As filed with the Securities and Exchange Commission on March 19,
1998 SEC Registration No. 33-98526-D
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CALIFORNIA APPLIED RESEARCH, INC.
(Exact name of registrant as specified in charter)
NEVADA 6770 84-1345053
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
1275 East Bellview, Cherry Hills Village, Colorado 80121
(303) 789-1946
(Address and telephone number of registrant's principal executive
offices and principal place of business)
J. Michael Spinali, 1275 East Bellview, Cherry Hills Village,
Colorado 80121, (303) 789-1946
(Name, address, and telephone number of agent for service)
Copy to: Robert C. Weaver, Jr., Esq., 721 Devon Court, San Diego,
California 92109, (619) 488-4433, FAX (619) 488-2555
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes
effective.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
(Continued on Next Page)
CALCULATION OF REGISTRATION FEE
Title of Each Amount Proposed Proposed Amount of
Class of Securities to be Maximum Maximum Registration
Being Registered Registered Offering Aggregate Fee
Price Offering
Per Share Price
Common Stock, par
value $.001 per
share 1,000,000 $.25 $ 250,000 $ 86.21
TOTAL $ 86.21
MINIMUM FEE $100.00
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as the
Commission acting pursuant to said section 8(a), may determine.
CALIFORNIA APPLIED RESEARCH, INC.
Minimum 100,000 / Maximum 1,000,000
Shares of Common Stock
Offering Price $0.25 Per Share
California Applied Research, Inc. (the "Company") hereby offers
1,000,000 shares of Common Stock, par value $.001 per share ("the
Shares"). See Description of Securities." The Company is a blank
check company and has not engaged in any business and has no specific
plans for any given business or industry.
Prior to this offering there has been no public market for
the Shares. The initial public offering price of the Shares has been
arbitrarily determined by the Company and does not bear any
relationship to such established valuation criteria as assets, book
value or prospective earnings. There can be no assurance that a
regular trading market will develop for the Shares after this
offering or that, if developed, any such market will be sustained.
After a merger, the Company anticipates that trading of the Shares
will be conducted through what is customarily known as the "pink
sheets" and/or on the National Association of Securities Dealers,
Inc.'s Electronic Bulletin Board (the "Bulletin Board"). Any market
for the Shares which may result will likely be less well developed
than if the Shares were traded on NASDAQ or on an exchange. For
information regarding the factors considered in determining the
initial public offering price of the Shares see "Risk Factors" and
"Offering."
The Company is conducting a blank check offering subject to
the Commission's Rule 419 of Regulation C. The net offering
proceeds, after deduction for underwriting commissions and offering
expenses, estimated at $10,400 and the securities to be issued to
investors must be deposited in an escrow account (The "DEPOSITED
FUNDS" and "DEPOSITED SECURITIES," respectively). While held in the
escrow account, the securities may not be traded or transferred.
Except for an amount up to 10% of the DEPOSITED FUNDS ($1,210 if
minimum is sold, $21,460 if the maximum is sold) otherwise releasable
under the rule, the DEPOSITED FUNDS and the DEPOSITED SECURITIES may
not be released until an acquisition meeting certain specified
criteria has been made and a sufficient number of investors reconfirm
their investment in accordance with the procedures set forth in the
Rule 419. Pursuant to these procedures, a new prospectus, which
describes an acquisition candidate and its business and includes
audited financial statements, will be delivered to all investors The
Company must return the pro rata portion of the DEPOSITED FUNDS to
any investor who does not elect to remain an investor. Unless a
sufficient number of investors elect to remain investors, all
investors will be entitled to the return of a pro rata portion of the
DEPOSITED PROCEEDS (and any interest earned thereon) and none of the
DEPOSITED SECURITIES will be issued to investors. In the event an
acquisition is not consummated within 18 months of the effective
date, the DEPOSITED PROCEEDS will be returned on a pro rata basis to
all investors. (see "Summary - Investors Rights and Substantive
Protection Under Rule 419")
Officers and directors of the Company may purchase up to 50,000
of the shares sold in the offering under the same terms and
conditions as the public investors. Such purchases, if made, will be
for investment purposes only and not for redistribution. Such
purchases may be made for the purpose of closing the minimum
offering.
"THE SECURITIES WILL ONLY BE REGISTERED IN COLORADO AND NEW
YORK, AND MAY ONLY BE OFFERED OR TRADED IN OTHER STATES PURSUANT TO
AN EXEMPTION FROM REGISTRATION. PURCHASERS OF SUCH SECURITIES EITHER
IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY
DEVELOP MUST BE RESIDENTS OF STATES IN WHICH THE SECURITIES ARE
REGISTERED OR EXEMPT FROM REGISTRATION
The Company intends to provide the Company's shareholders
with complete disclosure documentation, including audited financial
statements, concerning a target company and its business prior to any
merger or acquisition.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Offering Proceeds to
Price to Public (1) Discount (2) Company (3)
Per Share $ .25 $ .025 $ .225
Minimum 100,000 $ 25,000 $ 2,500 $ 22,500
Maximum 1,000,000 $ 250,000 $25,000 $225,000
(Notes on following page.)
CALIFORNIA APPLIED RESEARCH, INC.
1275 East Bellview
Cherry Hills Village, Colorado 80121
The date of this Prospectus is , 19
NOTES:
(1) SUBSCRIBERS PURCHASING THE SHARES SHOULD MAKE THEIR CHECK
PAYABLE TO "COLORADO BUSINESS BANK - ESCROW AGENT." The address of
Colorado Business Bank is 101 W. Mineral Ave., Littleton, CO 80120.
All proceeds from subscriptions to purchase the Shares will be
transmitted by the Company and any participating dealer to the
escrow account by noon of the next business day after receipt. The
Shares are offered by the Company on a "best efforts" 100,000 Share
minimum, 1,000,000 Share maximum basis. In the event that the
minimum of 100,000 Shares are not sold within 360 days from the
effective date of this prospectus all proceeds raised will be
returned promptly to subscriber in full without interest thereon.
Subscribers will not be entitled to a return of funds from the
escrow during the offering period (including the extension
thereof). All proceeds will be deposited into the escrow account.
Pursuant to Rule 419, the Company has 18 months from the effective
date of this prospectus to comsumate a business combination,
therefor, if the offering period were to go to the full 360 day
period the Company will only be alloted 6 months to consummate a
business combination.
(2) The Company intends to offer the Shares through its officers
and directors Michael Spinali and Brian French without the use of
a professional underwriter, and by selected broker-dealers who are
members of the National Association of Securities Dealers, Inc.
(N.A.S.D.) On sales made by brokers a maximum commission of 10%
will be allowed. No commissions will be paid for sales effected by
officers and directors, however these figures assume payment of
commissions on the sale of all Shares. The offering is being
conducted directly by the Company without the use of a professional
underwriter.
(3) The proceeds to the Company set forth in the table on the
cover page of the Prospectus have been computed before deduction of
costs that will be incurred in connection with this offering
(excluding the Offering discount), including filing, printing,
legal, accounting, transfer agent and escrow agent fees
(collectively, the "Offering Costs") estimated at $10,400.
PROSPECTUS
TABLE OF CONTENTS
INVESTOR SUITABILITY STANDARDS 7
JURISDICTIONAL NOTICES 9
PROSPECTUS SUMMARY 10
The Company 10
The Offering 11
Use of Proceeds 11
Risk Factors 12
RISK FACTORS 15
DILUTION 37
USE OF PROCEEDS 37
CAPITALIZATION 41
PROPOSED BUSINESS 42
Introduction 42
Payment of Salaries or Consulting Fees 49
Competition 49
Uncertainty of Competitive Environment of Acquired Business 49
Redemption Rights 50
Certain Securities Laws Considerations 51
Facilities 52
Employees 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 53
MANAGEMENT 54
Directors and Officers 54
Executive Compensation 55
PRINCIPAL SHAREHOLDERS 57
CERTAIN TRANSACTIONS 58
DESCRIPTION OF SECURITIES 59
General 59
Common Stock 59
Dividends 59
Shares Eligible For Future Sale 59
THE OFFERING 61
Prospective Investor Questionnaires 63
LEGAL PROCEEDINGS 64
LEGAL MATTERS 64
EXPERTS 64
INDEMNIFICATION 64
AVAILABLE INFORMATION 65
FINANCIAL STATEMENTS 65
THE SHARES ARE BEING OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE
WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY THE COMPANY, AND
SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL AND CERTAIN
OTHER CONDITIONS. THE COMPANY RESERVES THE RIGHT TO WITHDRAW,
CANCEL OR MODIFY THIS OFFERING AND TO REJECT ANY ORDER IN WHOLE OR
IN PART.
ESCROW OF 90% OF THE PROCEEDS DERIVED HEREBY
UPON COMPLETION OF THIS OFFERING, 90% OF THE NET PROCEEDS THEREFROM
WILL BE PLACED IN AN ESCROW ACCOUNT WITH THE COLORADO BUSINESS BANK
AS ESCROW AGENT, SUBJECT TO RELEASE UPON THE EARLIER OF (i) WRITTEN
NOTIFICATION BY THE COMPANY OF ITS NEED FOR ALL, OR SUBSTANTIALLY
ALL OF SUCH NET PROCEEDS FOR THE PURPOSE OF FACILITATING A BUSINESS
COMBINATION; OR (ii) THE EXERCISE BY CERTAIN SHAREHOLDERS OF THE
REDEMPTION OFFER (AS HEREINAFTER DEFINED), OR (iii) 18 MONTHS AFTER
THE EFFECTIVE DATE OF THIS OFFERING REGISTRATION STATEMENT. IN
THE EVENT OF THE EXERCISE OF THE REDEMPTION OFFER, INVESTORS MAY
RECOUP ONLY A PORTION OF THEIR SEE "RISK FACTORS" AND "PROPOSED
BUSINESS."
ESCROW FUNDS NOT TO BE USED FOR SALARIES OR REIMBURSABLE EXPENSES
NO FUNDS (INCLUDING ANY INTEREST EARNED THEREON) WILL BE DISBURSED
FROM THE ESCROW FUND FOR THE PAYMENT OF SALARIES OR REIMBURSEMENT
OF EXPENSES INCURRED ON THE COMPANY'S BEHALF BY THE COMPANY'S
OFFICERS AND DIRECTORS. OTHER THAN THE FOREGOING, THERE IS NO
LIMIT ON THE AMOUNT OF SUCH REIMBURSABLE EXPENSES, AND THERE WILL
BE NO REVIEW OF THE REASONABLENESS OF SUCH EXPENSES BY ANYONE OTHER
THAN THE COMPANY'S BOARD OF DIRECTORS, ALL OF WHOM ARE OFFICERS. IN
NO EVENT WILL THE ESCROW FUND (INCLUDING ANY INTEREST EARNED
THEREON) BE USED FOR ANY PURPOSE OTHER THAN IMPLEMENTATION OF A
BUSINESS COMBINATION OR FOR PURPOSES OF THE REDEMPTION OFFER. SEE
"RISK FACTORS," "USE OF PROCEEDS" AND "CERTAIN TRANSACTIONS."
NO PRIOR CONTACT WITH OTHER FIRMS REGARDING POSSIBLE BUSINESS
COMBINATIONS
NONE OF THE COMPANY'S OFFICERS, DIRECTORS OR GREATER THAN 10%
SHAREHOLDERS OR PERSONS WHO DIRECTLY OR INDIRECTLY CONTROL, ARE
CONTROLLED BY OR ARE UNDER COMMON CONTROL WITH, THE COMPANY OR
PERSONS WHO MAY BE DEEMED PROMOTERS OF THE COMPANY HAVE HAD ANY
PRELIMINARY CONTACT OR DISCUSSIONS WITH ANY REPRESENTATIVE OF ANY
OTHER FIRM REGARDING THE POSSIBILITY OF A BUSINESS COMBINATION
BETWEEN THE COMPANY AND SUCH OTHER FIRM.
MATERIAL PERSONS
THE OFFICERS, DIRECTORS, AND MAJOR SHAREHOLDERS OF THE COMPANY ARE
THE ONLY PERSONS WHO HAVE BEEN INSTRUMENTAL IN ARRANGING THE
CAPITALIZATION OF THE COMPANY TO DATE. NONE OF THE OFFICERS OR
DIRECTORS OF THE COMPANY ARE ACTING AS NOMINEES FOR ANY PERSONS OR
ARE OTHERWISE UNDER THE CONTROL OF ANY PERSON OR PERSONS. OTHER
THAN CERTAIN COMPENSATION TO BE PAID BY THE COMPANY TO EACH OF
MESSRS. SPINALI AND FRENCH, THERE ARE NO AGREEMENTS, AGREEMENTS IN
PRINCIPLE, OR UNDERSTANDINGS WITH REGARD TO COMPENSATION TO BE PAID
BY THE COMPANY TO ANY OFFICER OR DIRECTOR OF THE COMPANY.
OFFICERS OR DIRECTORS MAY PURCHASE UP TO 50,000 OF THE SHARES IN
THIS OFFERING.
IT IS ANTICIPATED THE COMPANY MAY MAKE SALES OF SHARES TO OFFICERS
AND DIRECTORS AND THAT SUCH PERSONS MAY PURCHASE UP TO 50,000 OF
THE SHARES OFFERED HEREBY. SUCH PURCHASES SHALL BE MADE FOR
INVESTMENT PURPOSES ONLY AND IN A MANNER CONSISTENT WITH A PUBLIC
OFFERING OF THE COMPANY'S SHARES. SUCH PURCHASES MAY BE USED TO
REACH THE AMOUNT REQUIRED FOR CLOSING IN THE EVENT SUCH AMOUNT IS
NOT REACHED AS A RESULT OF PURCHASES BY THE GENERAL PUBLIC. THUS
THE OFFICERS AND DIRECTORS COULD PURCHASE UP TO 50% OF THE AMOUNT
REQUIRED FOR CLOSING IF NO SALES ARE MADE TO NEW SHAREHOLDERS, THE
MAXIMUM OF WHICH COULD BE 50,000 SHARES. SUCH PURCHASES WILL
INCREASE THE PERCENTAGE OF SECURITIES BEING HELD BY THE OFFICERS
AND DIRECTORS.
INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH
ARE AN INTEGRAL PART OF THIS PROSPECTUS,
DEALERS PARTICIPATING IN THIS OFFERING ARE REQUIRED TO DELIVER A
COPY OF THE FINAL PROSPECTUS TO ANY PERSON WHO IS EXPECTED TO
RECEIVE A CONFIRMATION OF THE SALE AT LEAST 48 HOURS PRIOR TO THE
MAILING OF THE CONFIRMATION.
Until 90 days after the date funds and securities are released from
the escrow or trust account pursuant to Rule 419, all dealers
participating in this distribution are required to deliver a
prospectus.
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the
more detailed information and financial statements, including the
notes thereto appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its
entirety.
The Company
California Applied Research, Inc. (the "Company") was
incorporated in the State of Nevada on March 25, 1992, to seek and
make one or more Business Combinations to the extent its limited
assets will allow. See "RISK FACTORS" and "PROPOSED BUSINESS." The
Company is in the development stage and has no operating history.
No representation is made nor implied that the Company will be able
to carry on its activities profitably. The subsistence of the
Company is dependent initially upon sufficient proceeds being
realized by the Company from this Blank Check Offering, of which
there is no assurance. Proceeds of this Blank Check Offering may be
insufficient to enable the Company to conduct potentially
profitable operations or otherwise to engage in any business
endeavors. The likelihood of the success of the Company must be
considered in light of the expenses, difficulties and delays
frequently encountered in connection with the formation of any new
business. Further, no assurance can be given that the Company will
have the ability to acquire assets, business or properties with any
value to the Company. The Company's office is located at 1275 East
Bellview, Cherry Hills Village, Colorado 80121 and its' telephone
number is (303) 789-1946.
The Company intends to use the net proceeds of the Blank Check
Offering to effect a merger, acquire the assets or the capital
stock of existing businesses or other similar business combination
(a "Business Combination) and/or to establish businesses which may
become profitable, of which no assurances are given. The Company's
current management may manage any business developed or acquired by
the Company or may employ qualified, but as yet unidentified,
individuals to manage such business. No assurance can be given
that the net proceeds of the maximum offering of this Blank Check
Offering or any lesser net amount will be sufficient to accomplish
the Company's goals or that any business acquired or developed by
the Company will become profitable. In the event that substantially
less than the net proceeds from the maximum of offering are raised,
the Company's plans may be materially and adversely effected in
that the Company may find it even more difficult, if not
impossible, to realize its goals. Further, the Company has not
identified any business to be acquired, has no plan to create any
business and has no alternative plans to utilize the portion of the
net proceeds of the Blank Check Offering intended to be utilized
for such purposes. Investors will be providing their funds to
Management who will have complete discretion as to their
expenditure. See "RISK FACTORS", "USE OF PROCEEDS" and "PROPOSED
BUSINESS."
