrow
will be established. California Service Stations does not intend to use the
proceeds from this offering to effect any acquisition. All funds required for
the first acquisition have already been obtained.
Securities Offered: 1,000,000 shares of common stock.
Offering Price..........................$.01 per share for the duration of the offering.
Offering Period:........................Until [12 months from effective date]
Risk Factors The securities offered hereby involve a high degree of risk and immediate
substantial dilution and should not be purchased
by investors who cannot afford the loss of their entire investment.
Common Stock Outstanding (1) Before Offering:....1,250,000(1) shares
Common Stock Outstanding After Offering:.........1,250,000(1) shares
(1) Based on shares outstanding as of September 30, 2004. This is an offering by
selling stockholders only and no additional shares will be issued in connection
with the offering.
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Risk Factors
The securities offered hereby are highly speculative and very risky.
Before you buy consider the following risk factors and the rest of this
prospectus.
We have no operations.
California Service Station's activities have been limited to
organizational matters, becoming a reporting company and formulating our
business plan. Our cumulative losses since inception to June 30, 2004 are
$11,655. If we never acquire any service stations, we will not enjoy any
revenues.
Consent required to purchase branded service stations.
The acquisition of a service station is subject to the consent of the
major oil company supplier, if the service station is branded. The acquisition
of non-branded stations, known as "independent" stations, does not required the
approval of the supplier. Consent is granted based on financial wherewithal and
management experience, among other factors. If we are unable to obtain consent
of the major oil company supplier for any given station, we will only be able to
acquire independent stations.
ADDITIONAL INFORMATION
California Service Stations has filed a registration statement under
the Securities Act with respect to the securities offered hereby with the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. This prospectus,
which is a part of the registration statement, does not contain all of the
information contained in the registration statement and the exhibits and
schedules thereto, certain items of which are omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
California Service Stations and the securities offered, reference is made to the
registration statement, including all exhibits and schedules thereto, which may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates during regular business hours. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the registration statement, each
such statement being qualified in its entirety by such reference. California
Service Stations will provide, without charge upon oral or written request of
any person, a copy of any information incorporated by reference herein and any
of our Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB and
Current Reports on Form 8-K. This request should be directed to California
Service Stations at 24351 Pasto Road, Suite B, Dana Point, California 92629,
telephone (940) 489-2400.
California Service Stations is required to file reports and other
information with the Commission. All of such reports and other information may
be inspected and copied at the Commission's public reference facilities
described above. The public may obtain information on the operation of the
public reference room in Washington, D.C. by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. In addition, California Service Stations intends to make
available to its shareholders annual reports, including audited financial
statements and such other reports as California Service Stations may determine.
DETERMINATION OF OFFERING PRICE
The offering price of $.01 per share was determined by negotiation
between the principal selling stockholder, Jehu Hand, and California Service
Stations. The offering price is not based on any recognized criteria of value
such as book value or actual or projected earnings per share.
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DIVIDEND POLICY
California Service Stations has not paid any dividends on its common
stock. California Service Stations expects it will pay cash dividends to the
extent permitted by after-tax profits.
MARKET PRICE OF COMMON STOCK
Our common stock has never been traded. As of June 30, 2004, there were
approximately 120 record holders of common stock.
There are no warrants or options outstanding and no registration rights
have been granted. At the present time 1,250,000 shares are outstanding,
including 1,000,000 shares which have been registered for resale via this
prospectus. These 1,000,000 shares are eligible for resale under Rule 144,
subject to certain manner of sale and volume restrictions. California Service
Stations understands that of such 1,000,000 shares, 200,000 are held by
non-affiliates and may be sold under Rule 144(k).
PLAN OF OPERATION
We have never received revenues from operations. California Service
Stations seeks to acquire at least one and if possible up to 50 service stations
in southern California. We have $383,017 cash on hand as of September 30, 2004,
which is sufficient to acquire one service station under escrow at an estimated
price of $330,000 and for $53,000 for working capital related to that station.
The station is located in West Covina, California. This amount was loaned to
California Service Stations by an investment entity controlled by an officer and
director under an 8% convertible debenture due December 31, 2005. Our cumulative
losses through September 30, 2004 were $41,459. We have not had any operations
as of the date of this report. Service stations generally are sold at a price
equal to a multiple of earnings (2-4 times annual cash flow) plus the value of
underlying land, if any. We expect to concentrate on stations where the land is
not owned, because the acquisition cost is much less. In Southern California the
real estate underlying most stations is appraised at over $1 million.
We do not intend to acquire any station which is not profitable. Prior to
closing, we will review financial records of the business as well as leases and
other contracts. We will acquire inventory as of the closing date, including any
fuel in tanks. If the location has a liquor (beer and wine) license in
connection with a mini market, we will also be required to obtain approval for
the transfer of that license. Usually, the sale of a service station is
structured as an asset sale, so we will not assume any liabilities. If we
eventually acquire a large number of stations, it may be possible to benefit
from economies of scale or better purchasing terms for our supplies (gasoline
and diesel, groceries and automobile parts), but we do not expect there to be
any significant savings for some time. We do not expect at this time to place
the stations under one common brand or tradename.
We plan to fund future acquisitions from the proceeds of shareholder
loans, or from equity placements or debt financings. We do not have any
agreements or understandings with respect to sources of capital. We have not
identified any potential sources. Investors cannot expect that we will be able
to raise any funds whatsoever. Even if we are able to find one or more sources
of capital, it's likely that we will not be able to raise the entire amount
required initially, in which case our development time will be extended until
such full amount can be obtained. Even if we are successful in obtaining the
required funding, we probably will need to raise additional funds at the end of
12 months.
Information included in this report includes forward looking
statements, which can be identified by the use of forward-looking terminology
such as may, will, expect, anticipate, believe, estimate, or continue, or the
negative thereof or other variations thereon or comparable terminology. The
statements in "Risk Factors" and other statements and disclaimers in this
prospectus constitute cautionary statements identifying important factors,
including risks and uncertainties, relating to the forward-looking statements
that could cause actual results to differ materially from those reflected in the
forward-looking statements.
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Since we have not yet generated revenues, we are a development stage
company as that term is defined in paragraphs 8 and 9 of SFAS No. 7. Our
activities to date have been limited to seeking capital; seeking one or more
acquisitions, and development of a business plan. Our auditors have included an
explanatory paragraph in their report on our financial statements, relating to
the uncertainty of our business as a going concern, due to our lack of operating
history or current revenues, its nature as a start up business, management's
limited experience and limited funds. We do not believe that conventional
financing, such as bank loans, is available to us due to these factors. We have
no bank line of credit available to us. Management believes that it will be able
to raise the required funds for operations from one or more future offerings, in
order to affect our business plan.
Forward looking information
Our future operating results are subject to many factors, including:
O the impact of rapid and persistent fluctuations in the price of
gasoline and diesel;
O general economic conditions and conditions which affect the
market for fuel;
O our success in identifying an acquisition;
O our ability to integrate acquisitions;
O other risks which we identify in future filings with the SEC.
In some cases, you can identify forward-looking statements by terminology
such as "may," "should," "could," "predict," "potential," "continue," "expect,"
"anticipate," "future," "intend," "plan," "believe," "estimate" and similar
expressions (or the negative of such expressions). Any or all of our forward
looking statements in this annual report and in any other public statements we
make may turn out to be wrong. They can be affected by inaccurate assumptions we
might make or by known or unknown risks and uncertainties. Consequently, no
forward looking statement can be guaranteed. In addition, we undertake no
responsibility to update any forward-looking statement to reflect events or
circumstances which occur after the date of this prospectus.
BUSINESS
Background
California Service Stations, Inc., formerly known as Mendocino
Partners, Inc., is a publicly reporting Delaware corporation formed in April
1994 solely to seek for and make an acquisition. Management has decided to
acquire one or more gasoline stations in the Southern California region.
Our Intended Operations
Service stations are engaged in the retail sale of motor fuel,
merchandise, and ancillary products and services. Most stations operate small
convenience stores and offer some level of automobile repair services. Some
obtain additional income from sales of lottery tickets, propane, or other items.
We do intend to evaluate each station as it is acquired with respect to the
profitability of each of the ancillary segments. Some stations may need remodel
to improve sales performance.
We intend to acquire independent stations as well as stations
affiliated with a large oil company, referred to as "branded" locations. Branded
locations often have higher fuel sales volumes (in gallons) than non-branded
outlets due to the advertising and promotional activities of the respective oil
company, the consistency of amenities offered, store locations, and the
acceptance of such oil company's proprietary
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credit cards. The increased
customer traffic associated with higher fuel sales tends to increase merchandise
sales volumes, as well. However, branded fuel is usually more expensive than
unbranded fuel, which is bought from the spot market.
We will be required to purchase fuel for branded retail outlets from
the respective oil company that branded the outlet and for its unbranded outlets
from large integrated oil companies and independent refineries. Although our
purchases will be concentrated in a few vendors, largely due to the number of
branded outlets, management believes that the competition for retail outlets
among oil companies is such that we could find alternative supply sources if the
need to do so arose, assuming that suitable credit terms from fuel vendors can
be obtained.
