SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
August 30, 2004 (June 14, 2004)
CI SELL CARS INC.
(Exact name of registrant as specified in its charter)
Texas 333-106637
- ---------------------------- ------------------------
(State or other jurisdiction (Commission File Number)
of incorporation)
16-1644353
-------------------------------------------------
(IRS Employer Identification Number)
Sagicor Corporate Centre, Wildey, St. Michael, Barbados, West Indies
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
309A East Main, Tomball, Texas 77375
------------------------------------
(Former address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (246) 426-4556
Statements in this filing about anticipated or expected future revenue or growth
or expressions of future goals or objectives, including statements regarding
whether current plans to grow and strengthen the company's existing network will
be implemented or accomplished, are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements in this filing are based upon information available
to the Company on the date of this release. Any forward-looking statements
involve risks and uncertainties, including the risk that the Company will be
unable to grow or strengthen its business due to a lack of capital, as well as
those risks and uncertainties described in the Company's other filings with the
Securities and Exchange Commission, that could cause actual events or results to
differ materially from the events or results described in the forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
ITEM 2.01. ACQUISITION OR DISPOSITION OF ASSETS
On June 14, 2004, the closing was completed of that certain Agreement and Plan
of Reorganization ("Definitive Stock Exchange Agreement") with Strategy, Frank
Ney and Kavrav, Ltd. Pursuant to the Definitive Stock Exchange Agreement,
Strategy became a wholly owned subsidiary of the Company.
The Definitive Stock Exchange Agreement provided for the purchase and retirement
of 25,827,000 shares of our common stock by Strategy; the forward split of the
remaining 1,105,000 common shares into 15,470,000 shares; the issue of
45,100,000 shares of our common stock to acquire Strategy; and the issue of
900,000 shares of our common stock as a finders fee. After completion of the
above transactions, the Company will have 61,470,000 shares of its common stock
outstanding. The Board of Directors of the Company approved the transaction,
between unrelated parties, which they believe to be in the best interests of the
Company.
Strategy, through its wholly-owned subsidiary Strategy Insurance, Ltd., is a
provider of specialty lines of insurance, reinsurance and risk and credit
enhancement. It conducts its insurance and reinsurance operations principally
through subsidiaries incorporated in Barbados, West Indies. It has offices in
Barbados, West Indies, London, England and Toronto, Canada.
For accounting purposes, the acquisition will be treated as the acquisition of
Strategy by the Company with Strategy as the acquiror (reverse acquisition). The
historical financial statements prior to June 14, 2004 will be those of
Strategy.
The acquisition of Strategy by the Company is subject to the approval of the
Supervisor of Insurance for Barbados, West Indies. The Company does not
anticipate that approval will be withheld.
ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT
On June 14, 2004, the closing was completed of that certain Agreement and Plan
of Reorganization ("Definitive Stock Exchange Agreement") with Strategy Holding
Company Limited ("Strategy"), Frank Ney and Kavrav Ltd. (collectively the
"Sellers"). Pursuant to the Definitive Stock Exchange Agreement, Strategy became
a wholly owned subsidiary of CI Sell Cars, Inc. (the "Company").
The Definitive Stock Exchange Agreement provided for the purchase and retirement
of 25,827,000 shares of our common stock by Strategy; the forward split of the
remaining 1,105,000 common shares into 15,470,000 shares; the issue of
45,100,000 shares of our common stock to acquire Strategy; and the issue of
900,000 shares of our common stock as a finders fee. After completion of the
above transactions, the Company will have 61,470,000 shares of its common stock
outstanding. As a result of these transactions, a change in control has occurred
and Frank Ney received 26,691,840 common shares (43.42% of the total
outstanding) and Kavrav Ltd. received 18,408,160 common shares (29.95% of the
total outstanding).
Strategy, through its wholly-owned subsidiary Strategy Insurance, Ltd., is a
provider of specialty lines of insurance, reinsurance and risk and credit
enhancement. It conducts its insurance and reinsurance operations principally
through subsidiaries incorporated in Barbados, West Indies. It has offices in
Barbados, West Indies, London, England and Toronto, Canada.
The Definitive Stock Exchange Agreement provides, in part, that the present
officers and members of the Board of Directors, excluding Curtis Hunsinger, will
all resign. Just before resignation, the Board of Directors will appoint Stephen
Stonhill as their successor and as President and Chief Executive Officer.
