As filed with the Securities and Exchange Commission on July 18, 2008.
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
SMSA EL PASO II ACQUISTION CORP.
(Exact name of registrant as specified in its charter)
Nevada 26-2809162
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
12890 Hilltop Road 76226
Argyle, Texas
(Address of principal executive offices) (Zip Code)
(972) 233-0300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company [x]
(Do not check if a smaller reporting company)
Securities registered under Section 12 (b) of the Exchange Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
Securities to be registered pursuant to Section 12 (g) of the Exchange Act:
Common Stock, $0.001 par value
(Title of Class)
ADDITIONAL INFORMATION
Statements contained in this registration statement regarding the
contents of any contract or any other document are not necessarily complete and,
in each instance, reference is hereby made to the copy of such contract or other
document filed as an exhibit to the registration statement. As a result of this
registration statement, we will be subject to the informational requirements of
the Securities Exchange Act of 1934 and, consequently, will be required to file
annual and quarterly reports, proxy statements and other information with the
Securities and Exchange Commission, or SEC. The registration statement,
including exhibits, may be inspected without charge at the SEC's principal
office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Public Reference Section, Securities and Exchange Commission,
100 F Street, NW, Washington, D.C. 20549 upon payment of the prescribed fees.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at l.800.SEC.0330. The SEC maintains a Website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with it. The address of the SEC's Website
is http://www.sec.gov.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. Forward-looking statements are speculative and uncertain
and not based on historical facts. Because forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including those discussed under "Description of
Business" and "Management's Discussion and Analysis or Plan of Operation". These
uncertainties and other factor include, but are not limited to: our ability to
locate a business opportunity for merger; the terms of our acquisition of or
participation in a business opportunity; and the operating and financial
performance of any business combination with us.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements, and the reader is advised to
consult any further disclosures made on related subjects in our future SEC
filings.
2
Table of Contents
ITEM 1. DESCRIPTION OF BUSINESS ..............................................4
History ..................................................................4
Plan of Reorganization ...................................................4
Business Plan ............................................................5
Investigation and Selection of Business Opportunities ....................6
Risk Factors Relating to Our Business Plan ...............................7
Competition ..............................................................9
Employees ................................................................9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ...........10
Plan of Operation .......................................................10
Liquidity and Capital Resources .........................................10
ITEM 3. DESCRIPTION OF PROPERTY..............................................10
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ......11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ........12
ITEM 6. EXECUTIVE COMPENSATION ..............................................16
Executive Officers .....................................................16
Executive Compensation .................................................16
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE............................................................17
ITEM 8. LEGAL PROCEEDINGS ..................................................17
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS ................................................17
Market Information ....................................................17
Transfer Agent..........................................................17
Reports to Stockholders ................................................17
Securities Eligible for Future Sale.....................................17
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES ............................19
ITEM 11. DESCRIPTION OF SECURITIES TO BE REGISTERED ........................19
ITEM 12. INDEMNIFICATION OF OFFICERS AND DIRECTORS .........................20
ITEM 13. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA ........................21
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE ..................................................21
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS .................................21
SIGNATURES ..................................................................22
INDEX OF EXHIBITS ........................................................IOE-1
3
ITEM 1. DESCRIPTION OF BUSINESS
SMSA El Paso II Acquisition Corp. was organized on May 21, 2008 as a
Nevada corporation to effect the reincorporation of Senior Management Services
of El Paso Coronado, Inc., a Texas corporation, mandated by the plan of
reorganization discussed below. In accordance with the confirmed plan of
reorganization, our current business plan is to seek to identify a
privately-held operating company desiring to become a publicly held company by
merging with us through a reverse merger or acquisition. We are a development
stage company and a shell company as defined in Rule 405 under the Securities
Act of 1933, or the Securities Act, and Rule 12b-2 under the Securities Exchange
Act of 1934, or the Exchange Act. As a shell company, we have no operations and
no or nominal assets. Although we have no assets or operations, we believe we
possess a stockholder base which will make us an attractive merger or
acquisition candidate to an operating, privately-held company seeking to become
publicly held. Our principal office is located at 12890 Hilltop Road, Argyle, TX
76226, and our telephone number is (972) 233-0300.
History
On January 17, 2007 Senior Management Services of El Paso Coronado,
Inc. and its affiliated companies, or collectively SMS Companies, filed a
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. On August 1, 2007, the bankruptcy court confirmed the First Amended,
Modified Chapter 11 Plan, or the Plan, as presented by SMS Companies and their
creditors.
During the three years prior to filing the reorganization petition, SMS
Companies operated a chain of skilled nursing homes in Texas, which prior to the
bankruptcy proceedings consisted of 14 nursing facilities, ranging in size from
approximately 114 beds to 325 beds. In the aggregate, SMS Companies provided
care to approximately 1,600 resident patients and employed over 1,400 employees.
A significant portion of the SMS Companies cash flow was provided by patients
covered by Medicare and Medicaid. The SMS Companies facilities provided
round-the-clock care for the health, well-being, safety and medical needs of its
patients. The administrative and operational oversight of the nursing facilities
was provided by an affiliated management company located in Arlington, Texas.
In 2005 SMS Companies obtained a secured credit facility from a
financial institution. The credit facility eventually was comprised of an $8.3
million term loan and a revolving loan of up to $15 million which was utilized
for working capital and to finance the purchase of the real property on which 2
of its nursing care facilities operated. By late 2006, SMS Companies were in an
"overadvance" position, whereby the amount of funds extended by the lender
exceeded the amount of collateral eligible to be borrowed under the credit
facility. Beginning in September 2006, SMS Companies entered into the first of a
series of forbearance agreements whereby the lender agreed to forebear from
declaring the financing in default provided SMS Companies obtained a commitment
from a new lender to refinance and restructure the credit facility. SMS
Companies were unsuccessful in obtaining a commitment from a new lender and on
January 5, 2007, the lender declared SMS Companies in default and commenced
foreclosure and collection proceedings. On January 9, 2007 the lender agreed to
provide an additional $1.7 million to fund payroll and permit a controlled
transaction to bankruptcy. Subsequently, on January 17, 2007 the SMS Companies
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.
Plan of Reorganization
Halter Financial Group, Inc. or HFG, participated with SMS Companies
and their creditors in structuring the Plan. As part of the Plan, HFG provided
$115,000 to be used to pay professional fees associated with the Plan
confirmation process. HFG was granted an option to be repaid through the
issuance of equity securities in 23 of the SMS Companies, including Senior
Management Services of El Paso Sunset, Inc.
HFG exercised the option, and as provided in the Plan, 80% of our
outstanding common stock, or 400,000 shares, was issued to HFG in satisfaction
of HFG's administrative claims. The remaining 20% of our outstanding common
stock, or 100,004 shares, was issued to 449 holders of unsecured debt. The
500,004 shares, or Plan Shares, were issued pursuant to Section 1145 of the
Bankruptcy Code.
As further consideration for the issuance of the 400,000 Plan Shares to
HFG, the Plan required HFG to assist us in identifying a potential merger or
acquisition candidate. HFG is responsible for the payment of our operating
expenses and HFG will provide us, at no cost, with consulting services,
including assisting us with formulating the structure of any proposed merger or
acquisition. Additionally, HFG is responsible for paying our legal and
accounting expenses related to this registration statement and our expenses
4
incurred in consummating a merger or acquisition.
We will remain subject to the jurisdiction of the bankruptcy court
until we consummate a merger or acquisition. Pursuant to the confirmation order,
if we do not consummate a business combination prior to August 10, 2009, the
Plan Shares will be deemed canceled, the pre-merger or acquisition injunction
provisions of the confirmation order, as they pertain to us, shall be deemed
dissolved and no discharge will be granted to us, all without further order of
the bankruptcy court. If we timely consummate a merger or acquisition with an
entity which is engaged in business, we will file a certificate of compliance
with the bankruptcy court which will state that the requirements of the Plan
have been met, resulting in the discharge to be deemed granted. Thereafter, the
post discharge injunction provisions set forth in the Plan and the confirmation
order shall then become effective.
Effective May 21, 2008, HFG transferred its 400,000 Plan Shares to
Halter Financial Investments L.P., or HFI, a Texas limited partnership
controlled by Timothy P. Halter.
Timothy P. Halter is the sole officer, director and shareholder of HFG
and an officer and member of Halter Financial Investments GP, LLC, general
partner of HFI. Mr. Halter served as our president and sole director from May
21, 2008 until June 13, 2008 when he was replaced by Richard Crimmins. Mr.
Halter and HFG will continue to assist us with the implementation of our
business plan.
Business Plan
Our current business plan is to seek and identify a privately-held
operating company desiring to become a publicly held company by combining with
us through a reverse merger or acquisition type transaction. Private companies
wishing to have their securities publicly traded may seek to merge or effect an
exchange transaction with a shell company with a significant stockholder base.
As a result of the merger or exchange transaction, the stockholders of the
private company will hold a majority of the issued and outstanding shares of the
shell company. Typically, the directors and officers of the private company
become the directors and officers of the shell company. Often the name of the
private company becomes the name of the shell company. We believe that by
becoming a reporting company, under the rules and regulations of the Exchange
Act, we will become a more suitable candidate to engage in a combination
transaction with a privately-held company.
We have no capital and must depend on HFG to provide us with the
necessary funds to implement our business plan. We intend to seek opportunities
demonstrating the potential of long-term growth as opposed to short-term
earnings. However, at the present time, we have not identified any business
opportunity that we plan to pursue, nor have we reached any agreement or
definitive understanding with any person concerning an acquisition or merger.
Timothy P. Halter will be primarily responsible for investigating
business combination opportunities. However, we believe that business
opportunities may also come to our attention from various sources, including
HFG, professional advisors such as attorneys, and accountants, securities
broker-dealers, venture capitalists, members of the financial community, and
others who may present unsolicited proposals. We have no plan, understanding,
agreements, or commitments with any individual for such person to act as a
finder of opportunities for us.
No direct discussions regarding the possibility of a business
combination are expected to occur until after the effective date of this
registration statement. We can give no assurances that we will be successful in
finding or acquiring a desirable business opportunity, given the limited funds
that are expected to be available to us for implementation of our business plan.
Furthermore, we can give no assurances that any acquisition, if it occurs, will
be on terms that are favorable to us or our current stockholders.
We do not propose to restrict our search for a candidate to any
particular geographical area or industry, and therefore, we are unable to
predict the nature of our future business operations. Our management's
discretion in the selection of business opportunities is unrestricted, subject
to the availability of such opportunities, economic conditions, and other
factors.