During recent years, the industry has not experienced any difficulties
in obtaining sufficient quantities of motor fuel to satisfy retail sales
requirements. However, unanticipated national or international events or a
decrease in available credit from its fuel vendors could result in a curtailment
of motor fuel supplies, thereby adversely affecting motor fuel sales. In
addition, a significant portion of a station's minimarket or other sales are to
customers who also purchase motor fuel. Accordingly, reduced availability of
motor fuel could negatively impact other facets of our operations, as well.
The convenience stores included with service stations are generally
open seven days a week; offer extended hours and emphasize convenience to the
customer. Typical convenience stores sell groceries, tobacco products, take-out
foods and beverages (including beer and wine if a permit is obtained), dairy
products, pre-packaged sandwiches and fountain drinks and non-food merchandise
such as money orders, telephone calling cards, lottery tickets, health and
beauty aids, magazines.
Services and repairs are also provided at most stations, depending on
the available facilities. We will provide services on an as needed basis, in the
case of breakdowns and unforeseen problems, and for regularly scheduled periodic
maintenance or smog checks if a smog license is included. In addition to
providing services and repairs, stations typically also stock tires and commonly
needed parts.
Leverage
We might be able to benefit from the use of "leverage" in the acquisition
of one or more additional locations. Leveraging a transaction involves the
acquisition of a business through incurring significant indebtedness for a large
percentage of the purchase price for that business. Through a leveraged
transaction, we would be required to use less of its available funds for
acquiring the location and, therefore, could commit those funds to operations or
to the acquisition of other locations. The borrowing involved in a leveraged
transaction will ordinarily be secured by the assets of the location. If the
location acquired is not able to generate sufficient revenues to make payments
on the acquisition debt, the lender would be able to exercise the remedies
provided by law or by contract. These leveraging techniques, while reducing the
amount of funds that we will need to commit, may correspondingly increase the
risk of loss. No assurance can be given as to the terms or the availability of
financing for any acquisition. No assurance can be given as to the terms or the
availability of financing for any acquisition. During periods when interest
rates are relatively high, the benefits of leveraging are not as great as during
periods of lower interest rates because the investment in the locations held on
a leveraged basis will only be profitable if it generates sufficient revenues to
cover the related debt and other costs of the financing. Lenders from which we
may obtain funds for purposes of a leveraged buy-out may impose restrictions on
our future borrowing, distribution, and operating policies. It is not possible
at this time to predict the restrictions, if any, which lenders may impose or
the impact thereof on California Service Stations.
Regulation
The Company's fueling operations are subject to federal, state and
local laws and regulations concerning environmental matters. These laws and
regulations affect the storing, dispensing and discharge of petroleum and other
wastes and will affect us both in the securing of permits for its fueling
operations and in the ongoing conduct of such operations. Facilities that engage
primarily in dispensing petroleum products have in the last ten years been the
subject of close scrutiny by regulators. Although the Company
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believes that it
will maintain operating procedures satisfactory to comply with such regulations
and scrutiny, and expect to maintain environmental insurance on most of its
facilities, there can be no assurance that significant cleanup or compliance
costs may not be incurred and may affect earnings.
Service stations must comply with the requirements of local
governmental bodies concerning zoning, land use and, as discussed above,
environmental factors.
Our stations might sell alcoholic beverages in areas where such sales
are legally permitted. State and local laws generally regulate the sale of
alcoholic beverages and grant to various agencies the authority to approve,
revoke, or suspend permits and licenses relating to the sale of such beverages.
In most states, the regulatory agencies have wide-ranging discretion to
determine if a licensee or applicant is qualified to be licensed.
Sellers of alcoholic beverages have been held responsible for damages
caused by underage persons or persons who purchased alcoholic beverages from
them and who were intoxicated at the time of the purchase. Although we intend to
adopt employee training programs and strict procedures that are designed to
minimize such liability, the potential exposure as a seller of alcoholic
beverages is substantial.
Competition
Opportunities to acquire and dispose of service stations are limited by
competitive factors, available financing, and competing buyers. We expect to
located stations principally through business brokers.
Our products and merchandise will not be unique and generally can be
obtained readily from a variety of sources at competitive prices. There are many
sources of petroleum products, tires and auto parts, supplies and merchandise
for our convenience stores. Most of the products will be purchased for resale on
an as needed basis, through purchase orders.
The service station business in general and the separate aspects that
make up such business are all highly competitive. There are many service
stations throughout our intended marketing area. Many of the Company's
competitors, such as the major oil companies and National and regional
convenience store chains, are larger, better established and have greater
financial and other resources than us.
Employees; Facilities
We have no employees other than our officers. We are currently using a
limited amount of office space of an officer and director. We think our existing
office space will be adequate for the next year. One of our employees is full
time.
Legal Proceedings
California Service Stations is not a party to any pending legal
proceeding.
MANAGEMENT
Directors and Executive Officers
The members of the Board of Directors of California Service Stations
serve until the next annual meeting of stockholders, or until their successors
have been elected. The officers serve at the pleasure of the Board of Directors.
The following are the directors and executive officers of California Service
Stations. Mr. Sammarro devotes substantially full time to California Service
Stations. Mr. Hand devotes approximately ten hours per week.
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Vincent Sammarro President and Director
Jehu Hand Chief Financial Officer, Secretary and Director
Vincent Sammarro, age 35, has been President and a Director since May,
2004. He was owner of V & S Construction Co., Inc. in Westchester County, New
York from 1992 to May 2004. V & S is a general building contractor engaged in
commercial and residential construction, with an emphasis on renovation and
construction of gasoline stations. Clients included Mobile, Shell, Texaco and
Exxon. In 1994 he received an award from Mobil Oil Corporation for Total Quality
Management 1994. From 1988 to 1992 he was Project Manager for Rusal
Construction. Mr. Sammarro attended New York University and received a
bachelor's degree from SUNY Empire State College.
Jehu Hand, age 48, has been Chief Financial Officer, Secretary and
Director of California Service Stations since its inception, and was its
President from inception to May, 2004. Mr. Hand has been engaged in corporate
and securities law practice and has been a partner of the law firm of Hand &
Hand, a law corporation from 1994 to 1999, and of Hand & Hand, a professional
corporation, from June 2002 to the present. He is licensed with the California
State Bar. Hand & Hand was a sole proprietorship until it incorporated as a law
corporation in May 1994. From January 1992 to December 1992 he was the Vice
President-Corporate Counsel and Secretary of Biolase Technology, Inc., which
designs, manufactures and markets dental lasers and endodontics equipment. He
was a director of Biolase from February 1992 to February 1993. From January to
October, 1992 Mr. Hand was Of Counsel to the Law Firm of Lewis, D'Amato,
Brisbois & Bisgaard. From January 1991 to January 1992 he was a shareholder of
McKittrick, Jackson, DeMarco & Peckenpaugh, a law corporation. From January to
December 1990 he was a partner of Day, Campbell & Hand, and was an associate of
its predecessor law firm from July 1986 to December 1989. From 1984 to June 1986
Mr. Hand was an associate attorney with Schwartz, Kelm, Warren & Rubenstein in
Columbus, Ohio. Jehu Hand received a J.D. from New York University School of Law
and a B.A. from Brigham Young University. He is a licensed real estate broker
and is active as a registered principal (Series 7, 24 and 63) of SoCal
Securities, a broker-dealer and member of the National Association of Securities
Dealers, Inc. SoCal Securities will not participate in the offering and does not
make any market in securities. Mr. Hand was a director and president of Albion
Aviation, Inc. from 2000 to March 2003, and is the sole officer and director of
Russian Athena, Inc. He is also director of Worldwide Manufacturing Company USA,
Inc.
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Executive Compensation
The following table sets forth the cash and all other compensation of
California Service Station's executive officers and directors during each of the
last three fiscal years. The remuneration described in the table includes the
cost to California Service Stations of any benefits which may be furnished to
the named executive officers, including premiums for health insurance and other
benefits provided to such individual that are extended in connection with the
conduct of California Service Station's business. The executive officers named
below did not receive any manner of compensation in the years set forth below.
Vincent Sammarro receives a salary of $3000 per month under his
employment contract dated May 28, 2004. The contract is at will. He also was
issued 250,000 shares of common stock in May 2004, valued at $.01 per share.
These shares vest one third on each anniversary of the employment agreement.
..
Summary Compensation Table
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Other Annual Awards Payouts All
Principal Position Year Salary Bonus Compensation Other
RestrictedSecurities LTIP
Compensation
StockUnderlyingPayouts ($)
Awards ($)Options SARs(#)
Vincent Sammarro 2004 $3,00 0 0 0 0 0 0
CEO 2003 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
Jehu Hand 2004 $0 0 0 0 0 0 0
CFO 2003 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
California Service Stations, Inc., by resolution of its Board of
Directors and stockholders, adopted a 1994 Stock Option Plan (the "Plan") on
April 20, 1994. The Plan enables the Company to offer an incentive based
compensation system to employees, officers and directors and to employees of
companies who do business with the Company.