The acquisition of Strategy by the Company is subject to the approval of the
Supervisor of Insurance for Barbados, West Indies. The Company does not
anticipate that approval will be withheld.
3
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following financial statements omitted from the Current Report on
Form 8-K dated June 14, 2004 and filed June 18, 2004, in reliance on
Item 7(a)(4) of Form 8-K are filed herewith:
o The audited financial statements of Strategy Holding Company
Limited and Subsidiary together with the report of Samuel
Klein and Company are included herein.
(b) PROFORMA FINANCIAL INFORMATION
The following pro forma financial information omitted from the Current
Report on Form 8-K dated June 14, 2004 and filed June 18, 2004, in
reliance on Item 7(b)(2) of Form 8-K is filed herewith:
o Pro Forma Combining Balance Sheet as of April 30, 2004.
o Pro Forma Combining Statement of Operations for the year ended
April 30, 2004.
(c) EXHIBITS
Exhibit
Number Description of Exhibit
23.1 Consent of Samuel Klein and Company
4
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (JANUARY 1, 2004) TO FEBRUARY 15, 2004
5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Strategy Holding Company Limited and Subsidiary
Chancery House
High Street
Bridgetown, Barbados, West Indies
We have audited the accompanying consolidated balance sheet of Strategy Holding
Company Limited and Subsidiary (A Development Stage Company incorporated in
Barbados) at February 15, 2004 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the period from
inception (January 1, 2004) to February 15, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audit.
We conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States of America which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Strategy
Holding Company Limited and Subsidiary at February 15, 2004, and the results of
its operations and its cash flows for the period from inception (January 1,
2004) to February 15, 2004 in conformity with accounting principles generally
accepted in the United States of America.
/S/ SAMUEL KLEIN AND COMPANY
Newark, New Jersey
February 27, 2004
6
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
FEBRUARY 15, 2004
ASSETS
Current Assets:
Cash and cash equivalents $ 350,000
--------------
Mortgage notes receivable - held to maturity 104,231,610
--------------
Total Assets $ 104,581,610
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accrued preferred dividends payable $ 1,302,895
Accrued liabilities 25,000
--------------
Total Current Liabilities 1,327,895
--------------
Total Liabilities 1,327,895
--------------
Stockholders' Equity:
Common stock (no par value, unlimited shares
authorized 1,000 shares issued and outstanding) 350,000
10% Cumulative Class A Preferred stock ($.001 stated value,
unlimited shares authorized, 47,670 issued and outstanding) 47,670,084
10% Cumulative Class B Preferred stock ($.001 stated value,
unlimited shares authorized, 56,562 issued and outstanding) 56,561,526
Deficit accumulated during development stage (1,327,895)
--------------
Total Stockholders' Equity 103,253,715
--------------
Total Liabilities and Stockholders' Equity $ 104,581,610
==============
- --------------------
The accompanying notes are an integral part of these consolidated financial
statements.
7
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 1, 2004) TO FEBRUARY 15, 2004
Revenues $ --
------------
Total Revenues --
------------
Expenses 25,000
------------
Total Expenses 25,000
------------
Net Loss $ (25,000)
============
- --------------------
The accompanying notes are an integral part of these consolidated financial
statements.
9
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 1, 2004) TO FEBRUARY 15, 2004
Preferred Stock
----------------------------- Deficit
Common Stock Number of Accumulated
------------------------- Shares During the Total
Number of $.001 Development Stockholders'
Shares Amount Stated Value Amount Stage Equity
---------- ------------ ------------- ------------- ------------- -------------
Balances January 1, 2004 (Inception) - $ -- -- $ -- $ -- $ --
Issuance of Common Stock 1,000 350,000 -- -- -- 350,000
Issuance of Class A Preferred Stock -- -- 47,670 47,670,084 -- 47,670,084
Issuance of Class B Preferred Stock -- -- 56,562 56,561,526 -- 56,561,526
Net Loss for the Period -- -- -- -- (25,000) (25,000)
Dividends Payable on Preferred Stock - -- -- -- (1,302,895) (1,302,895)
Net Income (Loss) for the Period from
Inception (January 1, 2004) to
February 15, 2004 -- -- -- -- -- --
---------- ------------ ------------- ------------- ------------- -------------
Balances February 15, 2004 1,000 $ 350,000 104,232 $ 104,231,610 $ (1,327,895) $ 103,253,715
========== ============ ============= ============= ============= =============
- --------------------
The accompanying notes are an integral part of these consolidated financial statements.
