File No. 333-41428
As filed with the Securities & Exchange Commission on July 26, 2001
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 4 TO FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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SOLID MANAGEMENT CORP.
(Name of small business issuer in its charter)
Nevada
(State or jurisdiction of incorporation or organization)
98-0204702
(I.R.S. Employer Classification Code No.)
6770
(Primary Standard Industrial Identification No.)
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Suite 300
1286 Homer Street, Vancouver
British Columbia, Canada V6B 2Y5
(Address of principal place of business or intended principal place of business)
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Andrea Carley
Solid Management Corp.
300 - 1286 Homer Street, Vancouver
British Columbia, Canada V6B 2Y5
Telephone: (604)647-6400
(Name, address and telephone number of agent for service)
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Copies to:
Gerald R. Tuskey, Personal Law Corporation
Suite 1000, 409 Granville Street
Vancouver, British Columbia V6C 1T2
(604)681-9588
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH
CLASS OF PROPOSED PROPOSED AMOUNT OF
SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PRICE PER UNIT (1) OFFERING PRICE FEE
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Common Stock, 500,000 $0.10 $50,000 $13.20
Par value
$0.0001
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(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet Showing the Location in Prospectus of Information Required
by Items of Form SB-2.
ITEM NO. REQUIRED ITEM LOCATION OF CAPTION IN PROSPECTUS
- -------- ------------- ---------------------------------
1. Forepart of the Registration Statement Cover Page; Outside Front Page of
and Outside Front Cover of Prospectus Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages of
Pages of Prospectus Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Risk Prospectus Summary - Determination of
Factors; Plan of Distribution Offering Price
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Director, Executive Officer, Management
Management and Promoters and
Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Indemnification of Officers and
Indemnification for Securities Act Directors
Liabilities
15. Organization within Last Five Years Management, Certain Transactions
16. Description of Business Business
17. Management's Discussion and Analysis Plan of Operation
or Plan of Operation
18. Description of Property Description of Property
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Related Prospectus Summary, Market for Our
Stockholder Matters Common Stock; Shares Eligible for
Future Sale
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Changes in and Disagreements with
Accountants on Accounting and Accountants on Accounting and
Financial Disclosure Financial Disclosure
PART II
24. Indemnification of Directors and Indemnification of Directors and
Officers Officers
25. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
26. Recent Sales of Unregistered Securities Recent Sales of Unregistered Securities
27. Exhibits Exhibits
28. Undertakings Undertakings
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject To Completion, Dated July 26, 2001
INITIAL PUBLIC OFFERING PROSPECTUS
SOLID MANAGEMENT CORP.
500,000 SHARES OF COMMON STOCK
$0.10 PER SHARE
Solid Management Corp. is a startup company organized in the State of Nevada to
as a "blank check" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity.
We are offering these shares through our president, Ms. Andrea Carley, without
the use of a professional underwriter. We will not pay commissions on stock
sales.
This is our initial public offering, and no public market currently exists for
our shares. The offering price may not reflect the market price of our shares
after the offering.
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This investment involves a high degree of Risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 6.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Offering Information
PER SHARE TOTAL
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Initial public offering price $0.10 $50,000.00
Underwriting discounts/commissions $0.00 $0.00
Estimated offering expenses $0.00 $0.00
Net offering proceeds to Solid Management Corp. $0.10 $50,000.00
Estimated offering expenses do not include offering costs, including filing,
printing, legal, accounting, transfer agent and escrow agent fees estimated at
$9,579.20. We will pay these expenses.
The date of this Prospectus is July 26, 2001.
TABLE OF CONTENTS
PROSPECTUS SUMMARY................................................................................................3
LIMITED STATE REGISTRATION........................................................................................3
SUMMARY FINANCIAL INFORMATION.....................................................................................3
RISK FACTORS......................................................................................................6
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419 DEPOSIT OF OFFERING
PROCEEDS AND SECURITIES..........................................................................................10
DILUTION.........................................................................................................11
USE OF PROCEEDS..................................................................................................12
CAPITALIZATION...................................................................................................13
DESCRIPTION OF BUSINESS..........................................................................................14
PLAN OF OPERATION................................................................................................15
DESCRIPTION OF PROPERTY..........................................................................................21
PRINCIPAL SHAREHOLDERS...........................................................................................21
MANAGEMENT.......................................................................................................22
EXECUTIVE COMPENSATION...........................................................................................23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................23
LEGAL PROCEEDINGS................................................................................................24
MARKET FOR OUR COMMON STOCK......................................................................................24
DESCRIPTION OF SECURITIES........................................................................................26
SHARES ELIGIBLE FOR FUTURE RESALE................................................................................27
WHERE CAN YOU FIND MORE INFORMATION?.............................................................................28
REPORTS TO STOCKHOLDERS..........................................................................................28
PLAN OF DISTRIBUTION.............................................................................................29
LEGAL MATTERS....................................................................................................30
EXPERTS..........................................................................................................30
INDEMNIFICATION OF OFFICERS AND DIRECTORS........................................................................30
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES..............................30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.......................................................................................................31
INDEMNIFICATION OF OFFICERS AND DIRECTORS........................................................................44
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION......................................................................44
RECENT SALE OF UNREGISTERED SECURITIES...........................................................................44
Until 90 days after the date when the funds and securities are released from the
escrow account, all dealers effecting transactions in the shares, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters to their unsold allotments or subscriptions.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is a summary, it may not contain all of the information that you
should consider before receiving a distribution of our common stock. You should
read this entire prospectus carefully.
SOLID MANAGEMENT CORP.
We are a blank check company subject to Rule 419. We were organized as a vehicle
to acquire or merge with another business or company. We have no present plans,
proposals, agreements, arrangements or understandings to acquire or merge with
any specific business or company nor have we identified any specific business or
company for investigation and evaluation for a merger with us. Since our
organization, our activities have been limited to the sale of initial shares for
our organization and our preparation in producing a registration statement and
prospectus for our initial public offering. We will not engage in any
substantive commercial business following the offering. We maintain our office
at Suite 300, 1286 Homer Street, Vancouver, British Columbia, V6B 2Y5. Our phone
number is (604)647-6400.
The Offering
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Securities offered 500,000 shares of common stock, $0.0001 par
value, being offered at $0.10 per share. (See
"Description of Capital Stock.")
Common stock outstanding prior to 500,000 shares
the offering
Common stock to be outstanding after 1,000,000 shares
the offering
LIMITED STATE REGISTRATION
Our common shares may not be sold by us or resold by you in the states of
Alaska, Arizona, Idaho, Illinois, Iowa, Kansas, Kentucky, Maryland,
Massachusetts, Missouri, Nebraska, North Dakota, Pennsylvania, South Dakota,
Tennessee, Utah, Vermont and Washington.
SUMMARY FINANCIAL INFORMATION
The table below contains certain summary historical financial data. The
historical financial data for the fiscal year ended March 31, 2001 has been
derived from our audited financial statements which are contained in this
Prospectus. The information should be read in conjunction with those financial
statements and notes, and other financial information included in this
Prospectus.
3
INCOME STATEMENT
Fiscal Year Ended
March 31,
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2001 2000
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Revenue $ 0 $ 0
Expenses $ 23,410 $ 12,933
Net Income (loss) $ (23,410) $ (12,933)
Basic Earnings (loss) per share $ (0.05) $ 0
Weighted Average Number of Shares 500,000 500,000
Outstanding
BALANCE SHEET (at end of period)
Total Assets $ 0 $ 0
Total Liabilities $ 9,608 $ 0
Total Shareholders Equity (Net Assets) $ 0 $ 50
Net Income per share on a fully diluted basis $ (.05) $ (.01)
Expiration Date
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This offering will expire 12 months from the date of this prospectus. There is
no minimum number of securities that must be sold in the offering. The offering
may be extended for an additional 90 days at our sole election.
Escrow
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We will promptly deposit the proceeds of this offering into an escrow account
with City National Bank, Los Angeles, California ("escrow agent"). A certificate
bearing the investor's name will be issued and delivered to the escrow agent for
safekeeping.
After we enter into an acquisition agreement, and file a post-effective
amendment, we will notify the escrow agent to release the securities to the
shareholders, and the proceeds to our counsel, Foley & Lardner, San Francisco,
California. Investors will receive a supplement to the prospectus indicating the
amount of proceeds and securities released and the date of release.
Prescribed Acquisition Criteria
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Rule 419 requires that, before the funds and the securities can be released, we
must first execute an agreement to acquire a candidate meeting certain specified
criteria. The agreement must provide for the acquisition of a business or assets
for which the fair value of the business represents at least 80% of the maximum
offering proceeds. The agreement must include, as a precondition to its closing,
a requirement that the number of investors representing 80% of the maximum
offering proceeds must elect to reconfirm their investment. For purposes of the
offering, the fair value of the business or assets to be acquired must be at
least $40,000 (80% of $50,000).
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Post-Effective Amendment
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Once the agreement governing the acquisition of a business meeting the required
criteria has been executed, Rule 419 requires us to update the registration
statement with a post-effective amendment. The post-effective amendment must
contain information about the proposed acquisition candidate and their business,
including audited financial statements, the results of this offering and the use
of the funds disbursed from the escrow account. The post-effective amendment
must also include the terms of the reconfirmation offer mandated by Rule 419.
