As filed with the Securities and Exchange Commission on September __, 2001
Registration No. 333-45780
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 2)
CREST VIEW, INC.
(Name of small business issuer in its charter)
Nevada 7000 88-0462761
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
1700 West Horizon Ridge Parkway - Suite 202, Henderson, Nevada 89012
Telephone: (702) 614-1750; Telecopier: (702) 614-1790
(Address and telephone number of principal executive offices)
Johnny R. Thomas, Chief Executive Officer
Crest View, Inc.
1700 West Horizon Ridge Parkway - Suite 202
Henderson, Nevada 89012
Telephone: (702) 614-1750
Telecopier: (702) 614-1790
(Name, address and telephone number of agent for service)
Copies to:
Elliot H. Lutzker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158-0125
Telephone: (212) 687-3860
Telecopier: (212) 949-7052
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Approximate Date of Proposed Sale to the Public: As soon as practicable after
the effective date of this registration statement.
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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]
CALCULATION OF REGISTRATION FEE
====================================== ======================= ======================= ====================== ======================
Proposed maximum Proposed maximum
Title of Each class of securities to Amount to be offering price aggregate offering Amount of
be registered registered per unit (1) price (1) registration fee
-------------------------------------- ----------------------- ----------------------- ---------------------- ----------------------
Units, each consisting of one share of
common stock, par value $.001 per
share, and one-third of a class A
redeemable warrant 2,100,000(2) $.50 $1,050,000.00 $262.50
-------------------------------------- ----------------------- ----------------------- ---------------------- ----------------------
Common stock underlying the class A
warrants included in the units 700,000(3) $6.00(4) $4,200,000.00(4) $1,050.00(4)
-------------------------------------- ----------------------- ----------------------- ---------------------- ----------------------
Class B redeemable warrants issuable
upon exercise of the class A warrants 700,000(5) (6) (6) (6)
-------------------------------------- ----------------------- ----------------------- ---------------------- ----------------------
Common stock underlying the class B
warrants 700,000(3) $9.00(4) $6,300,000.00(4) $1,575.00(4)
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Total........................................................................................................ $2,887.50(7)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Securities Act Rule 457(a).
(2) The 2,100,000 units are comprised of (a) 2,100,000 shares of the common
stock, par value $.001 per share, and (b) 700,000 Class A redeemable
warrants. The units are being offered on a self-underwritten, "best
efforts," 1,200,000 units minimum and 2,100,000 maximum basis.
(3) There are also being registered such indeterminable number of additional
shares of common stock as may become issuable in accordance with the
anti-dilution provisions contained in the warrants, pursuant to Securities
Act Rule 416(a).
(4) The registration fee has been calculated on the basis of the price at which
these warrants may be exercised, pursuant to Securities Act Rule 457(g).
(5) There are also being registered such indeterminable number of additional
class B warrants as may become issuable in accordance with the
anti-dilution provisions contained in the class A warrants, pursuant to
Securities Act Rule 416(a).
(6) The purchase price of the class B warrants is included in the exercise
price of the class A warrants.
(7) A fee of $4,771.00 was paid with the initial filing of this registration
statement on September 14, 2000.
--------------------------------------------
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 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 SECTION 8(A), MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - September __, 2001
PROSPECTUS
CREST VIEW, INC.
2,100,000 Units
consisting of
2,100,000 Shares of Common Stock and 700,00 Class A Redeemable Warrants
This is our initial public offering. We are offering 2.1 million units at a
price of $0.50 per unit. The units are being offered on a self underwritten,
best efforts, 1.2 million units minimum and 2.1 million units maximum basis.
Each unit consists of one share of our common stock and one-third of one class A
redeemable warrant. The minimum purchase required by any one investor is 120
units and the number of units purchased must be in multiples of three. Each
class A warrant entitles its holder to purchase one share of our common stock
and one class B redeemable warrant. The class A warrants are exercisable for
four years from _____________, 2001, subject to earlier redemption, at an
exercise price of $6.00 per share. Each class B warrant entitles its holder to
purchase one share of our common stock. The class B warrants are exercisable for
five years from ____________, 2001, subject to earlier redemption, at an
exercise price of $9.00 per share.
If the minimum 1.2 million units are sold on or before __________, 2001 (90 days
from the date of this prospectus, unless we extend the offering for up to an
additional 90 days), the proceeds from the sale of such units will be
immediately released to us. If 1.2 million units are not sold by such date, all
subscription funds will be returned to the persons who subscribed to the
offering, with interest, if any. If we reach the minimum offering threshold of
1.2 million units, we will continue to offer units until the maximum 2.1 million
units are sold, the offering period ends, or the offering is terminated,
whichever first occurs. All of the cash proceeds from the offering of the units
will be promptly deposited in an escrow account at Southwest Escrow Company,
401 North Buffalo, Suite 205, Las Vegas, Nevada 89145.
Prior to this offering there has been no public market for the units, shares or
warrants. We only recently commenced operations and do not expect to generate
revenues for the immediate future.