The net proceeds from the maximum offering of this Blank Check
Offering, as well as any lesser net amount may be insufficient for
the Company to realize its goals and allow the Company to engage in
a business venture chosen by the Company's management. In the
event that Substantially less than the net proceeds from the
maximum of offering are raised, the Company's plans may be
materially and adversely effected in that the Company may find it
even more difficult, if not impossible, to realize its goals. (See
"Use of Proceeds.") If such proceeds are insufficient, the Company
may be required to seek additional capital. No assurance can be
given that the Company will be able to obtain such additional
capital, or even if available, that such additional capital will be
available on terms acceptable to the Company. In the event that
Management determines that the Company is unable to conduct any
business whatsoever, Management, subject to the requirements of
Rule 419, which provides that the DEPOSITED FUNDS will be returned
on a pro rata basis if an acquisition meeting certain prescribed
criteria is not consummated within 18 months of the date of this
Prospectus, will, in its sole discretion, seek shareholder approval
to liquidate the Company. In the event such a liquidation were to
occur at some point in time after the Company's compliance with the
provisions of Rule 419, all shareholders of the Company including
those owning shares purchased privately at less than the public
offering price (see "Dilution"), will receive the liquidated assets
on a pro rata basis (as opposed to being based on the amounts paid
for such shares). While Management has not established any
guidelines for determining at what point in tine it might elect to
discontinue its efforts to engage in a business and seek
shareholder approval to liquidate the Company, Management is
subject to the 18 month time frame set forth in Rule 419 in which
to effect an acquisition.
The Offering
Minimum Maximum
Securities offered 100,000 1,000,000
Common Shares
par value $0.001 per share
Common Shares to
be outstanding after
the offering 2,570,000 3,470,000
Officers and directors of the Company may purchase up to
50,000 of the shares sold in the offering under the same terms and
conditions as the public investors. Such purchases, if made, will
be for investment purposes only and not for redistribution. Such
purchases may be made for the purpose of closing the minimum
offering.
Use of Proceeds
The Company intends to apply substantially all of the Net
Proceeds of this offering (other than the proceeds to be delivered
to the Escrow Fund) to cover costs and expenses incurred in
attempting to effect a Business Combination, including selecting
and evaluating an Acquired Business, structuring and consummating
a Business Combination. The proceeds placed in the Escrow Fund
shall not be used by the Company for any Company payment of
salaries or expenses to Messrs. Spinali and French. The proceeds
placed in the Escrow Fund shall only be used, if at all, for the
implementation of a Business Combination or for purposes of the
Redemption Offer. See "USE OF PROCEEDS," "PROPOSED BUSINESS" and
"CERTAIN TRANSACTIONS."
Risk Factors
The securities offered hereby involve a high degree of risk
and immediate substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire investment.
Such risk factors include, among others: the Company's recent
formation and limited resources; discretionary use of proceeds; an
intense competition in selecting an Acquired Business and effecting
a Business Combination. See "Risk Factors," "Dilution" and "Use of
Proceeds."
Investors Rights to Reconfirm Investment Under Rule 419
Deposit of Offering Proceeds and Securities. Rule 419
requires that the net offering proceeds, after deduction for
underwriting compensation and offering expenses and all securities
to be issued be deposited into an escrow or trust account (The
"DEPOSITED FUNDS" and "DEPOSITED SECURITIES," respectively)
governed by an agreement which contains certain terms and
provisions specified by the rule. Under Rule 419, the DEPOSITED
FUNDS and DEPOSITED SECURITIES will be released to the Company and
to investors, respectively, only after the Company has met the
following three conditions. First, the Company must execute an
agreement for an acquisition(s) meeting certain prescribed
criteria. Second, the Company must successfully complete a
reconfirmation offering which includes certain prescribed terms and
conditions. Third, the acquisition(s) meeting the prescribed
criteria must be consummated (see "Prescribed Acquisition Criteria"
and " Reconfirmation Offering")
Accordingly, the Company has entered into an escrow agreement
with (name of bank or broker-dealer) (the "Escrow Agent") which
provides that:
(1) The net proceeds are to be deposited into an escrow
account (maintained by the bank) or (established by the broker-
dealer) promptly after the termination of the offering. The
DEPOSITED FUNDS and interest or dividends thereon, if any, are to
be held for the sole benefit of the investors and can be only
invested in bank deposits, in money mutual funds or federal
government securities or securities for which the principal or
interest is guaranteed by the federal government.
(2) All securities issued in connection with the offering
and any other securities issued with respect to such securities,
including securities issued with respect to stock splits, stock
dividends or similar rights are to be deposited directly into the
escrow account promptly upon issuance. The identity of the
investors are to be included on the stock certificates or other
documents evidencing the securities. The securities held in the
escrow account are to remain as issued and deposited and are to be
held for the sole benefit of the investors who retain the voting
rights, if any, with respect to the securities held in their names.
The securities held in the escrow account may not be transferred,
disposed of nor any interest created therein other than by will or
The laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by The Internal Revenue Code of
1986 or Table 1 of the Employee Retirement Income Security Act.
(3) Warrants, convertible securities or other derivative
securities relating to securities held in the escrow account may be
exercised or converted in accordance with the terms provided,
however that the securities received upon exercise or conversion
together with any cash or other consideration paid in connection
with The exercise or conversion, are to be promptly deposited into
the escrow account.
Prescribed Acquisition Criteria. Rule 419 requires that
before the DEPOSITED FUNDS and the DEPOSITED SECURITIES can be
released the Company must first execute an agreement(s) to acquire
an acquisition candidate(s) meeting certain specified criteria.
The agreement must provide for the acquisition of a business,
businesses or assets for which the fair value of the business
represents at least 80% of the maximum offering proceeds, including
funds received or to be received from the exercise of warrants, but
excluding underwriting commissions, underwriting expenses and
dealer allowances payable to non- affiliates. Once the acquisition
agreements meeting the above criteria have been executed, the
Company must successfully complete the mandated reconfirmation
offering and consummate the acquisition(s).
Post-Effective Amendment. Once the agreement governing The
acquisition of a business meeting the above criteria has been
executed, Rule 419 requires the Company to update the registration
statement with a post-effective amendment. The post-effective
amendment must contain information about: the proposed acquisition
candidate and its business, including audited financial statements;
the results of this offering; and the use of the funds disbursed
from the escrow account. The post-effective amendment must also
include the terms of the reconfirmation offer mandated by Rule 419.
The offer must include certain prescribed conditions which must
be satisfied before the DEPOSITED FUNDS and DEPOSITED SECURITIES
can be released from escrow.
Reconfirmation Offering. The reconfirmation offer must
commence within five business days after the effective date of the
post-effective amendment. Pursuant to Rule 419, the terms of The
reconfirmation offer must include the following conditions:
(1) The prospectus contained in The post-effective
amendment will be sent to each investor whose securities are held
in the escrow account within 5 business days after the effective
date of the post-effective amendment;
(2) Each investor will have no fewer than 20, and no more
than 45, business days from the effective date of the post-
effective amendment to notify the Company in writing that the
investor elects to remain an investor;
(3) If the Company does not receive written notification
from any investor within 45 business days following the effective
date, the pro rata portion of the DEPOSITED FUNDS (and any related
interest or dividends) held in the escrow account on such
investor's behalf will be returned to the investor within 5
business days by first class mail or other equally prompt means;
(4) The acquisition(s) will be consummated only if a
minimum number of investors representing 80% of the maximum
offering proceeds (including funds received or to be received from
the exercise of warrants) (state amount) elect to reconfirm their
investments;
(5) If a consummated acquisition(s) has not occurred by
18 months from The date of this prospectus, the DEPOSITED FUNDS
held in the escrow account shall be returned to all investors on a
pro rata basis within 5 business days by first class mail or other
equally prompt means.
Release of Deposited Securities and Deposited Funds. The
DEPOSITED FUNDS and DEPOSITED SECURITIES may be released to the
Company and the investors, respectively, after:
(1) The escrow agent has received a signed representation
from the Company and any other evidence acceptable by the escrow
agent that: (a) The Company has executed an agreement for the
acquisition of a business for which the par value of the business
represents at least 80% of the maximum offering proceeds and has
filed the required post-effective amendment; (b) The post-effective
amendment has been declared effective, that the mandated
reconfirmation offer having the conditions prescribed by Rule 419
has been completed and that The Company has satisfied all of the
prescribed conditions of the reconfirmation offer.
(2) The acquisition of the business with the fair value
of at least 80% of the maximum proceeds is consummated.
RISK FACTORS
The securities offered hereby are speculative, involve
immediate substantial dilution and a high degree of risk,
including, but not necessarily limited to, the several factors
described below. Each prospective investor should carefully
consider the following risk factors inherent in and affecting the
business of the Company and this offering before making an
investment decision.
Rule 419 Generally
Rule 419 generally requires that the securities to be issued
and the funds received in a blank check offering be deposited and
held in an escrow account until an acquisition meeting specified
criteria is completed. Before the acquisition can be completed and
before the funds and securities can be released, the blank check
company is required to update the registration statement with a
post-effective amendment; after the effective date of any such
post-effective amendment. the Company is required to furnish
investors with the prospectus produced thereby containing
information, including audited financial statements, regarding the
proposed acquisition candidate and its business. According to the
rule, the investors must have no fewer than 20 and no more than 45
days from the effective date of the post-effective amendment to
decide to remain an investor or require the return of their
investment funds. Any investor not making a decision within said
45-day period is to automatically receive a return of his
investment funds.
Conflicts of Interest - Possible Negotiation or Otherwise Grant of
Consent by Management to Purchase of Management's Common Stock.
While the Company and its Management intend that no shares of
the Company's Common Stock will be sold by any officers, directors
or greater than 10% shareholders or persons who may be deemed
promoters of the Company without affording all shareholders of the
Company a similar opportunity, Management may, nevertheless,
actively negotiate or otherwise consent to the purchase of all or
a portion of their shares of Common Stock as a condition to or in
connection with a proposed merger or acquisition transaction. It
is noted that Management may be deemed to have paid $.01875 per
share for Common Stock owned by Management. In connection with any
such stock purchase transaction, it is possible that a premium may
be paid for Management's shares of Common Stock and that public
investors in the Company may not receive any portion thereof in the
event such premium may he paid. Any transaction structured in such
manner may present Management with conflicts of interest and as a
result of such conflicts, may possibly compromise Management's
fiduciary duties to the Company's shareholders, as the potential
would therefore exist for members of Management to consider their
own personal pecuniary benefit rather than the best interests of
the Company's other shareholders. Further, the Company's other
shareholders may not be afforded an opportunity to otherwise
participate in any particular stock buy-out transaction.
Additionally, in any such transaction, it is possible, although not
presently intended, that the Company may borrow funds to be used
directly or indirectly to purchase Management's shares. Proceeds
from this Blank Check Offering will not be utilized directly or
indirectly to purchase Management's shares.
Although investors may request the return of their investment
funds in connection with the reconfirmation offering required by
Rule 419, the Company's shareholders will not be afforded an
opportunity specifically to approve or disapprove any particular
buy-out transaction. (See also RISK FACTOR entitled "Actual and
Potential Conflicts of Interest."
Actual and Potential Conflicts of Interest
The Company's officers and directors may engage in other
business activities similar and dissimilar to those engaged in by
the Company. To the extent that such officers and directors engage
in such other activities, they will have possible conflicts of
interest in diverting opportunities to other companies, entities or
persons with which they are or may be associated or have an
interest, rather than direct such opportunities to the Company.
Such potential conflicts of interest include, among other things,
the time, effort and corporate opportunity involved in their
participation in other business transactions or activities as well
as the preference, notwithstanding other possible factors, to
utilize Robert C. Weaver, Jr., Esq., a substantial shareholder, for
legal services. Since only limited policies have been established
for the resolution of such conflicts, the Company may be adversely
affected should these individuals choose to place their other
business interests before those of the Company. (See Risk Factor
entitled "Conflict of Interest.")
In addition, any officer, director, and shareholder of the
Company or their affiliates may receive personal financial gain,
other than from the proceeds of this Blank Check Offering, by means
of a stock exchange transaction or other means. including: (1)
payment of consulting fees: (ii) payments of finder's fees; (iii)
sales of affiliates' stock; (iv) payments of salaries; or (v) other
methods of payment by which affiliates may receive cash, stock or
other assets.
The potential exists that finder's fees or other acquisition
related compensation may be paid to the Company's officers,
directors, promoters or their affiliates or associates from
revenues or other funds of an acquisition or merger candidate, or
by the issuance of debt or equity of such an entity; the
possibility, therefore, exists that such fees may become a factor
in negotiations and present conflicts of interest.
The net proceeds of this Blank Check Offering may be used, in
Management's discretion, to make loans (other than to officers and
other affiliates); no restrictions exist other than as set forth
above, as to whom loans may be made. Further, no criteria have as
yet been established for determining whether or not to make loans,
whether any such loans will be secured or limitations as to amount.
The Company has not and does not presently intend to impose
any limits or other restrictions on the amount or circumstances
under which any of such transactions may occur, except that none of
the Company's officers, directors or their affiliates shall receive
any personal financial gain from the proceeds of this Blank Check
Offering except for reimbursement for out-of-pocket offering
expenses. ( See "USE OF PROCEEDS - Footnote No. 2." No assurance
can be given that any of such potential conflicts of interest will
be resolved in favor of the Company or will otherwise not cause the
Company to lose potential opportunities.
The Company may, subject to disinterested director or
shareholder approval and consistent with statutory procedures,
acquire a business or property from Management of the Company. In
such event, the terms of such acquisitions may not be the result of
arm's-length negotiations. (See Risk Factor entitled "Conflict of
Interest.")
Prohibition Pursuant to Rule 15g-8 Under Exchange Act to Sell or
Offer to Sell Shares in Rule 419 Account
According to Rule 15g-8 under the Exchange Act, it shall be
unlawful for any person to sell or offer to sell the Shares (or any
interest in or related to the Shares) held in the Rule 419 account
other than pursuant to a qualified domestic relations order. As a
result, contracts for sale to be satisfied by delivery of the
deposited shares (e.g., contracts for sale on a when, as, and if
issued basis) are prohibited. such rule prohibits sales of other
interests based on the shares, whether or not physical delivery is
required.
Recently Organized Company; Limited Resources; No Present Source of
Revenues; Report of Independent Auditors
The Company, which was incorporated on March 25, 1992 and is
in the development stage, has not as yet attempted to seek a
Business Combination. Management has no prior experience with
respect to a transaction involving the proposed combination of
certain corporations, including a blank check company (the
"Contemplated Transaction"). None of the Company's officers have
had prior experience relating to the identification, evaluation and
acquisition of an Acquired Business. See "Management." Thus the
Company has no experience in consummating a business combination
and, accordingly, there is only a limited basis upon which to
evaluate the Company's prospects for achieving its intended
business objectives. To date, the Company's efforts have been
limited primarily to organizational activities. The Company has
limited resources and has had no revenues to date. In addition,
the Company will not achieve any revenues (other than interest
income upon the proceeds of this offering) until, the consummation
of a Business Combination, if at all. Moreover, there can be no
assurance that any Acquired Business, at the time of the Company's
consummation of a Business Combination, or at any time thereafter,
will derive any material revenues from its operations or operate on
a profitable basis. The Company's independent auditors' report on
the Company's financial statements includes an explanatory
paragraph stating that the Company's ability to commence operations
is dependent on the sale of the Shares or other fund raising, which
raises substantial doubt about its ability to continue as a going
concern and that the financial statements do not include any
adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to
continue as a going concern. See "Proposed Business" and the
Financial Statements of the Company included elsewhere in this
Prospectus.
Discretionary Use of Proceeds; "Blank Check" Offering
As a result of management's broad discretion with respect to
the specific application of the Net Proceeds of this offering, this
offering can be characterized as a "Blank check" offering.
Although substantially all of the Net Proceeds of this offering are
intended to be generally applied toward effecting a Business
Combination, such proceeds are not otherwise being designated for
any more specific purposes. Accordingly, prospective investors
will invest in the Company without an opportunity to evaluate the
specific merits or risks of any one or more Business Combinations.
There can be no assurance that determinations ultimately made by
the Company relating to the specific allocation of the Net Proceeds
of this offering will permit the Company to achieve its business
objectives. See "Proposed Business -- 'Blank Check' Offering."
Absence of Substantive Disclosure Relating to Prospective Business
Combinations; Investment in the Company Versus Investment in an
Acquired Business
"Blank check" offerings are inherently characterized by an
absence of substantive disclosure (other than general descriptions
relating to the intended application of the Net Proceeds of the
offering). The Company has not yet identified a prospective
Acquired Business. Accordingly, investors in this offering will
have virtually no substantive information available for advance
consideration of any specific Business Combination. The absence of
disclosure can be contrasted with the disclosure which would be
necessary if the Company had already identified an Acquired
Business as a Business Combination candidate or if the Acquired
Business were to effect an offering of its securities directly to
the Public. There can be no assurance that an investment in the
securities offered hereby will not ultimately prove to be less
favorable to investors in this offering than a direct investment,
if such opportunity were available, in an Acquired Business. See
"Proposed Business -- 'Blank Check' Offering."
Seeking to Achieve Public Trading Market through Business
Combination
While a prospective Acquired Business may deem a Business
Combination with the Company desirable for diverse reasons, a
Business Combination may involve the acquisition, reorganization
of, merger, or some other form of business combination with a
company which does not need substantial additional capital but
which desires to establish a public trading market for its shares,
while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself, such as time delays,
significant expense, loss of voting control and compliance with
various federal and securities laws enacted for the protection of
investors. See the risks below entitled "Unspecified Industry and
Acquired Business; Unascertainable Risks" and "No Assurance of
Public Market; Arbitrary Determination of Offering Price."