The reconfirmation offer must include certain prescribed conditions that must be
satisfied before the funds and securities can be released from escrow.
Reconfirmation Offering
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The reconfirmation offer must commence after the effective date of the
post-effective amendment. Under Rule 419, the terms of the reconfirmation offer
must include the following conditions:
The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the escrow account within
5 business days after the effective date of the post-effective
amendment.
Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify
us in writing that the investor elects to remain an investor.
If we do not receive written notification from any investor within 45
business days following the effective date, the proportionate portion
of the funds and any related interest or dividends held in the escrow
account on the investor's behalf will be returned to the investor
within 5 business days by first class mail or other equally prompt
means.
The acquisition will be closed only if a minimum number of investors
representing 80% of the maximum offering proceeds equaling $40,000
elect to reconfirm their investment.
If a closed acquisition has not occurred by January 24, 2002, the funds
held in the escrow account shall be returned to all investors on a
proportionate basis within 5 business days by first class mail or other
equally prompt means.
Release Of Securities And Funds
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The funds will be released to us, and the securities will be released to you,
only after:
The escrow agent has received a signed representation from us and any other
evidence acceptable by the escrow agent that:
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We have executed an agreement for the acquisition of an acquisition
candidate whose fair market value represents at least 80% of the
maximum offering proceeds and has filed the required post-effective
amendment.
The post-effective amendment has been declared effective.
We have satisfied all of the prescribed conditions of the
reconfirmation offer.
The closing of the acquisition of the business with a fair value of at
least 80% of the maximum proceeds.
Determination of Offering Price
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The offering price of $0.10 per share for the shares has been arbitrarily
determined by us. This price bears no relation to our assets, book value, or any
other customary investment criteria, including our prior operating history.
Among factors considered by us in determining the offering price were:
Estimates of our business potential
Our limited financial resources
The amount of equity desired to be retained by present shareholders
The amount of dilution to the public
The general condition of the securities markets
RISK FACTORS
Our business is subject to numerous risk factors, including the following:
We Have No Operating History or Revenue and Only Minimal Assets. We have had no
recent operating history nor any revenues or earnings from operations since its
inception. We have no significant assets or financial resources. We will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in our
incurring a net operating loss that will increase continuously until we can
consummate a business combination with a profitable business opportunity. We
cannot assure you that we can identify a suitable business opportunity and
consummate a business combination.
You Will Not Have Access to Your Funds While They are Held in Escrow. If we are
unable to locate an acquisition candidate meeting these acquisition criteria,
you will have to wait 18 months from the date of this prospectus before a
proportionate portion of your funds are returned, without interest. You will be
offered return of your proportionate portion of the funds held in escrow only
upon the reconfirmation offering required to be conducted upon execution of an
agreement to acquire an acquisition candidate that represents 80% of the maximum
offering proceeds.
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We May Fail to Obtain a Sufficient Number of Investors to Reconfirm the
Offering. A business combination with an acquisition candidate cannot be closed
unless, after the reconfirmation offering required by Rule 419, a sufficient
number of investors representing 80% of the maximum offering proceeds elect to
reconfirm their investment. If, after completion of the reconfirmation offering,
a sufficient number of investors do not reconfirm their investment, the business
combination will not be closed. If so, none of the securities held in escrow
will be issued and the funds will be returned to you on a proportionate basis
without interest.
We Have Extremely Limited Capital. As of March 31, 2001, there were $0 assets
and $9,608 in liabilities. There was $0 available in our treasury as of March
31, 2001. Assuming the sale of all the shares in this offering, we will receive
net proceeds of approximately $50,000.00, all of which must be deposited in the
escrow account. It is unlikely that we will need additional funds, but we may if
an acquisition candidate insists we obtain additional capital. We may require
additional financing in the future in order to close a business combination.
This financing may consist of the issuance of debt or equity securities. These
funds might not be available, if needed, or might not be available on terms
acceptable to us.
Escrowed Securities Can Only Be Transferred Under Limited Circumstances. No
transfer or other disposition of the escrowed securities is permitted other than
by will or the laws of descent and distribution, or under a qualified domestic
relations order as defined by the Internal Revenue Code of 1986 as amended, or
Title 7 of the Employee Retirement Income Security Act, or the related rules.
Under Rule 15g-8, it is unlawful for any person to sell or offer to sell the
securities or any interest in or related to the securities held in the Rule 419
escrow account other than under a qualified domestic relations order in divorce
proceedings. Therefore, any and all contracts for sale to be satisfied by
delivery of the securities and sales of derivative securities to be settled by
delivery of the securities are prohibited. You are further prohibited from
selling any interest in the securities or any derivative securities whether or
not physical delivery is required.
The Nature of Our Operations are Highly Speculative. The success of our plan of
operation will depend to a great extent on the operations, financial condition
and management of the identified business opportunity. While management intends
to seek business combination(s) with entities having established operating
histories, we cannot assure you that we will be successful in locating
candidates meeting that criteria. In the event we complete a business
combination, the success of our operations may be dependent upon management of
the successor firm or venture partner firm and numerous other factors beyond our
control.
We are in a Highly Competitive Market for Small Number of Business
Opportunities. The Company is and will continue to be an insignificant
participant in the business of seeking mergers with, joint ventures with and
acquisitions of small private and public entities. A large number of established
and well-financed entities, including venture capital firms, are active in
mergers and acquisitions of companies that may be desirable target candidates
for us.
Nearly all these entities have significantly greater financial resources,
technical expertise and managerial capabilities than we do and, consequently, we
will be at a competitive disadvantage
7
in identifying possible business opportunities and successfully completing a
business combination. Moreover, we will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
We Have No Existing Agreement for a Business Combination or Other Transaction.
We have no arrangement, agreement or understanding with respect to engaging in a
merger with, joint venture with or acquisition of, a private or public entity.
No assurances can be given that we will successfully identify and evaluate
suitable business opportunities or that we will conclude a business combination.
Management has not identified any particular industry or specific business
within an industry for evaluation. We cannot guarantee that we will be able to
negotiate a business combination on favorable terms.
We Have No Established Criteria for a Target Company. We have not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria that we will require a target business opportunity
to have achieved. Accordingly, we may enter into a business combination with a
business opportunity having no significant operating history, losses, limited or
no potential for earnings, limited assets, negative net worth or other
characteristics that are indicative of development stage companies.
Management Only Devotes a Limited Amount of Time to Seeking a Target Company.
While seeking a business combination, management anticipates devoting no more
than five hours per month. None of our officers have entered into a written
employment agreements with us and none is expected to do so in the foreseeable
future. We have not obtained key man life insurance on any of its officers or
directors.
We are Dependent on Current Management to Develop Our Business. Notwithstanding
the combined limited experience and time commitment of management, loss of the
services of any of these individuals would adversely affect the development of
our business and its likelihood of continuing operations.
Our Officers and Directors May Participate in Business Ventures That Could be
Deemed to Compete Directly With Us. Additional conflicts of interest and
non-arms length transactions may also arise in the event our officers or
directors are involved in the management of any firm with which we transact
business. Management has adopted a policy that we will not seek a merger with,
or acquisition of, any entity in which management serves as officers, directors
or partners, or in which they or their family members own or hold any direct or
indirect ownership interest.
Our Officers and Directors may be Affiliated With Other "Blank Check" Companies
That Were Formed Previously. In the event that management identifies a candidate
for a business combination, and the candidate expresses no preference for a
particular company, management intends to enter into a business combination with
a previously formed blank check company. As a result, there may not be
sufficient business opportunities to consummate a business combination.
Target Companies That Fail to Comply With SEC Reporting Requirements May Delay
or Preclude Acquisition. Sections 13 and 15(d) of the `34 Act require reporting
companies to
8
provide certain information about significant acquisitions, including certified
financial statements for the company acquired, covering one, two, or three
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target entities to prepare these
statements may significantly delay or essentially preclude consummation of an
acquisition. Acquisition prospects that do not have or are unable to obtain the
required audited statements may be inappropriate for acquisition so long as the
reporting requirements of the `34 Act are applicable.
We Have Not Conducted Market Research and Have Not Engaged a Marketing
Organization. We have neither conducted, nor have others made available to us,
results of market research indicating that market demand exists for the
transactions we contemplate. Moreover, we do not have, and do not plan to
establish, a marketing organization. Even if demand is identified for a merger
or acquisition, we cannot assure you that we will be successful in completing a
business combination.
Our Proposed Operations Lack Diversification. Our proposed operations, even if
successful, will in all likelihood result in our engaging in a business
combination with a business opportunity. Consequently, our activities may be
limited to those engaged in by business opportunities that we merge with or
acquire. Our inability to diversify its activities into a number of areas may
subject us to economic fluctuations within a particular business or industry and
therefore increase the risks associated with our operations.
We may be Subject to Further Government Regulation. Although we will be subject
to the reporting requirements under the `34 Act, as amended, management believes
we will not be subject to regulation under the `40 Act, as amended, since we
will not be engaged in the business of investing or trading in securities. If we
engage in business combinations which result in our holding passive investment
interests in a number of entities, we could be subject to regulation under the
`40 Act. If so, we would be required to register as an investment company and
could be expected to incur significant registration and compliance costs. We
have obtained no formal determination from the Securities and Exchange
Commission as to our status under the `40 Act and, consequently, violation of
the Act could subject us to material adverse consequences.