In the discretion of a committee comprised of non-employee directors
(the "Committee"), directors, officers, and key employees or employees of
companies with which we do business become participants in the Plan upon
receiving grants in the form of stock options or restricted stock. A total of
1,000,000 shares are authorized for issuance under the Plan, of which no shares
are issued. The Company may increase the number of shares authorized for
issuance under the Plan or may make other material modifications to the Plan
without shareholder approval. However, no amendment may change the existing
rights of any option holder.
Any shares which are subject to an award but are not used because the
terms and conditions of the award are not met, or any shares which are used by
participants to pay all or part of the purchase price of any option may again be
used for awards under the Plan. However, shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.
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Stock options may be granted as non-qualified stock options or
incentive stock options, but incentive stock options may not be granted at a
price less than 100% of the fair market value of the stock as of the date of
grant (110% as to any 10% shareholder at the time of grant); non-qualified stock
options may not be granted at a price less than 85% of fair market value of the
stock as of the date of grant. Restricted stock may not be granted under the
Plan in connection with incentive stock options.
Stock options may be exercised during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability, whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock acquired through the exercise of a stock option may be made in cash,
shares of Common Stock or by delivery or recourse promissory notes or a
combination of notes, cash and shares of the Company's common stock or a
combination thereof. Incentive stock options may only be issued to directors,
officers and employees.
Stock options may be granted under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant contains the AO feature and if a participant pays all or part of the
purchase price of the option with shares of common stock, then upon exercise of
the option the participant is granted an AO to purchase, at the fair market
value as of the date of the AO grant, the number of shares of common stock equal
to the sum of the number of whole shares used by the participant in payment of
the purchase price and the number of whole shares, if any, withheld as payment
for withholding taxes. An AO may be exercised between the date of grant and the
date of expiration, which will be the same as the date of expiration of the
option to which the AO is related.
Stock appreciation rights and/or restricted stock may be granted in
conjunction with, or may be unrelated to stock options. A stock appreciation
right entitles a participant to receive a payment, in cash or common stock or a
combination thereof, in an amount equal to the excess of the fair market value
of the stock at the time of exercise over the fair market value as of the date
of grant. Stock appreciation rights may be exercised during a period of time
fixed by the Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later. Restricted stock requires
the recipient to continue in service as an officer, director, employee or
consultant for a fixed period of time for ownership of the shares to vest. If
restricted shares or stock appreciation rights are issued in tandem with
options, the restricted stock or stock appreciation right is canceled upon
exercise of the option and the option will likewise terminate upon vesting of
the restricted shares.
PRINCIPAL SHAREHOLDERS
The following table sets forth information relating to the beneficial
ownership of Company common stock as of the date of this prospectus by (i) each
person known by California Service Stations to be the beneficial owner of more
than 5% of the outstanding shares of common stock (ii) each of California
Service Station's directors and executive officers, and (iii) the Percentage
After Offering assumes the sale of all shares offered. Unless otherwise noted
below, California Service Stations believes that all persons named in the table
have sole voting and investment power with respect to all shares of common stock
beneficially owned by them. For purposes hereof, a person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from the date hereof upon the exercise of warrants or options or the
conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any warrants, options or convertible
securities that are held by such person (but not those held by any other person)
and which are exercisable within 60 days from the date hereof, have been
exercised.
Percentage Percentage
Name and Address Common Stock Before Offering After Offering
Vincent Sammarro (1) 250,000 20.0% 20.0%
Jehu Hand(2) 800,000 64,0% --
10
24351 Pasto Road, Suite B
Dana Point, California 92629
Kimberly Peterson 93,850 7.5% --
All officers and directors
as a group (2 persons) 1,050,000 84.0% 20%
(1) The address of this person is c/o the Company.
(2) Includes 800,000 shares held by Ecco Petroleum Family Limited
Partnership which Mr. Hand controls and of which the beneficial owner
is a family irrevocable trust for the benefit of his children.
SELLING STOCKHOLDERS
The shares of common stock of California Service Stations offered by the
Selling Stockholders will be offered at $.01 per share for the duration of the
offering. It is anticipated that registered broker-dealers will be allowed the
commissions which are usual and customary in open market transactions. There are
no other arrangements or understandings with respect to the distribution of the
Common Stock. Except as noted, the Selling Stockholders do not own any Common
Stock except as registered hereby for sale and will own no shares after the
completion of the offering. The relationship, if any, between California Service
Stations and any Selling Stockholder is set forth below.
Shares Beneficially Percentage
Owned Total Shares
Name and Address and Being Offered After Offering
Jehu Hand 800,000 __
24351 Pasto Road, #B
Dana Point, California 92629
(officer and director)
Kimberly Peterson 93,850 --
24 Calle De La Luna
San Clemente, California 92673
Societe Financiere du Seujet, S.A. (1) 50,000 --
14 Quai du Seujet
Geneva, Switzerland CH-1201
Kristen Roberts 150,000 --
15871 Caltech Circle
Westminster, California 92683
Lewis V. Sykes 1,875 --
24351 Pasto Road, #B
Dana Point, CA 92629
Iwona Alami 75 --
25132 Sanoria St.
Laguna Niguel, CA 92677
Gregory D. Wilson 75 --
747 3rd Street
San Pedro, CA 90731
Ken Graham 75 --
13213 Ballestros
Chino, CA 91710
11
Sayoko Tanaka 75 --
26572 Briarwood Lane
San Juan Capistrano, CA 92675
Ten Foot Line(2) 75 --
1002 California St., #A
Huntington Beach, CA 92648
Michael Rovere(2) 75 --
1002 California St., #A
Huntington Beach, CA 92648
Diane Biagianti(2) 75 --
1002 California St., #A
Huntington Beach, CA 92648
Connie Ferree 150 --
2150 N. Tenaya Way
Bldg. 21
No. 1175
L.V., NV 89128
Shaun P. Mackin 75 --
1786 Harmony Way
Pitsburg, CA 94565
Angela Sykes 1,875 --
24351 Pasto Road, #B
Dana Point, CA 92629
Vernon R. Gilbert 75 --
12131 Martha Ann Dr.
Los Alamitos, CA 90720
Richard B. Dunbar 375 --
15603 Edmore
Detroit, MI 48205
Desiree Royall 75 --
1408 Posada
Newport Beach, CA 92660
Barbara A. Royall 75 --
103 Greenfield Ave.
San Rafael, CA 94901
Jody Roberts 1,875 --
6212 Pickett Avenue
Garden Grove, CA 92845
Jeffery A. Czerwinski 1,020 --
304 1/2 B. Main St.
Balboa, CA 92624
Doug Sillasen 1,875 --
401 Memphis Avenue
Huntington Beach, CA 92648
Debra Sillasen 1,875 --
401 Memphis Avenue
Huntington Beach, CA 92648
Janae Sykes 375 --
(Lewis V. Sykes, Custodian)
24351 Pasto Road, #B
Dana Point, CA 92629
Craig Kennedy 75 --
831 Via Casitas
Greenbrae, CA 94904
12
Marvin Anderson 75 --
104 N. 26th Ave.
Yakima, WA 98902-2811
Margaret Peschong 75 --
1425 Pebble Beach Road
Mitchell, SD 57301
Nanette J. Peschong 75 --
511 S. Main St., No. 2
Mitchell, SD 57301
T.H. Peschong 75 --
1425 Pebble Beach Road
Mitchell, SD 57301
Kenneth Graham 75 --
13213 Ballestros
Chino, CA 91710
Denise Graham 75 --
13213 Ballestros
Chino, CA 91710
Kenneth & Denise Graham 75 --
13213 Ballestros
Chino, CA 91710
Marie Gunsten 75 --
(Denise Graham, Custodian)
13213 Ballestros
Chino, CA 91710
Audrey Gunsten 75 --
(Denise Graham, Custodian)
13213 Ballestros
Chino, CA 91710
Mary K. Roberts 75 --
24 Calle De La Luna
San Clemente, CA 92673
Mary K. Peterson 75 --
24 Calle De La Luna
San Clemente, CA 92673
Kimberly Roberts 75 --
24 Calle De La Luna
San Clemente, CA 92673
Randall Peterson 75 --
24 Calle De La Luna
San Clemente, CA 92673
Taylor Peterson 75 --
(Kimberly Peterson, Custodian)
24 Calle De La Luna
San Clemente, CA 92673
Debi K. P. Brandt 75 --
24 Calle De La Luna
San Clemente, CA 92673
Kevin Brandt 75 --
24 Calle De La Luna
San Clemente, CA 92673
Terance Brandt 75 --
24 Calle De La Luna
San Clemente, CA 92673
13
Connor Brandt 75 --
24 Calle De La Luna
San Clemente, CA 92673
Kimber Brandt 75 --
24 Calle De La Luna
San Clemente, CA 92673
Kenna Brandt 75 --
(Debi Brandt, Custodian)
24 Calle De La Luna
San Clemente, CA 92673
Kellyn Brandt 75 --
(Debi Brandt, Custodian)
24 Calle De La Luna
San Clemente, CA 92673
Kira Brandt 75 --
(Debi Brandt, Custodian)
24 Calle De La Luna
San Clemente, CA 92673
Brian James Paterson 75 --
24351 Pasto Road #B
Dana Point, CA 92629
Teresa Paterson 75 --
24351 Pasto Road #B
Dana Point, CA 92629
Keirstin Paterson 75 --
(Brian Paterson, Custodian)
24351 Pasto Road #B
Dana Point, CA 92629
Jacob Paterson 75 --
(Brian Paterson, Custodian)
24351 Pasto Road #B
Dana Point, CA 92629
Taylor Peterson 375 --
(Kimberly Peterson, Custodian)