Possible Reasons for Merger Transaction
In some instances, the potential acquisition or merger
candidate may not need substantial additional capital but rather
desires to establish a public trading market for its shares. A
business or company attempting to consolidate its operations by a
merger, reorganization, asset acquisition or some other form of
combination through the Company may desire to do so avoid what it
may deem to be adverse consequences of undertaking a public
offering itself. Factors considered may include time delays,
significant expense, loss of voting control and the inability or
unwillingness to comply with various federal and state laws enacted
for the protection of investors."
No Present Identification of Industry and/or Acquisition Prospects;
High Risk of Unavailability of Conventional Private or Public
Offerings of Securities or Conventional Bank Financing
Management has not identified any specific business or even
any specific industry which it intends to enter through the
purchase or formation of a business. Neither the Company or any of
its affiliates has any present plan., proposals, arrangements or
understandings with respect to any possible business combination or
opportunity. None of the Company's officers, directors, promoters,
their affiliates or associates have had any preliminary contact or
discussions with any representative of the owner of any business or
company regarding the possibility of an acquisition or merger
transaction contemplated hereby. While Management will have sole
discretion to determine which businesses, if any, are intended to
be formed or acquired, as well as the intended terms of any
acquisition, purchasers in this Blank Check offering will, as
further discussed under "PROSPECTUS SUMMARY - Investors Rights to
Reconfirm Investment Under Rule 419", in all likelihood have the
opportunity to evaluate the merits and risks of an acquisition and
be entitled to make an election as to whether they desire to remain
investors in the Company. An acquisition will only be consummated
if the number of investor purchasers representing 80% of the
maximum offering proceeds reconfirm that investment. Management
has no present intention of (a) considering a business combination
with entities owned or controlled by affiliates or associates of
the Company; (b) creating subsidiary entities with a view to
distributing their securities to the shareholders of the Company;
or (c) selling any securities owned or controlled by affiliates and
associates of the Company in connection with any business
combination transaction without affording all shareholders a
similar opportunity. The success or failure of an investment in
the shares will depend entirely upon the ability of Management to
acquire or form successful businesses and to continue to operate
them and obtain additional capital to support the working capital
requirements of these businesses after their acquisition or
formation, of which no assurances are given. (See :USE OF
PROCEEDS" and "PROPOSED BUSINESS.") Purchasers of Shares should
recognize that the investment may prove substantially less
favorable than a similar investment made directly in a company
which has a current business or stated business prospects.
Further, it may be expected that any target business will
present such a level of risk that conventional private or public
offerings of securities or conventional bank financing will not be
available.
Unspecified Industry and Acquired Business; Unascertainable Risks
To date, the Company has not selected any particular industry
in which to concentrate its Business Combination efforts.
Accordingly, there is no current basis for prospective investors in
this offering to evaluate the possible merits or risks of the
Acquired Business or the particular industry in which the Company
may ultimately operate. However, in connection with seeking
shareholder approval of a Business Combination, the Company, (as a
result of its intention to register its Common Stock under the
Securities Exchange Act of 1934 (the "Exchange Act") and thereby
become subject to the proxy solicitation rules contained therein)
intends to furnish its shareholders with proxy solicitation
materials prepared in accordance with the Exchange Act, which,
among other matters, will include a description of the operations
of the Acquired Business candidate and audited historical financial
statements thereof. To the extent the Company effects a Business
Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without
established records of sales or earnings), the Company will become
subject to numerous risks inherent in the business operations of
financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects a
Business Combination with an entity in an industry characterized by
a high level of risk, the Company will become subject to the
currently unascertainable risk of that industry. An extremely high
level of risk frequently characterizes certain industries which
experience rapid growth. Although management will endeavor to
evaluate the risks inherent in a particular Acquired Business or
industry, there can be no assurance that the Company will properly
ascertain or assess all such significant risk factors. See
"Proposed Business--'Blank Check' Offering."
Probable Lack of Business Diversification
While the Company may, under certain circumstances, seek to
effect Business Combinations with more than one Acquired Business,
it will not expend less than the Threshold Amount upon its first
Business Combination. Consequently, it is likely that the Company
will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be
entirely dependent upon the future performance of a single
Business. Unlike certain entities which have the resources to
consummate several Business Combinations of entities operating in
multiple industries or multiple areas of a single industry, it is
highly likely that the Company will not have the resources to
diversify its operations or benefit from the possible spreading of
risks or offsetting of losses. In addition, by consummating a
Business Combination with only a single entity, the prospects for
the Company's success may become dependent upon the development or
market acceptance of a single or limited number of products,
processes or services. Consequently, there can be no assurance
than the Acquired Business will prove to be commercially viable.
See "Proposed Business--'Blank Check' Offering."
Dependence Upon Key Personnel
The ability of the Company to successfully effect a Business
Combination will be largely dependent upon the efforts of
J. Michael Spinali and Brian French, the Company's President and
Director and Secretary/Treasurer and Director. It is anticipated
that Messrs. Spinali and French are the only persons whose
activities will be material to the operations of the Company
pending the Company's identification and/or consummation of a
Business Combination. The Company has not entered into employment
agreements with any officer or director. It is anticipated that
each of Messrs. Spinali and French will devote approximately 5% of
their time to the affairs of the Company. The Company has not
obtained "key man" life insurance on the lives of any of the
officers or directors. The loss of the services of such key
personnel before suitable replacements are obtained could have a
material adverse effect on the Company's capacity to successfully
achieve its business objectives. None of the Company's key
personnel are required to commit their full time to the affairs of
the Company and, accordingly, such personnel may have conflicts of
interest in allocating management time among various business
activities. In addition, the success of the Company may be
dependent upon its ability to retain additional personnel with
specific knowledge or skills who may be necessary to assist the
Company in evaluating a potential Business Combination. There can
be no assurance than the Company will be able to retain such
necessary additional personnel. See "Proposed Business --
Employees" and "Management."
Lack of Experience of Management
Messrs. Spinali and French, have no prior experience with
respect to the successful completion of a Business Combination.
("the Contemplated Transaction"). See "Management."
Possible Change in Control and Management
Although the Company has no present plans, understandings or
arrangements respecting any Business Combination, the successful
completion of such a transaction could result in a change in
control of the Company. This could result from the issuance of a
large percentage of the Company's authorized securities or the sale
by the present shareholders of all or a portion of their stock or
a combination thereof. Any change in control may also result in
the resignation or removal of the Company's present officers and
directors. If there is a change in management, no assurance can be
given as to the experience or qualifications of the persons who
replace present management respecting either the operation of the
Company's activities or the operation of the business, assets or
property being acquired.
Nature of Transaction, Benefits to Management
The Company's proposed activities may involve the merger of
the Company into or the consolidation of an interest in one or more
companies which will in turn be operated by the Company. In a
merger or acquisition present management may be able to negotiate
the sale of its control portion of Company stock at a premium
price. After the merger the investors in this offering may be left
with management whose background and competence are unknown, stock
worth substantially less than the price paid, and a greatly reduced
percentage of ownership.
Conflicts of Interest - Part-Time Management
None of the Company's key personnel are required to commit
their full time to the affairs of the Company and, accordingly,
such personnel may have conflicts of interest in allocating
management time, among various business activities. Messrs.
Spinali and French intend to devote approximately 5% of their time
to the affairs of the Company. Certain of these key personnel may
in the future become affiliated with entities, including other
"blank check" companies, engaged in business activities similar to
those intended to be conducted by the Company. In the course of
their other business activities, including private investment
activities, Messrs. Spinali and French may become aware of
investment and business opportunities which may be appropriate for
presentation to the Company as well as the other entities with
which they are affiliated. Such persons may have conflicts of
interest in determining to which entity a particular business
opportunity should be presented. In general, officers and
directors of corporations incorporated under the laws of the State
of Nevada are required to present certain business opportunities to
such corporations. Accordingly, as a result of multiple business
affiliations, Messrs. Spinali and French may have similar legal
obligations relating to presenting certain business opportunities
to multiple entities. In addition, conflicts of interest may arise
in connection with evaluations of a particular business opportunity
by the Board of Directors with respect to the foregoing criteria.
There can be no assurance that any of the foregoing conflicts will
be resolved in favor of the Company. See "Proposed Business --
'Blank Check' Offering -- Selection of an Acquired Business and
Structuring of a Business Combination."
Reimbursement of Expenses to Officers and Directors
No funds will be disbursed from the Escrow Fund for the
reimbursement of expenses incurred by the Company's officers and
directors on behalf of the Company. Notwithstanding the foregoing,
there is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by
anyone other than the Company's Board of Directors, all the members
of which are officers. In no event will the Escrow Fund be used
for any purpose other than implementation of a Business Combination
or for purpose of the Redemption Offer. See "Use of Proceeds";
"Proposed Business -- Payment of Salaries or Consulting Fees"; and,
"'Management. -- Executive Compensation."
Lack of Business Opportunities
Although the Company will use efforts to attempt to locate
potential Business Combinations, there is no assurance that any
Business or assets worthy of even preliminary investigation will
come to the Company's attention, or that any significant amount of
Funds will be expended in actual acquisition of assets.
No Present Acquisition or Merger Transaction Contemplated
None of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or
discussions with and there are no present plans, proposals,
arrangements or understandings with any representatives of the
owners of any business or company regarding the possibility of an
acquisition or merger transaction contemplated in the prospectus.
Risk of Minimum Offering
The Company will only raise $25,000 in the event only the
minimum offering amount is sold. Under this condition, in view of
the limited funds available, the attractiveness of the Company to
potential acquisition or merger candidates would be materially
diminished. In the event that less than the net proceeds from the
maximum offering are raised, the Company's plans may be materially
and adversely effected in that the Company may find it even more
difficult, if not impossible to realize its goals.
Officers or Directors May Purchase up to 50% of the Minimum Shares
in this Offering
The company may make sales of shares to officers and directors
of the company and that such persons may purchase up to 50,000 of
the shares offered hereby, although they have made no commitment to
do so. Such purchases shall be made for investment purposes only
and in a manner consistent with a public offering of the company's
shares. Such purchases may be used to reach the amount required
for closing in the event such amount is not reached as a result of
purchases by the general public. The officers and directors could
purchase up to 50% of the amount required for closing if no sales
are made to new shareholders, the maximum of which could be 50,000
shares to meet the offering minimum. Such purchases will increase
the percentage of securities being held by the officers and
directors.
Loss From Analysis and Investigation of Business Prospects
The Company will be required, in all probability, to expend
Funds in the preliminary investigation or examination of assets,
business or properties, whether or not an investment occurs. To
the extent management determines that the potential investment has
little of no value, the monies spent on investigation will be a
total loss. In no event will the funds placed in the Escrow Fund,
including any interest earned thereon, be used for expenses
associated with the evaluation and structuring of a contemplated
Business Combination.
Limited Ability to Evaluate Acquired Business' Management
While the Company's ability to successfully effect a Business
Combination will be dependent upon certain of its key personnel,
the future role of such personnel in the Acquired Business cannot
presently be stated with any certainty. While it is possible that
certain of the Company's key personnel will remain associated in
some capacities with the Company following a Business Combination,
it is unlikely that such key personnel will devote their full
efforts to the affairs of the Company subsequent thereto.
Moreover, there can be no assurance that such personnel will have
significant experience or knowledge relating to the operations of
the particular Acquired Business. Furthermore, although the
Company intends to closely scrutinize the management of a prospec-
tive Acquired Business in connection with evaluating the
desirability of effecting a Business Combination, there can be no
assurance that the Company's assessment of such management will
prove to be correct, especially in light of the possible
inexperience current key personnel of the Company in evaluating
certain types of businesses. In addition, there can be no
assurance that such future management will have the necessary
skills, qualifications or abilities to manage a public company.
The Company may also seek to recruit additional managers to
supplement the incumbent management of the Acquired Business.
There can be no assurance that the Company will have the ability to
recruit such additional managers, or that such additional managers
will have the requisite skills, knowledge or experience necessary
to enhance the incumbent management. See "Proposed Business--
'Blank Check' Offering."
Competition
The Company expects to encounter intense competition from
other entities having a business objective similar to that of the
Company. Many of these entities are well established and have
extensive experience in connection with identifying and effecting
business combinations directly or through affiliates. Many of
these competitors possess greater financial, technical, personnel
and other resources than the Company and there can be no assurance
that the Company will have the ability to compete successfully.
The Company's financial resources will be relatively limited when
contrasted with those of many of its competitors. This inherent
competitive limitation may compel the Company to select certain
less attractive Business Combination prospects. Further, the
Company's obligation to redeem shares of Common Stock held by
future non-affiliated shareholders of the Company, discussed under
"Proposed Business -- Redemption Rights" and elsewhere herein, may
place the Company at a competitive disadvantage in successfully
negotiating a Business Combination. There can be no assurance that
such prospects will permit the Company to meet its stated business
objective. See "Proposed Business -- Competition."
Uncertainty of Competitive Environment of Acquired Business
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to
intense competition from competitors of the Acquired Business. In
particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors,
including competitors with increasingly greater financial,
marketing, technical and other resources than the initial
competitors in the industry. The degree of competition
characterizing the industry of any prospective Acquired Business
cannot presently be ascertained. There can be no assurance that,
subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the
Acquired Business is in a high growth industry. See "Proposed
Business -- Competition."
Possible Need for Additional Financing
The Company has had no revenues to date (except for interest
income) and is entirely dependent upon the proceeds of this
offering to commence operations relating to selection of a
prospective Acquired Business. The Company will not receive any
revenues (other than interest income) until, at the earliest, the
consummation of a Business Combination. Although the Company
believes that the proceeds of this offering will be sufficient to
effect a Business Combination, inasmuch as the Company has not yet
identified any prospective Acquired Business candidates, the
Company cannot ascertain with any degree of certainly the capital
requirements for any particular transaction. In the event that the
Net Proceeds of this offering prove to be insufficient for purposes
of effecting a Business Combination (because of the size of the
Business Combination or the depletion of 10% of the portion of the
Net Proceeds available to the Company for the search of an Acquired
Business), the Company will be required to seek additional
financing. In the event no Business Combination is identified,
negotiations are incomplete or no Business Combination has been
consummated, and all of the Net Proceeds other than the Escrowed
Funds have been expended, the Company currently has no plans or
arrangements with respect to the possible acquisition of additional
financing which may be required to continue the operations of the
Company. In such event, Messrs. Spinali and French may consider
loaning to the Company Funds for operations other than the payment
of salaries to Messrs. Spinali and French. Although there are no
plans or arrangements with respect to such loans, Messrs. Spinali
and French do currently anticipate such loans, if any, to be made
on terms other than for market interest rates. There can be no
assurance that Messrs. Spinali and French will make such loans to
the Company, or if made that such will be made on terms favorable
to the Company. The Funds placed in the Escrow Fund, including any
interest earned thereon, however, will not be used for expenses
associated with the evaluation and structuring of a contemplated
Business Combination. There can be no assurance that such
financing would be available on acceptable terms, if at all. To
the extent that such additional financing proves to be unavailable
when needed to consummate a particular Business Combination, the
Company would, in all likelihood, be compelled to restructure the
transaction or abandon that particular Business Combination and
seek an alternative Acquired Business candidate. In addition, in
the event of the consummation of a Business Combination the Company
may require additional financing to Fund the operations or growth
of the Acquired Business. It is presently not contemplated that
any of the Company's executive officers or directors or their
respective affiliates will provide any financing to the Company in
connection with a Business Combination nor, will any such persons
borrow any money from the Company. The failure by the Company to
secure such additional financing could have a material adverse
effect on the continued development or growth of the Acquired
Business. See "Proposed Business 'Blank Check' Offering -
Selection of an Acquired Business and Structuring of a Business
Combination."
Possible Need for Additional Financing of Acquired Business
In the event of a consummation of a Business Combination, the
Company cannot ascertain with any degree of certainty the capital
requirements for any particular Acquired Business inasmuch as the
Company has not yet identified any prospective Acquired Business
candidates. To the extent the Business Combination results in the
Acquired Business requiring additional financing, such additional
financing (which, among other forms, could be derived from the
public or private offering of securities or from the acquisition of
debt through conventional bank financing), may not be available,
due to, among other things, the Acquired Business not having
sufficient (i) credit or operating history; (ii) income stream;
(iii) profit level; (iv) asset base eligible to be collateralized;
or (v) market for its securities.
As no specific Business Combination or industry has been
targeted, it is not possible to predict the specific reasons why
conventional private or public financing or conventional bank
financing might not become available. There can be no assurances
that, in the event of a consummation of a Business Combination,
sufficient financing to Fund the operations or growth of the
Acquired Business will be available upon terms satisfactory to the
Company, nor can there be any assurance that financing would be
available at all.
Risk that Additional Financing will be Unavailable
Although there are no specific business combinations or other
transactions contemplated by management, it may be expected that
any such target business will present such a level of risk that
conventional private or public offerings of securities or
conventional bank financing would not be available.
Possible Default on Loans
The Company may make short-term loans to a prospective
Acquired Business under certain conditions. Should one or more of
these prospective Acquired Businesses default on such loans, the
Company's capital would be adversely affected and its ability to
conduct its business may be adversely affected. There is no
prohibition against the Company engaging in this type of loan
transaction with affiliates of the Company or entities controlled
by affiliates, however, the Company does not anticipate such
transactions will occur. In the event such affiliate transactions
were to be proposed significant conflicts of interest are
associated therewith and they would be subject to approval by the
board of directors. (See "Proposed Business")
Possible Depletion of Operating Funds
In the event no Business Combination is identified,
negotiations are incomplete or no Business Combination has been
consummated, and all of the Net Proceeds other than the Escrowed
Funds have been expended, the Company currently has no plans or
arrangements with respect to the possible acquisition of additional
financing which may be required to continue the operations of the
Company. In such event, Messrs. Spinali and French may consider
loaning to the Company funds for operations Although there are no
plans or arrangements with respect to such loans, Messrs. Spinali
and French do not currently anticipate such loans, if any, to be
made on terms other than for market interest rates. There can be
no assurance that Messrs. Spinali and French will make such loans
to the Company, or if made that such will be made on terms
favorable to the Company.