These securities involve a high degree of risk and immediate substantial
dilution and should be purchased only by persons who can afford the loss of
their entire investment. See "Risk Factors" on page 6.
Throughout this prospectus, the terms "we," "our" and "our company" refer to
Crest View Inc. and, unless the context indicates otherwise, our subsidiaries on
a consolidated basis.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September __, 2001
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................1
The Company...........................................................1
Corporate Information.................................................1
The Offering..........................................................1
Summary Financial Information.........................................3
RISK FACTORS...................................................................4
Risks Relating to Our Financial Condition.............................4
Risks Relating to Our Business Prospects..............................6
Risks Relating to Our Company's Operations............................8
Risks Relating to an Investment in Our Securities....................10
FORWARD-LOOKING STATEMENTS....................................................12
DILUTION AND OTHER COMPARATIVE PER SHARE DATA.................................13
DIVIDEND POLICY...............................................................14
CAPITALIZATION................................................................15
USE OF PROCEEDS...............................................................16
PLAN OF OPERATION.............................................................18
Liquidity and Capital Resources......................................18
PROPOSED BUSINESS.............................................................20
Business Plans and Activities........................................20
Business Model.......................................................26
Competition..........................................................28
Seasonality..........................................................28
Employees............................................................28
Governmental Regulation..............................................29
Property ............................................................29
Legal Proceedings....................................................30
MANAGEMENT....................................................................30
Executive Officers and Directors.....................................30
Executive Compensation...............................................31
Limitation on Liability and Indemnification Matters..................31
Certain Relationships and Related Transactions.......................32
PRINCIPAL STOCKHOLDERS........................................................34
ii
DESCRIPTION OF SECURITIES.....................................................37
General ............................................................37
Units ............................................................37
Common Stock.........................................................37
Class A Redeemable Warrants..........................................37
Class B Redeemable Warrants..........................................39
Serial Preferred Stock...............................................40
State Blue Sky Information...........................................40
Transfer and Warrant Agent...........................................41
PLAN OF DISTRIBUTION..........................................................42
CERTAIN MARKET INFORMATION....................................................43
SHARES ELIGIBLE FOR FUTURE SALE...............................................43
ADDITIONAL INFORMATION........................................................44
LEGAL MATTERS.................................................................45
EXPERTS .....................................................................45
INDEX TO FINANCIAL STATEMENTS.................................................46
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You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information that is different. This
prospectus is intended to offer no securities other than the common stock and
the warrants. This prospectus may be used only where it is legal to offer and
sell these securities. The information in this prospectus may be accurate on the
date of this document only.
--------------------------------------------
iii
PROSPECTUS SUMMARY
This is a summary of the information contained in this prospectus. You should
carefully read the entire prospectus, including the "Risk Factors" section, to
fully understand our company's proposed business operations, the offering of our
securities being made under this prospectus and the risks associated with an
investment in our securities.
The Company
We intend to develop a vacation and tourist destination, featuring an
"eco-resort" and cultural exhibits, on the Honduran island of Guanaja. Our
intended business operations are anticipated to include a resort complex,
featuring an environmentally-friendly spiritual and wellness center, restaurant,
traditional fishing expeditions, deep sea diving and scuba diving. We also
intend to market a line of medicinal herbs and natural healing products, grown
and developed on our properties in Guanaja, as well as complementary third party
products, and to investigate and possibly develop an archeological site.
Our anticipated business operations will revolve around a central theme
involving the harmonious blending of:
o ancient indigenous history and culture, including that of the Mayans,
o local history and culture,
o natural products for healing and spiritual fulfillment, and
o the beauty and natural resources of the island of Guanaja.
Corporate Information
Our company was formed on January 20, 2000, under the laws of the State of
Nevada. We presently are a development stage company. Our executive offices are
located at 1700 West Horizon Ridge Parkway - Suite 202, Henderson, Nevada 89012.
Our telephone number is (702) 614-1750.
The Offering
We are offering the units on a self underwritten, best efforts, 1.2 million unit
minimum, 2.1 million unit maximum basis. If the minimum 1.2 million units are
sold on or before ______________, 2001 (90 days from the date of this
prospectus, unless we extend the offering upon written notice for up to an
additional 90 days), the proceeds from the sale of such units will be released
to us. If 1.2 million units are not received by such date, all subscription
funds will be immediately returned to the persons who subscribed to the
offering, with interest, if any. Lenders who financed our acquisition of real
property in Honduras will be given the opportunity to purchase units offered
under this prospectus through the reduction or cancellation of our debt to them,
rather than paying cash for their units. In such event, the cash proceeds which
we receive from this offering will be reduced by an amount equal to the debt so
reduced or cancelled. As of the date of this prospectus, we have not solicited
such purchases of units by our lenders and we
1
do not know if any of our lenders will purchase units through such reductions or
cancellations of our obligations to them.