10
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 1, 2004) TO FEBRUARY 15, 2004
Cash Flows Provided by Operating Activities:
Net loss $ (25,000)
Adjustments to reconcile net income to net
cash provided by operations:
Dividends payable on preferred stock (1,302,895)
Changes in operating assets and liabilities:
Increase in accrued expenses 25,000
Increase in accrued dividends payable 1,302,895
--------------
Net cash flows provided by operating activities --
--------------
Cash Flow from Investment Activities --
--------------
Cash Flows Provided by Financing Activities:
Proceeds from issuance of common shares 350,000
--------------
Net cash flows provided by financing activities 350,000
--------------
Net Increase in Cash 350,000
Cash and Cash Equivalents, Inception January 1, 2004 --
--------------
Cash and Cash Equivalents, February 15, 2004 $ 350,000
==============
Supplemental Disclosure of Noncash Investing and
Financing Activities:
Issuances of 10% cumulative preferred stock for
consideration of mortgage notes receivable $ 104,231,610
=============
- --------------------
The accompanying notes are an integral part of these consolidated financial
statements.
11
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
1. THE COMPANY AND NATURE OF OPERATIONS
Strategy Holding Company Limited, a Barbados incorporated company registered
under the Barbados Exempt Insurance Act as a holding company along with its
wholly-owned subsidiary, Strategy Insurance Limited, a Development Stage Company
incorporated in Barbados for the purpose of doing business as a licensed
multi-line insurer. Strategy Holding Company Limited and Strategy Insurance
Limited are hereafter referred to as the "Company". The Company plans to conduct
business as a direct writer as well as a reinsurer of worldwide property,
casualty and specialty risks.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and all
amounts are stated in U.S. dollars.
(b) USE OF ESTIMATES
The preparation of financial statements in accordance with accounting principals
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Management periodically reviews its estimates and
assumptions including particularly the adequacy of reserves for unpaid losses
and loss adjustment expenses, reinsurance allowance for doubtful accounts and
litigation liabilities, as well as deferred policy acquisition costs. Actual
results may differ from the estimates and assumptions used in preparing the
financial statements.
(c) FINANCIAL INSTRUMENTS
The Company plans to account for its investments in accordance with Financial
Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115) or in accordance with
Statement No. 107, "Disclosures About Fair Value of Financial Instruments" (SFAS
107). This statement, as amended by Statement No. 133 (SFAS 133), requires
disclosures of both the fair value and the basis of estimating the fair value.
SFAS No. 115 requires that certain debt and equity securities be classified into
one of three categories: held-to-maturity, available-for-sale, or trading
securities. Investments in debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified as held-to-maturity and
reported at amortized cost in the statement of financial position. Securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading securities and reported at fair value. Trading
generally reflects active and frequent buying and selling, and trading
securities are generally used to generate profit on short-term differences in
price. Investments not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities and reported at fair
value.
12
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) FINANCIAL INSTRUMENTS (Continued)
SFAS No. 107 defines noncurrent receivables as financial instruments and
requires disclosure of fair value information about financial instruments,
whether or not recognized on the face of the balance sheet, for which it is
practical to estimate that value. SFAS 107 defines fair value as the quoted
market prices for those instruments that are actively traded in financial
markets. In cases where quoted market prices are not available, fair values are
estimated using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available market
information and judgments about the financial instrument, such as estimates of
timing and amount of expected future cash flows. Such estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument, nor do they
consider the tax impact of the realization of unrealized gains or losses. In
many cases, the fair value estimates cannot be substantiated by comparison to
independent markets, nor can the disclosed value be realized in immediate
settlement of the instrument.
(d) CASH EQUIVALENTS
The Company considers all investments with original maturities of 90 days or
less to be cash equivalents.
(e) PREMIUM INCOME
Income on premiums will be recognized as written upon inception of the policy.
For multi-year policies written which are payable in annual installments, due to
the ability of the insured/reinsured to commute or cancel coverage within the
term of the policy, only the annual premium will be included as written at
policy inception. The remaining annual premiums included as written at each
successive anniversary date within the multi-year term.
Premiums written will be primarily earned on a daily pro-rata basis over the
terms of the policies to which they relate. Accordingly, unearned premiums will
represent the portion of premiums written which is applicable to the unexpired
portion of the policies in force.