Possible Use of Debt Financing; Debt of an Acquired Business
There are currently no limitations relating to the Company's
ability to borrow funds to increase the amount of capital available
to the Company to effect a Business Combination or otherwise
finance the operations of the Acquired Business. The amount and
nature of any borrowing by the Company will depend on numerous
considerations, including the Company's capital requirements, the
Company's perceived ability to meet debt service on any such
borrowing and then prevailing conditions in the financial markets,
as well as general economic conditions. There can be no assurance
that debt financing, if required or otherwise sought, would be
available on terms deemed to be commercially acceptable and in the
best interests of the Company. The inability of the Company to
borrow funds required to effect or facilitate a Business
Combination, or to provide Funds for an additional infusion of
capital into an Acquired Business, may have a material adverse
effect on the Company's financial condition and future prospects.
Additionally, to the extent that debt funding ultimately proves to
be available, any borrowing may subject the Company to various
risks traditionally associated with incurring of indebtedness,
including the risks of interest rate fluctuations and insufficiency
of cash flow to pay principal and interest. Furthermore, an
Acquired Business may have already incurred debt financing and,
therefore, all the risks inherent thereto. See "Use of Proceeds
and of Proposed Business -- 'Blank Check' Offering -- Selection of
an Acquired Business and Structuring of a Business Combination."
Authorization of Additional Securities; No Creation of Subsidiary
for the Purpose of Distributing Securities
The Company's Articles of Incorporation authorizes the
issuance of 100,000,000 shares of Common Stock, par value $.001 per
share. Upon completion of this offering, assuming all of the
Shares offered hereby are sold, there will be 96,530,000 authorized
but unissued shares of Common Stock available for issuance.
Although the Company has no commitments as of the date of this
Prospectus to issue any shares of Common Stock other than as
described in this Prospectus, the Company will, in all likelihood,
issue a substantial number of additional shares in connection with
a Business Combination. To the extent that additional shares of
Common Stock are issued, dilution to the interests of the Company's
shareholders will occur. Additionally, if a substantial number of
shares of Common Stock are issued in connection with a Business
Combination, a change in control of the Company may occur which may
impact, among other things, the utilization of net operating
losses, if any. Furthermore, the issuance of a substantial number
of shares of Common Stock may cause dilution and adversely affect
prevailing market prices, if any, for the Common Stock, and could
impair the Company's ability to raise additional capital through
the sale of its equity securities. The Company has no plans,
proposals, arrangements or understandings with respect to the
creation of a subsidiary entity with a view to distributing to the
Company's shareholders the securities of the subsidiary entity.
See "Proposed Business -- 'Blank Check' Offering -- Selection of an
Acquired Business and Structuring of a Business Combination" and
"Description of Securities."
Acquisition Dilution and Control
The Company plans to acquire another company or companies
through the issuance of its stock. (See "Proposed Business") Any
such acquisition effected by the Company may result in the issuance
of additional Common Stock which may result in substantial dilution
in the percentage of the Company's Common Stock held by the
Company's existing shareholders. Moreover, the Common Stock issued
in any such acquisition or merger transaction may be valued on an
arbitrary or non arms-length basis by management of the Company.
In addition, a future merger may involve the appointment of
additional members to the Company's Board of Directors. Any such
acquisition or merger may not legally require shareholder approval,
however, the Company plans to hold a shareholders' meeting to vote
on any acquisition or merger and provide a proxy statement to
shareholders at least 10 days prior thereto. Such transaction will
likely be structured so that the shareholders of a private company
being acquired will be issued an amount of the Company's shares
sufficient to provide them an 80% equity ownership interest in the
Company.
Investment Company Act Considerations
The regulatory scope of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which was enacted
principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies engaged
primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may,
however, also be deemed to be applicable to a company which does
not intend to be characterized as an investment company but which,
nevertheless, engages in activities which may be deemed to be
within the definitional scope of certain provisions of the
Investment Company Act. The Company believes that its anticipated
activities, which will involve acquiring control of an operating
company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance
that the Company will not be deemed to be an investment company,
especially during the period prior to a Business Combination. In
the event the Company is deemed to be an investment company, the
Company may become subject to certain restrictions relating to the
Company's activities, including restrictions on the nature of its
investments and the issuance of securities. In addition, the
Investment Company Act imposes certain requirements on companies
deemed to be within its regulatory scope, including registration as
an investment company, adoption of a specific form of corporate
structure and compliance with certain burdensome reporting,
recordkeeping, voting, proxy, disclosure and other rules and
regulations. In the event of characterization of the Company as an
investment company, the failure by the Company to satisfy
regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances, have a material adverse effect
on the Company. See "Proposed Business."
Tax Considerations
As a general rule, Federal and state tax laws and regulations
have a significant impact upon the structuring of business
combinations. The Company will evaluate the possible tax
consequences of any prospective Business Combination and will
endeavor to structure the Business Combination so as to achieve the
most favorable tax treatment to the Company, the Acquired Business
and their respective shareholders. There can be no assurance,
however, that the Internal Revenue Service (the "IRS") or
appropriate state tax authorities will ultimately assent to the
Company's tax treatment of a consummated Business Combination. To
the extent the IRS or state tax authorities ultimately prevail in
recharacterizing the tax treatment of a Business Combination, there
may be adverse tax consequences to the Company, the Acquired
Business and their respective shareholders. See "Proposed Business
- -- 'Blank Check' Offering -- Selection of an Acquired Business and
Structuring of a Business Combination."
Possible Payment of Finder's Fees to Management or Affiliates
In the event that a person or entity assists the Company in
connection with the introduction to a prospective Acquired Business
with which a Business Combination is ultimately consummated, such
person or entity may be entitled to receive a finder's fee in
consideration for such introduction. Such person may be required
to be registered as, among other things, an agent or broker-dealer
under the laws of certain jurisdictions. The Company is not
presently obligated to pay any finder's fees. The executive
officers and directors of the Company may be entitled to receive a
finder's fee in the event they originate a Business Combination.
See "Proposed Business - 'Blank Check' Offering -- Selection of an
Acquired Business and Structuring of a Business Combination" and
"Management"
The Company, rather than pay normal salaries, intends to
primarily compensate officers and directors through finders fees.
Since the business of the Company is to acquire business
opportunities and finders fees are often paid to intermediaries in
acquisition transactions, the Company has reasoned that, rather
than potentially pay both regular salaries and/or directors fees to
officers and directors, and, also pay finders fees to third
parties, the proceeds for acquisition of business opportunities
will be greater if officers and directors are allowed to share in
any finders fee, with other types of compensation for officers and
directors being limited in amount. (See "Certain Transactions")
Control by Present Shareholders
Upon consummation of the offering, if the maximum is sold, the
present shareholders (including management) of the Company, will
collective own approximately 71.2% of the then issued and
outstanding shares of Common Stock (approximately 4.6% will be
owned by the current officers and directors). These figures could
be higher if officers, directors and current shareholders acquire
Shares through this offering. In the election of directors,
shareholders are not entitled to cumulate their votes for nominees.
Accordingly, it is likely that the current shareholders will be
able to substantially impact the election of all of the Company's
directors and the other affairs of the Company. See "Principal
Stockholders," "Certain Transactions" and "Description Securities."
No Dividends
The Company has not paid any dividends on its Common Stock to
date and does not presently intend to pay cash dividends prior to
the consummation of a Business Combination. The payment of
dividends after any such Business Combination, if any, will be
contingent upon the Company's revenues and earnings, if any,
capital requirements and general financial condition subsequent to
consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the
discretion of the Company's then Board of Directors. It is the
present intention of the Board of Directors to retain all earnings,
if any, for use in the Company's business operations and,
accordingly, the Board does not anticipate paying any cash
dividends in the foreseeable future. See "Description of
Securities -- Dividends."
No Commitment to Purchase Shares
No commitment exists by anyone to purchase any of the Shares
offered. Consequently, no assurance can be given that any Shares
will be sold. Although no commitment has been made, officers and
directors MAY purchase up to 50,000 shares of the offering. This
Offering is being made on a "best efforts" 100,000 Share minimum,
1,000,000 Share maximum basis. In the event that the minimum of
100,000 Shares are not sold within 360 days from the effective date
of this prospectus , all proceeds raised will be returned promptly
to subscriber in full without interest thereon. Subscribers will
not be entitled to a return of funds from the escrow during the
offering period (including the extension thereof). (See
"Offering")
No Assurance of Public Market; Arbitrary Determination of Offering
Price
Prior to this offering, there has been no public trading
market for the Shares. The initial public offering price of the
Shares have been arbitrarily determined by negotiation between the
Company and the Representative and does not bear any relationship
to such established valuation criteria as assets, book value or
prospective earnings. There is no assurance that a regular trading
market will develop for any of the Company's securities after this
offering or that, if developed, that any such market will be
sustained. The Shares will likely appear in what is customarily
known as the "pink sheets" or on the NASD Bulletin Board, thus
limiting the marketability of the Shares. If the Company, at any
time, has net tangible assets of $2,000,000 or less, transactions
in the Shares would be subject to Rule 15c2-6 promulgated under the
Securities Exchange Act of 1934. Under such rule, broker-dealers
who recommend such securities to persons other than established
customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in
excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse) must make a special written
suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale.
Transactions are exempt from this rule if the market price of the
Shares is at least $5.00 per share. If the Shares become subject
to Rule 15c2-6, broker-dealers may find it difficult to effectuate
customer transactions and/or trading activity in the Shares, thus,
the market price, if any, may be depressed, and an investor may
find it more difficult to dispose of the Shares. As of the date
hereof, the Company has had no discussions and there are no
understandings with any firm regarding the participation of such
firm as a market maker in the shares of the Company's Common Stock.
See "Offering."
No Present Plans for the Development of a Trading Market
There are currently no plans, proposals, arrangements or
understandings with any person with regard to the development of a
trading market in any of the Company's securities.
Effect of Purchases of Stock in this Offering by Officers,
Directors and Affiliates
Officers and directors of the Company may purchase up to
50,000 of the shares sold in the offering under the same terms and
conditions as the public investors. Such purchases, if made, will
be in compliance with Rule 10b-6 and be for investment purposes
only and not for redistribution (i.e., no present intention to
distribute or resell the shares). Such purchases may be made for
the purpose of closing the minimum offering.
To the extent of any such share purchases for investment
purposes only, a portion of the shares from this Offering will not
enter the "public float." The public float is the amount of free-
trading shares which are immediately resalable in the trading
market. Such reduction means that there are less shares for the
public investors to purchase and resell and may cause a lack of
liquidity in the trading of the Company's shares. Also, such a
reduction in the public float may make possible the commitment of
public investors in the absence of public demand for the offering.
Immediate Substantial Dilution; Disparity of Consideration
New investors will incur of an immediate and substantial
dilution of approximately $.2426 per share between the pro forma
net tangible book value per share after the offering of $.0074 and
the public offering price of $.25 per share allocable to each
Share. The existing shareholders of the Company acquired their
shares of Common Stock at a nominal price and accordingly, new
investors will bear virtually all of the risks inherent in an
investment in the Company. See "Dilution."
Shares Eligible for Future Sale
Shares Eligible for Future Sale. All 2,470,000 shares of the
Company's Common Stock outstanding are "restricted securities" and
under certain circumstances may in the future be sold in compliance
with Rule 144 adopted under the Securities Act of 1933, as amended.
Future sales of those shares under Rule 144 could depress the
market price of the Common Stock in any market which may develop.
All of the current outstanding shares are eligible for sale
pursuant to Rule 144.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including
an affiliate of the Company (or persons whose shares are
aggregated) who has owned restricted shares of Common Stock
beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same
class or, if the Common Stock as quoted on NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the
sale. The person who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least two years is
entitled to sell such shares under Rule 144 without regard to any
of the limitations described above. No prediction can be made as
to the effect, if any, that sales of "restricted" shares of Common
Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the
possibility than substantial amounts of Common Stock may be sold in
the public market may adversely affect prevailing market prices for
the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities. See "Principal
Stockholders" and "Shares Eligible for Future Sale."
Regulations Concerning "Blank Check" Issuers
The ability to register or qualify for sale the Shares for
both initial sale and secondary trading is limited because a number
of states have enacted regulations pursuant to their securities or
"blue sky" laws restricting or, in some instances, prohibiting, the
sale of securities of "blank check" issuers, such as the Company,
within that state. In addition, many states, while not
specifically prohibiting or restricting "blank check" companies,
would not register the Shares for sale in their states. Because of
such regulations and other restrictions, the Company's selling
efforts, and any secondary market which may develop, may only be
conducted in the Primary Distribution States (as hereinafter
defined) or in those jurisdictions where an applicable exemption is
available or a blue sky application has been filed and accepted.
See "State Blue Sky Registration; Restricted Resales of the
Shares," below. In addition, the Commission enacted rules under
the Securities Act which, among other things, afford shareholders
of "blank check" companies a right to rescind their purchases of
such securities for a limited period subsequent to the consummation
of a Business Combination.
State Blue Sky Registration; Restricted Resales of the Shares
"THE SECURITIES HAVE NOT BEEN REGISTERED IN ANY STATE EXCEPT
COLORADO AND NEW YORK, AND MAY ONLY BE OFFERED OR TRADED IN SUCH
OTHER STATES PURSUANT TO AN EXEMPTION FROM REGISTRATION.
PURCHASERS OF SUCH SECURITIES EITHER IN THIS OFFERING OR IN ANY
SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF
STATES IN WHICH THE SECURITIES ARE REGISTERED OR EXEMPT FROM
REGISTRATION." FOR THE OFFERING HEREUNDER, THE COMPANY INTENDS TO
RELY ON, BUT HAS NOT OBTAINED EXEMPTIONS FROM REGISTRATION IN THE
STATES OF CALIFORNIA, FLORIDA, GEORGIA, ILLINOIS, AND NEVADA. SOME
OF THE EXEMPTIONS ARE SELF-EXECUTING, THAT IS TO SAY THAT THERE ARE
NO NOTICE OR FILING REQUIREMENTS AND COMPLIANCE WITH THE CONDITIONS
OF THE EXEMPTION RENDER THE EXEMPTION APPLICABLE. THE COMPANY WILL
AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL
STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL HAVE BEEN
REGISTERED OR AN EXEMPTION IS AVAILABLE."
The Company has not made application to register the Shares in
any states except Colorado and New York. The Company will seek to
obtain an exemption from registration to offer the Shares in
various state jurisdictions and may also make additional
application to register the Shares in some states. Purchasers of
the Shares in this offering must be residents of such jurisdictions
which either provide an applicable exemption or in which the Shares
are registered. In order to prevent resale transactions in
violation of states' securities laws, public stockholders may only
engage in resale transactions in the Shares in such jurisdictions
in which an applicable exemption is available or a blue sky
application has been filed and accepted. As a matter of notice to
the holders thereof, the Common Stock certificates shall contain
information with respect to resale of the Shares. Further, the
Company will advise its market makers in the Shares, if any, of
such restriction on resale. Such restriction on resales may limit
the ability of investors to resell the Shares purchased in this
offering.
Several additional states may permit secondary market sales of
the Shares (i) once or after certain financial and other
information with respect to the Company is published in a
recognized securities manual such as Standard & Poor's Corporation
Records (ii) after a certain period has elapsed from the date
hereof; or (iii) pursuant to exemptions applicable to certain
investors. However, since the Company is a "blank check" company,
it may not be able to be listed in a recognized securities manual
until after the consummation of the first Business Combination.
Certain Securities Law Considerations
There is no current trading market for the Shares and there
can be no assurance that a trading market will develop, or, if such
a trading market does develop, that it will be sustained. The
Shares, to the extent that a market develops for the Shares at all,
of which there can be no assurance, will likely appear in what is
customarily known as the "pink sheets" or on the NASD Bulletin
Board, which may limit the marketability and liquidity of the
Shares.
The Company is currently not seeking listing of the Shares on
NASDAQ. If the Shares are not listed on NASDAQ and if the Company,
at any time, has net tangible assets of $2,900,000 or less,
transactions in the Shares would be subject to Rule of 15c2-6
promulgated under the Securities Exchange Act of 1934. Under such
rule, broker-dealers who recommend such securities to persons other
than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals
with net worth in excess of $1,000.000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse) must make a special
written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale.
Transactions are exempt from this rule if the market price of the
Shares is at least $5.00 per share. If the Shares become subject
to Rule 15c2-6, broker-dealers may find it difficult to effectuate
customer transactions and/or trading activity in the Shares, thus,
the market price, if any, may be depressed, and an investor may
find it more difficult to dispose of the Shares.
The U.S. Securities and Exchange Commission Rule 3a51-1
generally define a penny stock to be any equity security that has
a market price of less than $5.00 per share, subject to certain
exemptions. Such exemptions include an equity security issued by
an issuer that has (i) net tangible assets of at least $2,000,000,
if such issuer has been in continuous operation for at least three
years; (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years;
or (iii) average revenue of at least $6,000,000 for the preceding
three years. Unless an exemption is available, the regulations
require the delivery, prior to any transaction involving a penny
stock, of a disclosure statement explaining the penny stock market
and the risks associated therewith.