Any entity which has an interest in being acquired by, or merging into
us, is expected to be an entity that desires to become a public company and
establish a public trading market for its securities. In connection with such a
merger or acquisition, it is anticipated that an amount of common stock
constituting control of us would either be issued by us or be purchased from
HFI.
We do not foresee that we will enter into a merger or acquisition
5
transaction with any business with which HFG, HFI, Timothy P. Halter or Richard
Crimmins is currently affiliated.
Investigation and Selection of Business Opportunities
Certain types of business acquisition transactions may be completed
without requiring us to first submit the transaction to our stockholders for
their approval. If the proposed transaction is structured in such a fashion our
stockholders (other than HFI our majority stockholder) will not be provided with
financial or other information relating to the candidate prior to the completion
of the transaction.
If a proposed business combination or business acquisition transaction
is structured that requires our stockholder approval, and we are a reporting
company, we will be required to provide our stockholders with information as
applicable under Regulations 14A and 14C under the Exchange Act.
The analysis of business opportunities will be undertaken by or under
the supervision of Timothy P. Halter. In analyzing potential merger candidates,
we will consider, among other things, the following factors:
* Potential for future earnings and appreciation of value of securities;
* Perception of how any particular business opportunity will be received by
the investment community and by our stockholders;
* Eligibility of a candidate, following the business combination, to qualify
its securities for listing on a national exchange or on a national
automated securities quotation system, such as NASDAQ;
* Historical results of operation;
* Liquidity and availability of capital resources;
* Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
* Strength and diversity of existing management or management prospects that
are scheduled for recruitment;
* Amount of debt and contingent liabilities; and
* The products and/or services and marketing concepts of the target company.
There is no single factor that will be controlling in the selection of
a business opportunity. We will attempt to analyze all factors appropriate to
each opportunity and make a determination based upon reasonable investigative
measures and available data. 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 such
business opportunities extremely difficult and complex. Because of our limited
capital available for investigation and our dependence on HFG and Timothy P.
Halter, we may not discover or adequately evaluate adverse facts about the
business opportunity to be acquired.
We are unable to predict when we may participate in a business
opportunity. We expect, however, that the analysis of specific proposals and the
selection of a business opportunity may take several months.
Prior to making a decision to participate in a business transaction, we
will generally request that we be provided with written materials regarding the
business opportunity containing as much relevant information as possible,
including, but not limited to, a description of products, services and company
history; management resumes; financial information; available projections, with
related assumptions upon which they are based; an explanation of proprietary
products and services; evidence of existing patents, trademarks, or service
marks, or rights thereto; present and proposed forms of compensation to
management; a description of transactions between such company and its
affiliates during the relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements, or
if audited financial statements are not available, unaudited financial
statements, together with reasonable assurance that audited financial statements
would be able to be produced to comply with the requirements of a Current Report
on Form 8-K to be filed with the Securities and Exchange Commission, or
Commission, upon consummation of the business combination.
As part of our investigation, Timothy P. Halter and our legal counsel
may meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
provided information, check references of management and key personnel, and take
other reasonable investigative measures, to the extent of our limited financial
and management resources.
We believe that various types of potential candidates might find a
business combination with us to be attractive. These include candidates desiring
to create a public market for their securities in order to enhance liquidity for
current stockholders, candidates which have long-term plans for raising capital
6
through public sale of securities and believe that the prior existence of a
public market for their securities would be beneficial, and candidates which
plan to acquire additional assets through issuance of securities rather than for
cash, and believe that the development of a public market for their securities
will be of assistance in that process. Companies which have a need for an
immediate cash infusion are not likely to find a potential business combination
with us to be a prudent business transaction alternative.
Risk Factors Relating to Our Business Plan
Our business plan and our ability to successfully implement our
business plan are subject to certain risk factors, including, the following:
We will be unable to successfully implement our business plan if HFG
does not, or is unable, to provide us with adequate capital to conduct
our operations and pay the expenses necessary to consummate a business
combination.
We are dependent upon HFG to pay our operating expenses and to fund the
implementation of our plan of operation. If HFG fails, or is unable, to provide
us with adequate capital to conduct our business operations including the
implementation of our business plan, we may be unable to complete a merger or
acquisition on or before August 10, 2009 as required by the Plan. In such event,
Plan Shares held by HFI and our other stockholders will be cancelled and voided
and the discharge and injunction provisions of the confirmation order, as they
pertain to us, shall be deemed dissolved.
There is no trading market for our securities which could impair our
ability to find a suitable merger candidate.
There is no public trading market for our securities and there can be
no assurance that a trading market for our securities will exist if we complete
a business combination. Although we intend to make our shares eligible for
trading on the OTC Bulletin Board, the Plan provides that no active trading
market shall exist for our securities until after the consummation of a business
combination. The Plan further provides that our stockholders are enjoined from
trading, selling or assigning the shares of common stock they received pursuant
to the Plan until we consummate a business transaction. HFI, however, may
transfer in a private transaction, a portion of its shares of our common stock
prior to the consummation of a business combination to a single transferee or
group of transferees under common control and to HFI employees and
representatives, subject to compliance with applicable federal and state
securities laws. Any such transfer shall be subject to the same restrictions as
applicable to HFG under the Plan. Until such time as our securities are eligible
for quotation on the OTC Bulletin Board, we will be at a competitive
disadvantage with other companies, including shell companies, who have publicly
traded securities, in attracting suitable candidates to participate in a
business combination with us.
We have no agreement for a business combination and we do not have any
minimum requirements for a business combination.
We have no current arrangement, agreement or understanding with respect
to engaging in a business combination with a specific entity. We may not be
successful in identifying and evaluating a suitable merger candidate or in
consummating a business combination. We have not selected a particular industry
or specific business within an industry 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 which we will require a target
company to have achieved, or without which we would not consider a business
combination with such business entity.
The loss of the services of Timothy P. Halter would adversely affect
our ability to implement our business plan.
Our management consists of only one person, Richard Crimmins, our
president and sole director. Mr. Crimmins will be primarily responsible for
conducting our day-to-day operations. However, Timothy P. Halter will be
responsible for implementing our business plan. We will rely solely on the
judgment of Mr. Halter when selecting a target company. Mr. Halter will only
devote a limited amount of his time each month to our business. Mr. Halter has
not entered into a written employment or consulting agreement with us and he is
not expected to do so. The loss of the services of Mr. Halter would adversely
affect our ability to implement our business plan.
7
Conflicts of interest may arise between us and our stockholders, and
HFG and Timothy P. Halter, during the implementation of our business
plan which may have a negative impact on our ability to consummate a
business transaction.
Timothy P. Halter is not required to commit his full time to our
affairs, which may result in a conflict of interest in allocating his time
between our operations and other businesses. We do not intend to have any full
time employees prior to the consummation of a business combination. Mr. Halter
is engaged in several other business endeavors and is not obligated to
contribute any specific number of hours to our affairs. If his other business
affairs require him to devote more substantial amounts of time to such
interests, it could limit his ability to devote time to our affairs and could
have a negative impact on our ability to consummate a business combination.
Mr. Halter, HFG and HFI, our majority stockholder, are affiliated with
other shell companies with business activities similar to those intended to be
conducted by us. Mr. Halter, HFG and HFI may become aware of business
opportunities which may be appropriate for presentation to us as well as the
other entities to which they have fiduciary obligations. Accordingly, there may
be conflicts of interest in determining to which entity a particular business
opportunity should be presented.
Depending upon the nature of a proposed transaction, our stockholders,
other than HFI, may not be afforded the opportunity to approve or consent to a
particular transaction.
To implement our business plan we may be required to employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. The selection of any such advisors will be made by Mr. Halter and
their fees will be paid by HFG. We anticipate that such persons may be engaged
on an as needed basis without a continuing fiduciary or other obligation to us.
If Mr. Halter considers it necessary to hire outside advisors, he may elect to
hire persons who are affiliates of HFG. Such advisors because of their
relationship with HFG and Mr. Halter may not fully consider our best interest in
rendering advice and services to us.
We have no cash and no operations and may not have access to
sufficient capital to consummate a business combination.
Payment of our operating expenses and expenses of implementing our
business plan is the responsibility of HFG. We may not be able to take advantage
of any available business opportunities because of the limited and uncertain
availability of capital. There is no assurance that HFG will have sufficient
capital to provide us with the necessary funds to successfully implement our
plan of operation or that HFG will continue to provide us with capital in the
future.
We will encounter significant competition in seeking mergers with and
acquisition of privately-held entitles which may impede our ability to
consummate business transactions.
We are and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of privately-held business
entities. A large number of established and well-financed entities, including
venture capital firms, are active in seeking potential merger and acquisition
candidates for their clients and investors. Substantially all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than we have and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination. Moreover, we will also compete in seeking
merger or acquisition candidates with other public shell companies who may have
more available funds or other assets that make them a more attractive candidate
for a merger than we are.
Reporting requirements under the Exchange Act and compliance with the
Sarbanes-Oxley Act of 2002 may delay or preclude a merger or
acquisition.
The rules and regulations of the Commission require a reporting shell
company to timely provide in a Current Report on Form 8-K financial and other
information, including audited financial statements, of the acquired company if
we engage in a business combination, or if there is a change in our control. The
additional time and costs that may be incurred by the potential target company
to prepare audited financial statements and other information may significantly
delay or essentially preclude consummation of an otherwise desirable
acquisition.
We may be required to have our internal control procedures audited for
the fiscal year ending December 31, 2009 as required by the Sarbanes-Oxley Act
of 2002. A target company may not be in compliance with provisions of the
8
Sarbanes-Oxley Act regarding adequacy of their internal controls. The
development of the internal controls of any such entity to achieve compliance
with the Sarbanes-Oxley Act may increase the time and costs necessary to
complete any such acquisition or result in our inability to consummate the
business transaction.
A business combination will result in a change in control of our
company and significantly reduce the ownership interest of our current
stockholders.
In conjunction with completion of a business acquisition, we anticipate
that we will issue an amount of our authorized but unissued common stock that
will represent a significant majority of the voting power and equity of our
company, which will, in all likelihood, result in stockholders of a target
company obtaining a controlling interest in us and thereby reducing the
ownership interest of our current stockholders. We may also issue preferred
stock to the stockholders of a target company. Holders of preferred stock may
have rights, preferences and privileges senior to those of our existing holders
of common stock. As a condition of the business combination, HFI, our majority
stockholder, may agree to sell or transfer all or a portion of the common stock
it owns to provide the target company with majority control. The resulting
change in control will likely result in the removal of our present officer and
director and a corresponding reduction in, or elimination of, his participation
in future business activities.