Reinsurance premiums assumed will be estimated based on information provided by
ceding companies. The information used in establishing these estimates is
reviewed and subsequent adjustments are recorded in the period in which they are
determined. These premiums are earned over the terms of the related reinsurance
contracts.
13
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) POLICY ACQUISITION COSTS
Policy acquisition costs will consist of commissions, premium taxes,
underwriting and other costs that vary with and are primarily related to the
production of premiums. Acquisition costs are deferred and amortized over the
period in which the related premiums are earned. To the extent that future
policy revenues on existing policies are not adequate to cover related costs and
expenses, deferred policy acquisition costs will be charged to earnings.
The Company will consider anticipated investment income in determining whether a
premium deficiency exists.
(g) UNPAID LOSSES AND LOSS EXPENSES
Unpaid losses and loss expenses will consist of a provision for outstanding
losses and loss expenses and a provision for losses incurred but not reported
(IBNR). As with premiums, current year losses will be as reported. Provisions
for outstanding losses and loss expenses are valued on claim adjusters'
evaluations, with additional provisions made where the ceding company's
management considers necessary. The IBNR component of the reported losses is
established by ceding company management in consultation with its actuaries
based on a combination of company and industry data.
A liability will be established for the estimated unpaid losses and loss
expenses of the Company under the terms of, and with respect to, its policies
and agreements.
The process of establishing reserves is a complex and imprecise process,
requiring the use of informed estimates and judgments. Estimates and judgments
may be revised as additional experience and other data become available and are
reviewed, as new or improved methodologies are developed or as current laws
change. Any such revisions could result in future changes in estimates of losses
or reinsurance recoverable, and would be reflected in the Company's results of
operations in the period in which the estimates are changed.
Reported losses and loss expenses on direct business will be valued on claim
adjusters' evaluation, with additional provisions made where management
considers these necessary. The IBNR provision is primarily established by
management in conjunction with the consulting actuaries based on the application
of a combination of company and industry data. Any difference between the
estimated amounts and the actual settlements will be reflected in the results of
the year in which they are determined.
Future developments may result in losses and loss expenses significantly greater
or less than the reserve provided.
14
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) PROPERTY AND EQUIPMENT
Property and equipment will be stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of property and equipment are
calculated using the straight-line method over the estimated useful lives.
(i) COMPREHENSIVE INCOME
Comprehensive income represents all changes in equity of an enterprise that
result from recognized transactions and other economic events during the period.
Other comprehensive income refers to revenues, expenses, gains and losses that,
under accounting principles generally accepted in the United States of America,
are included in comprehensive income but excluded from net income, such as
unrealized gains or losses on certain investments in fixed maturities and equity
securities.
(j) TRANSLATION OF FOREIGN CURRENCIES
Under FAS 52, "Foreign Currency Translation", monetary foreign currency assets
and liabilities are translated into U.S. dollars using period end rates of
exchange. Non-monetary assets and liabilities, as well as statement of
operations amounts, expressed in foreign currencies are translated using average
exchange rates. Gains and losses resulting from foreign currency translations
are recorded in current income.
(k) RISKS AND UNCERTAINTIES
Cash and investment securities are exposed to various risks, such as interest
rate, market, and credit. Due to the level of risk associated with investment
securities and the level of uncertainty related to changes in the value of
investment securities, it is at least reasonably possible that changes in risks
in the near term would materially affect the amounts reported in the financial
statements.
(l) NEW ACCOUNTING STANDARDS
In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" (SFAS 150). The statement requires an issuer to classify
a financial instrument as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer. These
obligations include, but are not limited to, mandatorily redeemable stock,
obligations to repurchase company shares and other obligations payable in
company stock. The Company has completed its assessment of the effect of the
pronouncement and has determined that it will not have an impact on its
financial condition, results of operations or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 is generally
effective for contracts entered into or modified after June 30, 2003. This
amendment, among other things, further clarifies several implementation issues
related to SFAS 133, as amended. The adoption of SFAS 149 did not have an impact
on the Company's financial condition, results of operations or cash flows.