Since the Company's Common Stock is subject to the regulations
on penny stocks, the market liquidity for the Company's Common
Stock could be adversely affected by limiting the ability
broker/dealers to sell the Company's Common Stock and the ability
of purchasers in this offering to sell their securities in the
secondary market. There is no assurance that trading in the
Company's securities will not be subject to these or other
regulations that would adversely affect the market for such
securities.
Penny Stock Regulation
Broker-dealer practices in connection with transactions in
"penny stocks" are regulated by certain penny stock rules adopted
by the Securities and Exchange Commission. Penny stock generally
are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks
and the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that
prior to a transaction in a penny stock the broker-dealer must make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may
have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny
stock rules. If the Company's common stock becomes subject to the
penny stock rules investors in the offering may find it more
difficult to sell their shares.
DILUTION
The difference between the public offering price per share and
the pro forma net tangible book value per share of Common Stock of
the Company after this offering constitutes the dilution to
investors in this offering. Net tangible book value per share is
determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of
outstanding shares of Common Stock.
At December 31, 1997, the net tangible book value of the
Company was $7,727 or $.0031 per share of Common Stock. After
giving effect to the sale of the maximum amount, 1,000,000 shares
of Common Stock offered hereby and the application of the estimated
Net Proceeds therefrom, the pro forma net tangible book value of
the Company at December 31, 1997 would have been $222,327 or $.0641
per share; representing an immediate increase in net tangible book
value of $214,600 or $.0609 per share to existing shareholders and
an immediate dilution of $35,400 or $.1859 per share to new
investors. As of the date hereof there are currently no plans,
proposals, arrangements or understandings with respect to the sale
of additional securities to any persons for the period commencing
with the closing of this offering and the Company's identification
of a Business Combination. See "Offering."
The following table illustrates the foregoing information with
respect to dilution to new investors on a per-share basis after the
offering.
Maximum
Public offering price per Share $ .2500
Net tangible book value per
Share, before this offering $ .0031
Increase per Share attributable
to Payment by new investors $ .0609
Net tangible book value per Share,
after this offering $ .0641
Dilution to new investors per Share $ .1859
The following table sets forth as of the date of this
Prospectus, with respect to existing shareholders and new
investors, a comparison of the number of shares of Common Stock
acquired from the Company, their percentage ownership of such
shares, the total consideration paid, the percentage of total
consideration paid and the average price per share:
Shares Purchased Total Consideration Price Per
Amount Percentage Paid Percentage Share
Existing
Shareholders 2,470,000 71.2% $13,750.00 5.2 $.0056
New Investors 1,000,000 28.8% 250,000.00 94.8 $.2500
Total 3,470,000 100.0% 263,750.00 100.0
USE OF PROCEEDS
Because Management has no specific business contemplated for
the Company, it is unable to precisely indicate categories for the
use of proceeds from this Blank Check Offering. However, the
following table sets forth Management's estimate as to how the
proceeds will likely be allocated:
Minimum Maximum
Gross Gross
Proceeds Proceeds
Description Raised(l) Raised (l)
Working capital available for
operations and other business
endeavors upon completion of
the Blank Check Offering (2) $12,100 $214,600
Expenses of the Blank Check
Offering (3) $10,400 $ 10,400
Underwriting Commissions $ 2,500 $ 25,000
Total $25,000 $250,000
(1) The Company intends' to utilize the proceeds from this Blank
Check Offering in the priority set forth in this column whether or
not such gross proceeds or a lesser amount are raised. No
assurances are given that the Company will sell any of its Shares
and raise gross proceeds in any of such aggregate amounts.
(2) The working capital (i.e., monies to be used in connection with
a potential acquisition, including but not limited to due
diligence, travel and related out-of -pocket expenses, and
consulting fees, if any) that will be available should be
considered to be uncommitted because the Company is not presently
planning to invest in any specific business or property, and the
Company has no understanding, arrangement or contractual commitment
to participate in, or acquire, any business or property. Such
funds, however, may be used in connection with the Company's
acquisition of a business or property, including the costs of such
acquisition. Substantial funds could be expended in connection with
preparing for an acquisition that is not consummated. (See
"PROPOSED BUSINESS - Business Objectives" and "CONFLICTS Of
Interest.") Working capital also will be used for paying other
costs of the Company's operations, including legal and accounting
fees and printing costs incurred in the filing of the periodic
reports under the federal securities laws. A portion of the gross
proceeds raised hereby may be paid to officers, directors and
promoters, and their affiliates or associates for any of their out-
of-pocket expenses relating to this offering. The Company has not
established any limit on the amount of the gross proceeds that may
be paid to officers, directors and promoters and their affiliates
or associates for expenses of the offering. However, no portion of
the proceeds raised hereby will be paid to those persons, directly
or indirectly, as consultants' fees, advisors' fees, officers:
salaries, directors' fees, warrant solicitation fees, finders' fees
for acquisitions, purchase of shares or other payments, in
accordance with an informal understanding among Management.
Management is not aware of any circumstances under which such
policy through its own initiative may be changed. Working capital
also may be used to obtain the services of independent outside
consultants to evaluate prospective acquisitions for the Company.
If the Company uses outside consultants. it will compensate such
consultants at competitive rates. The Company is not presently
under any agreement or understanding to use the services of any
outside consultant for such purposes. Indeed, the Company may
choose to enter into an acquisition or other business endeavors
without seeking such consulting services.
(3) Includes legal, accounting, printing, stock transfer fees, and
other miscellaneous expanses.
The Company has received a total of $5,000 from its founding
shareholders, all of which was a capital contribution (See "CERTAIN
TRANSACTIONS.") This amount is being used as seed money to finance
part of the expenses of this Blank Check Offering. The Company
estimates that it will have available as working capital for
acquisitions and other business endeavors an aggregate of
approximately $222,327, assuming all of the Shares offered hereby
are sold and underwriting commissions are paid, of which no
assurances are given.
The Company presently anticipates that it will be able to
locate and acquire suitable business interests or properties
utilizing the net proceeds of this Blank Check Offering, assuming
all or substantially all of the net proceeds from the maximum
offering are raised. In the event that substantially less than the
net proceeds from the maximum offering are raised, the Company's
plans may be materially and adversely effected in that the Company
may find it even more difficult, if not impossible, to realize its
goals. In any event, if the Company eventually determines that a
business opportunity requires additional funds, regardless of the
level of net proceeds raised, the Company may seek such additional
financing through loans, additional stock issuances or through
other financing arrangements. No such financing arrangements
presently exist, and no assurances can be given that such
additional financing will be available, or, if available, whether
such additional financing will be on terms acceptable to the
Company. Investors buying Shares in this Blank Check Offering will
not, unless otherwise required by law, participate in the
determination of whether to obtain additional financing or as to
the terms of any such financing. (See "PROPOSED BUSINESS").
The net proceeds of this Blank Check Offering may be used, in
Management's discretion, to make loans (other than to officers and
other affiliates); no restrictions exist other than as set forth
above, as to whom loans may be made. Further, no criteria have as
yet been established for determining whether or not to make loans,
whether any such loans will be secured or limitations as to amount.
The Company has not and does not presently intend to impose
any limits or other restrictions on the amount or circumstances
under which any of such transactions may occur, except that none of
the Company's officers, directors or their affiliates shall receive
any personal financial gain from the proceeds of this Blank Check
Offering except for reimbursement for out-of-pocket offering
expenses. No assurance can be given that any of such potential
conflicts of interest will be resolved in favor of the Company or
will otherwise not cause the Company to lose potential
opportunities.
None of the proceeds raised hereby will be used to make any
loans to the Company's promoters, management or their affiliates or
associate of any of the Company's shareholders. Further, the
Company may not borrow funds and use the proceeds therefrom to make
payments to the Company's promoters, management or their affiliates
or associates.
It is contemplated that the DEPOSITED FUNDS of this Blank
Check Offering will be invested in one of the following, pending
the consummation of any acquisition effected in accordance with
Rule 419:
(a) an obligation that constitutes a "deposit," as that
term is defined in Section 3(1) of the Federal Deposit Insurance
Act [12 U.S.C. 1813 (1) (1991)];
(b) securities of an open-end investment company
registered under the Investment Company Act of 1940 [15 U.S.C.
800.1 et seq.] that holds itself out as a money market fund meeting
the conditions of paragraph (c)(2), (c)(3) and (c)(4) of Rule 2a-7
(17 CFR 270.2a-7) under the Investment Company Act of 1940; or
(c) securities that are direct obligations of, or
obligations guaranteed as to principal or interest by, the United
States.
The Company believes that the proceeds from this Blank Check
Offering will be sufficient to satisfy the Company's cash needs for
at least one year. The Company may be deemed an "investment
company" should the net proceeds of this Blank Check Offering
remain invested in such investments for more than one year. Being
deemed an investment company without registration under the
Investment Company Act of 1940 can result in civil liability ad
criminal penalties to controlling person in certain instances, as
well as civil liabilities and unenforceability of contracts with
regard to the Company. In the event the Company has not completed
an acquisition of a business within one year of the closing of this
Blank Check Offering, the Company will take such actions as it
deems necessary to avoid being classified as an "investment
company." Such measures may include a decision, if deemed
necessary, to seek shareholder approval to liquidate the Company.
If there is such a liquidation, all investors in this Blank Check
Offering, will receive the liquidated assets comprised of the
DEPOSITS FUNDS on a pro-rata basis.
CAPITALIZATION
The following table sets forth the capitalization of the
Company as of December 31, 1997, and as adjusted to give effect to
the sale of the minimum and maximum number of Shares being offered
hereby and the application of the estimated net proceeds therefrom:
Minimum - 100,000 Shares
Outstanding As Adjusted
Shareholder's Equity
Common Stock, $.001 per value
100,000,000 shares authorized;
2,470,000 shares issued:
2,570,000 as adjusted $ 2,470 $ 2,570
Capital in excess of par value $11,281 $ 36,180
Deficit accumulated during
development stage $(6,039) $(18,924)
Total shareholders' equity $ 7,727 $ 19,827
Maximum - 1,000,000 Shares
Outstanding As Adjusted
Shareholder's Equity
Common Stock, $.001 per value
100,000,000 shares authorized;
2,470,000 shares issued:
3,470,000 as adjusted $ 2,470 $ 3,470
Capital in excess of par value $11,281 $260,281
Deficit accumulated during
development stage $(6,039) $(44,424)
Total shareholders' equity $ 8,659 $222,327
PROPOSED BUSINESS
Introduction
The Company was formed in March, 1992 to seek to effect a
merger, exchange of capital stock, asset acquisition or other
similar business combination (a "Business Combination") with an
operating business (an "Acquired Business"). The business
objective of the Company is to seek to effect a Business
Combination with an acquired Business, which the Company believes
has significant growth potential The Company will not engage in
any substantive commercial business immediately following this
offering and for an indefinite period of time following this
offering. The Company has no plan, proposal, agreement,
understanding or arrangement to acquire or merge with any specific
business or company and the Company has not identified any specific
Business or company for investigation and evaluation. The Company
intends to utilize cash (to be derived from the proceeds of this
offering), equity, debt or a combination thereof in effecting a
Business Combination. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than
one Acquired Business, it will not expend less than the Threshold
Amount upon its first Business Combination. Consequently, it is
likely that the Company will have the ability to effect only a
single Business Combination. The Company may effect a Business
Combination with an Acquired Business which may be financially
unstable or in its early stage of development or growth.
"Blank Check" Offering
Background. As a result of management's broad discretion with
respect to the specific application of the Net Proceeds of this
offering, this offering can be characterized as a "blank check"
offering. Although substantially all of the Net Proceeds of this
offering are intended to be generally applied toward effecting a
Business Combination, such proceeds are not otherwise being
designated for any more specific purposes. Accordingly,
prospective investors will invest in the Company without an
opportunity to evaluate the specific merits or risks of any one or
more Business Combinations. A Business Combination may involve the
acquisition of, or merger with, a company which does not need
substantial additional capital but which desires to establish a
public offering itself, while avoiding what it may deem to be
adverse consequences of undertaking a public offering itself, such
as time delays, significant expense, loss of voting control and
compliance with various Federal one state securities laws.
No Present Potential of Acquiring Any Business: Related Party
Acquisitions. None of the Company's officers, directors,
promoters, their affiliates or associates have had any preliminary
contact or discussions with any representative of the owner of any
business or company regarding the possibility of an acquisition or
merger transaction contemplated hereby. While Management will have
sole discretion to determine which businesses, if any, are intended
to be formed or acquired, as well as the intended terms of any
acquisition, purchasers in this Blank Check offering will, as
further discussed under "PROSPECTUS SUMMARY - Investors Rights to
Reconfirm Investment Under Rule 419", in all likelihood have the
opportunity to evaluate the merits and risks of an acquisition and
be entitled to make an election as to whether they desire to remain
investors in the Company. An acquisition will only be consummated
if the number of investor purchasers representing 80% of the
maximum offering proceeds reconfirm that investment. Management
has no present intention of (a) considering a business combination
with entities owned or controlled by affiliates or associates of
the Company (herein defined as a "related party transaction"); (b)
creating subsidiary entities with a view to distributing their
securities to the shareholders of the Company; or (c) selling any
securities owned or controlled by affiliates and associates of the
Company in connection with any business combination transaction
without affording all shareholders a similar opportunity. In the
event management contemplates a related party transaction it will
obtain an independent appraisal of the value of the business or
assets to be acquired and no transaction will be structured unless
it is at a price which is lesser or equal to the value determined
by the independent appraisal. Such a related party transaction is
not an arms-length transaction because management would be on both
sides of the transaction and may have financial interests which are
adverse to the shareholders of the Company. Such a situation
creates a potential for management's fiduciary duties to the
shareholders of the Company to be compromised and the interests of
the shareholders to be affected adversely. (See "RISK FACTORS").
If management's fiduciary duties are compromised, any remedy
available to shareholders under state corporate law will most
likely be prohibitively expensive and time consuming.
Unspecified Industry and Acquired Business. To date, the
Company has not selected any particular industry or any Acquired
Business in which to concentrate its Business Combination efforts.
Accordingly, there is no current basis for prospective investors
in this offering to evaluate the possible merits or risks of the
Acquired Business or the particular industry in which the Company
may ultimately operate. However, in connection with seeking
shareholder approval of a Business Combination, the Company, (as a
result of its intention to register its Common Stock under the
Exchange Act and thereby become subject to the proxy solicitation
rules contained therein) intends to furnish its shareholders with
proxy solicitation materials prepared in accordance with the
Exchange Act which, among other matters, will include a description
of the operations of the Acquired Business candidate and audited
historical financial statements thereof. To the extent the Company
effects a Business Combination with a financially unstable company
or an entity in its early stage of development or growth (including
entities without established records of sales or earnings), the
Company will become subject to numerous risks inherent in the
business and operations of financially unstable and early stage or
potential emerging growth companies. In addition, to the extent
that the Company effects a Business Combination with an entity in
an industry characterized by a high level of risk, the Company will
become subject to the currently unascertainable risks of that
industry. An extremely high level of risk frequently characterizes
certain industries which experience rapid growth. Although
management will endeavor to evaluate the risks inherent in a
particular industry or Acquired Business, there can be no assurance
that the Company will properly ascertain or assess all significant
risk factors.
Probable Lack of Business Diversification. While the Company
may, under certain circumstances, seek to effect Business
Combinations with more than one Acquired Business, it will not
expend less than the Threshold Amount upon its first Business
Combination. Consequently, it is likely that the Company will have
the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be
entirely dependent upon the future performance of a single
business. Unlike certain entities which have the resources to
consummate several Business Combination of entities operating in
multiple industries or multiple areas of a single industry, it is
highly likely that the Company will not have the resources to
diversify its operations or benefit from the possible spreading of
risks or offsetting of losses. The Company's probable lack of
diversification may subject the Company to numerous economic,
competitive and regulatory developments, any or all of which may
nave a substantial adverse impact upon the particular industry in
which the Company may operate subsequent to a Business Combination.
In addition, by consummating a Business Combination with only a
single entity, the prospects for the Company's success may become
dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly,
notwithstanding the possibility of capital investment in and
management assistance to the Acquired Business by the Company,
there can be no assurance that the Acquired Business will prove to
be commercially viable. Prior to the consummation of a Business
Combination, the Company has no intention to purchase or acquire a
minority interest in any company.
Opportunity for Shareholder Evaluation or Approval of Business
Combinations. The investors in this offering will, in all
likelihood, neither receive nor otherwise have the opportunity to
evaluate any financial or other information which will be made
available to the Company in connection with selecting a potential
Business Combination until after the Company has entered into an
agreement to effectuate a Business Combination. Such agreement to
effectuate a Business Combination, however, will be subject to
shareholder approval as discussed elsewhere herein. As a result,
investors in this offering will be almost entirely dependent on the
judgment of management in connection with the selection and
ultimate consummation of a Business Combination. In connection
with seeking shareholder approval of a Business Combination, the
Company intends to furnish its shareholders with proxy solicitation
materials prepared in accordance with the Exchange Act which, among
other matters, will include a description of the operations of the
Acquired Business candidate and audited historical financial
statements thereof.
Limited Ability to Evaluate Acquired Business' Management.