We may engage in a business combination with a foreign entity which
will subject us to additional business risks.
We may effectuate a business combination with a merger target whose
business operations or even headquarters, place of formation or primary place of
business are located outside the United States of America. In such event, we may
face the significant additional risks associated with doing business in that
country. In addition to the language barriers, different presentations of
financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a merger
target, we may encounter ongoing business risks associated with uncertain legal
systems and applications of law, prejudice against foreigners, corrupt
practices, uncertain economic policies and potential political and economic
instability that may be exacerbated in various foreign countries.
We may engage in a business combination that may have tax consequences
to us and our stockholders.
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination that we may undertake. Currently,
such transactions may be structured so as to result in tax-free treatment to
both companies and their stockholders, pursuant to various federal and state tax
provisions. We intend to structure any business combination so as to minimize
the federal and state tax consequences to both our company and the target entity
and their stockholders. However, there can be no assurance that such business
combination will meet the statutory requirements of a tax-free reorganization or
that the parties will obtain the intended tax-free treatment upon a transfer of
stock or assets. A non-qualifying reorganization could result in the imposition
of both federal and state taxes, which may have an adverse effect on both
parties to the transaction.
Competition
We expect to encounter substantial competition in our efforts to locate
potential business combination opportunities. The competition may in part come
from business development companies, venture capital partnerships and
corporations, small investment companies and brokerage firms. Most of these
organizations are likely to be in a better position than us to obtain access to
potential business acquisition candidates because they have greater experience,
resources and managerial capabilities than we do. We also will experience
competition from other public companies with similar business purposes, some of
which may also have funds available for use by an acquisition candidate.
Employees
We have no employees. Our president and sole director, Richard
Crimmins, will be responsible for managing our administrative affairs, including
our reporting obligations pursuant to the requirements of the Exchange Act. Upon
consummation of a business transaction, HFI has agreed to transfer to Mr.
Crimmins 1,000 shares of our common stock for his services. It is anticipated
that HFG and Timothy P. Halter will engage consultants, attorneys and
accountants as necessary for us to conduct our business operations and to
implement and successfully complete our business plan. We do not anticipate
employing any full-time employees until we have achieved our business purpose.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
As a shell company, we have no operations and no or nominal assets.
Although we have no assets or operations, we believe we possess a stockholder
base which will make us an attractive merger or acquisition candidate to an
operating privately-held company seeking to become publicly-held.
We intend to locate and combine with an existing, privately-held
company which has profitable operations or, in our management's view, potential
for earnings and appreciation of value of its equity securities, irrespective of
the industry in which it is engaged. A combination may be structured as a
merger, consolidation, exchange of our common stock for stock or assets or any
other form which will result in the combined companies becoming an operating
publicly-held corporation.
Pending negotiation and consummation of a business combination, we
anticipate that we will have, aside from carrying on our search for a
combination partner, no business activities, and, thus, will have no source of
revenue. Should we incur any significant liabilities prior to a combination with
a private company, we may not be able to satisfy such liabilities as they are
incurred.
If our management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is likely that such efforts will exhaust our ability to continue
to seek such combination opportunities before any successful combination can be
consummated.
In our pursuit for a business combination partner, our management
intends to consider only combination candidates which are profitable or, in
management's view, have growth potential. Our management does not intend to
pursue any combination proposal beyond the preliminary negotiation stage with
any combination candidate which does not furnish us with audited financial
statements for its historical operations or can furnish audited financial
statements in a timely manner. HFG may engage attorneys and/or accountants to
investigate a combination candidate and to consummate a business combination. We
may require payment of fees by such merger candidate to fund all or a portion of
such expenses. To the extent we are unable to obtain the advice or reports from
experts, the risks of any combined business combination being unsuccessful will
be enhanced.
We are not registered and we do not propose to register as an
investment company under the Investment Company Act of 1940. We intend to
conduct our business activities so as to avoid application of the registration
and other provisions of the Investment Company Act of 1940 and the related
regulations thereunder.
We have no operating history, no cash, no assets and our business plan
has significant business risks. Because of these factors, our Independent
Registered Certified Public Accounting Firm has issued an audit opinion on our
financial statements which includes a statement describing our going concern
status. This means in our auditor's opinion, there is substantial doubt about
our ability to continue as a going concern.
Liquidity and Capital Resources.
We have no operations and will not generate any revenue until we
consummate a business combination. We will need funds to support our operation
and implementation of our plan of operation and to comply with the periodic
reporting requirements of the Exchange Act. HFG has agreed to fund the expenses
in implementing our plan of operation and to fund our operating expenses until
we complete a business combination. We believe sufficient working capital will
be provided by HFG for at least the next 12 months to support and preserve the
integrity of our corporate entity and to fund the implementation of our business
plan. If adequate funds are not available to us, we may be unable to complete
our plan of operation. If we do not consummate a business combination by August
10, 2009 our Plan Shares will be cancelled and voided and the discharge and
injunction provisions of the confirmation order, as they pertain to us, shall be
deemed dissolved.
We have no current plans, proposals, arrangements or understandings
with respect to the sale or issuance of additional securities prior to the
identity of a merger or acquisition candidate and we do not anticipate that we
will incur any significant debt prior to a consummation of a business
combination.
ITEM 3. DESCRIPTION OF PROPERTY
We do not own property. We currently maintain a mailing address at
12890 Hilltop Road, Argyle, TX 76226. Our telephone number is (972) 233-0300.
Other than this mailing address, we do not currently maintain any other office
10
facilities, and do not anticipate the need for maintaining office facilities at
any time until we complete a business combination. We pay no rent or other fees
for the use of the mailing address. The facilities are also used by HFG for its
business operations. HFG provides us with the use of office equipment and
administrative services as necessary to conduct our business activities,
including the implementation of our business plan.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information at July 14, 2008,
regarding the beneficial ownership of our common stock of each person or group
known by us to beneficially own 5% or more of our outstanding shares of common
stock; each of our executive officers and directors; and all our executive
officers and directors as a group:
Unless otherwise noted, the persons named below have sole voting and
investment power with respect to the shares as beneficially owned by them.
Name and Address (2) Shares Beneficially Owned (1)
Number Percent (3)
- -------------------- -----------------------------
Halter Financial Investments, LP (4) 400,000 80.0
Richard Crimmins(5) -0- -0-
Pharmerica, Inc.(6) 29,723 5.9
Directors and officers as a group -0- -0-
(1 person)
- ------------
(1) On July 14, 2008 there were 500,004 shares of our common stock outstanding
and no shares of preferred stock issued and outstanding. We have no outstanding
stock options or warrants.
(2) Under applicable SEC rules, a person is deemed the "beneficial owner" of a
security with regard to which the person directly or indirectly, has or shares
(a) the voting power, which includes the power to vote or direct the voting of
the security, or (b) the investment power, which includes the power to dispose,
or direct the disposition, of the security, in each case irrespective of the
person's economic interest in the security. Under SEC rules, a person is deemed
to beneficially own securities which the person has the right to acquire within
60 days through the exercise of any option or warrant or through the conversion
of another security.
(3) In determining the percent of voting stock owned by a person on July 14,
2008 (a) the numerator is the number of shares of common stock beneficially
owned by the person, including shares the beneficial ownership of which may be
acquired within 60 days upon the exercise of options or warrants or conversion
of convertible securities, and (b) the denominator is the total of (i) the
500,004 shares of common stock outstanding on July 14, 2008, and (ii) any shares
of common stock which the person has the right to acquire within 60 days upon
the exercise of options or warrants or conversion of convertible securities.
Neither the numerator nor the denominator includes shares which may be issued
upon the exercise of any other options or warrants or the conversion of any
other convertible securities.
(4) Halter Financial Investments, L.P. ("HFI") is a Texas limited partnership of
which Halter Financial Investments GP, LLC, a Texas limited liability company
("HFI GP"), is the sole general partner. The limited partners of HFI are: (i)
TPH Capital, LP., a Texas limited partnership of which TPH Capital GP, LLC, a
Texas limited liability company ("TPH GP"), is the general partner and Timothy
P. Halter is the sole member of TPH GP, (ii) Bellifield, LP, a Texas limited
partnership of which Bellifield Capital Management, LLC, a Texas limited
liability company ("Bellifield LLC") is the sole general partner and David
Brigante is the sole member of Bellified LLC; (iii) Colhurst Capital LP, a Texas
limited partnership of which Colhurst Capital GP LLC, a Texas limited liability
company ("Colhurst LLC"), is the general partner and George L. Diamond is the
sole member of Colhurst LLC; and (iv) Rivergreen Capital, LLC, a Texas limited
liability company ("Rivergreen LLC"), of which Marat Rosenberg is the sole
member. As a result, each of the foregoing persons may be deemed to be a
beneficial owner of the shares held of record by HFI. HFI's address is 12890
Hilltop Road, Argyle, TX 76226.
(5) Upon consummation of a business transaction, HFI has agreed to transfer to
Mr. Crimmins 1,000 shares of our common stock for his services. Mr. Crimmins is
our president, secretary, chief executive officer, chief financial officer and
our sole director.
(6) Phamerica, Inc.'s address is 1675 Broadway, New York, New York.
11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors and executive officers are as follows:
Name Age Positions Held
---- --- --------------
Richard Crimmins 53 President, Chief Executive Officer,
Secretary, Chief Financial Officer
and Sole Director
Our directors serve until the next annual meeting of stockholders or
until their successors are duly elected and have qualified. Directors are
elected for one-year terms at the annual stockholders meeting. Officers will
hold their positions at the pleasure of the board of directors, absent any
employment agreement, of which none currently exists or is contemplated. There
is no arrangement or understanding between Mr. Cummins or any other person
pursuant to which any director or officer was or is to be selected as a director
or officer, and there is no arrangement, plan or understanding as to whether
non-management stockholders will exercise their voting rights to continue to
elect directors to our board. There are also no arrangements, agreements or
understandings between non-management stockholders that may directly or
indirectly participate in or influence the management of our affairs. Our board
of directors does not have any committees at this time.
