UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
Commission file Number: 000-26931
SOLID MANAGEMENT CORP.
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0204702
(I.R.S. Employer Identification Number)
2779 Lake City Way
Burnaby, British Columbia
V5A 2Z6
(Address of principal executive offices)
(604)415-0444
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 500,000 common shares as at September
30, 2001
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
SOLID MANAGEMENT CORP.
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets as of
September 30, 2001 and March 31, 2001 4
Consolidated Statements of Operations for the periods ended
September 30, 2001 and June 30, 2000 5
Consolidated Statements of Cash Flows for the periods ended
September 30, 2001 and June 30, 2000 6
Consolidated Statements of Changes in Stockholders' Equity 7
Notes to Consolidated Financial Statements 8
Item 2 Plan of Operation 12
PART II. OTHER INFORMATION 16
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8K 17
SIGNATURES 17
2
SOLID MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
3
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
==========================================================================================================
September 30, March 31,
2001 2001
- ----------------------------------------------------------------------------------------------------------
ASSETS $ -- $ --
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 1,100 $ 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, 2001 - 500,000 common shares
September 30, 2001 - 500,000 common shares 50 50
Additional paid in capital 40,886 26,735
Deficit accumulated during the development stage (42,036) (36,393)
-------- --------
(1,100) (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.
4
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Amounts
From Inception
on July 18, Three Month Three Month Six Month Six Month
1997 to Period Ended Period Ended Period Ended Period Ended
September 30, September 30, September 30, September 30, September 30,
2001 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Office and miscellaneous $ 5,646 $ -- $ -- $ -- $ 56
Professional fees 36,390 1,100 2,250 5,643 4,985
--------- --------- --------- --------- ---------
LOSS FOR THE PERIOD $ 42,036 $ 1,100 $ 2,250 $ 5,643 $ 5,041
====================================================================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.01)
====================================================================================================================================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 500,000 500,000 500,000 500,000
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
5
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
====================================================================================================================================
Cumulative
Amounts
From Inception
on July 18, Six Month Six Month
1997 to Period Ended Period Ended
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $(42,036) $ (5,643) $ (5,041)
Items not affecting cash:
Stock issued for services 50 -- --
Expenses paid by related entity on behalf of Company 40,886 5,643 541
Changes in non-cash working capital items
Increase (decrease) in accounts payable 1,100 -- 4,500
-------- -------- --------
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 Company 40,886 5,643 541
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
6
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
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 contributions -- -- 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 contributions -- -- 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)
Shareholder capital contributions -- -- 14,151 -- 14,151
Loss for the period -- -- -- (5,643) (5,643)
-------- -------- -------- -------- --------
BALANCE, SEPTEMBER 30, 2001 500,000 $ 50 $ 40,886 $(42,036) $ (1,100)
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
7
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 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.
In the opinion of management, the accompanying financial statements
contain all adjustments necessary (consisting only of normal recurring
accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures required by
generally accepted accounting principles and should be read in
conjunction with the audited financial statements of the Company for
the year ended March 31, 2001. The results of operations for the period
ended September 30, 2001 are not necessarily indicative of the results
to be expected for the year ending March 31, 2002.
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.
8
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 2001
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
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.
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 September 30, 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.
9
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 2001
================================================================================
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.
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.
10
SOLID MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 2001
================================================================================
5. INCOME TAXES
The Company's total deferred tax asset is as follows:
====================================================================
September 30, March 31,
2001 2001
--------------------------------------------------------------------
Tax benefit of net operating loss carryforward $ 6,305 $ 5,459
Valuation allowance (6,305) (5,459)
-------- --------
$ -- $ --
====================================================================
The Company has a net operating loss carryforward of approximately
$42,036, which if not used, will begin to expire in the year 2017. 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 period ended
September 30, 2001, the Company incurred professional fees of $5,643.
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.
11
PLAN OF OPERATION
The following discussion of the plan of operations of the Company should be read
in conjunction with the financial statements and the related notes thereto
included elsewhere in this quarterly report for the six months ended September
30, 2001. This quarterly report contains certain forward-looking statements and
the Company's future operation results could differ materially from those
discussed herein.
Introduction
- ------------
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.
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.
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
12
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.
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. 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.
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:
13
* 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.
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 have 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 to 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.
14
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.
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
15
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.
"CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters,
the matters discussed in this Form 10-QSB are forward-looking statements based
on current expectations and involve risks and uncertainties. Forward-looking
statements include, but are not limited to, statements under the following
heading: "Managements Discussion And Analysis Or Plan Of Operations" the timing
and expected profitable results of sales and the need for no additional
financing.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3 DEFAULTS UPON SENIOR SECURITIES
None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) We held an annual general meeting on August 1, 2001.
(b) Our annual general meeting involved the election of directors.
Ms. Andrea Carley was re-elected the sole director of our
company.
(c) The first matter which was voted on at our annual general
meeting was the election of directors. 304,000 votes received
were cast for and zero votes were received against the
election of Ms. Andrea Carley as the sole director of the
Company.
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The second matter which was voted on at our annual general
meeting was the election of auditors. 304,000 votes received
were cast for and zero votes were received against the
election of Davidson & Company as our auditors for the fiscal
year ending March 31, 2002.
(d) Not applicable.
Item 5 OTHER INFORMATION
None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SOLID MANAGEMENT CORP.
Dated: November 15, 2001 Per: /s/Andrea Carley
---------------------------------------------
Andrea Carley, President, C.F.O. and Director
17