If We Enter into a Business Combination With Foreign Concern, we will be Subject
to Risks Inherent in Business Operations Outside of the United States. These
risks include, for example, currency fluctuations, regulatory problems, punitive
tariffs, unstable local tax policies, trade embargoes, risks related to shipment
of raw materials and finished goods across national borders and cultural and
language differences. Foreign economies may differ favorably or unfavorably from
the United States economy in growth of gross national product, rate of
inflation, market development, rate of savings and capital investment, resource
self-sufficiency and balance of payments positions, and in other respects.
You Will Experience a Reduction of Your Percentage Share Ownership Following a
Business Combination. Our primary plan of operation is based upon a business
combination with a private concern that, in all likelihood, would result in the
issuance of our securities to the shareholders of the private company. The
issuance of previously authorized and unissued common stock would result in
reduction in percentage of shares owned by present and prospective shareholders
of the Company and may result in a change in control or management.
9
Even if we are successful in completing a merger or acquisition, we may not be
successful in listing our shares on a public market. Until our shares are listed
on a public market, you have no liquidity to sell your shares and you will not
be able to obtain a return on your investment. If our shares are never listed on
a public market, it may be impossible for you to recover the money you invested
in our shares. The following states restrict the sale and resale of shares of
blank check companies: Alaska, Arizona, Idaho, Illinois, Iowa, Kansas, Kentucky,
Maryland, Massachusetts, Missouri, Nebraska, North Dakota, Pennsylvania, South
Dakota, Tennessee, Utah, Vermont and Washington. You are unable to liquidate
your investment by selling our shares in these states.
The Requirement of Audited Financial Statements May Disqualify Potential
Business Opportunities. Management believes that any potential business
opportunity must provide audited financial statements for review for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with us, rather than incur the expenses associated with preparing
audited financial statements.
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419 DEPOSIT OF
OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deduction for underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by you and other investors in this offering, be deposited
into an escrow or trust account governed by an agreement that contains certain
terms and provisions specified by Rule 419. Under Rule 419, the funds will be
released to us and the securities will be released to you only after we have met
the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or asset
that will constitute our business and for which the fair value of the business
or net assets to be acquired represents at least 80% of the maximum offering
proceeds, but excluding underwriting commissions, underwriting expenses and
dealer allowances, if any.
Second, we must file a post-effective amendment to the registration statement
that includes the results of this offering including, but not limited to, the
gross offering proceeds raised to date, the amounts paid for underwriting
commissions, underwriting expenses and dealer allowances, if any, amounts
dispersed to us and amounts remaining in the escrow account. In addition, we
must disclose the specific amount, use and appropriation of funds disbursed to
us to date, including, payments to officers, directors, controlling shareholders
or affiliates, specifying the amounts and purposes of these payments, and the
terms of a reconfirmation offer that must contain conditions prescribed by the
rules. The post-effective amendment must also contain information regarding the
acquisition candidate and business, including audited financial statements.
Third, we will mail to each investor within five business days of a
post-effective amendment, a copy of the prospectus contained therein. The
Reconfirmation Offering shall be made as described under "Prospectus Summary;
Reconfirmation Offering. " After we submit a signed representation to the escrow
agent that the requirements of Rule 419 have been met and after the acquisition
is closed, the escrow agent can release the funds and securities.
10
Accordingly, we have entered into an escrow agreement with City National Bank,
Los Angeles, California, which provides that:
The proceeds are to be deposited into the escrow account maintained by
the escrow agent promptly upon receipt. While Rule 419 permits 10% of
the funds to be released to us prior to the reconfirmation offering, we
do not intend to release these funds. The funds and any dividends or
interest thereon, if any, are to be held for the sole benefit of the
investor and can only be invested in bank deposit, in money market
mutual funds, federal government securities or securities for which the
principal or interest is guaranteed by the federal government.
All securities issued for the offering and any other securities issued,
including stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. Your
name must be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account
are to remain as issued, and are to be held for your sole benefit. You
retain the voting rights, if any, to the securities held in your name.
The securities held in the escrow account may neither be transferred or
disposed of nor any interest created in them other than by will or the
laws of descent and distribution, or under a qualified domestic
relations order as defined by the Internal Revenue Code of 1986 or
Table 1 of the Employee Retirement Income Security Act.
Warrants, convertible securities or other derivative securities
relating to securities held in the escrow account may be exercised or
converted in accordance with their terms, provided that, however, the
securities received upon exercise or conversion, together with any cash
or other consideration paid for the exercise or conversion, are to be
promptly deposited into the escrow account.
DILUTION
The difference between the initial public offering price per share of common
stock and the net tangible book value per share after this offering constitutes
the dilution to investors in this offering. Net tangible book value per share of
common stock is determined by dividing our net tangible book value (total
tangible assets less total liabilities) by the number of shares of common stock
outstanding.
As of March 31, 2001, our net tangible book value was $0.00 or $0.00 per share
of common stock. Net tangible book value represents the amount of our total
assets, less any intangible assets and total liabilities. After giving effect to
the sale of the 500,000 shares of common stock offered through this prospectus
(at an initial public offering price of $0.10 per share), and after deducting
estimated expenses of the offering), our adjusted pro forma net tangible book
value as of March 31, 2001, would have been $40.421 or $0.0404 per share. This
represents an immediate increase in net tangible book value of $0.0404 per share
to existing shareholders and
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an immediate dilution of $(0.0596) per share to investors in this offering. The
following table illustrates this per share dilution:
Public offering price per share $ 0.10
Net tangible book value per share before offering $ 0.00
Increase per share attributable to new investors $ 0.0404
Dilution per share to new investors $(0.0596)
- --------------------------------------------------------------------------------
NUMBER OF SHARES BEFORE MONEY RECEIVED FOR SHARES NET TANGIBLE BOOK VALUE PER
OFFERING BEFORE OFFERING SHARE BEFORE OFFERING
- --------------------------------------------------------------------------------
500,000 $0.00 $0.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER OF SHARES TOTAL AMOUNT OF MONEY PRO-FORMA NET TANGIBLE BOOK
AFTER OFFERING RECEIVED FOR SHARES VALUE PER SHARE AFTER OFFERING
- --------------------------------------------------------------------------------
1,000,000 $50,000 $0.0404
- --------------------------------------------------------------------------------
As of the date of this prospectus, the following table sets forth the percentage
of equity to be purchased by investors in this offering compared to the
percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the shares by the investors in this offering as
compared to the total consideration paid by our present stockholders.
- ----------------------------------------------------------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
PRICE
- ----------------------------------------------------------------------------------------------------------
NUMBER PERCENT AMOUNT PERCENT PAID PER
SHARE
- ----------------------------------------------------------------------------------------------------------
New Investors 500,000 50% $50,000 99% $ 0.10
- ----------------------------------------------------------------------------------------------------------
Existing Shareholders 500,000 50% $ 50 1% $.0001
- ----------------------------------------------------------------------------------------------------------
USE OF PROCEEDS
The gross proceeds of this offering will be $50,000. Rule 419 permits 10% of the
funds $(5,000) to be released from escrow to us prior to the reconfirmation of
the offering. However, we do not intend to request release of these funds. This
offering is not contingent on a minimum member of shares to be sold and will be
sold on a first come, first served basis. If subscriptions exceed the amount
being offered, these excess subscriptions will be promptly refunded without
deductions for commissions or expenses. Accordingly, we will receive these funds
in the event a business combination is closed in accordance with Rule 419.
We have not incurred and do not intend to incur in the future any debt from
anyone other than management for our organizational activities. Debt to
management will not be repaid. Management is not aware of any circumstances that
would change this policy. Accordingly, no portion of the proceeds are being used
to repay debt. It is anticipated that management will pay the expenses of the
offering, estimated to be $9,579.20.
Under Rule 419, after the reconfirmation offering and the closing of the
business combination, and assuming the sale of all the shares in this offering,
$50,000, plus any dividends received, but less any amount returned to investors
who did not reconfirm their investment under Rule 419, will be released to us.
12
Assuming Maximum Offering
Amount Percent
------ -------
Offering Expenses $ 9,579.20 19.15%
Working Capital $40,420.80 80.85%
Total $50,000 100%
Offering costs include filing, printing, legal, accounting, transfer agent and
escrow agent fees.
If less than the maximum proceeds are raised, a greater portion of this accrued
liability will have to be borne by the acquisition candidate as a condition of
the merger. Management believes that this is in our best interest, because it
reduces the amount of liabilities an acquisition candidate must assume in the
merger, and thus, may facilitate an acquisition transaction.
All offering proceeds will be held in escrow pending a business combination. We
will not request a release of 10% of these funds under Rule 419.
The proceeds received in this offering will be put into the escrow account
pending closing of a business combination and reconfirmation. These funds will
be in an insured financial institution in either a certificate of deposit,
interest bearing savings account or in short term federal government securities
as placed by City National Bank.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2001.
Stockholders' equity:
common stock, $.001 par value;
authorized 100,000,000 shares,
issued and outstanding
500,000 shares and 1,000,000
shares, pro-forma as adjusted 0
Additional paid-in capital 0
Deficit accumulated during the
development period (12,983)
Total stockholders equity 0
Total Capitalization 0
13
DESCRIPTION OF BUSINESS
Solid Management Corp. (referred to as "us," "we" or "our"), was incorporated on
July 18, 1997 under the laws of the State of Nevada to engage in any lawful
corporate purpose. Other than issuing shares to its shareholders, we never
commenced any other operational activities. We can be defined as a "blank check"
company, whose sole purpose at this time is to locate and consummate a merger or
acquisition with a private entity. The Board of Directors has elected to
commence implementation of our principal business purpose, described below under
"Plan of Operation."