Richard Crimmins. Mr. Crimmins has served as our president, secretary
and sole director since June 13, 2008. Mr. Crimmins has spent over 25 years in
the consumer products industry in various executive management positions. Mr.
Crimmins served 15 years at Nu-kote International (formerly Unisys Office
Products Group) where he held numerous management roles including Vice President
Sales and Marketing. Mr. Crimmins has spent the last five years as an
independent consultant in the technology services industry working with major
retailers and warranty companies to secure national service contracts. Mr.
Crimmins will be responsible for managing our administrative affairs, including
our reporting obligations pursuant to the requirements of the Exchange Act. Mr.
Crimmins is also a director of Fashion Tech International, Inc. (OTC.BB
symbol:FTEC.OB) and SMSA El Paso I Acquisition Corp., each a shell company.
Timothy P. Halter. Mr. Halter, age 42, served as our sole officer and
director from May 21, 2008 to June 13, 2008. Mr. Halter is primarily responsible
for implementing our business plan. Since 1995, Mr. Halter has been the
president and the sole stockholder of Halter Financial Group, Inc., a Dallas,
Texas based consulting firm specializing in the area of mergers, acquisitions
and corporate finance. In September 2005, Mr. Halter and other minority partners
formed HFI. HFI conducts no business operations. Mr. Halter currently serves as
a director of DXP Enterprises, Inc., a public corporation (Nasdaq: DXPE), and is
an officer and director of Marketing Acquisition Corp., a Nevada corporation,
BTHC VIII, Inc., BTHC X, Inc., BTHC XIV, Inc., and BTHC XV, Inc. each a Delaware
corporation. Each of the afore-referenced companies is current in the filing of
their periodic reports with the SEC. Except for DXP Enterprises, each of the
afore-referenced companies for which Mr. Halter acts as an officer and director
may be deemed shell corporations. Mr. Halter will devote as much of his time to
our business affairs as may be necessary to implement our business plan.
Mr. Halter has significant experience acting in the capacity of the
principal stockholder, a director and an executive officer of blank check
companies. The following table identifies those companies with which Mr. Halter
has been affiliated that operated as a blank check company at some point in
their history and whose securities are registered under the Exchange Act. The
table also details Mr. Halter's prior and present involvement with each
referenced company and the current status of each company's business operations.
The business descriptions provided below are derived from the respective
entities' periodic reports as filed with the SEC. Except for BTHC VIII, Inc.,
BTHC X, Inc., BTHC XIV, Inc., BTHC XV, Inc., Marketing Acquisition Corp. and
SMSA El Paso I Acquisition Corp., each a shell company, we have made no
independent verification of the accuracy of the disclosure found in such reports
or whether the entities are current in the filing of their respective periodic
reports with the SEC.
As noted in the table below, Mr. Halter is currently a director,
officer and principal shareholder of Fashion Tech International, Inc., Marketing
Acquisition Corp., and SMSA El Paso I Acquisition Corp, each a Nevada
corporation, as well as BTHC VIII, Inc. BTHC X, Inc., BTHC XIV, Inc., and BTHC
XV, Inc., each a Delaware corporation. Regarding the other registrants listed in
the table, Mr. Halter was not affiliated with any of the operating businesses
prior to the consummation of the reverse merger transaction and resigned as an
officer and director upon consummation of the transaction. After the merger
transaction, Mr. Halter did not participate in the management of any of the
registrants and ceased being a principal shareholder. Other than being a
minority shareholder of certain of the registrants, Mr. Halter is not affiliated
with, and does not control, any of the registrants.
12
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Name of Registrant Date of Registration/SEC File Nature of Interest Current Status of Registrant
Number
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Athersys, Inc. Form 10 filed on July 6, Mr. Halter remains a minority The company is in the
(formerly BTHC VI, 2006; SEC File Number stockholder of the company. Mr. business of developing
Inc.) 000-52108 Halter resigned as an officer and therapeutic product
director of the company as a candidates.
result of a change in control
transaction completed on June 8,
2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Avatar Systems, Inc. Form 10 filed on June 25, Mr. Halter remains a minority The company is in the
2001; SEC File Number stockholder of the company. Mr. business of providing
000-32925 Halter resigned as an officer and petroleum industry
director of the company as a solutions for accounting
result of a change in control and financial management.
transaction completed on November
14, 2000.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Bitech Pharma, Inc. Form 10 filed on December Mr. Halter remains a minority The company is in the
16, 2005; SEC File Number stockholder of the company. Mr. business of developing and
000-51684 Halter resigned as an officer and producing therapeutic
director of the company as a protein products.
result of a change in control
transaction completed on June 30,
2005.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC VII, Inc. Form 10 filed on July 10, Mr. Halter acquired control on The company now operates a
2006; SEC File Number June 7, 2005. Mr. Halter resigned chain of retail jewelry
000-52123 as an officer and director of the stores.
company as a result of a change
in control transaction completed
on July 27, 2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC VIII, Inc. Form 10-SB filed on September Mr. Halter acquired control on The company is a shell
21, 2006; SEC File Number August 7, 2006 and currently company.
0-52232 serves as its sole officer and
director.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC X, Inc. Form 10 filed on September Mr. Halter acquired control on The company is a shell
22, 2006; SEC File Number August 16, 2006 and currently company.
0-52237 serves as its sole officer and
director.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC XIV, Inc. Form 10-SB filed on July 9, Mr. Halter acquired control on The company is a shell
2007; SEC File Number August 16, 2006 and currently company.
000-52722 serves as its sole officer and
director.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC XV Form 10-SB filed on September Mr. Halter acquired control on The company is a shell
13, 2007; SEC File Number August 16, 2006 and currently company.
0-52808 serves as its sole officer and
director.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
China Agritech, Inc. Form 10 filed on February 2, Mr. Halter acquired a controlling The company is currently
2002; Current SEC File Number interest in the company on May engaged in the business of
0-49608 25, 2004, and acted as its sole producing organic liquid
officer and director until his compound fertilizers.
resignation as a result of a
change in control transaction
completed on February 3, 2005.
Mr. Halter remains a minority
stockholder of the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
China BAK Battery, The company originally filed Mr. Halter acquired a controlling The company is a
Inc. a registration statement on interest in the company on June manufacturer of lithium
Form S-1 on June 10, 2000 and 14, 2004, and acted as its sole -ion batteries and related
a Form 8-A12G on March 29, officer and director until his products.
2002; SEC File Number resignation as a result of a
000-49712 change in control transaction
completed on January 20, 2005.
Mr. Halter remains a minority
stockholder of the company
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
China Digital The company originally became Mr. Halter acquired a controlling The company is a provider
Wireless, Inc. obligated to file reports interest in the company on of value added information
with the SEC in 1983 with the February 23, 2004, and acted as services to mobile phone
filing of a Registration its sole officer and director subscribers in China.
Statement on Form S-18(File until his resignation as a result
Number 2-84351); Current SEC of a change in control
File Number 0-12536. transaction completed on June 23,
2004. Mr. Halter remains a
minority stockholder of the
company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
13
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
China Pharma Form 10 filed on February 15, Mr. Halter acquired a controlling The company's primary
Holdings, Inc. 2000; SEC File Number interest in the company on May business is research,
000-29523 11, 2005, and acted as its sole development, manufacturing
officer and director until the and sale of
completion of a change in control bio-pharmaceutical
transaction on October 20, 2005. products.
Mr. Halter remains a minority
stockholder of the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
China Ritar Power Form 10-SB filed on April 29, Mr. Halter remains a minority The company is a
Corp. (formerly 1999; SEC File Number stockholder of the company. Mr. manufacturer of lead acid
Concept Ventures 000-25901 Halter resigned as an officer and batteries.
Corp.) director of the company as a
result of a change in control
transaction completed on February
16, 2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Energroup Holdings The company originally became Mr. Halter acquired a controlling The company is a provider
Corp. obligated to file reports interest in the company on May of packaged and processed
with the SEC in 2001 with the 22, 2007, and acted as its sole pork products in China.
filing of a Registration officer and director until his
Statement on Form 10-SB (File resignation as a result of a
Number 0-32873);. change in control transaction
completed on December 31, 2007.
Mr. Halter remains a minority
stockholder of the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Fashion Tech The company became a public Mr. Halter acquired a controlling The company is a shell
International, Inc. Company in 1984: SEC file interest in the company on October corporation
Number 2-93231-NY 18, 2007
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Games, Inc. Form 10 filed on November 15, Mr. Halter remains a minority The company is a technology
2001; SEC File Number stockholder of the company. Mr. company operating in the
000-33345 Halter resigned as an officer and area of interactive
director of the company as a entertainment.
result of a change in control
transaction completed on
September 30, 2001.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Hong Kong Form SB-2 filed on July 21, Mr. Halter acquired a controlling The company is a
Winalite Group, 1999; SEC File Number 333- interest in the company on manufacturer of feminine
Inc. 83375 October 1, 2007. A change in hygiene products.
control transaction occurred
on December 28, 2007.
Mr. Halter remains a minority
stockholder of the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
International Stem Form 10 filed on April 4, Mr. Halter remains a minority The company is engaged in
Cell Corp. (formerly 2006; SEC File Number stockholder of the company. Mr. the business of developing
BTHC III, Inc.) 000-51891 Halter resigned as an officer and therapeutic products.
director of the company as a
result of a change in control
transaction completed on December
28, 2006.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
KMG Chemicals, Inc. Form 10 filed on December 6, Mr. Halter is not a current The company is a seller of
1996; SEC File Number stockholder of the company. Mr. industrial wood preserving
000-29278 Halter resigned as an officer and chemicals in the United
director of the company as a States.
result of a change in control
transaction completed on October
15, 1996.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
MGCC Investment The company became public via Mr. Halter remains a minority The company is a
Strategies, Inc. the filing of a SB-2 stockholder of the company. Mr. manufacturer of auto parts.
registration statement filed Halter resigned as an officer and
in October 2001, SEC File director of the company as a
Number 000-50883 result of the change in control
transaction completed on June 22,
2006.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Millennium Quest, The company became public via Mr. Halter remains a minority The company is a
Inc. the filing of a Form 10 stockholder of the company. Mr. manufacturer of dried food
registration statement filed Halter resigned as an officer and products.
in September 2000, SEC File director of the company as a
Number 000-31619 result of the change in control
transaction completed on May3,
2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
14
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Microwave Form 10 filed on March 31, Mr. Halter is not a current The company is currently
Transmission 2000; SEC File Number stockholder of the company. Mr. engaged in the business of
Systems, Inc. 000-30722 Halter resigned as an officer and constructing and
director of the company on as a maintaining wireless
result of a change in control communications transmitting
transaction completed on August and recovering facilities.