If the minimum number of units are sold, we will continue to offer units until
the maximum 2.1 million units are sold, the offering period ends, or the
offering is terminated, whichever first occurs.
The units will be sold by our executive officers who will not receive
commissions and who will be registered as sales representatives where required
under state securities laws. We may also retain NASD member firms to sell units
and pay them customary sales commissions subject to our first filing this
prospectus with the NASD. A market may never develop for the shares. We have
arbitrarily set the offering price of the units, warrants and shares of common
stock.
Unit offering price............................ $0.50
Securities offered............................. 2,100,000 units. Each unit consists of
one share of our common stock and one-
third of one class A warrant. Each class
A warrant entitles the holder to purchase
one share of common stock and one
class B warrant. Each class B warrant
entitles the holder to purchase one share
of common stock.
Shares of common stock outstanding as of the
date of this prospectus............... 5,828,924
Shares of common stock outstanding after the:
maximum offering...................... 7,928,924
minimum offering...................... 7,028,924
Class A warrants outstanding as of the
date of this prospectus............... 1,800,000
Class A warrants outstanding after the:
maximum offering ..................... 2,500,000
minimum offering ..................... 2,200,000
Use of Proceeds................................ To finance the purchase and/or
development of real property in
Honduras or repayment of affiliated
indebtedness and working capital
purposes.
Unless the context indicates to the contrary, all reference to shares of our
common stock do not include shares issuable upon exercise of any outstanding
options or warrants.
2
Summary Financial Information
The summary financial information set forth below is derived from the more
detailed audited financial statements appearing elsewhere in this prospectus.
This information should be read in conjunction with such financial statements,
including the notes to such financial statements, and the "Use of Proceeds" and
"Plan of Operations" sections of this prospectus.
Balance Sheet Data:
The pro forma information included below gives effect to:
o the sale of 345,600 shares of our common stock for non-cash consideration
valued at $172,800 in July 2001,
o our borrowings of $473,000 in long term indebtedness in July 2001, and
o our purchases of real estate in Guanaja, at a cost of approximately
$470,000.
The as adjusted information included below assumes:
o the pro forma adjustments as set forth above,
o the holders of all of our $473,000 principal amount of debt incurred in
connection with our real estate acquisitions, and accrued and unpaid
interest on such debt as of August 31, 2001, will elect to purchase units
being offered under this prospectus through the cancellation of such debt
and accrued interest, although we have no agreements, understandings or
commitments with respect to such elections,
o the sale of 1.2 million units in the minimum offering, resulting in net
proceeds of $560,000, after the payment of offering expenses, and cash
proceeds of $87,000; and the sale of 2.1 million units in the maximum
offering, resulting in net proceeds of $1,010,000, after the payment of
offering expenses, and cash proceeds of $537,000.
As of June 30, 2001
-------------------------------------------------
As Adjusted
Actual Pro Forma Minimum Maximum
---------- ----------- ---------- -----------
Cash and cash equivalents.. $ 31,841 $ 34,841 $ 121,841 $ 571,841
Total assets............... 31,841 677,641 764,641 1,214,641
Total liabilities.......... 7,000 480,000 7,000 7,000
Stockholders' equity....... 24,841 197,641 757,641 1,207,641
Statements of Operations Data:
Cumulative During the
Development Stage For the From Inception
(January 20, 2000 to Year Ended (January 20, 2000)
June 30, 2001) June 30, 2001 to June 30, 2000
--------------------- ------------- ------------------
Revenues................. $ -- $ -- $ --
Total costs and expenses. 22,221 22,121 100
Net loss................. $(22,221) $(22,121) $(100)
3
RISK FACTORS
An investment in our securities is highly speculative and subject to numerous
and substantial risks. These risks include those set forth below and elsewhere
in this prospectus. You should not purchase any of our securities unless you can
afford to lose your entire investment. Readers are encouraged to review these
risks carefully before making any investment decision.
Risks Relating to Our Financial Condition
We are a recently organized and have no operating history. We were
organized on January 20, 2000. Our efforts through June 30, 2001, were
limited primarily to organizational activities. Accordingly, we do not have
any operating history or experience on which you may rely in making an
investment decision. We also anticipate that we will not generate any
revenues for the immediate future. Accordingly, we are considered to be a
development stage company that is subject to all of the business risks
associated with a new business. Therefore, the likelihood of our success
must be considered in light of the expenses, difficulties and delays
frequently encountered in connection with the formation and initial
operations of a new and unproven business. There can be no assurance
regarding when or whether we will be able to implement our business plan,
generate revenues and ultimately become profitable.