The proposed business activities classifies us as a "blank check" company. The
Securities and Exchange Commission defines these companies as "any development
stage company that is issuing a penny stock (within the meaning of section 3
(a)(51) of the Securities Exchange Act of 1934) and that has no specific
business plan or purpose, or has indicated that its business plan is to merge
with an unidentified company or companies. "Many states have enacted statutes,
rules and regulations limiting the sale of securities of "blank check" companies
in their respective jurisdictions. Management does not intend to undertake any
efforts to cause a market to develop in our securities, either debt or equity,
until we have successfully implemented our business plan. We intend to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.
Lock-up Agreement
- -----------------
Each of our shareholders has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of common
stock until we have successfully consummated a merger or acquisition and we are
no longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in our securities until a merger or
acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with our legal counsel, Foley & Lardner, who will
not release these respective certificates until they have confirmed that a
merger or acquisition was successfully consummated. However, while management
believes that the procedures established to preclude any sale of our securities
prior to closing of a merger or acquisition will be sufficient, we cannot assure
you that the procedures established will unequivocally limit any shareholder's
ability to sell their respective securities before a closing.
Investment Company Act of 1940
- ------------------------------
Although we will be subject to regulation under the Securities Act of 1933, as
amended (the "`33 Act"), and the Securities Exchange Act of 1934, as amended
(the "`34 Act"), management believes we will not be subject to regulation under
the Investment Company Act of 1940, as amended (the "`40 Act"), since we will
not be engaged in the business of investing or trading in securities. In the
event we engage in business combinations that result in our holding passive
14
investment interests in a number of entities, we could be subject to regulation
under the `40 Act. If that occurs, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to our status under the `40 Act and, consequently, a
violation of the Act could subject us to material adverse consequences.
Investment Advisors Act of 1940
- -------------------------------
Under Section 202(a)(11) of the Investment Advisors Act of 1940, as amended, an
"investment adviser" means any person who, for compensation, engages in the
business of advising others, either directly or through publications or
writings, as to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports concerning
securities. We seek to locate a suitable merger of acquisition candidate, and we
do not intend to engage in the business of advising others in investment matters
for a fee or other type of consideration.
Forward Looking Statements
- --------------------------
Because we desire to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"), we caution
readers regarding forward looking statements found in the following discussion
and elsewhere in this registration statement and in any other statement made by,
or on our behalf, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and that relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward looking statements made by or on our behalf.
We disclaim any obligation to update forward looking statements. Readers should
also understand that under Section 27A(b)(2)(D) of the `33 Act, and Section
21E(b)(2)(D) of the `34 Act, the "safe harbor" provisions of the PSLRA do not
apply to statements made in connection with our offering.
PLAN OF OPERATION
We intend to seek to acquire assets or shares of an entity actively engaged in a
business that generates revenues, in exchange for its securities. We have not
identified a particular acquisition target and have not entered into any
negotiations regarding an acquisition. As soon as this registration statement
becomes effective under Section 12 of the `34 Act, we intend to contact
investment bankers, corporate financial analysts, attorneys and other investment
industry professionals through various media. None of our officers, directors,
promoters or affiliates have engaged in any preliminary contact or discussions
with any representative of any other company regarding the possibility of an
acquisition or merger with us as of the date of this registration statement.
15
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing how the transaction is structured, our Board
of Directors expects that it will provide our shareholders with complete
disclosure documentation concerning a potential business opportunity and the
structure of the proposed business combination prior to consummation. Disclosure
is expected to be in the form of a proxy or information statement, in addition
to the post-effective amendment.
While any disclosure must include audited financial statements of the target
entity, we cannot assure you that such audited financial statements will be
available. As part of the negotiation process, the Board of Directors does
intend to obtain certain assurances of value, including statements of assets and
liabilities, material contracts, accounts receivable statements, or other
indicia of the target entity's condition prior to consummating a transaction,
with further assurances that an audited statement would be provided prior to
execution of a merger or acquisition agreement. Closing documents will include
representations that the value of the assets transferred will not materially
differ from the representations included in the closing documents, or the
transaction will be voidable.
Due to our intent to remain a shell corporation until a merger or acquisition
candidate is identified, it is anticipated that its cash requirements shall be
minimal, and that all necessary capital, to the extent required, will be
provided by the directors or officers. We do not anticipate that we will have to
raise capital in the next twelve months. We also do not expect to acquire any
plant or significant equipment.
We have not, and do not intend to enter into, any arrangement, agreement or
understanding with non-management shareholders allowing non-management
shareholders to directly or indirectly participate in or influence our
management of the Company. Management currently holds 60.8% of our stock. As a
result, management is in a position to elect a majority of the directors and to
control our affairs.
We have no full time employees. Our President and Secretary have agreed to
allocate a portion of their time to our activities, without compensation. These
officers anticipate that our business plan can be implemented by their devoting
approximately five (5) hours each per month to our business affairs and,
consequently, conflicts of interest may arise with respect to their limited time
commitment. We do not expect any significant changes in the number of employees.
Our officers and directors may become involved with other companies who have a
business purpose similar to ours. As a result, potential conflicts of interest
may arise in the future. If a conflict does arise and an officer or director is
presented with business opportunities under circumstances where there may be a
doubt as to whether the opportunity should belong to us or another "blank check"
company they are affiliated with, they will disclose the opportunity to all the
companies. If a situation arises where more than one company desires to merge
with or acquire that target company and the principals of the proposed target
company have no preference as to which company will merge with or acquire the
target company, the company that first filed a registration statement with the
Securities and Exchange Commission will be entitled to proceed with the proposed
transaction.
16
General Business Plan
- ---------------------
Our purpose is to seek, investigate and, if investigation warrants, acquire an
interest in business opportunities presented to it by persons or firms that
desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to restrict our discretion to search for
and enter into potential business opportunities. Management anticipates that it
may be able to participate in only one potential business venture because we
have nominal assets and limited financial resources. See the financial
statements at page F-1 of this prospectus. This lack of diversification should
be considered a substantial risk to our shareholders because it will not permit
us to offset potential losses from one venture against gains from another.
We may seek a business opportunity with entities that have recently commenced
operations, or that wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes. We may acquire assets
and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity will be complex and
extremely risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available capital,
management believes that there are numerous firms seeking the perceived benefits
of a publicly registered corporation. The perceived benefits may include
facilitating or improving the terms for additional equity financing that may be
sought, providing liquidity for incentive stock options or similar benefits to
key employees, providing liquidity (subject to restrictions of applicable
statutes) for all shareholders and other factors. Potentially, available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of these business opportunities extremely difficult
and complex.
We have, and will continue to have, no capital to provide the owners of business
opportunities with any significant cash or other assets. However, management
believes we will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in a publicly registered
company without incurring the cost and time required to conduct an initial
public offering. The owners of the business opportunities will, however, incur
significant legal and accounting costs in connection with acquisition of a
business opportunity, including the costs of preparing Form 8-K's, 10-K's or
10-KSBs, 10-Q's or 10-QSBs, agreements and related reports and documents. The
`34 Act specifically requires that any merger or acquisition candidate comply
with all applicable reporting requirements, which include providing audited
financial statements to be included within the numerous filings relevant to
complying with the `34 Act. Nevertheless, our officers and directors have not
conducted market research and are not aware of statistical data that would
support the perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.
17
The analysis of new business opportunities will be undertaken by our officers
and directors, none of whom is a professional business analyst. Management
intends to concentrate on identifying preliminary prospective business
opportunities that may be brought to our attention through present associations
of our officers and directors, or by our shareholders. In analyzing prospective
business opportunities, management will consider:
* the available technical, financial and managerial resources;
* working capital and other financial requirements;
* history of operations, if any;
* prospects for the future;
* nature of present and expected competition;
* the quality and experience of management services that may be
available and the depth of that management;
* the potential for further research, development, or
exploration;
* specific risk factors not now foreseeable but could be
anticipated to impact our proposed activities;
* the potential for growth or expansion;
* the potential for profit;
* the perceived public recognition of acceptance of products,
services, or trades;
* name identification; and
* other relevant factors.
Our officers and directors expect to meet personally with management and key
personnel of the business opportunity as part of their "due diligence"
investigation. To the extent possible, we intend to utilize written reports and
personal investigations to evaluate the above factors. We will not acquire or
merge with any company that cannot provide audited financial statements within a
reasonable period of time after closing of the proposed transaction.
Our management, while probably not especially experienced in matters relating to
our prospective new business, shall rely upon their own efforts and, to a much
lesser extent, the efforts of our shareholders, in accomplishing our business
purposes. We do not anticipate that any outside consultants or advisors, except
for our legal counsel and accountants, will be utilized by us to accomplish our
business purposes. However, if we do retain an outside consultant or advisor,
any cash fee will be paid by the prospective merger/acquisition candidate, as we
have no cash assets. We have no contracts or agreements with any outside
consultants and none are contemplated.