6, 1999.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Nevstar Corporation The Company filed a Mr. Halter acquired control of The company is a
registration statement on the company on October 11, 2005 manufacturer of windshield
Form S-1 on September 24, and until the closing of a change and similar glass products.
1997; SEC File Number in control transaction on March
000-21071 31, 2008 served as its sole
officer and director.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Playlogic The company filed with the Mr. Halter acquired a controlling The company is presently
Entertainment, Inc. SEC a registration statement interest in the company on engaged in the business of
on Form SB-2 on August 30, December 15, 2004, and acted as developing gaming software.
2001 and a Form 8-A12G on its sole officer and director
February 28, 2002; SEC File until the completion of a change
Number 000-49649 in control transaction on June 3,
2005. Mr. Halter remains a
minority stockholder of the
company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Polymedix, Inc. Form 10 filed on April 5, Mr. Halter resigned as an officer The company is a
2006; SEC File Number and director on October 6, 2005. bio-technology company
000-51895 Mr. Halter remains a minority focusing on research of
stockholder of the company. infectious diseases.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Point Acquisition The company became public via Mr. Halter remains a minority The company is engaged in
Corp. the filing of a Form 10 stockholder of the company. Mr. the business of
registration statement filed Halter resigned as an officer and manufacturing monolithic
in September 2005, SEC File director of the company as a refractory products.
Number 000-51527 result of the change in control
transaction completed on April
25, 2007
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Redpoint Bio Corp. The company became public via Mr. Halter remains a minority The company is presently
(formerly Robcor the filing of a SB-2 stockholder of the company. Mr. engaged in the development
Properties, Inc.) registration statement filed Halter resigned as an officer and of biotech products.
on May 19, 2005; SEC File director of the company as a
Number 000-51708 result of a change in control
transaction completed on March
12, 2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
RTO Holdings, Inc. The Company originally became Mr. Halter acquired control of The company is presently
public in 1986 pursuant to the company on June 21, 2006 and engaged in the development
the filing of a registration served as its sole officer and and operation of ethanol
statement under the director until August 29, 2006 manufacturing facilities.
Securities Act of 1933; SEC when a change in control
File Number 000-15579 transaction was consummated. Mr.
Halter remains a minority
stockholder of the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Segmentz, Inc. Form 10 filed on January 30, Mr. Halter remains a minority The company is currently
2002; SEC File Number stockholder of the company. Mr. engaged in the business of
000-49606 Halter resigned as officer and providing transportation
director of the company as a services to clients in the
result of a change in control U.S. and Canada.
transaction completed on January
31, 2001.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Shelron Group, Inc. Form 10 filed on October 11, Mr. Halter is not a current The company is currently
2000; SEC File Number stockholder of the company. Mr. engaged in the business of
000-31176 Halter resigned as an officer and developing business
director of the company as a intelligence software and
result of a change in control comparative shopping
transaction completed on April software programs.
26, 2000.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
SMSA El Paso I Form 10 filed on March 12, Mr. Halter acquired control in The company is a shell
Acquisition Corp. 2008: SEC File Number September, 2007. corporation.
000-53132
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Sutor Technology, The company originally became Mr. Halter remains a minority The company is engaged in
Inc. obligated to file reports stockholder of the company. Mr. the business of
with the SEC as the result of Halter resigned as an officer and manufacturing and selling
its 1989 filing of a director of the company as a steel fabrication products.
registration statement on result of a change in control
Form SB-2; SEC File Number transaction completed on February
333-83351. 1, 2007.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
15
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Tiens Biotech Group, Form 10 filed on March 7, Mr. Halter remains a minority The company primarily
Inc. 2002; SEC File Number stockholder of the company. Mr. engages in the development,
000-49666 Halter resigned as an officer and manufacturing, and
director of the company as a marketing of nutrition
result of a change in control supplement products.
transaction completed on February
11, 2002.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Winner Medical The company originally became Mr. Halter acquired a controlling The company is involved in
Group, Inc. obligated to file reports interest in the company on the development,
with the SEC as the result of November 4, 2005, and acted as manufacturing and marketing
its 1989 filing of a its sole officer and director of medical dressings and
registration statement on until the completion of a change medical disposables.
Form S-18; SEC File Number in control transaction on
000-16547. December 16, 2005. Mr. Halter
remains a minority stockholder of
the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Yuhe International, Form SB-2 filed in September Mr. Halter acquired a controlling The company operates chicken
Inc. 1999; SEC File Number 333- interest in the company on hatcheries.
83125 November 6, 2007. A change in
control transaction occurred on
March 12, 2008. Mr. Halter
remains a minority stockholder of
the company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
Zeolite Exploration The company originally became Mr. Halter acquired a controlling The company owns and
Company public with the filing of a interest in the company on operates a nano
Registration Statement on November 30, 2005, and acted as precipitated calcium
Form SB-2 on October 23, its sole officer and director carbonate manufacturing
2002; SEC File Number until the completion of a change company in China.
333-74670 in control transaction on March
31, 2006. Mr. Halter remains a
minority stockholder of the
company.
- ---------------------- ------------------------------- ----------------------------------- -----------------------------
In addition to the companies listed above, Mr. Halter is an officer,
director, and shareholder of several private companies, including some of the
SMS Companies entities discussed in "Item 1. Description of Business - Plan of
Reorganization."
It is specifically noted that the relative success or failure of any of
the entities referenced above subsequent to Mr. Halter's affiliation should not
be deemed an indication of the possibility of our success or failure upon the
completion of our current plan of operations.
ITEM 6. EXECUTIVE COMPENSATION
Executive Officers
No officer or director has received any compensation from us. Until we
consummate a business combination, it is not anticipated that any officer or
director will receive compensation from us.
We have no stock option, retirement, pension, or profit-sharing
programs for the benefit of directors, officers or other employees.
Our board of directors appoints our executive officers to serve at the
discretion of the board. Richard Crimmins is our sole officer and director. Our
directors receive no compensation from us for serving on the board. Until we
consummate a business combination, we do not intend to reimburse our officers or
directors for travel and other expenses incurred in connection with attending
the board meetings or for conducting business activities.
Executive Compensation
Richard Crimmins has received no compensation from us nor have we
accrued any cash or non-cash compensation for his services since he was elected
as an officer and director. He will not receive any compensation from us for his
services as our sole officer and director until after we complete a business
combination. HFI has agreed to transfer to Mr. Crimmins 1000 shares of its
holdings in our company for his services as our sole officer and director when
we complete a business combination. Timothy P. Halter has not received any
compensation from us nor have we accrued any cash or non-cash compensation for
his service during his tenure as an officer and director.
16
We do not have any employment or consulting agreements with any parties
nor do we have a stock option plan or other equity compensation plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Other than the participation of HFG and Timothy P. Halter in our plan
of reorganization and the issuance to HFG of 400,000 shares of our common stock
for satisfaction of certain administrative claims and for HFG's agreement to
provide us with certain services as discussed in "Item 1- Description of
Business", there are no relationships or transactions between us and any of our
directors, officers and principal stockholders.
ITEM 8. LEGAL PROCEEDINGS
Other than being subject to the provisions of the Plan and confirmation
order, we are not a party to any legal proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information
There is no public trading market for our securities. We will seek to
make our shares eligible for quotation on the OTC Bulletin Board. However, the
Plan provides that no active trading market shall exist for our securities until
after the consummation of a business combination. No assurance can be given that
an active market will exist after we complete a business combination. The Plan
further provides that our stockholders are enjoined from trading, selling or
assigning their Plan Shares until we consummate a transaction. HFG, however, may
transfer in a private transaction, a portion of its shares of our common stock
prior to the consummation of a business combination to a single transferee or
group of transferees under common control and to HFG employees and
representatives, subject to compliance with applicable federal and state
securities laws. Any such transferee shall be subject to the same restrictions
as applicable to HFG under the Plan.
Effective May 21, 2008, HFG transferred 400,000 Plan Shares to its
affiliate, HFI.
We have no equity compensation or other types of employee benefit
plans.
Transfer Agent
We have engaged Securities Transfer Corporation, 2591 Dallas Parkway,
Suite 102, Frisco, Texas 75034 (telephone number 469.633.0100) as our transfer
agent. The Plan Shares have been issued and are being held by the transfer agent
until a business combination is consummated.
Reports to Stockholders
We plan to furnish our stockholders with an annual report for each
fiscal year ending December 31 containing financial statements audited by our
independent registered public accounting firm. In the event we enter into a
business combination with another company, we anticipate that management will
continue furnishing annual reports to stockholders. Additionally, we may, in our
sole discretion, issue unaudited quarterly or other interim reports to our
stockholders when we deem appropriate. Upon effectiveness of this registration
statement, we intend to maintain compliance with the periodic reporting
requirements of the Exchange Act.
Holders. As of July 14, 2008, there were a total of 500,004 shares of
our common stock outstanding, held by approximately 449 stockholders of record.
Dividends. We have not declared any dividends on our common stock since
inception and do not intend to pay dividends on our common stock in the
foreseeable future.
Securities Eligible for Future Sale
We relied, based on the confirmation order we received from the
Bankruptcy Court, on Section 1145(a) (1) of the Bankruptcy Code to exempt from
the registration requirements of the Securities Act of 1933, as amended, both
17
the offer of the Plan Shares which may have been deemed to have occurred through
the solicitation of acceptances of the plan of reorganization and the issuance
of the Plan Shares pursuant to the plan of reorganization. In general, offers
and sale of securities made in reliance on the exemption afforded under Section
1145(a)(1) of the Bankruptcy Code are deemed to be made in a public offering, so
that the recipients thereof, are free to resell such securities without
registration under the Securities Act.
We currently do not have any outstanding restricted securities as
defined in Rule 144. We do not intend to issue any securities prior to
consummating a business transaction. The securities we issue in a merger
transaction will most likely be restricted securities. Since we are a blank
check or shell company, we believe the resale of restricted securities we issue
in a merger transaction will be subject to the restrictions as stated below.