While the Company's ability to successfully effect a Business
Combination will be dependent upon certain key personnel, the
future role of such personnel in the Acquired Business cannot
presently be stated with any certainty. While it is possible that
certain of the Company's key personnel will remain associated in
some capacities with the Company following a Business Combination,
it is unlikely that such key personnel will devote their full
efforts to the affairs of the Company subsequent thereto.
Moreover, there can be no assurance that such personnel will have
any experience or knowledge relating to the operations of
particular Acquired Business. Furthermore, although the Company
intends to closely scrutinize the management of a prospective
Acquired Business in connection with evaluating the desirability of
effecting a Business Combination, there can be no assurance that
the Company's assessment of such management will prove to be
correct, especially in light of the inexperience of current key
personnel of the Company in evaluating businesses. Furthermore,
there can be no assurance that such future management will have the
necessary skills, qualifications or abilities to manage a public
company intending to embark on a program of business development.
The Company may also seek to recruit additional managers to
supplement the incumbent management of the Acquired Business.
There can be no assurance that the Company will have the ability to
recruit additional managers, or that such additional managers will
have the requisite skill, knowledge or experience necessary or
desirable to enhance the incumbent management.
Selection of an Acquired Business and Structuring of a
Business Combination. Management anticipates that the selection of
an Acquired Business will be complex and risky because of competi-
tion for such business opportunities among all segments of the
financial community. The nature of the Company's search for the
acquisition of an Acquired Business requires maximum flexibility
inasmuch as the Company will be required to consider various
factors and divergent circumstances which may preclude meaningful
direct comparison among the various business enterprises, products
or services investigated. Investors should recognize that the
possible lack of diversification among the Company's acquisitions
may not permit the Company to offset potential losses from one
venture against profits from another. This should be considered a
negative factor affecting any decision to purchase the Shares.
Management of the Company will have virtually unrestricted
flexibility in identifying and selecting a prospective Acquired
Business. In addition, in evaluating a prospective Acquired
Business, management will consider, among other factors, the
following:
- - costs associated with effecting the Business
Combination;
- - equity interest in and possible management
participation in the Acquired Business;
- - growth potential of the Acquired Business and
the industry in which it operates;
- - experience and skill of management and
availability of additional personnel of the
Acquired Business;
- - capital requirements of the Acquired Business;
- - competitive position of the Acquired Business;
- - stage of development of the product, process
or service of the Acquired Business;
- - degree of current or potential market
acceptance of the product, process or service
of the Acquired Business:
- - possible proprietary features and possible
other protection of the product, process or
service of the Acquired Business; and
- - regulatory environment of the industry in
which the Acquired Business operates.
The foregoing criteria are not intended to be exhaustive; any
evaluation relating to the merits of a particular Business
Combination will be based, to the extent relevant, on the above
factors as well as other considerations deemed relevant by
management in connection with effecting a Business Combination
consistent with the Company's business objective. In connection
with its evaluation of a prospective Acquired Business, management
anticipates that it will conduct an extensive due diligence review
which will encompass, among other things, meetings with incumbent
management and inspection of facilities, as well as review of
financial or other information which will be made available to the
Company.
The Company will consider the quality of the management of any
Acquired Business candidate and the operating records of the
entity, the soundness of the service or product to be developed or
being developed, the effect of market and economic conditions and
governmental policies on the business and its products, the nature
of its competition, and the total projected required capital.
The time and costs required to select and evaluate an Acquired
Business candidate (including conducting a due diligence review)
and to structure and consummate the Business Combination (including
negotiating relevant agreements and preparing requisite documents
for filing pursuant to applicable securities laws and state
corporation laws) cannot presently be ascertained with any degree
of certainty. Messrs. Spinali and French, the current executive
officers of the Company, intend to devote approximately 5% of their
respective time to the affairs of the Company and, accordingly,
consummation of a Business Combination may require a greater period
of time than if the Company's executive officers devoted their full
time to the Company's affairs. Any costs incurred in connection
with the identification and evaluation of a prospective Acquired
Business with which a Business Combination is not ultimately
consummated will result in a loss to the Company and reduce the
amount of capital available to otherwise complete a Business
Combination.
The Company anticipates that it will make contact with
Business prospects primarily through the efforts of its officers,
who will meet personally with existing management and key
personnel, visit and inspect material facilities, assets, products
and services belonging to such prospects, and undertake such
further reasonable investigation as management deems appropriate,
to the extent of its limited financial resources. The Company
anticipates that certain Acquired Business candidates may be
brought to its attention from various unaffiliated sources,
including securities broker-dealers, investment bankers, venture
capitalists, bankers, other members of the financial community, and
affiliated sources. While the Company does not presently
anticipate engaging the services of professional firms that
specialize in business acquisitions on any formal basis, the
Company may engage such firms in the future, in which event the
Company may pay a finder's fee or other compensation. Such finder
may be required to be registered as, among other things, an agent
or broker-dealer under the laws of certain jurisdictions. See
"Management, Certain Transactions."
As part of the Company's investigation of prospective
enterprises, products and services, management intends to request
that current owners of a prospective Acquired Business provide,
among other things, written materials regarding the current owner's
business, product or service, available market studies, as well as
the assumptions upon which they are made, appropriate title
documentation with respect to the assets, products and services of
the potential Acquired Business, detailed written descriptions of
any transactions between the potential Acquired Business and any of
its affiliates, copies of pleadings and material litigation, if
any, copies of material contracts and any and all other information
deemed relevant. Additionally, the Company may verify such
information, if possible, by interviewing competitors, certified
public accountants and other persons in a position to have
independent knowledge regarding the product or service as well as
the financial condition of the potential Acquired Business.
As a general rule, Federal and state tax laws and regulations
have a significant impact upon the structuring of business
combinations. The Company will evaluate the possible tax
consequences of any prospective Business Combination and will
endeavor to structure the Business Combination so as to achieve the
most favorable tax treatment to the Company, the Acquired Business
and their respective shareholders. There can be no assurance that
the IRS or appropriate state tax authorities will ultimately assent
to the Company's tax treatment of a particular consummated Business
Combination. To the extent the IRS or state tax authorities
ultimately prevail in recharacterizing the tax treatment of a
Business Combination, there may be adverse tax consequences to the
Company, the Acquired Business and their respective shareholders.
Tax considerations as well as other relevant factors will be
evaluated in determining the precise structure of a particular
Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash (derived from the proceeds of
this offering), equity, debt or a combination of these as
consideration in effecting a Business Combination. Although the
Company has no commitments as of the date of this Prospectus to
issue any shares of Common Stock other than as described in this
Prospectus, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with a
Business Combination. To the extent that such additional shares
are issued, dilution to the interest of the Company's shareholders
will occur. Additionally, if a substantial number of shares of
Common Stock are issued in connection with a Business Combination,
a change in control of the Company may occur.
If securities of the Company are issued as part of an
acquisition, it cannot be predicted whether such securities will be
issued in reliance upon exemptions from registration under
applicable federal or state securities laws or will be registered
for public distribution. When registration of securities is
required, substantial cost may be incurred and time delays
encountered. In addition, the issuance of additional securities
and their potential sale in any trading market which may develop in
the Company's Common Stock, of which there is no assurance, may
depress the price of the Company's Common Stock in any market which
may develop in the Company's Common Stock. Additionally, such
issuance of additional securities of the Company would result in a
decrease in the percentage ownership of the Company of purchasers
of the Common Stock being offered hereby.
The Company's operations may be limited by the Investment
Company Act of 1940. Unless the Company registers with the
Securities and Exchange Commission as an investment company, it
will not, among other things, be permitted to own or propose to
acquire investment securities, exclusive of government securities
and cash items, which have a value exceeding 40% of the value of
the Company's total assets on an unconsolidated basis. It is not
anticipated that the Company will have a policy restricting the
type of investments it may make. While the Company will attempt to
conduct its operations so as not to require registration under the
Investment Company Act of 1940, there can be no assurances that the
Company will not be deemed to be subject to the Investment Company
Act of 1940.
There are currently no limitations relating to the Company's
ability to borrow funds to increase the amount of capital available
to the Company to effect a Business Combination or otherwise
finance the operations of the Acquired Business. The amount and
nature of any borrowings by the Company will depend on numerous
considerations, including the Company's capital requirements, the
Company's perceived ability to meet debt service on such borrowings
and then prevailing conditions in the financial markets, as well as
general economic conditions. There can be no assurance that debt
financing, if required or otherwise sought, would be available on
terms deemed to be commercially acceptable and in the best
interests of the Company. The inability of the Company to borrow
funds for an additional infusion of capital into an Acquired
Business may have material adverse effects on the Company's
financial condition and future prospects. To the extent that debt
financing ultimately proves to be available, any borrowings may
subject the Company to various risks traditionally associated with
incurring indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, an Acquired Business may have already
incurred debt financing and, therefore, all the risks inherent
thereto.
Because of the Company's small size, investors in the Company
should carefully consider the business constraints on its ability
to raise additional capital when needed. Until such time as any
enterprise, product or service which the Company acquires generates
revenues sufficient to cover operating costs, it is conceivable
that the Company could find itself in a situation where it needs
additional funds in order to continue its operations. This need
could arise at a time when the Company is unable to borrow funds
and/or when market acceptance for the sale of additional shares of
the Company's Common Stock does not exist.
Payment of Salaries or Consulting Fees
In connection with the consummation of a Business Combination,
the Company may become obligated to pay to certain persons
consulting fees and/or salaries. No officers, directors or current
shareholders shall be paid any consulting fees or salaries for
services delivered by such persons in connection with a Business
Combination. The Company shall reimburse officers and directors
for any accountable reasonable expenses incurred in connection with
activities on behalf of the Company. The Escrow Fund (including
any interest earned thereon) will not be used for salaries or
benefits payable to Mr. Spinali, Mr. French to reimburse the
Company's officers and directors for expenses incurred in
connection with activities on behalf of the Company. No funds
(including any interest earned thereon) will be disbursed from the
Escrow Fund for reimbursement of expenses. Other than the
foregoing, there is no limit on the amount of such reimbursable
expenses and there will be no review of the reasonableness of such
expenses by anyone other than the Board of Directors, all of the
members of which are officers. Subsequent to the consummation of
a Business Combination, to the extent current officers, directors
and/or shareholders of the Company provide services to the Company,
such persons may receive from the Company consulting fees and/or
salaries. The Company has no present intention to pay to anyone
any consulting fees or salaries. The Company is not aware of any
plans, proposals, understandings or arrangements with respect to
the sale of any shares of Common Stock of the Company by any
current shareholders. Further, there are no plans, proposals,
understandings or arrangements with respect to the transfer by the
Company to any of the Current Shareholders, any funds securities or
other assets of the Company.
Competition
The Company expects to encounter intense competition from
other entities having a business objective similar to that of the
Company. Many of these entities are well established and have
extensive experience in connection with identifying and effecting
business combinations directly or through affiliates. Many of
these competitors possess greater financial, technical, personnel
and other resources than the Company and there can be no assurance
that the Company will have the ability to compete successfully.
Inasmuch as the Company may not have the ability to compete
effectively with its competitors in selecting a prospective
Acquired Business, the Company may be compelled to evaluate certain
less attractive prospects. There can be no assurance that such
prospects will permit the Company to meet its stated business
objective.
Uncertainty of Competitive Environment of Acquired Business
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to
Intense competition from competitors of the Acquired Business. In
particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors,
including competitors with increasingly greater financial,
marketing, technical and other resources than the initial competi-
tors in the industry. The degree of competition characterizing the
industry of any prospective Acquired Business cannot presently be
ascertained. There can be no assurance that, subsequent to a
Business Combination, the Company will have the resources to
compete effectively, especially to the extent that the Acquired
Business is in a high growth industry.
Redemption Rights
At the time the Company seeks shareholder approval of any
potential Business Combination, the Company will offer (the
"Redemption Offer") each of the Public Stockholders the right, for
a specified period of time of not less than 20 days, to redeem all,
but not a portion of, their shares of Common Stock, at a per share
price equal to the Company's liquidation value on the record date
for determination of shareholders entitled to vote upon the
proposal to approve such Business Combination (the "Record Date")
divided by the number of Shares held by all of the Public Stock-
holders. The Redemption Offer will be described in the disclosure
documentation relating to the proposed Business Combination, which
such disclosure documentation may require the Company to file a
Registration Statement with the Commission. See "The Company."
The Company's liquidation value will be equal to the Company's book
value, as determined by the Company and audited by the Company's
independent public accountants (the "Company's Liquidation Value")
(which amount will be less than the initial public offering price
per Share in the offering in view of the expenses of this offering
and the anticipated expenses which will be incurred in seeking a
Business Combination), calculated as of the Record Date. In no
event, however, will the Company's Liquidation Value, be less than
the Escrow Fund, inclusive of any net interest income thereon. If
less than 30% of the Shares held by the Public Stockholders elect
to have their Shares redeemed, the Company may, but will not be
required to, proceed with such Business Combination. If the
Company elects to so proceed, it will redeem Shares, based upon the
Company's Liquidation Value, from those Public Stockholders who
affirmatively requested such redemption and who voted against the
Business Combination. If 30% or more of the Shares held by Public
Stockholders vote against approval of any potential Business
Combination, the Company will not proceed with such Business
Combination and will not redeem such shares. The determination as
to whether the Company proceeds with a Business Combination
ultimately rests with the Company. If the Company determines not
to pursue a Business Combination, even if less than 30% of the
Shares held by Public Stockholders vote against approval of the
potential Business Combination, no Shares will be redeemed. If a
shareholder votes against a potential Business Combination and the
Company determines not to pursue such Business Combination, such
vote will not constitute the exercise of the Redemption Offer so as
to permit release of the Escrowed Funds. Escrowed Funds will be
released to shareholders voting against a Business Combination only
in connection with the consummation of a Business Combination.
Unless otherwise specified by such shareholder, a vote against the
proposed Business Combination will constitute a request by such
shareholder for redemption of his Shares.
Prescribed Acquisition Criteria
As previously discussed herein on the cover page of this
Prospectus and under "PROSPECTUS SUMMARY", this Blank Check
Offering is subject to Rule 419 under the Act. As such, any
agreement to acquire an acquisition candidate must provide for the
acquisition of a. business or assets for which the fair market
value of the business or assets to be acquired represents at least
80% of the offering proceeds, less underwriting commissions, if
any, and expenses and dealer allowances payable to non-affiliates.
Once an acquisition agreement meeting the above criteria has been
executed, the Company must successfully complete a reconfirmation
offering as described herein under "PROSPECTUS SUMMARY - Investor
Rights to Reconfirm Investment Under Rule 419 - Prescribed
Acquisition Criteria."
Certain Securities Laws Considerations
The Company has agreed, contemporaneous with the sale of the
Shares, that it will file an application with the Securities and
Exchange Commission to register its Common Stock under the
provisions of Section 12(g) of the Exchange Act, and that it will
use it best efforts to continue to maintain such registration for
a minimum of two years from the date of this Prospectus. Such
registration will require the Company to comply with periodic
reporting, proxy solicitations and certain other requirements of
the Exchange Act.
If the Company seeks shareholder approval of a Business
Combination at such time as the Company's securities are registered
pursuant to Section 12 of the Exchange Act, the Company's proxy
solicitation materials required to be transmitted to shareholders
may be subject to prior review by the Securities and Exchange
Commission.
Under the Federal securities laws, public companies must
furnish certain information about significant acquisitions, which
information may require audited financial statements of an acquired
company with respect to one or more fiscal years, depending upon
the relative size of the acquisition. Consequently, if a
prospective Acquired Business did not have available and was unable
to reasonably obtain the requisite audited financial statements,
the Company could, in the event of consummation of a Business
Combination with such company, be precluded from (i) any public
financing of its own securities for a period of as long as three
years, as such financial statements would be required to undertake
registration of such securities for sale to the public; and (ii)
registration of its securities under the Securities Exchange Act of
1934. Consequently, it is unlikely that the Company would seek to
consummate a Business Combination with such an Acquired Business.
See "Risk Factors."
The Company is currently not seeking listing of the Shares on
NASDAQ. The Shares are not listed on NASDAQ and if the Company, at
any time, has net tangible assets of $5,000,000 or less,
transactions in the Shares would be subject to Rule 15g promulgated
under the Securities Exchange Act of 1934. Under such rule,
broker-dealers who recommend such securities to persons other than
established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals
with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse) must make a special
written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale.
Transactions are exempt from this rule of the market price of the
Shares is at least $5.00 per share. The U.S. Securities and
Exchange Commission Rule 3a51-1, that generally defines a penny
stock to be any equity security that has a market price of less
than $5.00 per share, subject to certain exemptions. Such
exemptions include an equity security issued by an issuer that has
(i) net tangible assets of at least $2,000,000, of such issuer has
been in continuous operation for at least three years, (ii) net
tangible assets of at least $5,000,000, of such issuer has been in
continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years.
Unless an exemption is available, Rule 15g require the delivery,
prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith.
Since the Shares are subject to Rule 15g, broker-dealers may
find it difficult to effectuate customer transactions and/or
trading activity in the Shares, thus, the market price, if any, may
be depressed, and an investor may find it more difficult to dispose
of the Shares. Also, the market liquidity for the Company's Common
Stock could be adversely affected by limiting the ability of
broker/dealers to sell the Company's Common Stock and the ability
of investors in this offering to sell their securities in the
secondary market.