18
We will not restrict our search for any specific kind of firms, and may acquire
a venture that is in its preliminary or development stage or is already
operating. We cannot predict at this time the status of any business in which we
may become engaged, because the business may need to seek additional capital,
may desire to have its shares publicly traded, or may seek other perceived
advantages that we may offer. Furthermore, we do not intend to seek capital to
finance the operation of any acquired business opportunity until we have
successfully consummated a merger or acquisition.
We anticipate that we will incur nominal expenses in the implementation of its
business plan. Because we has no capital to pay these anticipated expenses,
present management will pay these charges with their personal funds, as interest
free loans, for a minimum of twelve months from the date of this registration
statement. If additional funding is necessary, management and or shareholders
will continue to provide capital or arrange for additional outside funding.
However, the only opportunity that management has to have these loans repaid
will be from a prospective merger or acquisition candidate. Management has no
agreements with us that would impede or prevent consummation of a proposed
transaction. We cannot assure, however, that management will continue to provide
capital indefinitely if a merger candidate cannot be found. If a merger
candidate cannot be found in a reasonable period of time, management may be
required reconsider its business strategy, which could result in our
dissolution.
A business combination involving the issuance of our common stock will, in all
likelihood, result in shareholders of a private company obtaining a controlling
interest in the Company. If that occurs, management may be required to sell or
transfer all or a portion of the Company's common stock held by them, or resign
as members of the Board of Directors of the Company. The resulting change in
control could result in removal of one or more present officers and directors
and a corresponding reduction in or elimination of their participation in our
future affairs.
Acquisition of Opportunities
- ----------------------------
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. It may also acquire stock or
assets of an existing business. On the consummation of a transaction, it is
probable that our present management and shareholders will no longer be in
control. In addition, our directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
shareholders. Furthermore, management may negotiate or consent to the purchase
of all or a portion of our stock. Any terms of sale of the shares presently held
by officers and/or directors will be also afforded to all other shareholders on
similar terms and conditions. Any and all sales will only be made in compliance
with the securities laws of the United States and any applicable state.
While the actual terms of a transaction that management may not be a party to
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In that event, our shareholders would retain 20% or less of the issued
and outstanding shares of the surviving entity, which would result in
significant dilution in the equity of the shareholders.
19
As part of the "due diligence" investigation, our officers and directors will
meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis of verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures to the extent of our limited financial
resources and management expertise. How we will participate in an opportunity
will depend on the nature of the opportunity, the respective needs and desires
of the parties, the management of the target company and our relative
negotiation strength.
With respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of our Company that the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will probably hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our then shareholders.
We will participate in a business opportunity only after the negotiation and
execution of appropriate written agreements. Although we cannot predict the
terms of the agreements, generally the agreements will require some specific
representations and warranties by all of the parties, will specify certain
events of default, will detail the terms of closing and the conditions that must
be satisfied by each of the parties prior to and after the closing, will outline
the manner of bearing costs, including costs associated with our attorneys and
accountants, will set forth remedies on default and will include miscellaneous
other terms.
As stated previously, we will not acquire or merge with any entity that cannot
provide independent audited financial statements concurrent with the closing of
the proposed transaction. We are subject to the reporting requirements of the
`34 Act. Included in these requirements is our affirmative duty to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as our audited financial statements included in our annual
report on Form 10-KSB and quarterly reports on Form 10-QSB. If the audited
financial statements are not available at closing, or if the audited financial
statements provided do not conform to the representations made by the candidate
to be acquired in the closing documents, the closing documents will provide that
the proposed transaction will be voidable at the discretion of our present
management. If the transaction is voided, the agreement will also contain a
provision providing for the acquisition entity to reimburse us for all costs
associated with the proposed transaction.
Competition
- -----------
We will remain an insignificant participant among the firms that engage in the
acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we do. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to our
competitors.
20
DESCRIPTION OF PROPERTY
We have no properties and at this time have no agreements to acquire any
properties.
We operate from our offices at Suite 300, 1286 Homer Street, Vancouver, British
Columbia, Canada. Space is provided to us on a rent free basis by Ms. Carley,
our sole officer and director, and it is anticipated that this arrangement will
remain until we successfully consummate a merger or acquisition. Management
believes that this space will meet our needs for the foreseeable future.
PRINCIPAL SHAREHOLDERS
The table below lists the beneficial ownership of our voting securities by each
person known by us to be the beneficial owner of more than 5% of our securities,
as well as the securities beneficially owned by all our directors and officers.
Unless specifically indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Directors, Officers Shares Beneficially Owned Shares to be Beneficially Owned
And 5% Stockholders Prior to Offering After Offering
Number Percent Number Percent
------ ------- ------ -------
Devinder Randhawa 152,000 30.4% 152,000 15.2%
Suite 104, 1456 St. Paul Street
Kelowna, British Columbia
Canada V1Y 2E6
Bob Hemmerling 152,000 30.4% 152,000 15.2%
Suite 104, 1456 St. Paul Street
Kelowna, B.C.
Canada V1Y 2E6
All directors and officers as a 304,000 60.8% 304,000 30.4%
group (2 persons)
All shares shown above are Common Stock. The balance of the Company's
outstanding Common stock are held by 8 persons. On September 6, 2000, we forward
split our 500,000 issued common shares on a 1 for 20 basis such that our issued
share capital increased to 10,000,000 common shares. On October 17, 2000, we
reversed the previous forward split to return our issued share capital to
500,000 common shares.
21
MANAGEMENT
Our director and officer is as follows:
Name Age Position
- ---- --- --------
Andrea Carley 30 President, C.F.O., Secretary,
Treasurer, Director
The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining Directors. Our officers serve at the will of the Board of
Directors. There are no family relationships between any executive officer and
director.
Andrea Carley, President, Chief Financial Officer, Secretary, Treasurer and
Director, was appointed to her positions with the Company on March 30, 2000.
Prior to joining the Company, Ms. Carley was employed full time managing her
investment portfolio.
Prior "Blank Check" Experience
- ------------------------------
Ms. Carley has no prior experience as an officer or director of a blank check
company.
Conflicts of Interest
- ---------------------
Members of our management are associated with other firms involved in a range of
business activities. Consequently, there are potential inherent conflicts of
interest in their acting as officers and directors. Because the officers and
directors are engaged in other business activities, management anticipates it
will devote only a minor amount of time to our affairs.
Our officers and directors are now and may in the future become shareholders,
officers or directors of other companies that may be formed for the purpose of
engaging in business activities similar to those conducted by us. Accordingly,
additional direct conflicts of interest may arise in the future with respect to
individuals acting on our behalf or other entities. Moreover, additional
conflicts of interest may arise with respect to opportunities that come to the
attention of these individuals in the performance of their duties. We do not
currently have a right of first refusal pertaining to opportunities that come to
management's attention where the opportunity may relate to our proposed business
operations.
The officers and directors are, so long as they remain officers or directors,
subject to the restriction that all opportunities contemplated by our plan of
operation that come to their attention, either in the performance of their
duties or in any other manner, will be considered opportunities of, and be made
available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of the officer or director. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to those
transactions.
22
EXECUTIVE COMPENSATION
None of our officers and/or directors have received any compensation for their
respective services rendered unto us. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until we have generated revenues from operations after consummation of
a merger or acquisition. As of the date of this registration statement, we have
no funds available to pay directors. Further, none of the directors are accruing
any compensation pursuant to any agreement with us.
It is possible that, after we successfully consummate a merger or acquisition
with an unaffiliated entity, that entity may desire to employ or retain one or a
number of members of our management for the purposes of providing services to
the surviving entity. However, we have adopted a policy whereby the offer of any
post-transaction employment to members of management will not be a consideration
in our decision to undertake any proposed transaction. Each member of management
has agreed to disclose to the Board of Directors any discussions concerning
possible employment by any entity that proposes to undertake a transaction with
us and further, to abstain from voting on the transaction. Therefore, as a
practical matter, if each member of the Board of Directors is offered employment
in any form from any prospective merger or acquisition candidate, the proposed
transaction will not be approved by the Board of Directors as a result of the
inability of the Board to affirmatively approve the transaction. The transaction
would then be presented to our shareholders for approval.
It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to us. In the event we consummate a transaction
with any entity referred by associates of management, it is possible that the
associate will be compensated for their referral in the form of a finder's fee.
It is anticipated that this fee will be either in the form of restricted common
stock issued by us as part of the terms of the proposed transaction, or will be
in the form of cash consideration. However, if compensation is in the form of
cash, payment will be tendered by the acquisition or merger candidate, because
we have insufficient cash available. The amount of any finder's fee cannot be
determined as of the date of this registration statement, but is expected to be
comparable to consideration normally paid in like transactions, which range up
to ten (10%) percent of the transaction price. No member of management will
receive any finders fee, either directly or indirectly, as a result of their
respective efforts to implement our business plan.
No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by the Company for the benefit of its
employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
23
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there has been no
trading market to date. Management has not undertaken any discussions with any
prospective market maker concerning the participation in the aftermarket for our
securities and management does not intend to initiate any discussions until we
have consummated a merger or acquisition. We cannot guarantee that a trading
market will ever develop or if a market does develop, that it will continue.