24 Calle De La Luna
San Clemente, CA 92673
Richard K. Solosky 75 --
15871 Caltech Cir.
Westminster, CA 92683
Mary L. Roberts-Solosky 75 --
15871 Caltech Cir.
Westminster, CA 92683
Scott R. Roberts 75 --
6212 Pickett Avenue
Garden Grove, CA 92845
Kristen J. Roberts 75 --
15871 Caltech Cir.
Westminster, CA 92683
James S. Roberts 75 --
15871 Caltech Cir.
Westminster, CA 92683
Delone H. Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
14
Delone Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
Dee Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
Rulon Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
Brad Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
Todd Peterson 75 --
8392 Carnegie Avenue
Westminster, CA 92683
Mark Spragg 150 --
14621 Oak Ave.
Irvine, CA 92714
Mark Peterson 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
Jolene Peterson 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
M.D. Peterson 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
J.H. Peterson 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
Jolene Hadley 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
Roy Harward 75 --
3485 Summerhill
Salt Lake City, UT 84121
Brian Cowley 75 --
4378 Burgess Drive
Sacramento, CA 95838
Charles Allan Hall 75 --
2100 S. 336th St., #K-6
Federal Way, WA 98003
Kristen Hall 75 --
2100 S. 336th St., #K-6
Federal Way, WA 98003
Janice E. Johnson 150 --
26002 McNatt Ct.
Lake Forest, CA 92630
Graig G. Johnson 75 --
26002 McNatt Ct.
Lake Forest, CA 92630
15
Lunetta J. Peterson 150 --
91 Fuente
R.S.M., CA 92688
Cliff J. Peterson 75 --
91 Fuente
R.S.M., CA 92688
Michael E. Bever 150 --
540 Olden Way Rd.
Toppenish, WA 98948
Marian L. Bever 150 --
540 Olden Way Rd.
Toppenish, WA 98948
Michael & Marian Bever 150 --
540 Olden Way Rd.
Toppenish, WA 98948
Ryan Bever 150 --
(Michael Bever, Custodian)
540 Olden Way Rd.
Toppenish, WA 98948
Matthew Bever 150 --
(Michael Bever, Custodian)
540 Olden Way Rd.
Toppenish, WA 98948
Rebekah Bever 150 --
(Michael Bever, Custodian)
540 Olden Way Rd.
Toppenish, WA 98948
Richard M. Cobabe 75 --
17 Weeping Wood
Irvine, CA 92714
Christine L. Cobabe 75 --
17 Weeping Wood
Irvine, CA 92714
Richard L. Cobabe, Jr. 75 --
(Christine Cobabe, Custodian)
17 Weeping Wood
Irvine, CA 92714
Matthew M. Cobabe 75 --
(Christine Cobabe, Custodian)
17 Weeping Wood
Irvine, CA 92714
Shayla C. Cobabe 75 --
(Christine Cobabe, Custodian)
17 Weeping Wood
Irvine, CA 92714
Kenneth J. Cobabe 75 --
(Christine Cobabe, Custodian)
17 Weeping Wood
Irvine, CA 92714
Richard M. Peterson 75 --
22001 Oak Grove
Mission Viejo, CA 92692
Patti J. Peterson 75 --
22001 Oak Grove
Mission Viejo, CA 92692
16
Paul Thomas 75 --
5855 W. 95th #9
Los Angeles, CA 90045
Steven B. Morris 150 --
417 32nd
Manhattan Beach, CA 9026
Leann Michele Bouzidin 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
Henrique Carlos Pinguelo 75 --
6447 Evening Star Circle
Huntington Beach, CA 92648
R. Christopher Rhody 75 --
24351 Pasto Road, #B
Dana Point, CA 92629
William P. Hunt 75 --
24351 Pasto Road, #B
Dana Point, CA 92629
Dana S. Thomsen 150 --
2000 Westown Pky.
Apt. 7
W. Des Moines, IA 50265
Lori E. Jarvis 75 --
26 Deerfield
Irvine, CA 92714
Joel E. Hand(3) 75 --
3930 Montefrio Court
San Diego, CA 92130
Kristen Hand(3) 75 --
3930 Montefrio Court
San Diego, CA 92130
Joel Hand CUST Z.C. Hand(3) 75 --
3930 Montefrio Court
San Diego, CA 92130
Kellie Hand (3) 75 --
2365 South East Regner
Gresham, Oregon 97080
TOTAL 1,000,000 100%
* None
(1) This corporation is controlled by Riccardo Mortara.
(2) Ten Foot line is owned by Michael Rovere, who is the husband of
Diane Biagianti.
(3) Joel E. Hand is the brother of Jehu Hand, Kristen Hand is Joel
Hand's ex-spouse, Z.C. Hand is the
son of Joel Hand and Kellie Hand is the niece of Jehu and Joel Hand.
PLAN OF DISTRIBUTION
California Service Stations has applied to have its shares of common
stock registered on the OTC Bulletin Board. California Service Stations
anticipates once the shares are trading on the OTC Bulletin Board or any other
market the selling stockholders will sell their shares directly into any market
created. Selling stockholders sell at $.01 per share for the duration of the
offering. Selling stockholders may also sell in private transactions. California
Service Stations cannot predict whether the common stock will ever trade on any
market. The shares may be sold by the selling stockholders, as the case may be,
from time to time, in one or more transactions. California Service Stations does
not intend to enter into any arrangements with any securities dealers concerning
solicitation of offers to purchase the shares.
17
Commissions and discounts paid in connection with the sale of the
shares by the selling stockholders will be determined through negotiations
between them and the broker-dealers through or to which the securities are to be
sold and may vary, depending on the broker-dealers fee schedule, the size of the
transaction and other factors. The separate costs of the selling stockholders
will be borne by them. The selling stockholders will, and any broker-broker
dealer or agent that participates with the selling stockholders in the sale of
the shares by them may be deemed an "underwriter" within the meaning of the
Securities Act, and any commissions or discounts received by them and any
profits on the resale of shares purchased by them may be deemed to be
underwriting commissions under the Securities Act.
Regulation M prohibits certain market activities by persons selling
securities in a distribution. To demonstrate their understanding of those
restrictions and others, selling stockholders will be required, prior to the
release of unlegended shares to themselves or any transferee, to represent as
follows: that they have delivered a copy of this prospectus, and if they are
effecting sales on the Electronic Bulletin Board or interdealer quotation system
or any electronic network, that neither they nor any affiliates or person acting
on their behalf, directly or indirectly, has engaged in any short sale of
California Service Stations common stock; and for a period commencing at least 5
business days before his first sale and ending with the date of his last sale,
bid for, purchase, or attempt to induce any person to bid for or purchase
California Service Stations common stock.
A selling stockholder, Jehu Hand, is a principal of SoCal Securities,
an NASD broker dealer. SoCal does not make markets in any securities and will
not participate in this offering. SoCal Securities has not reviewed the contents
of this prospectus.
California Service Stations will bear all costs of the offering in
registering the shares but will bear no selling expense cost. The costs of the
offering are estimated at $8,000. California Service Stations will use its best
efforts to update the registration statement and maintain its effectiveness for
one year.
Blue Sky
Pacific Land will not make any filings under "Blue Sky Laws" for
registration of the securities offered except for a notice filing in New York to
the extent that selling stockholders sell to New York purchasers. No filings
have been made as of the date of this prospectus. As a result, sales will only
be made to residents of such states which the selling stockholder can
demonstrate to the satisfaction of Pacific Land that such registration is not
necessary.
CERTAIN TRANSACTIONS
Mendocino Partners, Inc. was organized as a Delaware corporation on
April 21, 1994 to seek out an advantageous acquisition. The name of the
corporation was changed to California Service Stations, Inc. in August, 2004. On
May 13, 2004, an investment fund controlled by Jehu Hand, Arrakis Select, LP,
loaned $400,000 to California Service Stations, pursuant to an 8% convertible
debenture due December 31, 2005. The debenture is convertible into shares of
common stock at a price of $.01 per share. An additional $25,000 was loaned in
June 2004, due on demand at 8% interest, and $10,000 was contributed to capital
of California Service Stations by a shareholder controlled by Mr. Hand.