Facilities
Since December 1994 the Company, pursuant to an oral agreement
with the President, at no cost to the Company, has maintained its
executive offices in approximately 200 square feet of office space
located at 1275 East Bellview, Cherry Hills Village, Colorado,
80121, in the home of the President. The Company considers this
space, to be adequate for its needs and, other than as stated, has
no preliminary agreements or understandings with respect to the
office facility in the future.
Employees
As of the date of this Prospectus, the Company's employees
consist of its executive officers, each of whom devote
approximately 5% of their working time to the affairs of the
Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company, a development stage entity, has neither engaged
in any operations nor generated any revenues to date. Its entire
activity since its inception has been to prepare for its proposed
fund raising through an offering of equity securities as
contemplated herein.
The Company's expenses to date, all of which are attributable
to its formation and proposed fund raising are approximately
$6,079.
Substantially all of the Company's working capital needs
subsequent to the offering contemplated hereby will be attributable
to the identification of a suitable Acquired Business, and
thereafter to effectuate a Business Combination with such Acquired
Business. Such working capital needs are expected to be satisfied
from the Net Proceeds of the proposed offering. Although no
assurances can be made, the Company believes it can satisfy its
cash requirements until a Business Combination is consummated, with
10% of the Net Proceeds derived hereby. Due to the possible
indefinite period of time to consummate a Business Combination and
the nature and cost of the Company's expenses related to the
Company's search and analysis of a Business Combination, there can
be no assurances that the Company's cash requirements until a
Business Combination is consummated will be satisfied with 10% of
the Net Proceeds of this offering (including interest income earned
thereon). Prior to the conclusion of this offering the Company
currently anticipates its expenses to be limited to accounting
fees, legal fees, telephone, mailing, filing fees, occupational
license fees, escrow agent fees, transfer agent fees. See "Risk
Factors."
MANAGEMENT
Directors and Officers
Name Age Title
J. Michael Spinali 47 President, Director
Chief Financial Officer, Treasurer
Brian S. French 30 Vice President, Secretary, Director
J. Michael Spinali is President, Chief Financial Officer,
Treasurer and a Director of the Company and will devote 5% of his
time to the Company's affairs. His responsibilities will include
management of the Company's operations as well as the Company's
administrative and financial activities. Since 1994 Mr. Spinali
has been President of Jalapeno Mexican Grill a restaurant company.
From 1993 to present, Mr. Spinali has been involved in real estate
development in Denver, Colorado. From 1983 to 1992, Mr. Spinali
was a Founder, Chief Operations Officer, and Chief Financial
Officer of Aspen Marine Group, Inc., a public corporation engaged
in boat manufacturing, houseboat vacation ownership, and marina
acquisition, management, and development. In April of 1991, Aspen
Marine Group was listed in the Denver Post 100, and in June of 1991
was rated number 67 in Colorado Business Magazines Top 300 Public
Companies. Aspen Marine Group's revenues exceeded $16,000,000 in
1991.
Brian S. French is Vice President, Secretary, and a Director
of the Company and will devote 5% of his time to the Company's
affairs. Mr. French has over ten years of combined experience in
the areas of restaurant management and corporate finance.
Currently Mr. French is a Systems Analyst with Fredrick Wella, a
software consulting firm. From 1993 to 1996 he was Controller for
Hammon Contractors, a major highway contractor. From 1986 to 1993,
Mr. French was the Controller for Aspen Marine Group, Inc. Prior
experience in the restaurant industry includes over four years
management with direct involvement in food preparation, scheduling,
ordering, and cost control. Further, Mr. French is an accomplished
chef and has developed a personnel training system specifically
designed for the restaurant industry.
All Directors of the Company will hold office until the next
annual meeting of the shareholders and until their successors have
been elected and qualified.
All directors hold office until the next annual meeting of
shareholders and the election and qualification of their
successors. Directors receive no compensation for serving on the
Board of Directors other than reimbursement of reasonable expenses
incurred in attending meetings. Officers are appointed by the
Board of Directors and serve at the discretion of the Board.
Messrs. Spinal and French, the current executive officers of the
Company, intend to devote approximately 5% of their time to the
affairs of the Company.
There are no agreements or understandings for any officer or
director to resign at the request of another person and none of the
officers or directors are acting on behalf of or will act at the
direction of any other person.
Executive Compensation
No compensation has been paid to any officers or directors
since inception. Pursuant to an oral understanding with management,
the Company does not expect to pay any direct or indirect
compensation to its officers and directors except for reimbursement
for reasonable out-of-pocket expenses. There are no understandings
or arrangements otherwise relating to compensation. Management
anticipates that shares of the Company's authorized but unissued
Common Stock may be utilized in connection with a business
acquisition or combination and not as compensation to the Company's
management, promoters, or their affiliates or associates. (See
"Use of Proceeds", "MANAGEMENT - Conflicts of Interest" and
"CERTAIN TRANSACTIONS").
Conflicts of Interest
The proposed business of the Company raises potential
conflicts of interest between the Company and its officers and
directors. The company has been formed for the purpose of locating
suitable business opportunities in which to participate. Each
member of management will not be devoting full time to the Company
and is engaged in various other business activities. From time to
time, in the course of such activities they may become aware of
investment and business opportunities and may be faced with the
issue of whether to involve the Company in such a transaction.
Management of the Company is required by the Company's by-laws
to bring business opportunities to the Company insofar as they
relate to business opportunities in which the Company has expressed
an interest. Because the business of the Company is to locate a
suitable business venture, management is required to bring such
business opportunities to the Company. Potential conflicts may
arise if a member of management does not disclose such potential
business opportunities.
It is possible that members of management may organize other
companies as "blank check" or "blind pool" companies in the future
and offer their securities to the public. Management may have
conflicts in the event that another "blank check" or "blind pool"
company associated with management is actively seeking the
acquisition of properties and businesses that are identical or
similar to those that the Company may seek, should the Company
complete this Blank Check Offering. A conflict will not be present
as between the Company and another affiliated "blank check" or
"blind pool" if , before the Company begins seeking acquisitions,
such other blank check" or "blind pool" : (i) enters into any
understanding, arrangement or contractual commitment to participate
in, or acquire, any business or property; and (ii) ceases its
search for additional properties or businesses identical or similar
to those the Company may seek. Conflicts also may not be present
to the extent that potential business opportunities are appropriate
for the Company but not for other affiliated "blank check" or
"blind pool" (or vice versa), because of such factors as the
difference in working capital available to the Company. If,
however, at any time the Company and any other firms affiliated
with management are simultaneously seeking business opportunities,
management may fact the conflict of whether to submit a potential
business acquisition to the Company or to such other firms. In the
event that an opportunity is appropriate to both the Company and
another affiliated "blank check" or "blind pool" management intends
to first offer such opportunity to that entity that first closed
sale of its securities.
The Company will not invest the proceeds of this Blank Check
Offering in any entity affiliated with management with approval of
either a majority of the disinterested directors or approval of
disinterested shareholders holding a majority of the Company's
voting stock not owned by the Company's officers and directors,
beneficially and of record. Further, and in any event, the Company
must comply with the reconfirmation offering requirements of Rule
419. (See PROSPECTUS SUMMARY - Investor Rights to Reconfirm
Investment Under Rule 419" and "RISK FACTORS - Conflicts of
Interest"). The Company has established no other guidelines or
procedures for resolving potential conflicts. Failure by
management to resolve conflicts of interest in favor of the Company
may result in liability of management to the Company. Management
has and will continue to have an affirmative obligation to disclose
conflicts of interest to the Company' Board of Directors or
shareholders.
Other potential conflicts of interest include (i) the
potential payment of a finder's fee, other than from the proceeds
of this Blank Check Offering, to members of management,
shareholders of the Company or their affiliates if they bring a
proposed business venture to the Company and the Company entered
into such business venture; (ii) demands on management's time from
their other business interests; and (iii) the preferences,
notwithstanding other possible factors, to utilized the legal
services of a major shareholder.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the date
hereof and as adjusted to reflect the sale of the Shares offered
hereby, based on information obtained from the persons named below,
with respect to the beneficial ownership of shares of Common Stock
by (i) each person known by the Company to be the owner of more
than 5% of the outstanding shares of Common Stock, (ii) each
director, and (iii) all officers and directors as a group:
Amount and Approximate
Percentage of Outstanding Shares
Beneficial Before After
Shareholder Ownership Offering Offering
Scott Bengfort 1,000,000 40.5% 28.8%
11403 Corta Playa Laguna
San Diego, CA 92124
Robert C. Weaver, Jr.(1) 800,000 32.4% 23.1%
721 Devon Court
San Diego, CA 92109
J. Michael Spinali (2) 120,000 4.9% 3.5%
1275 East Bellview
Cherry Hills Village,
CO 80121
Brian S. French (2) 40,000 1.6% 1.2%
1275 East Bellview
Cherry Hills Village,
CO 80121
All Officers & Directors 160,000 6.5% 4.6%
as a Group (2 persons)
(1) Counsel for the Company
(2) Officer or Director
Unless otherwise noted, all persons named in the table have sole
voting and investment power with respect to all shares of Common
Stock beneficially owned by them. No persons named in the table
are acting as nominees for any persons or are otherwise under the
control of any person or group of persons.
Messrs. Bengfort, Weaver, Spinali and French and Ms. Boyd may
be deemed to be "promoters" and "parents" of the Company, as such
terms are defined under the Federal securities laws. Messrs.
Bengfort and Weaver, although not management, are substantial
shareholders of the Company and may be instrumental in assisting
management in activities of the Company.
CERTAIN TRANSACTIONS
On March 20, 1992, the Company issued 500,000 shares of it's
Common Stock each to Ross H. Boyd and Jean P. Boyd, at the time,
the Company's President and a Director and Vice President and a
Director, respectively, for cash and services aggregating $1,000.
Ross H. Boyd subsequently died and his shares transferred from his
estate to his wife Jean P. Boyd leaving her with a total of
1,000,000 shares. On March 20, 1992, the Company also issued
1,000,000 shares of Common Stock to Scott Bengfort for cash and
services aggregating $1,000.
On November 16, 1994, Ms. Jean Boyd, a former officer and
director of the Company, transferred from herself to Robert C.
Weaver, Jr. 800,000 shares of the Company's Common Stock. Mr.
Weaver is counsel for the Company. Previously, Ms. Jean Boyd,
through Scott Bengfort, approached Mr. Weaver to act as counsel for
the Company in connection with this offering. Mr. Weaver agreed to
act as counsel for the Company on the condition that Ms. Boyd
tender 800,000 shares of Company common stock owned by Ms. Boyd to
Mr. Weaver. Ms. Boyd agreed and did so tender the stock.
Since December 1994 the Company, pursuant to a an oral
agreement with the President, at no cost to the Company, has
maintained its executive offices in approximately 200 square feet
of office space located at 1275 East Bellview, Cherry Hills
Village, Colorado, 80121.
On September 21, 1995, the Company issued the following Common
Stock for services rendered: 90,000 shares to J. Michael Spinali,
the Company's President and a Director, and 30,000 shares to Brian
S. French, the Company's Secretary, Treasurer and Director, for an
aggregate valuation of $3,000.
On September 21, 1995, the Company issued 350,000 shares of
Common Stock to 15 persons, including Messrs. Spinali and French
for an aggregate purchase price of $8,750.
The Company shall not make any loans to any officers or
directors following this offering. Further, the Company shall not
borrow Funds for the purpose of making payments to the Company's
officers, directors, promoters, management or their affiliates or
associates.
Officers, directors or their affiliates may act as finders of
business opportunities. The finders fees which they may receive in
connection therewith will be established by negotiation with the
Company and the potential merger partner and will be no less
favorable to the Company than could be obtained with unrelated
third parties.
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue 100,000,000 shares of
Common Stock, par value $.001 per share. Prior to this offering,
2,470,000 shares of Common Stock were outstanding, held of record
by 18 persons.
Common Stock
The holders of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by shareholders.
There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the
shares voted for the election of directors can elect all of the
directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of
Funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other
subscription rights, and, except as noted herein, there are no
redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the Shares when issued
and paid for as set forth in this Prospectus, will be, fully paid
and nonassessable.
Dividends
The Company has not paid any dividends on its Common Stock to
date and does not presently intend to pay cash dividends prior to
the consummation of a Business Combination. The payment of cash
dividends in the future, of any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and
general financial condition subsequent to consummation of a
Business Combination. The payment of any dividends subsequent to
a Business Combination will be within the discretion of the
Company's then Board of Directors. It is the present intention of
the Board of Directors to retain all earnings, if any, for use in
the Company's business operations and, accordingly, the Board does
not anticipate paying any cash dividends in the foreseeable future.
Transfer Agent
After completion of this Offering, the transfer agent for the
Company's Common Stock will be Atlas Stock Transfer, 5899 South
State Street, Salt Lake City, UT 84107. Currently the Company is
acting as it's own transfer agent.
Shares Eligible For Future Sale
Upon the consummation of the maximum amount of this offering,
the Company will have 3,470,000 shares of Common Stock outstanding.
Of these shares, the 1,000,000 shares sold in this offering will be
freely tradeable without restriction or further registration under
the Securities Act, except for any shares purchased by an
"affiliate" of the Company (in general, a person who has a control
relationship with the Company) which will be subject to limitations
of Rule 144 promulgated by the Commission under the Securities Act.
All of the remaining 2,470,000 shares are deemed to be "restricted
securities," as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were issued in
private transactions not involving a public offering. All of such
shares are eligible for sale under Rule 144.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including
an affiliate of the Company (or persons whose shares are
aggregated), who has owned restricted shares of Common Stock
beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same
class or, the average weekly trading volume during the four
calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least the three months immediately
preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares under
Rule 144 without regard to any of the limitations described above.
Prior to this offering, there has been no market for the
Common Stock, and no prediction can be made as to the effect, if
any, that market sales of restricted shares of Common Stock or the
availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public
market may adversely affect the price for the sale of the Company's
equity securities in any trading market which may develop.
THE OFFERING
The Company proposes to offer the Shares through it's officers
and directors, and selected broker-dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD") and who
agree to sell the Shares in conformity with the NASD Rules of Fair
Practice. Such selected broker-dealer may receive maximum
compensation for sales hereunder a 10% selling commission. No
selected dealers have yet been identified by the Company. The
Company will amend the registration statement by post-effective
amendment to identify a selected broker-dealer at such time as such
broker-dealer sells 5% or more of the offering. In the view of the
Commission's Division of Corporation of Finance, a selected broker-
dealer that sells securities in this type of an offering would be
deemed an underwriter as defined in Section 2(11) of the Securities
Act of 1933, as amended. Prior to the involvement of any broker-
dealer in the offering, the Company must obtain a no objection
position from the NASD regarding the contemplated underwriting
compensation and arrangements.
The offering is being conducted directly by the Company
without the use of a professional underwriter.
Prior to this offering, there has been no public market for
the Shares. Consequently, the initial public offering price for
the Shares has been determined by negotiation between the Company
and the Representative. Among the factors considered in
determining the public offering price were the history of, and the
prospects for, the Company's business, an assessment of the
Company's management, its past and present operations, the
prospects for earnings of the Company, the present state of the
Company's development, the general condition of the securities
market at the time of the offering and the market prices of similar
securities of comparable companies at the time of the offering.
Such price is subject to change as a result of market conditions
and other factors, and no assurance can be given that a public
market for the Shares will develop after the close of the offering,
or if a public market in fact develops, that such public market
will be sustained, or that the Shares can be resold at any time at
the offering or any other price. See "Risk Factors -- No Assurance
of Public Market; Arbitrary Determination of Offering Price."
The foregoing is a summary of the principal terms of the
agreements described above and does not purport to be complete.
Reference is made to copies of each such agreement which are filed
as exhibits to the Registration Statement. See "Additional
Information."
Offering Conducted In Accordance With Rule 419
The Company's offering is being conducted in accordance with
the Commission's Rule 419 which was adopted to strengthen the
regulation of securities offerings by "blank check" companies which
Congress has found to have been common vehicles for fraud and
manipulation in the penny stock market. The Company is a "blank
check" company subject to Rule 419 because the Shares are being
offered at a price below $5.00. Accordingly, investors in the
offering will receive the substantive protection provided by Rule
419. Rule 419 requires that the securities to be issued and the
funds received in a "blank check" offering be deposited and held in
an escrow account until an acquisition meeting specified criteria
is completed. Before the acquisition can be completed and before
the Funds and securities can be released, the "blank check" company
is required to update the registration statement with a post-
effective amendment; and after the effective date thereof the
Company is required to furnish investors with the Prospectus
produced thereby containing information, including audited
financial statements, regarding the proposed acquisition candidate
and its business. According to the rule, the investors must have
no fewer than 20 and no more than 45 days from the effective date
of the post-effective amendment to decide to remain an investor or
require the return of their investment funds. Any investor not
making any decision within said 45 day period is to automatically
receive a return of his investment funds. Unless a sufficient
number of investors elect to remain investors, all of the deposited
funds in the escrow account must be returned to all investors and
none of the securities will be issued. Rule 419 further provides
that if the "blank check" company does not complete an acquisition
meeting specified criteria within 18 months, all of the deposited
funds in the escrow account must be returned to investors.
LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any
threatened litigation of a material nature.