Market Price
- ------------
Our common stock is not quoted at the present time. The Securities and Exchange
Commission has adopted a Rule that established the definition of a "penny
stock," for purposes relevant to us, as any equity security that has a market
price of less than $5.00 per share or with an exercise price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require: (i) that a broker or dealer approve a
person's account for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth
the identity and quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock market, which, in
highlight form, (i) sets forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure also
has to be made about the risks of investing in penny stock in both public
offering and in secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate that will allow our securities to be traded
without the aforesaid limitations. However, we cannot predict whether, upon a
successful merger or acquisition, we will qualify our securities for listing on
Nasdaq or some other national exchange, or be able to maintain the maintenance
criteria necessary to insure continued listing. Failure to qualify our
securities or to meet the relevant maintenance criteria after qualification in
the future may result in the discontinuance of the inclusion of our securities
on a national exchange. However, trading, if any, in our securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, our securities.
24
Escrow
- ------
The common stock under this offering will remain in escrow until our closing of
a business combination under the requirements of Rule 419. There are currently
ten holders of our outstanding common stock. The outstanding common stock was
sold in reliance upon an exemption from registration contained in Section 4(2)
of the Securities Act. Assuming our officer, director, current shareholders and
any of their affiliates or associates purchase 80% of the shares in this
offering, although this is not their current intention, current Shareholders
will own 94.29% of the outstanding shares upon completion of the offering.
Holders
- -------
There are ten (10) holders of our common stock. In July 1997, we issued 500,000
of common stock for services in formation and organization valued at $.0001 per
share ($50.00). On September 6, 2000, we forward split our common stock on a 1
for 20 basis increasing our issued share capital to 10,000,000 common shares. On
October 17, 2000, we reversed our previous share split returning our issued
share capital to 500,000 shares. All of our issued and outstanding shares of
common stock were issued in accordance with the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933.
As of the date of this report, all of our common stock are eligible for sale
under Rule 144 promulgated under the `33 Act, as amended, subject to certain
limitations included in said Rule. In general, under Rule 144, a person (or
persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three-month period a
number of shares that does not exceed the greater of one percent of the then
outstanding common stock or the average weekly trading volume during the four
calendar weeks prior to the sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate.
Penny Stock Regulation
- ----------------------
For transactions covered by Rule 15g-9 under the `34 Act, a broker-dealer must
furnish to all investors in penny stocks, a risk disclosure document required by
the rule, make a special suitability determination of the purchaser and have
received the purchaser's written agreement to the transaction prior to the sale.
In order to approve a person's account for transactions in penny stock, the
broker or dealer must (i) obtain information concerning the person's financial
situation, investment experience and investment objectives; (ii) reasonably
determine, based on the information required by paragraph (i) that transactions
in penny stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably may be
expected to be capable of evaluating the rights of transactions in penny stock;
and (iii) deliver to the person a written statement setting forth the basis on
which the broker or dealer made the determination required by paragraph (ii) in
this section, stating in a highlighted format that it is unlawful for the broker
or dealer to effect a transaction in a designated security
25
subject to the provisions of paragraph (ii) of this section unless the broker or
dealer has received, prior to the transaction, a written agreement to the
transaction from the person; and stating in a highlighted format immediately
preceding the customer signature line that the broker or dealer is required to
provide the person with the written statement and the person should not sign and
return the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement.
A penny stock means any equity security other than a security (i) registered, or
approved for registration upon notice of issuance on a national securities
exchange that makes transaction reports available pursuant to 17 CFR 11Aa3-1
(ii) authorized or approved for authorization upon notice of issuance, for
quotation on the Nasdaq NMS; (iii) that has a price of five dollars or more or
(iv) whose issuer has net tangible assets in excess of $2,000,000 demonstrated
by financial statements dated less than fifteen months previously that the
broker or dealer has reviewed and has a reasonable basis to believe are true and
complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities.
Dividends
- ---------
We have not paid any dividends to date, and have no plans to do so in the
immediate future.
Transfer Agent
- --------------
Our transfer agent is The Nevada Agency and Trust Company of Suite 880, Bank of
America Plaza, 50 West Liberty Street, Reno, Nevada, 89501.
Late Filings
- ------------
Our quarterly report on Form 10-QSB for the period ending September 30, 1999 was
filed on November 17, 1999, 4 days late. A notice of late filing was filed with
the Commission on November 17, 1999, 2 days after the due date. We experienced a
delay in obtaining the information we required to complete the report.
Our annual report on Form 10-KSB for the period ending March 31, 2000 was filed
on July 14, 2000, 14 days late. A notice of late filing was filed with the
commission on June 30, 2000. We experienced a delay in obtaining the information
we required to complete the report.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common stock,
par value $.0001 per share. There are 500,000 shares of common stock issued and
outstanding as of the date of this filing.
26
Common Stock
- ------------
All shares of common stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to be voted upon
by shareholders. The shares of common stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully paid and
nonassessable shares. Cumulative voting in the election of directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event of liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of funds
legally available therefor. We have no intention to issue additional shares of
stock.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act. Under Rule 144 of the Securities Act, if all the shares being
offered are sold, the holders of the restricted securities may each sell a
portion of their shares during any three (3) month period after September 15,
2000. We are offering 500,000 shares of our common stock at $0.10 per share.
Dilution to the investors in this offering shall be approximately $(0.0596) per
share.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot assure you
that a significant public market for our common stock will be developed or be
sustained after this offering. Sales of substantial amounts of common stock in
the public market after this offering, or the possibility of substantial sales
occurring, could adversely affect prevailing market prices for the common stock
or our future ability to raise capital through an offering of equity securities.
Upon completion of this offering, we will have 1,000,000 shares outstanding. The
500,000 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act unless purchased by
"affiliates" of Solid Management Corp., as that term is defined in Rule 144
under the Securities Act ("Rule 144") described below. Sales of outstanding
shares to residents of certain states or jurisdictions may only be effected
pursuant to a registration in or applicable exemption from the registration
provisions of the securities laws of those states or jurisdictions.
The remaining 500,000 shares of common stock outstanding upon completion of this
Offering, which are held of record by stockholders prior to this Offering are
"restricted securities" and may not be sold in a public distribution except in
compliance with the registration requirements of the Securities Act or an
applicable exemption under the Securities Act, including an exemption pursuant
to Rule 144. In general, under Rule 144 as in effect at the closing of this
offering, beginning 90 days after the date of this prospectus, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year (including the
27
holding period of any prior owner who is not an affiliate of Solid Management
Corp.) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the then outstanding
shares of common stock (10,000 shares immediately after this offering) or the
average weekly trading volume of the common stock during the four calendar weeks
preceding the filing of a Form 144 with respect to the sale. Sales under Rule
144 are also subject to certain manner of sale and notice requirements and to
the availability of current public information about Solid Management Corp..
Under Rule 144(k), a person who is not deemed to have been an affiliate of Solid
Management Corp. at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner who is not an affiliate of
Solid Management Corp.) is entitled to sell their shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144.
A substantial number of shares currently restricted from resale under Rule 144
will become freely tradeable 90 days after this offering. We are unable to
estimate the number of shares that will be sold under Rule 144, since this will
depend on the market price for the common stock, the personal circumstances of
the sellers and other factors. Sales of substantial amounts of shares in the
public market could adversely affect prevailing market prices and could impair
our future ability to raise capital through an offering of its equity
securities.
WHERE CAN YOU FIND MORE INFORMATION?
We are a reporting company, and are subject to the reporting requirements of the
Exchange Act. We voluntarily filed a Form 10-SB on August 4, 1999. We have filed
a registration statement with the SEC on form SB-2 to register the offer and
sale of the shares. This prospectus is part of that registration statement, and,
as permitted by the SEC's rules, does not contain all of the information in the
registration statement. For further information about us and the shares offered
under this prospectus, you may refer to the registration statement and to the
exhibits and schedules filed as a part of the registration statement. You can
review the registration statement and its exhibits and schedules at the public
reference facility maintained by the SEC at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
SEC at 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The registration statement is also available electronically on the World
Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may have. We'd
be pleased to speak with you about any aspect of our business and this offering.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing audited
financial statements as soon as practicable at the end of each fiscal year. Our
fiscal year ends on March 31.
28
PLAN OF DISTRIBUTION
We offer the right to purchase 500,000 shares at $0.10 per share. We propose to
offer the shares directly on a best efforts, no minimum basis, and no
compensation is to be paid to any person for the offer and sale of the shares.
We are selling the shares through our president without the use of a
professional securities underwriting firm. Consequently, there may be less due
diligence performed in conjunction with this offering than would be performed in
an underwritten offering. Although he is an associated person of us as that term
is defined in Rule 3a4-1 under the Exchange Act, he is deemed not to be a broker
for the following reasons:
He is not subject to a statutory disqualification as that term is defined in
Section 3(a)(39) of the Exchange Act at the time of his participation in the
sale of our securities.
He will not be compensated for his participation in the sale of our securities
by the payment of commission or other remuneration based either directly or
indirectly on transactions in securities.
He is not an associated person of a broker or dealers at the time of his
participation in the sale of our securities.
He will restrict his participation to the following activities:
A. Preparing any written communication or delivering any
communication through the mails or other means that does not
involve oral solicitation by him of a potential purchaser;
B. Responding to inquiries of potential purchasers in a
communication initiated by the potential purchasers, provided
however, that the content of responses are limited to information
contained in a registration statement filed under the Securities
Act or other offering document;
C. Performing ministerial and clerical work involved in effecting
any transaction.