18
DESCRIPTION OF SECURITIES
Common Stock
California Service Station's Certificate of Incorporation authorizes
the issuance of 20,000,000 shares of common stock, $.001 par value per share, of
which 1,250,000 shares were outstanding as of September 30, 2004. California
Service Stations does not intend to sell additional shares of common stock at
this time. Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common stock
have no cumulative voting rights. Holders of shares of common stock are entitled
to share ratably in dividends, if any, as may be declared, from time to time by
the Board of Directors in its discretion, from funds legally available
therefore. In the event of a liquidation, dissolution or winding up of
California Service Stations, the holders of shares of common stock are entitled
to share pro rata all assets remaining after payment in full of all liabilities
and the liquidation preference to holders of Preferred Stock. Holders of common
stock have no preemptive rights to purchase California Service Station's common
stock. There are no conversion rights or redemption or sinking fund provisions
with respect to the common stock.
Meetings of stockholders may be called by the board of directors, the
chairman of the board, the president, or by one or more holders entitled to cast
in the aggregate not less than 20% of the votes at the meeting. Holders of a
majority of the shares outstanding and entitled to vote at the meeting must be
present, in person or by proxy, for a quorum to be present to enable the conduct
of business at the meeting.
Preferred Stock
California Service Station's Certificate of Incorporation authorizes
the issuance of 1,000,000 shares of preferred stock, $.001 par value, of which
no shares of Preferred Stock are outstanding.
California Service Station's Board of Directors has authority, without
action by the shareholders, to issue all or any portion of the authorized but
unissued preferred stock in one or more series and to determine the voting
rights, preferences as to dividends and liquidation, conversion rights, and
other rights of such series. California Service Stations considers it desirable
to have preferred stock available to provide increased flexibility in
structuring possible future acquisitions and financings and in meeting corporate
needs which may arise. If opportunities arise that would make desirable the
issuance of preferred stock through either public offering or private
placements, the provisions for preferred stock in California Service Station's
Articles of Incorporation would avoid the possible delay and expense of a
shareholder's meeting, except as may be required by law or regulatory
authorities. Issuance of the preferred stock could result, however, in a series
of securities outstanding that will have certain preferences with respect to
dividends and liquidation over the common stock which would result in dilution
of the income per share and net book value of the common stock. Issuance of
additional common stock pursuant to any conversion right which may be attached
to the terms of any series of preferred stock may also result in dilution of the
net income per share and the net book value of the common stock. The specific
terms of any series of preferred stock will depend primarily on market
conditions, terms of a proposed acquisition or financing, and other factors
existing at the time of issuance. Therefore, it is not possible at this time to
determine in what respect a particular series of preferred stock will be
superior to California Service Station's common stock or any other series of
preferred stock which California Service Stations may issue. The Board of
Directors may issue additional preferred stock in future financings, but has no
current plans to do so at this time.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of California Service Stations.
California Service Stations intends to furnish holders of its common
stock annual reports containing audited financial statements and to make public
quarterly reports containing unaudited financial information.
19
Transfer Agent
The transfer agent for the common stock is Colonial Stock Transfer, 66
Exchange Place, Salt Lake City, Utah 84111, and its telephone number is (801)
355-5740.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the Shares offered hereby will be passed upon for
California Service Stations by Hand & Hand, a professional corporation, Dana
Point, California. The principal of Hand & Hand, Jehu Hand and California
Service Station's former president and its current Chief Financial Officer,
beneficially owns 800,000 shares of common stock.
EXPERTS
The audited financial statements of California Service Stations, Inc.
included in this Prospectus as of June 30, 2003 and 2004 have been audited by
Pritchett, Siler & Hardy, PC., independent certified public accountants, to the
extent and for the periods set forth in their report thereon and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
INDEMNIFICATION
California Service Stations has adopted provisions in its articles of
incorporation and bylaws that limit the liability of its directors and provide
for indemnification of its directors and officers to the full extent permitted
under the Delaware General Corporation Law ("DGCL"). Under California Service
Station's articles of incorporation, and as permitted under the Delaware General
Business Act, directors are not liable to California Service Stations or its
stockholders for monetary damages arising from a breach of their fiduciary duty
of care as directors. Such provisions do not, however, relieve liability for
breach of a director's duty of loyalty to California Service Stations or its
stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Delaware law. Further, the provisions do
not relieve a director's liability for violation of, or otherwise relieve
California Service Stations or its directors from the necessity of complying
with, federal or state securities laws or affect the availability of equitable
remedies such as injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of California Service Stations where
indemnification will be required or permitted. California Service Stations is
not aware of any threatened litigation or preceding that may result in a claim
for indemnification by any director or officer.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of California Service Stations pursuant to the foregoing provisions, or
otherwise, California Service Stations has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by California Service Stations of expenses incurred or
paid by a director, officer or controlling person of California Service Stations
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, California Service Stations will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
20
FINANCIAL STATEMENTS INDEX
Report of Independent Public Accounting Firm F-1
Consolidated Balance Sheet - June 30, 2004 F-2
Consolidated Statements of Operations for the years ended June 30, 2004 and 2003 and for the
period from Inception [February 14, 2003] through June 30, 2004 F-3
Consolidated Stockholders' Equity for the period from Inception [February 14,
2003] through June 30, 2004 F-4-5
Consolidated Statements of Cash Flows for the years ended June 30, 2004 and June 30, 2003
and for the period from Inception [February 14, 2003] through June 30, 2004 F-6
Notes to Consolidated Financial Statements F-7-11
Consolidated Balance Sheet - September 30, 2004 F-12
Consolidated Statements of Operations for the three months ended September 30,
2004 and 2003 and for the period from Inception [February 14, 2003] through
September 30, 2004 (unaudited) 13
Statements of Cash Flows for the three months ended September 30, 2004 and 2003
and for the period from Inception [February 14, 2003] through September 30, 2004 (unaudited) F-14
Notes to Interim Consolidated Financial Statements F-15-19
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
Dana Point, California
We have audited the accompanying consolidated balance sheet of Mendocino
Partners, Inc. and Subsidiary [a development stage company] as of June 30, 2004
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years ended June 30, 2004 and 2003 and for the
period from inception on April 20, 1994 through June 30, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Mendocino Partners, Inc. and Subsidiary
as of and for the year ended June 30, 2000 were audited by other auditors whose
report, dated January 12, 2001, expressed an unqualified opinion on those
statements. The financial statements as of June 30, 2000 reflect an accumulated
deficit of $2,784. The other auditors' report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for such prior periods,
is based solely on the report of the other auditors.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Mendocino Partners, Inc. and
Subsidiary [a development stage company] as of June 30, 2004 and the results of
their operations and their cash flows for the years ended June 30, 2004 and 2003
and for the period from inception on April 20, 1994 through June 30, 2004, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 7 to the financial
statements, the Company has incurred losses since its inception and has not yet
been successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 7. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
August 31, 2004
F-1
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED BALANCE SHEET
ASSETS
June 30,
2004
-----------
CURRENT ASSETS:
Cash $ 405,365
-----------
Total Current Assets 405,365
OTHER ASSETS:
Acquisition deposit - held in escrow 25,000
-----------
$ 430,365
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,769
Accounts payable - related party 3,905
Note payable - related party 25,000
-----------
Total Current Liabilities 30,674
CONVERTIBLE DEBENTURE - RELATED PARTY 400,000
-----------
Total Liabilities 430,674
-----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value,
1,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value,
20,000,000 shares authorized,
1,250,000 shares issued and
outstanding 1,250
Capital in excess of par value 16,660
Deficit accumulated during the
development stage (15,823)
-----------
2,087
Less deferred compensation (2,396)
-----------
Total Stockholders' Equity (Deficit) (309)
-----------
$ 430,365
-------------
The accompanying notes are an integral part of this
consolidated financial statement.
F-2
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENTS OF OPERATIONS
For the From Inception
Year Ended on April 20,
June 30, 1994 Through
_________________________ June 30,
2004 2003 2004
------------ ------------ ------------
REVENUE $ - $ - $ -
EXPENSES:
General and administrative 5,345 511 11,664
------------ ------------ ------------
LOSS FROM OPERATIONS (5,345) (511) (11,664)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 236 - 236
Interest expense (4,395) - (4,395)
------------ ------------ ------------
Total Other Income (Expense) (4,159) - (4,159)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (9,504) (511) (15,823)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
------------ ------------ ------------
NET LOSS $ (9,504) $ (511) $ (15,823)
------------ ------------ ------------
LOSS PER COMMON SHARE $ (.01) $ (.00) $ (.02)
------------ ------------ ------------
The accompanying notes are an integral part of this
consolidated financial statement.