LEGAL MATTERS
Robert C. Weaver, Jr., Esq., 721 Devon Court, San Diego, CA
92109, has rendered an opinion (which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part) to the
effect that the Shares, when issued and paid for as described
herein, will constitute legally issued securities of the Company,
fully paid and non-assessable. Mr. Weaver is a significant
shareholder of the Company. (See "Principal Shareholders")
EXPERTS
The financial statements included in this Prospectus have been
audited by Davis & Co., independent public accountants, as
indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made
to said report in which the opinion is modified with respect to the
fact that the Company's ability to commence operations is
dependent, among other factors, upon the success of this offering
or other fund raising. Further, the financial statements do not
include any adjustment relating to the recoverability of asset
carrying amounts and the amounts and classification of liabilities
should the Company be unable to continue in existence.
INDEMNIFICATION
The Company's Articles of Incorporation and Nevada law contain
provisions relating to the indemnification of officers and
directors.
Generally, the foregoing provide that the corporation may
indemnify any person who was or is a party to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except for an action by
or in right of the Corporation, by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation.
It must be shown that he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation. Generally, no indemnification may be
made where the person has been determined to be negligent or guilty
of misconduct in the performance of his duty to the Corporation.
Insofar as indemnification for liabilities arising under the
securities act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of his
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 Act and will be governed by the final adjudication of such
issue.
AVAILABLE INFORMATION
The Company has filed with the Denver Regional Office of the
Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2 (the "Registration Statement")
under the Securities Act with respect to the Shares. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For
further information with respect to the Company and this offering,
reference is made to the Registration Statement, including the
exhibits filed therewith, which may be examined at the Commission's
principal office, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, the New York Regional Office of the Commission at 7
World Trade Center, New York, New York 10007 and the Chicago
Regional Office of the Commission, Northwest Atrium, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, where copies
may be obtained upon payment of the fees prescribed By the
Commission. Descriptions contained in this Prospectus as to the
contents of any contract or other document filed as an exhibit to
the Registration Statement are not necessarily complete and each
such description is qualified by reference to such contract or
document. References in this Prospectus to various documents,
statutes, regulations and agreements do not purport to be complete
and are qualified in their entirety by reference to such documents,
statutes, regulations and agreements. The Company will provide
without charge to each person who receives a Prospectus, upon
written request of such person, a copy of any of the information
that is incorporated by reference in the Prospectus.
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
California Applied Research, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of California
Applied Research, Inc. at December 31, 1997 and the related
statements of changes in stockholders' equity, operations and
cash flows for the years ended December 31, 1996 and 1997, and
for the period from inception (March 25, 1992) to December 31,
1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit 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 California Applied Research, Inc. at December 31, 1997, and
the results of its operations and its cash flows for the years
ended December 31, 1996 and 1997, and for the period from
inception (March 25, 1992) to December 31, 1997, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. However, the
Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by
similar companies, and with which to carry out its planned
activities. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's
plans in regard to this matter are discussed in Note 2. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
February 25, 1998
F-1
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Balance Sheet
DECEMBER 31,
1997
ASSETS
Current asset
Cash $4,166
Other asset
Deferred public offering costs 3,561
$7,727
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liability
Account payable $55
Contingencies and commitments (Notes
2, 4 and 5)
Stockholders' equity
Common stock, $.001 par value per
share; 100,000,000 shares
authorized; 2,470,000 shares issued
and outstanding at December 31, 2,470
Additional paid-in capital 11,281
Deficit accumulated during the
development stage -6,079
7,672
$7,727
The accompanying notes are an integral part of this statement.
F-2
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (March 25, 1992) to December 31, 1992
For the Years Ended December 31, 1993, 1994, 1995, 1996 and 1997
ADDL.
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
Shares issued as of March 25, 1992
during the formation of the Company, for
services valued at $.001 per share to:
Officers and directors 2,000,000 $2,000 $
Net loss for the period from inception
(March 25, 1992) to December 31, 1992
Balance at December 31, 1992 2,000,000 2,000
Net loss for the year ended
December 31, 1993
Balance at December 31, 1993 2,000,000 2,000 (--)
Shares issued for cash of $.025
per share in November and
December 1994 to others 140,000 140 3,360
Shares contributed to the Company in
November 1994 by former officer
and director (Note 3) 1
Net loss for the year ended Dec. 31, 1994
Balance at December 31, 1994 2,140,000 2,140 3,361
Common stock issued in September 1995
at $.25 per share in exchange for:
Services of officers and directors 120,000 120 2,880
Cash from officers and directors 40,000 40 960
Cash from others 170,000 170 4,080
Net loss for the year ended
December 31, 1995
Balance at December 31, 1995 2,470,000 2,470 11,281
Net loss for the year ended
December 31, 1996
Balance at December 31, 1996 2,470,000 2,470 11,281
Net loss for the year ended
December 31, 1997
Balance at December 31, 1997 2,470,000 $2,470 $11,281
The accompanying notes are an integral part of this statement.
F-3
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (March 25, 1992) to December 31, 1992
For the Years Ended December 31, 1993, 1994, 1995, 1996 and 1997
(Page 2)
DEFICIT ACCUM. TOTAL
DURING THE STOCK-
DEVELOPMENT HOLDERS'
STAGE EQUITY
Shares issued as of March 25, 1992
during the formation of the Company, for
services valued at $.001 per share to:
Officers and directors $ $2,000
Net loss for the period from inception
(March 25, 1992) to December 31, 1992 (2,000) (2,000)
Balance at December 31, 1992 (2,000) --
Net loss for the year ended
December 31, 1993 (--) (--)
Balance at December 31, 1993 (2,000) --
Shares issued for cash of $.025
per share in November and
December 1994 to others 3,500
Shares contributed to the Company in
November 1994 by former officer
and director (Note 3) 1
Net loss for the year ended Dec. 31, 1994 (--) (--)
Balance at December 31, 1994 (2,000) 3,501
Common stock issued in September 1995
at $.25 per share in exchange for:
Services of officers and directors 3,000
Cash from officers and directors 1,000
Cash from others 4,250
Net loss for the year ended Dec. 31, 1995 (3,552) (3,552)
Balance at December 31, 1995 (5,552) 8,199
Net loss for the year ended Dec. 31, 1996 (525) (525)
Balance at December 31, 1996 (6,077) 7,672
Net loss for the year ended Dec. 31, 1997 (2) (2)
Balance at December 31, 1997 $(6,079) $7,672
The accompanying notes are an integral part of this statement.
F-4
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Operations
FOR THE PERIOD
FROM INCEPTION
FOR THE YEAR ENDED (MARCH 25, 1992)
DECEMBER 31, TO DEC. 31, 1997
1996 1997 (UNAUDITED)
Expenses
Stock issued for services $ -- $ -- $ 5,000
Travel 368 -- 800
Other general and
administrative 157 2 279
525 2 6,079
Net loss $ (525) $ (2) $ (6,079)
Weighted average number
of shares 2,470,000 2,470,000 2,470,000
Net loss per common share $ (--) $ -- $ (.002)
The accompanying notes are an integral part of this statement.
F-5
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Cash Flows
FOR THE PERIOD
FROM INCEPTION
FOR THE YEAR ENDED (MARCH 25, 1992)
DECEMBER 31, TO DEC. 31, 1997
1996 1997 (UNAUDITED)
Cash flow from operating
activities:
Net loss $ (525) $ (2) $(6,079)
Noncash items included in the
net loss:
Stock issued for services -- -- 5,000
Changes in assets and liabilities
(Increase) decrease in expense
advance to officer 368 --
Increase in accounts payable 55 -- 55
(Increase) decrease in stock
subscription receivable -- -- --
Net cash provided (used) by
operating activities (102) (2) (1,024)
Cash flow from financing
activities:
Proceeds from sale of
common stock -- -- 8,750
Contribution of stock by
founder -- -- 1
Costs related to public
offering (750) (500) (3,561)
Net cash provided by
financing activities (750) (500) 5,190
Increase (decrease) in cash (852) (502) 4,166
Cash, beginning of period 5,520 4,668 --
Cash, end of period $4,668 $4,166 $4,166
The accompanying notes are an integral part of this statement.
F-6
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1: SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies are as follows:
a. ORGANIZATION
California Applied Research, Inc. (the "Company") was
incorporated under the laws of the State of Nevada on March 25,
1992. The Company is in the development stage as more fully
defined in Statement No. 7 of the Financial Accounting Standards
Board. Planned principal operations of the Company have not yet
commenced, and activities to date have been limited to its
formation and obtaining its initial capitalization. The Company
intends to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to it by
persons who or firms which desire to employ the Company's funds
in their business or seek the perceived advantages of a publicly
held corporation.
b. DEFERRED COSTS RELATED TO PROPOSED PUBLIC OFFERING
Costs incurred in connection with the proposed public
offering of common stock have been deferred and will be charged
against capital if the offering is successful or against
operations if it is unsuccessful.
c. SHARES ISSUED IN EXCHANGE FOR SERVICES
The fair value of shares issued in exchange for
services rendered to the Company was determined by the Company's
officers and directors.
d. INCOME TAXES
The Company has made no provision for income taxes
because of financial statement and tax losses since its
inception. As of December 31, 1997, the Company has net
operating loss carryforwards for tax purposes of approximately
$600 and $500 which will expire in 2010 and 2011, respectively.
e. NET LOSS PER COMMON SHARE
The net loss per common share is computed by dividing
the net loss for the period by the weighted average number of
shares outstanding. For purposes of computing the weighted
average number of shares, all stock issued prior to the public
offering is considered to be "cheap stock" as defined in SEC
Staff Accounting Bulletin 4D and is therefore counted as
outstanding for the entire period.
f. ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(Continued)
F-7
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 2: GOING CONCERN CONTINGENCY
The Company has minimal capital resources presently
available to meet obligations which normally can be expected to
be incurred by similar companies and to carry out its planned
operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
In order to begin any significant operations, the Company
will have to pursue other sources of capital, such as additional
equity financing as discussed in Note 4, herein. There is no
assurance that the Company will be able to obtain such financing.
The financial statements, herein, do not include any adjustments
that might result from the outcome of this uncertainty.
Note 3: RELATED PARTY TRANSACTIONS
In December 1994 the Company's President began providing
to the Company free of charge a minimal amount of office space in
his home.
In November 1994 one of the Company's founders who was
also an officer and director of the Company, transferred 800,000
shares of her originally issued shares, valued at $1, to the
Company's corporate attorney in consideration for said attorney's
undertaking to provide legal services incurred in connection with
the Company's proposed public offering.
See also Note 5 regarding a contingent legal fee.
Note 4: COMMITMENT - PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company intends to undertake a public offering to
sell up to 1,000,000 shares of its $.001 par value common stock
at a price of $.25 per share.
The shares will be offered and sold on a "best efforts"
100,000 share minimum, 1,000,000 share maximum basis, pursuant to
a continuing offer over 360 days after the date of the
Prospectus. The shares will be offered by authorized officers
and directors of the Company who will receive no underwriting
discounts or commission, but only the reimbursement of their out-
of-pocket expenses relating to the offering. The Company may
also offer the shares through selected broker-dealers, as sales
agents, at a commission of 10%. No expense allowance, warrants
to purchase common stock or other remuneration except the 10%
commission will be paid. Offering expenses to be incurred by the
Company are estimated to be a maximum of $30,400 which assumes a
commission will be paid on the maximum of 1,000,000 shares to be
sold.
Proceeds from subscriptions for shares are required to be
deposited into an escrow account with an independent third party,
pursuant to an escrow agreement between the Company and the
Escrow Agent. The securities to be issued to investors must also
be deposited into this escrow account. If the minimum number of
shares are not sold, the sale of shares hereunder will not be
completed and the full amount paid by subscribers will be
refunded without interest. (Continued) F-8
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 4: COMMITMENT - PROPOSED PUBLIC OFFERING OF COMMON STOCK
(CONTINUED)
If the public offering is successfully completed, except
for an amount up to 10% of the deposited funds ($1,750 if minimum
is sold, $22,000 if the maximum is sold) otherwise releasable,
the deposited funds and the deposited securities may not be
released until an acquisition, meeting certain specified
criteria, has been made and a sufficient number of investors
reconfirm their investment in accordance with certain specified
procedures. Pursuant to these procedures, a new prospectus,
which describes an acquisition candidate and its business and
includes audited financial statements, must be delivered to all
investors. The Company must return the pro rata portion of the
deposited funds to any investor who does not elect to remain an
investor. Unless a sufficient number of investors elect to
remain investors, all investors will be entitled to the return of
a pro rata portion of the deposited proceeds (and any interest
earned thereon) and none of the deposited securities will be
issued to investors. In the event an acquisition is not
consummated within 18 months of the effective date, the deposited
proceeds will be returned on a pro rata basis to all investors.
Officers, directors, affiliates, and principal
shareholders of the Company may purchase a percent of the shares
sold in the offering under the same terms and conditions as the
public investors. Such purchases, if made, will be for
investment purposes only and not for redistribution. Such
purchases may be made for the purpose of closing the minimum
offering.
Note 5: CONTINGENT LEGAL FEE
The Company has agreed to pay its corporate attorney, who
is also a stockholder of the Company, $5,000 cash if the
registration statement for the proposed public offering (see Note
4 above) becomes effective. Because there is no assurance the
offering will be declared effective, this fee has not been
accrued in the balance sheet, herein.
F-9
Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 22. Indemnification of Directors and Officers.
The information required by this Item is incorporated by
reference to "Indemnification" in the Prospectus herein.
Item 23. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 100
NASD Filing Fees 300
Blue Sky Fees and Expenses 500
Legal Fees and Expenses 5,000
Printing and Engraving Expenses 1,500
Accountants' Fees and Expenses 2,000
Miscellaneous 1,000
________
Total $10,400
The foregoing expenses, except for the SEC fees, are estimated.
Item 24. Recent Sales of Unregistered Securities.
The following sets forth information relating to all previous
sales of Common Stock by the Registrant which sales were not
registered under the Securities Act of 1933.
Date of
Sale Purchaser Shares Consideration
3-20-92 Scott Bengfort 1,000,000 $ 1,000.00
3-20-92 Ross and Jean Boyd 1,000,000 $ 1,000.00
9-21-95 Robert L. & Diane C.
Fields Trust 60,000 $ 1,500.00
9-21-95 Brian French 40,000 $ 1,000.00
9-21-95 Jay A. Geier 20,000 $ 500.00
9-21-95 Kenneth E. Goodwin 20,000 $ 500.00
9-21-95 Frank J. Greene 30,000 $ 750.00
9-21-95 James C. Holly 20,000 $ 500.00
9-21-95 Richard D. Kennedy 10,000 $ 250.00
9-21-95 Richard Kyndberg 20,000 $ 500.00
9-21-95 Cindy J. Mendex 10,000 $ 250.00
9-21-95 James W. Rodgers 40,000 $ 1,000.00
9-21-95 Frank Sheldon 20,000 $ 500.00
9-21-95 Ron Shepton 20,000 $ 500.00
9-21-95 J. Michael Spinali 120,000 $ 3,000.00
9-21-95 George B. Tarver 10,000 $ 250.00
9-21-95 Nathanel Weinberger 30,000 $ 750.00
Total 2,470,000 $ 13,750.00
With respect to the issuance of the aforementioned shares, the
Registrant relied on the exemptions from registration provided by
Section 4(2) of the Securities Act of 1933. No advertising or
general solicitation was employed in offering the stock. The
securities were offered to officers, directors, a corporation which
had access to information by virtue of its' relationship with
officers and directors of the Company, and the Company's legal
counsel. The securities were offered for investment only and not
for the purpose of resale or distribution. All of the shares
issued to the aforementioned persons bear or shall bear restrictive
legends preventing their transfer except in accordance with the Act
and the regulations promulgated thereunder. In addition, stop
transfer instructions pertaining to these shares will be lodged
with the Registrant's transfer agent.
Item 25. Exhibits.
The following exhibits are filed with this Registration
Statement:
Exhibit Number Exhibit Name Page Number
1.1 Participating Dealer Agreement *
1.2.1 Fund Escrow Agreement **
1.2.2 Escrow Agreement in Accordance with
Rule 419 under the Securities
Act of 1933, as amended **
3.1 Articles of Incorporation *
3.2 By-Laws *
4.1 Common Stock *
5 Opinion Regarding Legality *
24.1 Consent of Counsel (2) *
24.2 Consent of Expert 81
25 Power of Attorney (3) *
* previously provided in the original filing
** previously provided in amendment no. 1.
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing.
__________________
(1) Information pertaining to the Common Stock of the Company is
contained in the Certificate of Incorporation and By-Laws of the
Company.
(2) The Consent of Counsel is contained in the Opinion Regarding
Legality filed previously.
(3) The Power of Attorney herein below is incorporated by reference
to Part II, Item 25 of the Registration Statement.
Item 26. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the Offering.
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby
undertakes to file with the Securities and Exchange Commission such
supplementary and periodic information, documents, and reports as
may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority
conferred to that section.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to its Certificate
of Incorporation or provisions of Nevada law, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,the
registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has
duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized
by power of attorney, in the City of Denver, State of Colorado, on
March 16, 1998.
California Applied Research, Inc. (Registrant)
/s/
J. Michael Spinali, President and Chairman
(Signature)
EXHIBIT 24.2
CONSENT OF EXPERT
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Prospectus on Form SB-2 of
our report dated February 25, 1998 relative to our audits of the
financial statements of California Applied Research, Inc. at
December 31, 1997, and for the period from inception (March 25,
1992) to December 31, 1997, and for the years then ended, and to
the reference to our firm under the heading "Experts" therein.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
March 11, 1998