Rule 144
The SEC has recently adopted amendments to Rule 144 which will become
effective on February 15, 2008 and will apply to securities acquired both before
and after that date. Under these amendments, a person who has beneficially owned
restricted shares of our common stock for at least six months would be entitled
to sell their securities provided that (i) such person is not deemed to have
been one of our affiliates at the time of, or at any time during the three
months preceding a sale, (ii) we are subject to the Exchange Act periodic
reporting requirements for at least 90 days before the sale and (iii) if the
sale occurs prior to satisfaction of a one-year holding period, we provide
current information at the time of sale.
Persons who have beneficially owned restricted shares of our
common stock for at least six months but who are our affiliates at the time of,
or at any time during the three months preceding a sale, would be subject to
additional restrictions, by which such person would be entitled to sell within
any three-month period only a number of securities that does not exceed the
greater of either of the following:
o 1% of the total number of securities of the same class then
outstanding; or
o the average weekly trading volume of such securities during the four
calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale;
provided, in each case, that we are subject to the Exchange Act periodic
reporting requirements for at least three months before the sale.
Such sales by affiliates must also comply with the manner of sale,
current public information and notice provisions of Rule 144.
Restrictions on the Reliance of Rule 144 by Shell Companies or Former
Shell Companies
Historically, the SEC staff has taken the position that Rule 144 is not
available for the resale of securities initially issued by companies that are,
or previously were, blank check companies, like us. The SEC has codified and
expanded this position in the amendments discussed above by prohibiting the use
of Rule 144 for resale of securities issued by any shell companies (other than
business combination related shell companies) or any issuer that has been at any
time previously a shell company. The SEC has provided an important exception to
this prohibition, however, if the following conditions are met:
o The issuer of the securities that was formerly a shell company has
ceased to be a shell company;
o The issuer of the securities is subject to the reporting requirements
of Section 14 or 15(d) of the Exchange Act;
o The issuer of the securities has filed all Exchange Act reports and
material required to be filed, as applicable, during the preceding 12
months (or such shorter period that the issuer was required to file
such reports and materials), other than Current Reports on Form 8-K;
and
o At least one year has elapsed from the time that the issuer filed
current comprehensive disclosure with the SEC reflecting its status as
an entity that is not a shell company.
As a result, it is likely that pursuant to Rule 144, stockholders who receive
our restricted securities in a business combination will not be able to sell our
shares without registration until one year after we have completed our initial
18
business combination.
Rule 145
In the business combination context, Rule 145 has imposed on affiliates
of either the acquiror or the target company restrictions on public resales of
securities received in a business combination, even where the securities to be
issued in the business combination were registered under the Securities Act.
These restrictions were designed to prevent the rapid distribution of securities
into the public markets after a registered business combination by those who
were in a position to influence the business combination transaction. The recent
adopted amendments to Rule 145 eliminate these restrictions in most
circumstances.
Under the new amendments, affiliates of a target company who receive
registered shares in a Rule 145 business combination transaction, and who do not
become affiliates of the acquiror, will be able to immediately resell the
securities received by them into the public markets without registration (except
for affiliates of a shell company as discussed in the following section).
However, those persons who are affiliates of the acquiror, and those who become
affiliates of the acquiror after the acquisition, will still be subject to the
Rule 144 resale conditions generally applicable to affiliates, including the
adequate current public information requirement, volume limitations,
manner-of-sale requirements for equity securities, and, if applicable, a Form
144 filing.
Application of Rule 145 to Shell Companies
Public resales of securities acquired by affiliates of acquirers and
target companies in business combination transactions involving shell companies
will continue to be subject to restrictions imposed by Rule 145. If the business
combination transaction is not registered under the Securities Act, then the
affiliates must look to Rule 144 to resell their securities (with the additional
Rule 144 conditions applicable to shell company securities). If the business
combination transaction is registered under the Securities Act, then affiliates
of the acquirer and target company may resell the securities acquired in the
transaction, subject to the following conditions:
o The issuer must meet all of the conditions applicable to shell
companies under Rule 144;
o After 90 days from the date of the acquisition, the affiliates may
resell their securities subject to Rule 144's volume limitations,
adequate current public information requirement, and manner-of-sale
requirements;
o After six months from the date of the acquisition, selling
security-holders who are not affiliates of the acquirer may resell
their securities subject only to the adequate current public
information requirement of Rule 144; and
o After one year from the date of the acquisition, selling
security-holders who are not affiliates or the acquirer may resell
their securities without restriction.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to the plan of reorganization, we issued an aggregate of
500,004 shares of our common stock to 449 of our holders of unsecured debt and
administrative claims. Such shares were issued in accordance with Section 1145
under the United States Bankruptcy Code and the transaction was thus exempt from
the registration requirements of Section 5 of the Securities Act of 1933.
ITEM 11. DESCRIPTION OF SECURITIES TO BE REGISTERED
Capital Stock
Our authorized capital stock consists of 100 million shares of common
stock and 10 million shares of preferred stock. Each share of common stock
entitles a stockholder to one vote on all matters upon which stockholders are
permitted to vote. No stockholder has any preemptive right or other similar
right to purchase or subscribe for any additional securities issued by us, and
no stockholder has any right to convert the common stock into other securities.
No shares of common stock are subject to redemption or any sinking fund
provisions. All the outstanding shares of our common stock are fully paid and
non-assessable. Subject to the rights of the holders of the preferred stock, if
any, our stockholders of common stock are entitled to dividends when, as and if
declared by our board from funds legally available therefore and, upon
liquidation, to a pro-rata share in any distribution to stockholders. We do not
anticipate declaring or paying any cash dividends on our common stock in the
19
foreseeable future.
Pursuant to our Articles of Incorporation, our board has the authority,
without further stockholder approval, to provide for the issuance of up to 10
million shares of our preferred stock in one or more series and to determine the
dividend rights, conversion rights, voting rights, rights in terms of
redemption, liquidation preferences, the number of shares constituting any such
series and the designation of such series. Our board has the power to afford
preferences, powers and rights (including voting rights) to the holders of any
preferred stock preferences, such rights and preferences being senior to the
rights of holders of common stock. No shares of our preferred stock are
currently outstanding. Although we have no present intention to issue any shares
of preferred stock, the issuance of shares of preferred stock, or the issuance
of rights to purchase such shares, may have the effect of delaying, deferring or
preventing a change in control of our company.
Provisions Having A Possible Anti-Takeover Effect
Our Articles of Incorporation and Bylaws contain certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of our board and in the policies formulated by our board and to
discourage certain types of transactions which may involve an actual or
threatened change of our control. Our board is authorized to adopt, alter, amend
and repeal our Bylaws or to adopt new Bylaws. In addition, our board has the
authority, without further action by our stockholders, to issue up to 10 million
shares of our preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof. The issuance of our preferred
stock or additional shares of common stock could adversely affect the voting
power of the holders of common stock and could have the effect of delaying,
deferring or preventing a change in our control.
ITEM 12. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Sections 78.751 and 78.752 of the Nevada Revised Statues, the
registrant has broad powers to indemnify and insure its directors and officers
against liabilities they may incur in their capacities as such. The registrant's
Bylaws implement the indemnification and insurance provisions permitted by
Chapter 78 of the Nevada Revised Statutes by providing that:
o The registrant must indemnify its directors to the fullest extent
permitted by Chapter 78 of the Nevada Revised Statutes and may, if and
to the extent authorized by the registrant's board of directors, so
indemnify its officers and any other person whom it has power to
indemnify against liability, reasonable expense or other matter
whatsoever.
o The registrant may at the discretion of its board of directors
purchase and maintain insurance on behalf of the registrant and any
person whom it has power to indemnify pursuant to law, its articles of
incorporation, its bylaws or otherwise.
These indemnification provisions may be sufficiently broad to permit
indemnification of the registrant's directors and officers for liabilities
(including reimbursement of expenses incurred) arising under the Securities Act.
Our Articles of Incorporation provides that none of our directors or
officers shall be personally liable to us or our stockholders for monetary
damages for a breach of fiduciary duty as a director or officer provided,
however, that the foregoing provisions shall not eliminate or limit the
liability of a director or officer for acts or omissions which involve
intentional misconduct, fraud or knowing violation of law, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes.
Limitations on liability provided for in our Articles of Incorporation do not
restrict the availability of non-monetary remedies and do not affect a
director's responsibility under any other law, such as the federal securities
laws or state or federal environmental laws.
We believe that these provisions will assist us in attracting and
retaining qualified individuals to serve as executive officers and directors.
The inclusion of these provisions in our Articles of Incorporation may have the
effect of reducing a likelihood of derivative litigation against our directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited us or our stockholders.
Our Bylaws provide that we will indemnify our directors to the fullest
extent provided by the Nevada Revised Statutes and we may, if and to the extent
authorized by our board of directors, so indemnify our officers and other
persons whom we have the power to indemnify against liability, reasonable
expense or other matters.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
20
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other that the payment by SMSA El Paso II Acquisition Corp., of
expenses incurred or paid by a director, officer or controlling person of SMSA
El Paso II Acquisition Corp, in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, we will (unless in the opinion
of our counsel the matter has been settled by controlling precedent) submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information beginning on page F-l hereof is provided in
accordance with the requirements of Article 8 of Regulation S-X and Item 302 of
Regulation S-K.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) See the index to financial statements on page F-2 hereof.
(b) Exhibits. The following documents are filed as exhibits to this registration
statement:
Exhibit Description of Exhibit
- --------------------------------------------------------------------------------
2.1 First Amended, Modified Chapter 11 Plan Proposed by Debtors, In the
United States Bankruptcy Court, Northern District of Texas, Dallas
Division, In Re: Senior Management Services of Treemont, Inc., et. al.,
Debtors, Case No. 07-30230, Jointly Administered, dated August 1, 2007.
2.2 Order Confirming First Amended, Modified Chapter 11 Plan Proposed by
Debtors, Case No. 07-30230, signed August 1, 2007.
3.1 Agreement and Plan of Merger by and between Senior Management Services
of El Paso Coronado, Inc. and SMSA El Paso II Acquisition Corp. dated
May 22, 2008.
3.2 Articles of Merger as filed with the Secretary of State of the State of
Nevada on June 3, 2008.
3.3 Articles of Merger as filed with the Secretary of State of the State of
Texas on June 5, 2008.
3.4 Articles of Incorporation of SMSA El Paso II Acquisition Corp.
3.5 Bylaws of SMSA El Paso II Acquisition Corp.
4.1 Form of common stock certificate.
- -----------------
21
SMSA El Paso II Acquisition Corp.