F-3
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM THE DATE OF INCEPTION ON APRIL 20, 1994
THROUGH JUNE 30, 2004
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
________________ ________________ Excess of Deferred Development
Shares Amount Shares Amount Par Value Comp. Stage
-------- ------- -------- ------- -------- ------- -----------
BALANCE, April 20, 1994 - $ - - $ - $ - $ - $ -
Issuance of 1,000,000 shares of
common stock for cash of $1,015,
or $.001 per share, April 20, 1994 - - 1,000,000 1,000 15 - -
Net loss for the period ended
June 30, 1994 - - - - - - (42)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1994 - - 1,000,000 1,000 15 - (42)
Net loss for the year ended
June 30, 1995 - - - - - - (338)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1995 - - 1,000,000 1,000 15 - (380)
Net loss for the year ended
June 30, 1996 - - - - - - (320)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1996 - - 1,000,000 1,000 15 - (700)
Net loss for the year ended
June 30, 1997 - - - - - - (314)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1997 - - 1,000,000 1,000 15 - (1,014)
Net loss for the year ended
June 30, 1998 - - - - - - (312)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1998 - - 1,000,000 1,000 15 - (1,326)
Net loss for the year ended
June 30, 1999 - - - - - - (790)
[Continued]
F-4
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM THE DATE OF INCEPTION ON APRIL 20, 1994
THROUGH JUNE 30, 2004
[Continued]
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
________________ ________________ Excess of Deferred Development
Shares Amount Shares Amount Par Value Comp. Stage
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 1999 - - 1,000,000 1,000 15 - (2,116)
Net loss for the year ended
June 30, 2000 - - - - - - (907)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 2000 - - 1,000,000 1,000 15 - (3,023)
Net loss for the year ended
June 30, 2001 - - - - - - (947)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 2001 - - 1,000,000 1,000 15 - (3,970)
Net loss for the year ended
June 30, 2002 - - - - - - (1,838)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 2002 - - 1,000,000 1,000 15 - (5,808)
Net loss for the year ended
June 30, 2003 - - - - - - (511)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 2003 - - 1,000,000 1,000 15 - (6,319)
Capital Contributions, May 2004 - - - - 10,000 - -
Accrued interest forgiven recorded
as contribution to capital - - - - 4,395 - -
Issuance of 250,000 shares of
common stock for employee
services valued at $2,500, or
$.01 per share, May 2004 - - 250,000 250 2,250 2,500 -
Net loss for the year ended
June 30, 2004 - - - - - (104) (9,504)
-------- ------- -------- ------- -------- ------- -----------
BALANCE, June 30, 2004 - $ - 1,250,000 $ 1,250 $ 16,660 $ 2,396 $ (15,823)
-------- ------- -------- ------- -------- ------- -----------
The accompanying notes are an integral part of this
consolidated financial statement.
F-5
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the From Inception
Year Ended on April 20,
June 30, 1994 Through
_________________________ June 30,
2004 2003 2004
------------ ------------ ------------
Cash Flows from Operating Activities:
Net loss $ (9,504) $ (511) $ (15,823)
Adjustments to reconcile net loss to net cash used by
operating activities:
Amortization - - 1,015
Non-cash interest expense 4,395 - 4,395
Non-cash services for common stock 105 - 105
Changes in assets and liabilities:
Increase in accounts payable 269 511 1,768
Increase in accounts payable - related party 100 3,905
------------ ------------ ------------
Net Cash Provided by Operating Activities (4,635) - (4,635)
------------ ------------ ------------
Cash Flows from Investing Activities:
Payments of organization costs - - (1,015)
Acquisition deposit held in escrow (25,000) - (25,000)
------------ ------------ ------------
Net Cash (Used) by Investing Activities (25,000) - (26,015)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from convertible debenture - related party 400,000 - 400,000
Proceeds from notes payable - related party 25,000 - 25,000
Capital contributions 10,000 - 10,000
Proceeds from sale of common stock - - 1,015
------------ ------------ ------------
Net Cash Provided by Financing Activities 435,000 - 436,015
------------ ------------ ------------
Net Increase (Decrease) in Cash 405,365 - 405,365
Cash at Beginning of Period - - -
------------ ------------ ------------
Cash at End of Period $ 405,365 $ - $ 405,365
------------ ------------ ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the year ended June 30, 2004:
Issued 250,000 shares for employee services valued at $2,500 to be rendered
over three years. Through June 30, 2004 the Company recognized $105 of the
expense.
A shareholder of the Company forgave accrued interest totaling $4,395. Due
to the related party nature of the debt forgiveness, the Company recorded
the forgiveness as a capital contribution.
For the year ended June 30, 2003:
None
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Mendocino Partners, Inc. and Subsidiary ("Parent") was
organized under the laws of the State of
Delaware on April 20, 1994 for the purpose of seeking out business
opportunities, including acquisitions.
Sunset Service Stations ("Subsidiary") was organized under the laws of the
State of California on June 21, 2004 as a wholly-owned subsidiary of
Parent.
Mendocino Partners, Inc. and Subsidiary ("the Company") plans to acquire
and operate gas service stations that are currently in operation. The
Company has not generated any revenue from its planned principle
operations. The Company is considered a development stage company as
defined in Statement of Financial Accounting Standards No. 7. The Company
has, at the present time, not paid any dividends and any dividends that may
be paid in the future will depend upon the financial requirements of the
Company and other relevant factors.
Cash and Cash Equivalents - The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
Consolidation - The financial statements include the accounts of Parent and
Parent's wholly-owned subsidiary. All significant intercompany transactions
have been eliminated in consolidation.
Fiscal Year - The Company's fiscal year-end is June 30, 2004.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" [See Note 5].
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" [See Note 8].
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reported period. Actual results could differ from those estimated.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities", and SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", were recently issued. SFAS No. 149 and 150 have no current
applicability to the Company or their effect on the financial statements
would not have been significant.
F-7
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTE PAYABLE
In May 2004, the Company issued a $25,000 note payable to an entity related
to a shareholder of the Company. The note is due on demand and accrues
interest at 8% per annum. The entity related to a shareholder of the
Company is forgiving the accrued interest on the note. Through June 30,
2004 the entity has forgiven $187 of accrued interest. Due to the related
party nature of the debt forgiveness, the Company recorded the forgiveness
as a capital contribution.
NOTE 3 - CONVERTIBLE DEBENTURE
In May 2004, the Company issued a $400,000 convertible debenture to an
entity related to a shareholder of the Company. The debenture is due on
December 31, 2005 and accrues interest at 8% per annum and is convertible
to common stock at $.01 per share. The entity related to a shareholder of
the Company is forgiving the accrued interest on the note. Through June 30,
2004 the entity has forgiven $4,208 of accrued interest. Due to the related
party nature of the debt forgiveness, the Company recorded the forgiveness
as a capital contribution.
The Company has the following convertible debentures payable at:
June 30,
2004
-----------
$400,000 8% unsecured convertible debenture
maturing in December 2005, convertible into
common stock at $.01 per share. $ 400,000
-----------
Less current portion -
-----------
$ 400,000
-----------
The convertible debentures mature as follows for the twelve-month periods
ended:
June 30, Principal Due
----------- -----------
2005 $ -
2006 400,000
-----------
$ 400,000
-----------
NOTE 4 - CAPITAL STOCK
Preferred Stock - The Company has authorized 1,000,000 shares of
preferred stock, $.001 par value, with such
rights, preferences and designations and to be issued in such series as
determined by the Board of Directors. No
shares are issued and outstanding at June 30, 2004.
F-8
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK [Continued]
Common Stock - The Company has authorized 20,000,000 shares of common stock
with a par value of $.001. In May 2004, the Company issued 250,000 shares
of common stock for employee services valued at $2,500 (or $.01 per share).
The shares vest one-third each anniversary for three years. Through June
30, 2004, the Company recognized $105 of the expense.
In April 1994, in connection with their organization, the Company issued
1,000,000 shares of their previously authorized but unissued common stock.
The shares were issued for cash of $1,015 (or approximately $.001 per
share).
1994 Stock Option Plan - On April 20, 1994, the Company adopted the 1994
Stock Option Plan. The plan provides for the granting of awards of up to
2,000,000 shares of common stock to officers, directors, employees,
advisors, and employees of other companies that do business with the
Company as non-qualified and qualified stock options. The Stock Option
Committee of the Board of Directors determines the option price, which
cannot be less than the fair market value at the date of the grant or 110%
of the fair market value if the recipient of the grant holds 10% or more of
the Company's common stock. The price per share of shares subject to a
Non-Qualified option cannot be less than 85% of the fair market value.
Options granted under the plan will typically expire ten years from the
date of the grant (five years if the recipient of the grant holds 10% or
more of the Company's common stock on the date of the grant) or three
months after termination of employment. As of June 30, 2004, no options
have been granted.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". SFAS
No. 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. The Company has available at
June 30, 2004 unused operating loss carryforwards of approximately $15,800
which may be applied against future taxable income and which expire in
various years through 2024.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards, the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $5,400 and $2,150 as of June 30, 2004 and 2003, respectively,
with an offsetting valuation allowance of the same amount resulting in a
change in the valuation allowance of approximately $3,250 during the year
ended June 30, 2004.
F-9
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY TRANSACTIONS
Accounts Payable - Related Party - During the years ended June 30, 2004 and
2003, an officer/shareholder of the Company directly paid expenses totaling
$100 and $0 on behalf of the Company. At June 30, 2004, the Company owed
the shareholder $3,905. No interest is being accrued on the payable.
In May 2004, the Company borrowed $25,000 from an entity related to a
shareholder of the Company [See Note 2].
Notes Payable - In May 2004, the Company issued a $400,000 convertible
debenture payable to an entity related to a shareholder of the Company [See
Note 3].