15
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) NEW ACCOUNTING STANDARDS (CONTINUED)
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." This
interpretation provides guidance on the identification and consolidation of
variable interest entities, whereby consolidation is achieved through means
other than through control. FIN 46 did not have an impact on the Company's
financial condition, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (SFAS 148), an amendment of FASB
Statement No. 123. SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
has not elected a voluntary change in accounting to the fair value based method,
and accordingly, the adoption of SFAS 148 did not have a significant impact on
the Company's results of operations or financial position.
3. MORTGAGE NOTES RECEIVABLE
In early February 2004 the Company received, as consideration for their issuance
of both the Class A and Class B 10% cumulative preferred stock, mortgage notes
receivable totaling $104,231,610. The Company has classified the mortgage notes
receivable as noncurrent and they have been recorded at cost in accordance with
the Company's intention to hold these notes to maturity. The aggregate fair
value of the mortgage notes receivable approximates its carrying amount because
the transaction in which the notes were acquired was recent and based on market
conditions. The notes receivable are interest receivable only beginning April 1,
2004 with principal receivable at maturity on April 1, 2014. The notes are
collateralized by real estate having an estimated fair market value equal to the
carrying amount of the mortgage notes receivable.
4. REINSURANCE
The Company intends to purchase reinsurance for the purpose of minimizing their
net loss.
16
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
5. TAXATION
Pursuant to the Exempt Insurance Act (the "Act") of the Laws of Barbados, the
profits and gains of a licensee derived from exempt insurance business conducted
in Barbados are exempt from income tax:
(a) for the first 15 financial years of the licensee, including the year in
which its license was issued
(b) thereafter at the rate of 2 percent of the first $250,000 of taxable
income and at the rate of zero per cent in respect of all other taxable
income in excess of $250,000.
6. REGULATORY REQUIREMENTS
A license may be issued to a company under this Act when that company has a
minimum paid-up capital of $250,000.
When a company that has been licensed proposes to begin, and in any case not
later than 7 days after beginning, to engage in exempt insurance business, it
shall so notify the Supervisor, and shall certify to his satisfaction that it
has minimum paid-up capital or contributed reserves.
7. STOCKHOLDERS' EQUITY
Under the Companies Act of Barbados, the Company is authorized to issue:
(i) an unlimited number of shares of a class designated Common
shares
(ii) an unlimited number of redeemable preference shares of a class
designated Class A Redeemable Preference Shares, Series 1
(iii) an unlimited number of redeemable preference of a class
designated Class B Redeemable Preference Shares, Series 1
(vi) an unlimited number of redeemable preference shares of a class
designated Class C Redeemable Preference Shares, Series 1
(v) an unlimited number of redeemable preference shares of a class
designated Class D Redeemable Preference Shares, Series 1.
17
STRATEGY HOLDING COMPANY LIMITED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 15, 2004
(Continued)
7. STOCKHOLDERS' EQUITY (Continued)
COMMON STOCK
On January 30, 2004 the Company issued 1,000 shares of its Common Stock for
$350,000.
PREFERRED STOCK
On February 4, 2004 the Company issued non-voting 10% Cumulative Class A
Preferred Stock Series 1; having a redemption value of approximately FORTY-SEVEN
MILLION SIX HUNDRED AND SEVENTY THOUSAND AND EIGHTY-FOUR ($47,670,084.00) and
also issued non-voting 10% Cumulative Class B Preferred Stock of the Company
having a redemption value of approximately FIFTY-SIX MILLION FIVE HUNDRED AND
SIXTY ONE THOUSAND FIVE HUNDRED AND TWENTY-SIX ($56,561,526.00), and received
mortgage notes receivable totaling approximately $104,231,610 in consideration
for these issuances. The preferred stockholders' agreement calls for dividends
to begin to accrue as of January 1, 2004.
8. SUBSEQUENT EVENTS (Unaudited)
On June 14, 2004, the Company completed an Agreement and plan of Reorganization
("The Definitive Stock Exchange Agreement") with CI Sells Cars, Inc. ("CI") a
Texas incorporated public company.
The Definitive Stock Exchange Agreement provided for the purchase and retirement
of 25,827,000 shares of CI's common stock by the Company and the forward split
of the remaining 1,105,000 outstanding shares of CI's common stock into
15,470,000 shares and the issuance of 45,100,000 shares of CI's common stock to
the Company's shareholders.
Under the terms of the transaction, CI Sells issued 45,100,000 shares of its
common stock in exchange for 100% of the Company's outstanding shares. After
taking full effect of the share exchange agreement, as well as a 14 to 1 forward
stock split of CI shares effective as of June 3, 2004, the Company now has
approximately 61,500,000 shares outstanding.