(a development stage company)
Contents
Page
Report of Registered Independent Certified Public Accounting Firm F-2
Financial Statements
Balance Sheets
as of June 30, 2008 and December 31, 2007 F-3
Statement of Operations and Comprehensive Loss
for the six months ended June 30, 2008, for the period from
August 1, 2007 (date of bankruptcy settlement) through December
31, 2007 and for the period from August 1, 2007 (date of
bankruptcy settlement) through June 30, 2008 F-4
Statement of Changes in Stockholders' Equity
for the period from August 1, 2007 (date of bankruptcy settlement)
through June 30, 2008 F-5
Statement of Cash Flows
for the six months ended June 30, 2008, for the period
from August 1, 2007 (date of bankruptcy settlement) through
December 31, 2007 and for the period from August 1, 2007
(date of bankruptcy settlement) through June 30, 2008 F-6
Notes to Financial Statements F-7
F-1
LETTERHEAD OF S. W. HATFIELD, CPA
REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
SMSA El Paso II Acquisition Corp.
We have audited the accompanying balance sheets of SMSA El Paso II Acquisition
Corp. (a Nevada corporation and a development stage company) as of March 31,
2008 and December 31, 2007 and the related statements of operations and
comprehensive loss, changes in stockholders' equity and cash flows for the six
months ended June 30, 2008, the period from August 1, 2007 (date of bankruptcy
settlement) through December 31, 2007 and the period from August 1, 2007 (date
of bankruptcy settlement) through June 30, 2008. These financial statements are
the sole 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SMSA El Paso II Acquisition
Corp. (a development stage company) as of June 30, 2008 and December 31, 2007
and the results of its operations and cash flows for the six months ended June
30, 2008, the period from August 1, 2007 (date of bankruptcy settlement) through
December 31, 2007 and the period from August 1, 2007 (date of bankruptcy
settlement) through June 30, 2008, in conformity with generally accepted
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note D to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant stockholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note D. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
S.W. HATFIELD, CPA
Dallas, Texas
July 16, 2008
F-2
SMSA El Paso II Acquisition Corp.
(a development stage company)
Balance Sheets
March 31, 2008 and December 31, 2007
March 31, December 31,
2008 2007
------- -------
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ --
Due from controlling shareholder -- 1,000
------- -------
Total Assets $ -- $ 1,000
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities
Accounts payable - trade $ -- $ --
Working capital advances from controlling stockholder 2,344 --
------- -------
Total Liabilities 2,344 --
------- -------
Commitments and Contingencies
Stockholders' Equity (Deficit)
Preferred stock - $0.001 par value
10,000,000 shares authorized.
None issued and outstanding -- --
Common stock - $0.001 par value.
100,000,000 shares authorized.
500,004 shares issued and outstanding 500 500
Additional paid-in capital 500 500
Deficit accumulated during the development stage (3,344) --
------- -------
Total Stockholders' Equity (Deficit) (2,344) 1,000
------- -------
Total Liabilities and
Stockholders' Equity (Deficit) $ -- $ 1,000
======= =======
The accompanying notes are an integral part of these financial statements.
F-3
SMSA El Paso II Acquisition Corp.
(a development stage company)
Statements of Operations and Comprehensive Loss
Six months ended June 30, 2008 and
Period from August 1, 2007 (date of bankruptcy settlement) through
December 31, 2008 and Period from August 1, 2007 (date of
bankruptcy settlement) through June 30, 2008
Period from Period from
August 1, 2007 August 1, 2007
(date of (date of
bankruptcy bankruptcy
Six months settlement) settlement)
ended through through
June 30, December 31, June 30,
2008 2007 2008
--------- -------- ---------
Revenues $ -- $ -- $ --
--------- -------- ---------
Operating expenses
Reorganization costs 3,081 -- 3,081
Other general and administrative costs 263 -- 263
--------- -------- ---------
Total operating expenses 3,344 -- 3,344
--------- -------- ---------
Loss from operations (3,344) -- (3,344)
Provision for income taxes -- -- --
--------- -------- ---------
Net loss (3,344) -- (3,344)
Other comprehensive income -- -- --
--------- -------- ---------
Comprehensive loss $ (3,344) $ -- $ (3,344)
========= ======== =========
Loss per weighted-average share
of common stock outstanding,
computed on net loss - basic
and fully diluted $ (0.01) $ 0.00 $ (0.01)
========= ======== =========
Weighted-average number of shares
of common stock outstanding -
basic and fully diluted 500,004 500,004 500,004
========= ======== =========
The accompanying notes are an integral part of these financial statements.
F-4
SMSA El Paso II Acquisition Corp.
(a development stage company)
Statement of Changes in Stockholders' Equity
(Deficit) Period from August 1, 2007 (date of bankruptcy
settlement) through June 30, 2008
Deficit
accumulated
Common Stock Additional during the
------------------- paid-in development
Shares Amount capital stage Total
------- ------- ------- ------- -------
Stock issued through bankruptcy
settlement on August 1, 2007 500,004 $ 500 $ 500 $ -- $ 1,000
Net loss for the period -- -- -- -- --
------- ------- ------- ------- -------
Balances at December 31, 2007 500,004 500 500 -- 1,000
Net loss for the period -- -- -- (3,344) (3,344)
------- ------- ------- ------- -------
Balances at June 30, 2008 500,004 $ 500 $ 500 $(3,344) $(2,344)
======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-5
SMSA El Paso II Acquisition Corp.
(a development stage company)
Statement of Cash Flows
Six months ended June 30, 2008 and
Period from August 1, 2007 (date of bankruptcy settlement) through
December 31, 2008 and Period from August 1, 2007 (date of
bankruptcy settlement) through June 30, 2008
Period from Period from
August 1, 2007 August 1, 2007
(date of (date of
bankruptcy bankruptcy
Six months settlement) settlement)
ended through through
June 30, December 31, June 30,
2008 2007 2008
------- ------ -------
Cash Flows from Operating Activities
Net loss for the period $(3,344) $ -- $(3,344)
Adjustments to reconcile net loss
to net cash provided by
operating activities
Increase in accounts payable-trade -- -- --
------- ------ -------
Net cash used in operating activities (3,344) -- (3,344)
------- ------ -------
Cash Flows from Investing Activities -- -- --
------- ------ -------
Cash Flows from Financing Activities
Cash funded from bankruptcy trust -- 1,000 1,000
Working capital advances
(to) from majority stockholder 3,344 (1,000) 2,344
------- ------ -------
Net cash provided by financing activities 3,344 -- 3,344
------- ------ -------
Increase in Cash -- -- --
Cash at beginning of period -- -- --
------- ------ -------
Cash at end of period $ -- $ -- $ --
======= ====== =======
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid during the period $ -- $ -- $ --
======= ====== =======
Income taxes paid during the period $ -- $ -- $ --
======= ====== =======
The accompanying notes are an integral part of these financial statements.
F-6
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements
June 30, 2008 and December 31, 2007
Note A - Background and Description of Business
SMSA El Paso II Acquisition Corp. (Company) was organized on May 21, 2008 as a
Nevada corporation to effect the reincorporation of Senior Management Services
of El Paso Coronado, Inc., a Texas corporation, mandated by the plan of
reorganization discussed below.
The Company's emergence from Chapter 11 of Title 11 of the United States Code on
August 1, 2007 created the combination of a change in majority ownership and
voting control - that is, loss of control by the then-existing stockholders, a
court-approved reorganization, and a reliable measure of the entity's fair value
- - resulting in a fresh start, creating, in substance, a new reporting entity.
Accordingly, the Company, post bankruptcy, has no significant assets,
liabilities or operating activities. Therefore, the Company, as a new reporting
entity, qualifies as a "development stage enterprise" as defined in Statement of
Financial Accounting Standard No. 7, as amended and a shell company as defined
in Rule 405 under the Securities Act of 1933, (Securities Act), and Rule 12b-2
under the Securities Exchange Act of 1934, (Exchange Act).
In accordance with the confirmed plan of reorganization, our current business
plan is to seek to identify a privately-held operating company desiring to
become a publicly held company by merging with the Company through a reverse
merger or acquisition.
Note B - Bankruptcy Action
On January 17, 2007, Senior Management Services of El Paso Coronado, Inc. and
its affiliated companies (SMS Companies) filed a petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. During the three years
prior to filing the reorganization petition, SMS Companies operated a chain of
skilled nursing homes in Texas, which prior to the bankruptcy proceedings
consisted of 14 nursing facilities, ranging in size from approximately 114 beds
to 325 beds. In the aggregate, SMS Companies provided care to approximately
1,600 resident patients and employed over 1,400 employees. A significant portion
of the SMS Companies cash flow was provided by patients covered by Medicare and
Medicaid. The SMS Companies facilities provided round-the-clock care for the
health, well-being, safety and medical needs of its patients. The administrative
and operational oversight of the nursing facilities was provided by an
affiliated management company located in Arlington, Texas. In 2005, SMS
Companies obtained a secured credit facility from a financial institution. The
credit facility eventually was comprised of an $8.3 million term loan and a
revolving loan of up to $15 million which was utilized for working capital and
to finance the purchase of the real property on which 2 of its nursing care
facilities operated. By late 2006, SMS Companies were in an "overadvance"
position, whereby the amount of funds by the lender exceeded the amount of
collateral eligible to be borrowed under the credit facility. Beginning in
September 2006, SMS Companies entered into the first of a series of forbearance
agreements whereby the lender agreed to forebear from declaring the financing in
default provided SMS Companies obtained a commitment from a new lender to
refinance and restructure the credit facility. SMS Companies were unsuccessful
in obtaining a commitment from a new lender and, on January 5, 2007, the lender
declared SMS Companies in default and commenced foreclosure and collection
proceedings. On January 9, 2007, the lender agreed to provide an additional $1.7
million to fund payroll and permit a controlled transaction to bankruptcy.
Subsequently, on January 17, 2007, the SMS Companies filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code.
All assets, liabilities and other claims against the Company and it's affiliated
entities were combined for the purpose of distribution of funds to creditors.
Each of the entities otherwise remained separate corporate entities. From the
commencement of the bankruptcy proceedings through August 1, 2007 (the effective
date of the plan of reorganization), all secured claims and/or administrative
claims during this period were satisfied through either direct payment or
negotiation.