Management Compensation - For the years ended June 30, 2004 and 2003,
the Company paid $3,000 and $0 to the
president of the Subsidiary.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his
offices as a mailing address, as needed, at no expense to the Company.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America,
which contemplate continuation of the Company as a going concern. However,
the Company has incurred losses since its inception and has not yet been
successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise any necessary
additional funds not provided by operations through loans or through
additional sales of its common stock or through a possible business
combination with another company. There is no assurance that the Company
will be successful in raising this additional capital or in achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
F-10
MENDOCINO PARTNERS, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO COSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share:
For the From Inception
Year Ended on April 20,
June 30, 1994 Through
_________________________ June 30,
2004 2003 2004
------------ ------------ ------------
Loss from continuing operations
available to common shareholders
(numerator) $ (9,504) $ (511) $ (15,823)
------------ ------------ ------------
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 1,025,273 1,000,000 1,002,484
------------ ------------ ------------
Dilutive loss per share was not presented, as the Company had no common
stock equivalent shares for all periods presented that would affect the
computation of diluted loss per share.
NOTE 9 - SUBSEQUENT EVENT
Name Changes - In August 2004 Parent changed its name to California Service
Stations, Inc.
Proposed Acquisition - The Company is proposing to acquire a gas station in
southern California. The proposed agreement calls for the Company to pay
$299,000 to acquire all of the assets associated with the gas station. At
June 30, 2004, the Company had paid a deposit of $25,000 into an escrow for
the proposed acquisition.
Final acquisition agreement has not yet been signed and final consummation
of the acquisition is not guaranteed.
F-11
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
September 30, June 30,
2004 2004
----------- -----------
CURRENT ASSETS:
Cash $ 383,017 $ 405,365
Prepaid expenses 960 -
----------- -----------
Total Current Assets 383,977 405,365
----------- -----------
OTHER ASSETS:
Acquisition deposit, held in escrow 25,000 25,000
Deferred acquisition costs 4,000 -
----------- -----------
Total Other Assets 29,000 25,000
----------- -----------
$ 412,977 $ 430,365
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,239 $ 1,769
Accounts payable - related party 3,905 3,905
Note payable - related party 25,000 25,000
----------- -----------
Total Current Liabilities 30,144 30,674
CONVERTIBLE DEBENTURE - RELATED PARTY 400,000 400,000
----------- -----------
Total Liabilities 430,144 430,674
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value,
1,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
20,000,000 shares authorized,
1,250,000 shares issued and
outstanding 1,250 1,250
Capital in excess of par value 25,230 16,660
Deficit accumulated during the
development stage (41,459) (15,823)
----------- -----------
(14,979) 2,087
Less deferred compensation (2,188) (2,396)
----------- -----------
Total Stockholders' Equity (Deficit) (17,167) (309)
----------- -----------
$ 412,977 $ 430,365
------------- -------------
Note: The balance sheet at June 30, 2004 was taken from the audited financial
statements at that date and condensed.
The accompanying notes are an integral part of this condensed
consolidated financial statement.
F-12
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three From Inception
Months Ended on April 20,
September 30, 1994 Through
_________________________ September 30,
2004 2003 2004
------------ ------------ ------------
REVENUE $ - $ - $ -
EXPENSES:
General and administrative 17,823 534 29,487
------------ ------------ ------------
LOSS FROM OPERATIONS (17,823) (534) (29,487)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 757 - 993
Interest expense (8,570) - (12,965)
------------ ------------ ------------
Total Other Income (Expense) (7,813) - (11,972)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (25,636) (534) (41,459)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
------------ ------------ ------------
NET LOSS $ (25,636) $ (534) $ (41,459)
------------ ------------ ------------
LOSS PER COMMON SHARE $ (.02) $ (.00) $ (.04)
------------ ------------ ------------
The accompanying notes are an integral part of this condensed
consolidated financial statement.
F-13
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three From Inception
Months Ended on April 20,
September 30, 1994 Through
_________________________ September 30,
2004 2003 2004
------------ ------------ ------------
Cash Flows from Operating Activities:
Net loss $ (25,636) $ (534) $ (41,459)
Adjustments to reconcile net loss to net cash used by
operating activities:
Amortization - - 1,015
Non-cash interest expense 8,570 - 12,965
Non-cash services for common stock 207 - 312
Changes in assets and liabilities:
Increase (decrease) in accounts payable (529) 534 1,239
Increase in accounts payable - related party - 3,905
(Increase) in prepaid expenses (960) - (960)
------------ ------------ ------------
Net Cash Provided by Operating Activities (18,348) - (22,983)
------------ ------------ ------------
Cash Flows from Investing Activities:
Payments of organization costs - - (1,015)
Payment of acquisition deposit, held in escrow - - (25,000)
Deferred acquisition costs (4,000) - (4,000)
------------ ------------ ------------
Net Cash (Used) by Investing Activities (4,000) - (30,015)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from convertible debenture - related party - - 400,000
Proceeds from note payable - related party - - 25,000
Capital contributions - - 10,000
Proceeds from sale of common stock - - 1,015
------------ ------------ ------------
Net Cash Provided by Financing Activities - - 436,015
------------ ------------ ------------
Net Increase (Decrease) in Cash (22,348) - 383,017
Cash at Beginning of Period 405,365 - -
------------ ------------ ------------
Cash at End of Period $ 383,017 $ - $ 383,017
------------ ------------ ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the three months ended September 30, 2004:
In May 2004, the Company issued 250,000 shares for employee services valued
at $2,500 to be rendered over three years. For the three months ended
September 30, 2004 the Company recognized $207 of the expense.
A shareholder of the Company forgave accrued interest totaling $8,570. Due
to the related party nature of the debt forgiveness, the Company recorded
the forgiveness as a capital contribution.
For the three months ended September 30, 2003:
None
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-14
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - California Service Stations, Inc. and Subsidiary
("Parent") was organized under the laws of the
State of Delaware on April 20, 1994 as Mendocino Parthers, Inc.
In August 2004 Parent changed its name to
California Service Stations, Inc. and Subsidiary for the purpose of seeking
out business opportunities, including
acquisitions.
Sunset Service Stations ("Subsidiary") was organized under the laws of the
State of California on June 21, 2004 as a wholly-owned subsidiary of
Parent.
California Service Stations, Inc. and Subsidiary ("the Company") plans to
acquire and operate gas service stations that are currently in operation.
The Company has not generated any revenue from its planned principle
operations. The Company is considered a development stage company as
defined in Statement of Financial Accounting Standards No. 7. The Company
has, at the present time, not paid any dividends and any dividends that may
be paid in the future will depend upon the financial requirements of the
Company and other relevant factors.
Condensed Financial Statements - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows at September 30, 2004 and 2003 and for the periods then ended have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's June 30, 2004 audited financial statements. The results of
operations for the periods ended September 30, 2004 and 2003 are not
necessarily indicative of the operating results for the full year.
Cash and Cash Equivalents - The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
Acquisition Costs - Costs related to proposed acquisitions are deferred and
will be included in the acquisition price upon completion of the related
acquisition. In the event an acquisition is unsuccessful, the costs related
to the acquisition are written off to expense.
Consolidation - The financial statements include the accounts of Parent and
Parent's wholly-owned subsidiary. All significant intercompany transactions
have been eliminated in consolidation.
Fiscal Year - The Company's fiscal year-end is June 30, 2004.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" [See Note 5].
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" [See Note 8].
F-15
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reported period. Actual results could differ from those estimated.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities", and SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", were recently issued. SFAS No. 149 and 150 have no current
applicability to the Company or their effect on the financial statements
would not have been significant.
NOTE 2 - NOTE PAYABLE
In May 2004, the Company issued a $25,000 note payable to an entity related
to a shareholder of the Company. The note is due on demand and accrues
interest at 8% per annum. The entity related to a shareholder of the
Company is forgiving the accrued interest on the note. Through September
30, 2004 the entity has forgiven $691 of accrued interest. Due to the
related party nature of the debt forgiveness, the Company recorded the
forgiveness as a capital contribution.
NOTE 3 - CONVERTIBLE DEBENTURE
In May 2004, the Company issued a $400,000 convertible debenture to an
entity related to a shareholder of the Company. The debenture is due on
December 31, 2005 and accrues interest at 8% per annum and is convertible
to common stock at $.01 per share. The entity related to a shareholder of
the Company is forgiving the accrued interest on the note. Through
September 30, 2004 the entity has forgiven $12,274 of accrued interest. Due
to the related party nature of the debt forgiveness, the Company recorded
the forgiveness as a capital contribution.
The Company has the following convertible debentures payable at:
September 30,
2004
-----------
$400,000 8% unsecured convertible debenture
maturing in December 2005, convertible into
common stock at $.01 per share. $ 400,000
-----------
Less current portion -
-----------
$ 400,000
-----------
F-16
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - CONVERTIBLE DEBENTURE [Continued]
The convertible debentures mature as follows for the twelve-month periods
ended:
September 30, Principal Due
----------- -----------
2005 $ -
2006 400,000
-----------
$ 400,000
-----------
NOTE 4 - CAPITAL STOCK
Preferred Stock - The Company has authorized 1,000,000 shares of
preferred stock, $.001 par value, with such
rights, preferences and designations and to be issued in such series as
determined by the Board of Directors. No
shares are issued and outstanding at September 30, 2004.