18
CI SELL CARS, INC.
PRO FORMA COMBINING BALANCE SHEET
AS OF APRIL 30, 2004
Strategy Pro Forma
Historical Holding Adjustments Combined
ASSETS
Cash and cash equivalents $ 14,678 $ 350,000 $ 364,678
Deposits 1,000 - 1,000
------------ ---------------- --------------- ----------------
Total current assets 15,678 350,000 - 365,678
Mortgage notes receivable - held
to maturity - 104,231,610 104,231,610
Investment in subsidiaries (c) 350,000 -
(d) (350,000)
------------ ---------------- --------------- ----------------
Total assets $ 15,678 $104,581,610 $ - $104,597,288
============ ================ =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 123 $ - $ 123
Note payable to related party 325 - 325
Accrued preferred dividends 1,302,895 1,302,895
Accrued liabilities - 25,000 25,000
------------ ---------------- --------------- ----------------
Total liabilities 448 1,327,895 - 1,328,343
Minority interest - subsidiary preferred stock (e) 104,231,610 104,231,610
STOCKHOLDERS' EQUITY
10% Cumulative Class A Preferred Stock ($.001
stated value, unlimited shares authorized,
47,670 issued and outstanding) - 47,670,084 (e) (47,670,084) -
10% Cumulative Class B Preferred Stock ($.001
stated value, unlimited shares authorized,
56,562 issued and outstanding) - 56,561,526 (e) (56,561,526) -
Common stock ($.001 par value, 100,000,000 shares
authorized, 26,932,000 shares issued and out-
standing at April 30, 2004 and 61,470,000 shares
issued and outstanding at June 14, 2004) 26,932 350,000 (a) (25,827) 61,470
(b) 14,365
(c) 46,000
(d) (350,000)
Additional paid in capital 91,268 - (a) 25,827 303,760
(b) (14,365)
(c) 201,030
Retained deficit (102,970) (1,327,895) (c) 102,970 (1,327,895)
------------ ---------------- --------------- ----------------
Total stockholders' equity 15,230 103,253,715 (104,231,610) (962,665)
------------ ---------------- --------------- ----------------
Total liabilities and stockholders'
equity $ 15,678 $104,581,610 $ - $104,597,288
============ ================ =============== ================
19
CI SELL CARS, INC.
PRO FORMA COMBINING BALANCE SHEET
AS OF APRIL 30, 2004
Pro Forma Adjusting Entries
a)
Common stock 25,827
Additional paid in capital 25,827
Retire 25,827,000 common shares
(b)
Additional paid in capital 14,365
Common stock 14,365
Forward-split common shares
(c)
Investment in subsidiary 350,000
Common stock 46,000
Additional paid in capital 201,030
Retained earnings 102,970
Record acquisition of Strategy Holding and subsidiaries
(d)
Common stock 350,000
Investment in subsidiaries 350,000
Eliminate investment in subsidiaries
(e)
Preferred stock - Series A 47,670,084
Preferred stock - Series B 56,561,526
Minority interest 104,231,610
Minority interest in subsidiary preferred stock
20
CI SELL CARS, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2004
STRATEGY PRO FORMA PRO FORMA
Historical Holding Adjustments Consolidated
Sales $ 5,000 $ - $ 5,000
Cost of goods sold 5,065 5,065
------------- -------------- ------------- ---------------
Gross loss (65) - - (65)
Administrative expense 34,301 25,000 - 59,301
------------- -------------- ------------- ---------------
Net loss $ (34,366) $ (25,000) $ - $ (59,366)
============= ============== ============= ===============
Basic and diluted loss attributable
to common shareholders:
Net loss $ (34,366) $ (25,000) $ (59,366)
Preferred dividends - (1,302,895) (1,302,895)
------------- -------------- ------------- ---------------
$ (34,366) $ (1,327,895) $ - $ (1,362,261)
============= ============== ============= ===============
Basic and diluted loss per common share:
Net loss $ (0.00)
Preferred dividends (0.02)
---------------
$ (0.02)
===============
Weighted average shares outstanding 61,470,000
===============
21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CI SELL CARS INC.
Date: August 30, 2004 By: /s/ Stephen Stonhill
-----------------------------------
Stephen Stonhill,
President and Chief Executive Officer