F-7
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
June 30, 2008 and December 31, 2007
Note B - Bankruptcy Action - Continued
We will remain subject to the jurisdiction of the bankruptcy court until we
consummate a merger or acquisition. Pursuant to the confirmation order, if we do
not consummate a business combination prior to August 10, 2009, the Plan Shares
will be deemed canceled, the pre-merger or acquisition injunction provisions of
the confirmation order, as they pertain to the Company, shall be deemed
dissolved and no discharge will be granted to the Company, all without further
order of the bankruptcy court. If we timely consummate a merger or acquisition
with an entity which is engaged in business, we will file a certificate of
compliance with the bankruptcy court which will state that the requirements of
the Plan have been met, resulting in the discharge to be deemed granted.
Thereafter, the post discharge injunction provisions set forth in the Plan and
the confirmation order shall then become effective.
The First Amended, Modified Chapter 11 Plan, (the Plan) as presented by SMS
Companies and their creditors was approved by the United States Bankruptcy
Court, Northern District of Texas - Dallas Division on August 1, 2007. The Plan,
which contemplates the Company entering into a reverse merger transaction,
provided that certain identified claimants as well as unsecured creditors, in
accordance with the allocation provisions of the Plan of Reorganization, and the
Company's new controlling stockholder would receive "new" shares of the
Company's post-reorganization common stock, pursuant to Section 1145(a) of the
Bankruptcy Code. As a result of the Plan's approval, all liens, security
interests, encumbrances and other interests, as defined in the Plan of
Reorganization, attach to the creditor's trust. Specific injunctions prohibit
any of these claims from being asserted against the Company prior to the
contemplated reverse merger.
The cancellation of all existing shares at the date of the bankruptcy filing and
the issuance of "new" shares of the reorganized entity caused an issuance of
shares of common stock and a related change of control of the Company with more
than 50.0% of the "new" shares being held by persons and/or entities which were
not pre-bankruptcy stockholders. Accordingly, per American Institute of
Certified Public Accountants' Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code", the Company adopted
"fresh-start" accounting as of the bankruptcy discharge date whereby all
continuing assets and liabilities of the Company were restated to the fair
market value. As of August 1, 2007, by virtue of the Plan, the only asset of the
Company was approximately $1,000 in cash due from the Bankruptcy Estate.
Note C - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with generally
accepted accounting principles and has established a year-end for accounting
purposes of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented.
F-8
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
June 30, 2008 and December 31, 2007
Note D - Going Concern Uncertainty
The Company has no post-bankruptcy operating history, no cash on hand, no assets
and has a business plan with inherent risk. Because of these factors, the
Company's auditors have issued an audit opinion on the Company's financial
statements which includes a statement describing our going concern status. This
means, in the auditor's opinion, substantial doubt about our ability to continue
as a going concern exists at the date of their opinion.
The Company's majority stockholder maintains the corporate status of the Company
and has provided all nominal working capital support on the Company's behalf
since the bankruptcy discharge date. Because of the Company's lack of operating
assets, its continuance is fully dependent upon the majority stockholder's
continuing support. The majority stockholder intends to continue the funding of
nominal necessary expenses to sustain the corporate entity.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis. Further, the Company faces considerable risk in it's business plan
and a potential shortfall of funding due to our inability to raise capital in
the equity securities market. If no additional operating capital is received
during the next twelve months, the Company will be forced to rely on existing
cash in the bank and additional funds loaned by management and/or significant
stockholders.
The Company's business plan is to seek an acquisition or merger with a private
operating company which offers an opportunity for growth and possible
appreciation of our stockholders' investment in the then issued and outstanding
common stock. However, there is no assurance that the Company will be able to
successfully consummate an acquisition or merger with a private operating
company or, if successful, that any acquisition or merger will result in the
appreciation of our stockholders' investment in the then outstanding common
stock.
The Company remains dependent upon additional external sources of financing;
including being dependent upon its management and/or significant stockholders to
provide sufficient working capital in excess of the Company's initial
capitalization to preserve the integrity of the corporate entity.
The Company anticipates offering future sales of equity securities. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
The Company's certificate of incorporation authorizes the issuance of up to
10,000,000 million shares of preferred stock and 100,000,000 shares of common
stock. The Company's ability to issue preferred stock may limit the Company's
ability to obtain debt or equity financing as well as impede potential takeover
of the Company, which takeover may be in the best interest of stockholders. The
Company's ability to issue these authorized but unissued securities may also
negatively impact our ability to raise additional capital through the sale of
our debt or equity securities.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.
In such a restricted cash flow scenario, the Company would be unable to complete
its business plan steps, and would, instead, delay all cash intensive
activities. Without necessary cash flow, the Company may become dormant during
the next twelve months, or until such time as necessary funds could be raised in
the equity securities market.
F-9
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
June 30, 2008 and December 31, 2007
Note D - Going Concern Uncertainty - Continued
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach its goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
Note E - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
2. Reorganization costs
--------------------
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all costs incurred
with the incorporation and reorganization, post-bankruptcy, of the Company
were charged to operations as incurred.
3. Income taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At June 30, 2008 and December 31, 2007, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
As of June 30, 2008 and 2007, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
4. Income (Loss) per share
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
As of June 30, 2008 and December 30, 2007, and subsequent thereto, the
Company had no outstanding stock warrants, options or convertible
securities which could be considered as dilutive for purposes of the loss
per share calculation.
F-10
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
June 30, 2008 and December 31, 2007
Note F - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note G - Income Taxes
The components of income tax (benefit) expense for the six month period ended
June 30, 2008, the period from August 1, 2007(date of bankruptcy settlement)
through December 31, 2007 and the period from August 1, 2007 (date of bankruptcy
settlement) through June 30, 2008 are as follows:
Period from Period from
August 1, 2007 August 1, 2007
(date of (date of
bankruptcy bankruptcy
Six months settlement) settlement)
ended through through
June 30, December 31, June 30,
2008 2007 2008
------- ------ -------
Federal:
Current $ - $ - $ -
Deferred - - -
------- ------ -------
- - -
------- ------ -------
State:
Current - - -
Deferred - - -
------- ------ -------
- - -
------- ------ -------
Total $ - $ - $ -
======= ====== =======
As of June 30, 2008, the Company has a net operating loss carryforward of
approximately $3,344 to offset future taxable income. The amount and
availability of any net operating loss carryforwards will be subject to the
limitations set forth in the Internal Revenue Code. Such factors as the number
of shares ultimately issued within a three year look-back period; whether there
is a deemed more than 50 percent change in control; the applicable long-term tax
exempt bond rate; continuity of historical business; and subsequent income of
the Company all enter into the annual computation of allowable annual
utilization of any net operating loss carryforward(s).
F-11
SMSA El Paso II Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
June 30, 2008 and December 31, 2007
Note G - Income Taxes - Continued
The Company's income tax expense for the six month period ended June 30, 2008,
the period from August 1, 2007(date of bankruptcy settlement) through December
31, 2007 and the period from August 1, 2007 (date of bankruptcy settlement)
through June 30, 2008 varied from the statutory rate of 34% as follows:
Period from Period from
August 1, 2007 August 1, 2007
(date of (date of
bankruptcy bankruptcy
Six months settlement) settlement)
ended through through
June 30, December 31, June 30,
2008 2007 2008
------- ------- -------
Statutory rate applied to
income before income taxes $(1,100) $ -- $(1,100)
Increase (decrease) in income
taxes resulting from:
State income taxes -- -- --
Other, including reserve for
deferred tax asset and application
of net operating loss carryforward 1,100 -- 1,100
------- ------- -------
Income tax expense $ -- $ -- $ --
======= ======= =======
The Company's only temporary differences as of June 30, 2008 and December 31,
2007 relate to the Company's net operating loss. Accordingly, any deferred tax
asset, as fully reserved, or liability, if any, as of June 30, 2008 and December
31, 2007 is nominal and not material to the accompanying financial statements.
Note H - Capital Stock Transactions
Pursuant to the Plan affirmed by the U. S. Bankruptcy Court - Northern District
of Texas - Dallas Division, the Company will issue a sufficient number of Plan
shares to meet the requirements of the Plan. Such number was estimated in the
Plan to be approximately 500,000 Plan Shares relative to each Post Confirmation
Debtor.
As provided in the Plan, 80.0% of the Plan Shares of the Company were issued to
Halter Financial Group, Inc. (HFG). In exchange for the release of its Allowed
Administrative Claims and for the performance of certain services and the
payment of certain fees related to the anticipated reverse merger or acquisition
transactions described in the Plan. The remaining 20.0% of the Plan Shares of
the Company were issued to other holders of various claims as defined in the
Plan.
Based upon the calculations provided by the Creditor's Trustee, the Company
issued an aggregate 500,004 shares of the Company's "new" common stock to all
unsecured creditors and the controlling stockholder in settlement of all unpaid
pre-confirmation obligations of the Company and/or the bankruptcy trust.
Effective May 21, 2008, HFG transferred its 400,000 Plan Shares to Halter
Financial Investments, L.P. (HFI), a Texas limited partnership controlled by
Timothy P. Halter, who is also the controlling officer of HFG.
F-12
SIGNATURES
In accordance with Section 12 of the Exchange Act, the Company caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
SMSA El PASO I ACQUISITON CORP.
DATE: July 18, 2008 By: /s/ Richard Crimmins
---------------------------------------------
Richard Crimmins, President, Secretary, Chief
Executive Officer and Chief Financial Officer
22
INDEX OF EXHIBITS
The following documents are filed as exhibits to this Registration Statement
Exhibit Description of Exhibit
- --------------------------------------------------------------------------------
2.1 First Amended, Modified Chapter 11 Plan Proposed by Debtors, In the
United States Bankruptcy Court, Northern District of Texas, Dallas
Division, In Re: Senior Management Services of Treemont, Inc., et. al.,
Debtors, Case No. 07-30230, Jointly Administered, dated August 1, 2007.
2.2 Order Confirming First Amended, Modified Chapter 11 Plan Proposed by
Debtors, Case No. 07-30230, signed August 1, 2007.
3.1 Agreement and Plan of Merger by and between Senior Management Services
of El Paso Coronado, Inc. and SMSA El Paso II Acquisition Corp. dated
May 22, 2008.
3.2 Articles of Merger as filed with the Secretary of State of the State of
Nevada on June 3, 2008.
3.3 Articles of Merger as filed with the Secretary of State of the State of
Texas on June 5, 2008.
3.4 Articles of Incorporation of SMSA El Paso II Acquisition Corp.
3.5 Bylaws of SMSA El Paso II Acquisition Corp.
4.1 Form of common stock certificate.
- -----------------
IOE-1