Common Stock - The Company has authorized 20,000,000 shares of common stock
with a par value of $.001. In May 2004, the Company issued 250,000 shares
of common stock for employee services valued at $2,500 (or $.01 per share).
The shares vest one-third each anniversary for three years. Through
September 30, 2004, the Company recognized $312 of the expense.
In April 1994, in connection with their organization, the Company issued
1,000,000 shares of their previously authorized but unissued common stock.
The shares were issued for cash of $1,015 (or approximately $.001 per
share).
1994 Stock Option Plan - On April 20, 1994, the Company adopted the 1994
Stock Option Plan. The plan provides for the granting of awards of up to
2,000,000 shares of common stock to officers, directors, employees,
advisors, and employees of other companies that do business with the
Company as non-qualified and qualified stock options. The Stock Option
Committee of the Board of Directors determines the option price, which
cannot be less than the fair market value at the date of the grant or 110%
of the fair market value if the recipient of the grant holds 10% or more of
the Company's common stock. The price per share of shares subject to a
Non-Qualified option cannot be less than 85% of the fair market value.
Options granted under the plan will typically expire ten years from the
date of the grant (five years if the recipient of the grant holds 10% or
more of the Company's common stock on the date of the grant) or three
months after termination of employment. As of September 30, 2004, no
options have been granted.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". SFAS
No. 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. The Company has available at
September 30, 2004 unused operating loss carryforwards of approximately
$41,500 which may be applied against future taxable income and which expire
in various years through 2025.
F-17
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES [Continued]
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards, the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $14,100 and $5,400 as of September 30, 2004 and June 30,
2004, respectively, with an offsetting valuation allowance of the same
amount resulting in a change in the valuation allowance of approximately
$8,700 during the three months ended September 30, 2004.
NOTE 6 - RELATED PARTY TRANSACTIONS
Accounts Payable - Related Party - During the three months ended September
30, 2004 and 2003, an officer/shareholder of the Company directly paid
expenses totaling $0 and $0 on behalf of the Company. At September 30,
2004, the Company owed the shareholder $3,905. No interest is being accrued
on the payable.
In May 2004, the Company borrowed $25,000 from an entity related to a
shareholder of the Company [See Note 2].
Notes Payable - In May 2004, the Company issued a $400,000 convertible
debenture payable to an entity related to a shareholder of the Company [See
Note 3].
Management Compensation - For the three months ended September 30, 2004
and 2003, the Company paid $9,000 and $0
to the president of the Subsidiary.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his
offices as a mailing address, as needed, at no expense to the Company.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America,
which contemplate continuation of the Company as a going concern. However,
the Company has incurred losses since its inception and has not yet been
successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise any necessary
additional funds not provided by operations through loans or through
additional sales of its common stock or through a possible business
combination with another company. There is no assurance that the Company
will be successful in raising this additional capital or in achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
F-18
CALIFORNIA SERVICE STATIONS, INC. AND SUBSIDIARY
(Formerly Mendocino Partners, Inc.)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share:
For the Three From Inception
Months Ended on April 20,
September 30, 1994 Through
_________________________ September 30,
2004 2003 2004
------------ ------------ ------------
Loss from continuing operations
available to common shareholders
(numerator) $ (25,636) $ (534) $ (41,459)
------------ ------------ ------------
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 1,250,000 1,000,000 1,008,451
------------ ------------ ------------
Dilutive loss per share was not presented, as the Company had no common
stock equivalent shares for all periods presented that would affect the
computation of diluted loss per share.
NOTE 9 - SUBSEQUENT EVENT
Proposed Acquisition - The Company is proposing to acquire a gas station in
southern California. The proposed agreement calls for the Company to pay
$299,000 to acquire all of the assets associated with the gas station. In
June 2004, the Company deposited $25,000 with an escrow agent in
anticipation of the proposed acquisition.
Final acquisition agreement has not yet been signed and final consummation
of the acquisition is not guaranteed.
F-19
No dealer, salesman or other person is authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by
California Service Stations. This Prospectus does not constitute an offer to
sell or a solicitation to an offer to buy the securities offered hereby to any
person in any state or other jurisdiction in which such offer or solicitation
would be unlawful. 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 time subsequent to the date
hereof.
TABLE OF CONTENTS Page
Prospectus Summary.................................2
Risk Factors.......................................3
Additional Information.............................3
Dividend Policy....................................4
Market Price of Common Stock.......................4
Plan of Operation..................................4
Business...........................................5
Management.........................................7
Principal Shareholders............................10
Selling Stockholders..............................11
Plan of Distribution..............................17
Certain Transactions..............................18
Description of Securities.........................19
Interest of Named Experts and Counsel.............20
Experts...........................................20
Indemnification...................................20
Financial Statements..............................21
CALIFORNIA SERVICE STATIONS, INC.
1,000,000 SHARES
PROSPECTUS
December __, 2004
CALIFORNIA SERVICE STATIONS, INC.
PART II
Item 24. Indemnification of Directors and Officers.
California Service Stations has adopted provisions in its articles
of incorporation and bylaws that limit the liability of its directors and
provide for indemnification of its directors and officers to the full extent
permitted under the Delaware General Corporation Law. Under California Service
Station's articles of incorporation, and as permitted under the Delaware General
Corporation Law, directors are not liable to California Service Stations or its
stockholders for monetary damages arising from a breach of their fiduciary duty
of care as directors. Such provisions do not, however, relieve liability for
breach of a director's duty of loyalty to California Service Stations or its
stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Delaware law. Further, the provisions do
not relieve a director's liability for violation of, or otherwise relieve
California Service Stations or its directors from the necessity of complying
with, federal or state securities laws or affect the availability of equitable
remedies such as injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of California Service Stations where
indemnification will be required or permitted. California Service Stations is
not aware of any threatened litigation or preceding that may result in a claim
for indemnification by any director or officer.
Item 25. Other Expenses of Issuance and Distribution. (All to be paid by
California Service Stations)
Filing fee under the Securities Act of 1933 $ 2.43
Printing and engraving (1) $ 300.00
Legal Fees $ 502.43
Blue Sky Fees $ 1,200.00
Auditing Fees (1) $ 5,000.00
NASD Filing Fees $ 500.00
Miscellaneous (1) $ 255.14
TOTAL $ 8,000.00
(1) Estimates
Item 26. Recent Sales of Unregistered Securities.
The company issued 250,000 newly issued shares on May 28, 2004 to
Vincent Sammarro, a director and officer, in connection with his employment. The
transaction is exempt under Section 4(2) of the Securities Act of 1933 as one
not involving any public offering, and under Section 4(6) as a sale to an
accredited investor. No public solicitation was made. No underwriter was
involved. The value of the shares issued was fixed at $.01.
Item 27. Exhibits and Financial Schedules
3. Certificate of Incorporation and Bylaws
3.1. Articles of Incorporation (1)
3.2 Articles of Amendment (2)
3.3 Bylaws (1)
5. Opinion of Hand & Hand as to legality of securities being registered. (2)
10. Material Contracts
10.1 Stock Option Plan. (1)
10.2 Form of Demand note (2)
10.3 Employment Agreement with Vincent Sammarro (2)
10.4 Convertible Debenture due December 31, 2005 (2)
21. Subsidiaries of the small business issuer-Sunset Service Stations,
a California corporation. No trade names are employed.
23. Consents of Experts and Counsel
23.1 Consent of Pritchett, Siler & Hardy, PC. (2)
23.2 Consent of Hand & Hand included in Exhibit 5 hereto
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because
the required information is included in the financial statements or notes
thereto.
(1) Incorporated by reference to such exhibit as filed with
California Service Station's registration statement on Form
10-SB, file number 0-30395, filed on May 10, 2003.
(2) Filed herewith.
Item 28. Undertakings.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this
registration statement to:
(I) Include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together represent a fundamental
change in the information in the registration
statement;
(iii) Include any material or changed information the
plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration
statement of the securities offered, and the offering of
the securities as at that time to be the initial bona fide
offering thereof.
(3) File a post effective amendment to remove from
registration any of the securities that remain unsold at
the end of the offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel that matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned small business issuer hereby undertakes that
it will:
(1) For purposes of determining any liability under the
Securities Act that 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 Registrant pursuant to Rule 424(b) (1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the
Securities Act, that each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it meets all the requirements for filing on Form SB-2
and has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Dana
Point, State of California on December 1, 2004.
CALIFORNIA SERVICE STATIONS
By: /s/ Vincent Sammarro
Vincent Sammarro
President
In accordance with the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities indicated on December 1, 2004.
By: /s/ Vincent Sammarro Chief Executive Officer and Director
Vincent Sammarro (principal executive officer)
By: /s/ Jehu Hand Chief Financial Officer and Director
Jehu Hand (principal financial and accounting
officer)