As of the date of this Prospectus, no broker has been retained by us for the
sale of securities being offered. In the event a broker who may be deemed an
underwriter is retained by us, an amendment to our registration statement will
be filed.
Arbitrary Determination of Offering Price
- -----------------------------------------
The initial offering price of $0.10 per share has been arbitrarily determined by
us, and bears no relationship whatsoever to our assets, earnings, book value or
any other objective standard of value. Among the factors considered by us were:
A. The lack of operating history;
B. The proceeds to be raised by the offering;
C. The amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present
stockholders;
D. The current market conditions in the over-the-counter market
29
Method of Subscribing
- ---------------------
Persons may subscribe by filling in and signing the share purchase agreement and
delivering it, prior to the expiration date, to us. The purchase price of $0.10
per share must be paid by check, bank draft or postal express money order
payable in United States dollars to our order. You may not pay in cash.
LEGAL MATTERS
The validity of the shares offered under this prospectus is being passed upon
for us by Foley & Lardner of San Francisco, California.
EXPERTS
Our financial statements as of the period ended March 31, 2001, included in this
prospectus and in the registration statement, have been so included in reliance
upon the reports of Davidson and Company, Chartered Accountants, included in
this prospectus, and upon the authority of said firm as experts in accounting
and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our Bylaws, as
amended, set forth certain indemnification rights. Our Bylaws provide that we
will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification. See
Exhibit 3.1 hereto.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
The Nevada Revised Statutes, as amended, authorize us to indemnify any director
or officer under certain prescribed circumstances and subject to certain
limitations against certain costs and expenses, including attorneys' fees
actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
the person is a party by reason of being a director or officer if it is
determined that the person acted in accordance with the applicable standard of
conduct set forth in the statutory provisions. Our Articles of Incorporation
provides for the indemnification of directors and officers to the full extent
permitted by Nevada law.
We may also purchase and maintain insurance for the benefit of any director or
officer that may cover claims for situations where we could not provide
indemnification.
30
Although indemnification for liabilities arising under the `33 Act may be
permitted to officers, directors or persons controlling us under Nevada law, we
have been informed that in the opinion of the U.S. Securities and Exchange
Commission, this form of indemnification is against public policy as expressed
in the `33 Act, and is therefore unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace Kish, Leake &
Associates, P.C. as our principal accountants. The report of Kish, Leake &
Associates, P.C. on our financial statements did not contain an adverse opinion
or a disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. We had no disagreements with them on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. We did not consult with Cordovano & Harvey, P.C. on
any accounting or financial reporting matters in the periods prior to their
appointment. The change in accountants was approved by the Board of Directors.
We filed a Form 8-K with the Commission (File No. 000-26931) on January 24,
2000.
On June 19, 2000, the Registrant's directors resolved to change our accountant
from Cordovano & Harvey, P.C. (the "Former Accountant") to Davidson & Company,
Chartered Accountants. This resolution of our board of directors constitutes a
dismissal of the Former Accountant, however, we were in no way dissatisfied with
the professionalism or accounting work of the Former Accountant. The decision to
change our accountant was approved by the board of directors. There were no
disagreements with the Former Accountant whether or not resolved on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which if not resolved to the Former Accountant's
satisfaction would have caused it to make reference to the subject matter of the
disagreements in connection with its report. We filed a Form 8-K with the
Commission (File No. 000-26931) on June 21, 2000.
31
Financial Statements
The following financial statements for the year ended March 31, 2001 are
attached to this report and filed as a part of this Registration Statement and
reference is made to the financial statements for the three month period ended
June 30, 2000 filed with the SEC on Form 10QSB on August 10, 2000.
Independent Auditor's Report.................................................F-2
Balance Sheet as of March 31, 2001...........................................F-3
Statement of Operations as of March 31, 2001.................................F-4
Statement of Cash Flows as of March 31, 2001.................................F-5
Statement of Stockholders' Equity............................................F-6
Notes to Financial Statements as of March 31, 2001...................F-7 -- F-10
32
SOLID MANAGEMENT CORP.
(A Development Stage Company)
Financial Statements
MARCH 31, 2001
F-1
DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated Professionals
----- --------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
Solid Management Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of Solid Management Corporation
as at March 31, 2001 and 2000 and the related statements of operations,
stockholders' equity and cash flows for the years then ended and for the period
from inception on July 18, 1997 to March 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that Solid
Management Corporation will continue as a going concern. The Company is in the
development stage and does not have the necessary working capital for its
planned activity which raises substantial doubt about its ability to continue as
a going concern. Management's plans in regards to these matters are discussed in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Solid Management Corporation as at March 31,
2001 and 2000 and the results of its operations and its cash flows for the years
then ended and for the period from inception on July 18, 1997 to March 31, 2001
in conformity with generally accepted accounting principles in the United States
of America.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
June 26, 2001
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
F-2
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
BALANCE SHEETS
AS AT MARCH 31
============================================================================================================================
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS $ -- $ --
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 9,608 $ --
----------- -------------
STOCKHOLDERS' EQUITY
Capital stock (Note 4)
Authorized
100,000,000 common shares with a par value of $0.0001
Issued and outstanding
March 31, 2000 - 500,000 common shares
March 31, 2001 - 500,000 common shares 50 50
Additional paid in capital 26,735 12,933
Deficit accumulated during the development stage (36,393) (12,983)
----------- -------------
(9,608) --
----------- -------------
Total liabilities and stockholders' equity $ -- $ --
============================================================================================================================
On Behalf of the Board:
/s/Andrea Carley
- --------------------------
Andrea Carley, Director
The accompanying notes are an integral part of these financial statements.
F-3
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
================================================================================
Cumulative
Amounts
From Inception
on July 18,
1997 to Year Ended Year Ended
March 31, March 31, March 31,
2001 2001 2000
================================================================================
EXPENSES
Office and miscellaneous $ 5,646 $ 1,104 $ 4,492
Professional fees 30,747 22,306 8,441
- --------------------------------------------------------------------------------
LOSS FOR THE PERIOD $ (36,393) $ (23,410) $(12,933)
================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.05) $ (0.03)
================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 500,000 500,000
================================================================================
The accompanying notes are an integral part of these financial statements.
F-4
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
===================================================================================================================================
Cumulative
Amounts
From Inception
on July 18,
1997 to Year Ended Year Ended
March 31, March 31, March 31,
2001 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $(36,393) $(23,410) $(12,933)
Stock issued for services 50 -- --
Expenses paid by related entity on behalf of Company 26,735 13,802 12,933
Changes in non-cash operating assets and liabilities
Increase in accounts payable 9,608 9,608 --
-------- -------- --------
Net cash used in operating activities -- -- --
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities -- -- --
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities -- -- --
-------- -------- --------
CHANGE IN CASH POSITION DURING THE PERIOD -- -- --
CASH POSITION, BEGINNING OF THE PERIOD -- -- --
-------- -------- --------
CASH POSITION, END OF THE PERIOD $ -- $ -- $ --
===================================================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
Cash paid for income taxes $ -- $ -- $ --
Cash paid for interest -- -- --
===================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Common shares issued for services $ 50 $ -- $ --
Expenses paid by related entity on behalf of the Company 26,735 13,802 12,933
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-5
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
===================================================================================================================================
Deficit
Accumulated
During
Common Stock Additional the Total
Paid in Development Stockholders'
Shares Amount Capital Stage Equity
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 18, 1997 -- $ -- $ -- $ -- $ --
Capital stock issued for services 500,000 50 -- -- 50
Loss for the period -- -- -- (50) (50)
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 1998 500,000 50 -- (50) --
Loss for the year -- -- -- -- --
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 1999 500,000 50 -- (50) --
Shareholder capital contribution -- -- 12,933 -- 12,933
Loss for the year -- -- -- (12,933) (12,933)
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 2000 500,000 50 12,933 (12,983) --
Shareholder capital contribution -- -- 13,802 -- 13,802
Loss for the year -- -- -- (23,410) (23,410)
-------- -------- -------- -------- --------
BALANCE, MARCH 31, 2001 500,000 $ 50 $ 26,735 $(36,393) $ (9,608)
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-6
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2001
================================================================================
1. ORGANIZATION OF THE COMPANY
Solid Management Corporation ("the Company") was incorporated on July
18, 1997 under the laws of Nevada to engage in any lawful business or
activity for which corporations may be organized under the laws of the
State of Nevada.
The Company entered the development stage in accordance with Statement
of Financial Accounting Standards No. 7 on July 18, 1997. Its purpose
is to evaluate, structure and complete a merger with, or acquire a
privately owned corporation.
The Company is a "Blank Check" company which plans to search for a
suitable business to merge with or acquire. Operations since
incorporation consisted primarily of obtaining capital contributions by
the initial investors and activities regarding the registration of the
offering with the Securities and Exchange commission.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has no current
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The
Company's management plans on advancing funds on an as needed basis and
in the longer term, revenues from the operations of the merger or
acquisition candidate, if found. The Company's ability to continue as a
going concern is dependent on these additional management advances,
and, ultimately, upon achieving profitable operations through a merger
or acquisition candidate.
3. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the year. Actual results could differ from
these estimates.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). Under SFAS 128, basic and diluted earnings per
share are to be presented. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding in the period. Diluted
earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive
common shares.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts payable. Unless
otherwise noted, it is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
F-7
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2001
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expenses (benefit) result from the net
change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of March 31, 2001.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, the FASB issued SFAS
137 to defer the effective date of SFAS 133 to fiscal quarters of
fiscal years beginning after June 15, 1999. In June 2000, the FASB
issued SFAS No. 138, which is a significant amendment to SFAS 133. The
Company does not anticipate that the adoption of these statements will
have a significant impact on its financial statements.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
4. CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of common stock, with a par value of $0.0001 per share. All shares of
common stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no
pre-emptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non-assessable shares. Holders of the
common stock are entitled to share pro-rata in dividends and
distributions with respect to the common stock, as may be declared by
the Board of Directors out of funds legally available.
On July 18, 1997, the Company issued 500,000 shares of common stock for
services at a deemed value of $50.
F-8
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2001
================================================================================
4. CAPITAL STOCK (cont'd...)
On September 6, 2000, the Company implemented a 20:1 forward stock
split which was subsequently rescinded on October 17, 2000.
Proposed public offering of common stock
The Company is preparing to commence with a "Blank Check" offering
subject to Rule 419 of the Securities Act of 1933, as amended, for
500,000 common shares to be sold at a price of $0.10 per share.
Rule 419 requirements
Rule 419 requires that offering proceeds, after deduction for
underwriting commissions, underwriting expenses and deal allowances
issued, be deposited into an escrow or trust account (the "Deposited
Funds" and "Deposited Securities", respectively) governed by an
agreement which contains certain terms and provisions specified by the
Rule. Under Rule 419, the Deposited Funds and Deposited Securities will
be released to the company and to the investors, respectively, only
after the company has met the following three basic conditions. First,
the company must execute an agreement(s) for an acquisition(s) meeting
certain prescribed criteria. Second, the company must file a
post-effective amendment to the registration statement that includes
the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate(s) and its
business(es), including audited financial statements. The agreement(s)
must include, as a condition precedent to their consummation, a
requirement that the number of investors representing 80% of the
maximum proceeds must elect to reconfirm their investments. Third, the
company must conduct the reconfirmation offer and satisfy all of the
prescribed conditions, including the condition that investors
representing 80% of the Deposited Funds must elect to remain investors.
The post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer
must include certain prescribed conditions that must be satisfied
before the Deposited Funds and Deposited Securities can be released
from escrow. After the company submits a signed representation to the
escrow agent that the requirements of Rule 419 have been met and after
the acquisition(s) is consummated, the escrow agent can release the
Deposited Funds and Deposited Securities. Investors who do not
reconfirm their investments will receive the return of a pro-rata
portion thereof; and in the event investors representing less than 80%
of the Deposited Funds reconfirm their investments, the Deposited Funds
will be returned to the investors on a pro-rata basis.
5. INCOME TAXES
The Company's total deferred tax asset at March 31 is as follows:
=======================================================================
2001 2000
-----------------------------------------------------------------------
Tax benefit of net operating loss carryforward $ 5,459 $ 1,947
Valuation allowance (5,459) (1,947)
-------- ---------
$ -- $ --
=======================================================================
F-9
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2001
================================================================================
5. INCOME TAXES (cont'd...)
The Company has a net operating loss carryforward of approximately
$36,393, which if not used, will expire between the years 2019 and
2020. The Company has provided a full valuation allowance on the
deferred tax asset because of the uncertainty regarding realizability.
6. RELATED PARTY TRANSACTIONS
The Company does not maintain a checking account and all expenses
incurred by the Company are paid by an affiliate. For the year ended
March 31, 2001, the Company accrued $9,045 and $563 for professional
fees and office and miscellaneous expenses and paid $13,261 in
professional fees and $541 of office and miscellaneous expense. The
affiliate does not expect to be repaid for the expenses it pays on
behalf of the Company. Accordingly, as the expenses are paid, they are
classified as additional paid-in capital.
F-10
====================================================================================================================
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to 500,000 Shares
buy, shares of common stock only in jurisdictions where offers and sales are common stock
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
Prospectus or of any sale of our common stock. In this prospectus, the words
"we," "us" and "our" refer to Solid Management Corp. (unless the context
indicates otherwise). SOLID MANAGEMENT CORP.
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................3
LIMITED STATE REGISTRATION.....................................................3
SUMMARY FINANCIAL INFORMATION..................................................3
RISK FACTORS...................................................................6 -----------------------
YOUR RIGHTS AND SUBSTANTIVE
PROTECTION UNDER RULE 419.....................................................10 PROSPECTUS
DILUTION......................................................................11
USE OF PROCEEDS...............................................................12 -----------------------
CAPITALIZATION................................................................13
DESCRIPTION OF BUSINESS.......................................................14
PLAN OF OPERATION.............................................................15
DESCRIPTION OF PROPERTY.......................................................21
PRINCIPAL SHAREHOLDERS........................................................21
MANAGEMENT....................................................................22 July 26, 2001
EXECUTIVE COMPENSATION........................................................23
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS..........................................................23
LEGAL PROCEEDINGS.............................................................23
MARKET FOR OUR COMMON STOCK...................................................24
DESCRIPTION OF SECURITIES.....................................................26
SHARES ELIGIBLE FOR FUTURE
RESALE........................................................................27
WHERE CAN YOU FIND MORE
INFORMATION...................................................................28
REPORTS TO STOCKHOLDERS.......................................................28
PLAN OF DISTRIBUTION..........................................................29
LEGAL MATTERS.................................................................30
EXPERTS.......................................................................30
INDEMNIFICATION OF OFFICERS
AND DIRECTORS.................................................................30
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE......................................................30
FINANCIAL STATEMENTS.........................................................F-1
====================================================================================================================
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the Prospectus.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Our estimated expenses in connection with the issuance and distribution of the
securities being registered are estimated to be as follows:
Securities and Exchange Commission filing fee $79.20
Blue Sky filing fees 500.00
Legal fees and expenses 6,000.00
Printing 1,500.00
Marketing expenses 1,000.00
Miscellaneous 500.00
Total $9,579.20
=========
We will bear all expenses shown above.
RECENT SALE OF UNREGISTERED SECURITIES
On July 18, 1997, the Company issued 500,000 shares of common stock to Devinder
Randhawa, for $50. The Company relied on exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, for the issuance of 500,000 shares of
common stock to Mr. Randhawa. All of the shares of common stock of the Company
previously issued have been issued for investment purposes in a "private
transaction" and are "restricted" shares as defined in Rule 144 under the `33
Act, as amended. These shares may not be offered for public sale except under
Rule 144, or otherwise, pursuant to the `33 Act.
On July 18, 1997, Mr. Randhawa gifted 152,000 shares of common stock to Bob
Hemmerling, President of the Company, and 196,000 shares of common stock to
eight other shareholders for a total of 348,000 shares of common stock. The
shares were gifted to increase the number of shareholders. Mr. Randhawa relied
on exemption provided by Section 4(1) of the Securities Act of 1933, as amended,
for the transfer of the 348,000 shares. On September 6, 2000, we forward split
our shares on a 1 for 20 basis resulting in our issued share capital increasing
to 10,000,000 common shares. On October 17, 2000, we reversed the previous share
split returning our issued share capital to 500,000 common shares. All of these
shares are "restricted" shares as defined in Rule 144 under the Securities Act
of 1933, as amended (the "Act"). These shares may not be offered for public sale
except under Rule 144, or otherwise, pursuant to the Act.
As of the date of this report, all of the issued and outstanding shares of the
Company's common stock are eligible for sale under Rule 144 promulgated under
the `33 Act, as amended, subject to certain limitations included in said Rule.
44
However, all of the shareholders of the Company have executed and delivered a
"lock-up" letter agreement which provides that each such shareholder shall not
sell their respective securities until such time as the Company has successfully
consummated a merger or acquisition. Further, each shareholder has placed their
respective stock certificate with the Company's legal counsel, Foley & Lardner,
who has agreed not to release any of the certificates until the Company has
closed a merger or acquisition. Any liquidation by the current shareholders
after the release from the "lock-up" selling limitation period may have a
depressive effect upon the trading prices of the Company's securities in any
future market that may develop.
In general, under Rule 144, a person (or persons whose shares are aggregated)
who has satisfied a one year holding period, under certain circumstances, may
sell within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
Item 27-Exhibits
- ----------------
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.1* Form of Lock-up Agreement Executed by the Company's Shareholders
4.1.2*** Share Purchase Agreement
5.1*** Opinion of Evers & Hendrickson LLP with respect to the legality
of the shares being registered
23.1*** Consent of Davidson & Company, C.A.
23.2*** Consent of Evers & Hendrickson LLP (included in Exhibit 5.1)
27.1*** Financial Data Schedule
99.1*** Escrow Instructions
* Incorporated by reference to Form 10-SB, file no. 000-27233 filed
August 4, 1999.
*** Previously filed.
45
Item 28 -- Undertakings
- -----------------------
We undertake that we will:
1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the bona fide offering.
3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
We undertake to provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as the underwriter requires to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
46
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, Province of British Columbia, Canada,
on July 26, 2001.
SOLID MANAGEMENT CORP.
/s/Andrea Carley
-----------------------------------------
Andrea Carley, President, Chief Financial
Officer and Director
Signature Title Date
- --------- ----- ----
/s/ Andrea Carley President, Chief Financial Officer July 26, 2001
- ----------------- and Director
Andrea Carley
47