We have extremely limited resources and will have limited resources after
this offering. We have relied on loans from friends and family members of
our management to fund a significant portion of our activities to date. We
do not expect to receive any additional loans from these lenders after
completion of the offering made under this prospectus.
There is a need for additional financing. We have very limited funds and
such funds are not adequate to fully implement our business plan.
Accordingly, our ultimate success may depend on our ability to raise
additional capital. We have not investigated the availability, source or
terms that might govern the acquisition of additional financing. When
additional financing is needed, there is no assurance that funds will be
available from any source or, if available, that the funds can be obtained
on terms acceptable to us. If not available, our proposed operations would
be severely limited and commencement of business operations may be
impossible.
There is no limitation on the amount of debt we may incur. As of August 31,
2001, we had approximately $473,000 of debt which we incurred in connection
with our acquisition of real estate in Honduras. Although we intend to
follow a conservative debt policy, there is no contractual limit to the
amount of debt we can take on. If our policy were to change or be
eliminated, we could become more highly leveraged, which could adversely
affect our ability to meet our obligations and risk default.
Hotel properties require continuing renovation and capital improvements,
including periodic refurbishment and replacement of furniture, fixtures and
equipment, to
4
remain competitive. While we intend to maintain a capital expenditures
account to fund such renovations and improvements, required expenditures
could exceed our expectations. The funding of this capital expenditures
account will, in turn, be dependent on our revenues and cash flow. In
addition, renovations and other capital improvements entail certain risks,
including environmental risks, construction cost overruns and delays, and
unanticipated downturns in demand or unanticipated emergence of competition
in the affected market.
We are subject to risks associated with uninsured and underinsured losses.
We intend to maintain comprehensive insurance on each of our properties,
including liability, employee dishonesty and building casualty coverage. We
anticipate the types and amounts of coverage, including coverage limits and
deductibility provisions, to be customary for similar properties. However,
there are certain types of losses, generally of a catastrophic nature, such
as hurricanes, earthquakes and floods, that may be uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose our investment in the affected
operations, as well as the anticipated future revenues from those
operations, while remaining obligated for any mortgage indebtedness or
other financial obligations related to those operations.
We will have risks associated with real estate financing. We expect to
finance some, if not all, of our real estate acquisitions and construction
costs through debt financing. In doing so, we will be subject to the risks
normally associated with debt financing, including the risks that:
o our cash flow will be insufficient to meet required payments of
principal and interest,
o we will not be able to refinance indebtedness at maturity,
o that the terms of any such refinancing will not be as favorable as the
terms of the existing indebtedness,
o that necessary capital expenditures for such purposes as renovations
and other improvements cannot be financed on favorable terms, if at
all, due to the terms of the debt financing,
o the potential for a forced sale of properties at potentially
distressed prices, and
o an increase in interest rates would increase the amount payable under
variable rate debt.
If we were unable to secure refinancing of any debt financing on acceptable
terms, we might be forced to dispose of properties on disadvantageous
terms. If we incur variable rate mortgage indebtedness, an increase in
interest rates could have an adverse effect on us. In addition, if a
property is mortgaged to secure payment of indebtedness and we are unable
to make mortgage payments, the property could be foreclosed upon by, or
otherwise transferred to, the mortgagee with a consequent loss of income
and asset value to us.
5
Risks Relating to Our Business Prospects
Development of our operations could be subject to delays. There are
numerous uncertainties surrounding our ability to develop a
tourist/vacation destination in Honduras where the eco-resort concept has
not been proven a successful business model. We currently anticipate that
the first phase of developing our operations will be completed in or about
the late fall of 2001, subject to obtaining required permits and financing,
and that the remainder of the development of Phase II of our operations
will occur in a number of phases through the spring of 2003. A failure by
us to successfully complete our development and construction activities may
have a material adverse effect on our results of operations.
We will have to compete for customers. Our resort hotel will compete for
customers with a wide range of lodging facilities offering full-service,
limited-service and all-suite lodging options to the public and with other
competitors offering other types of vacation destinations. We will compete
with other local tourist/vacation destinations, as well as with
tourist/vacation destinations located throughout the world. We face
significant competition from many of the world's established and recognized
lodging, hospitality, entertainment, vacation ownership companies. Many of
our competitors have much greater financial, marketing, personnel and other
resources than we do, which could adversely affect our ability to
successfully compete with these competitors.
Companies in the lodging and vacation industries compete based on factors
such as room rates, quality of accommodations, name recognition, service
levels, marketing programs, convenience of location and entertainment
value. We cannot assure you that our competitors will not significantly
expand or improve facilities, adjust prices or implement new or improved
marketing programs so that our proposed operations are adversely affected.
We will also compete with other alternative entertainment destinations in
attracting cruise ships and tour groups. We cannot assure you that we will
be successful in obtaining commitments from cruise ship lines and travel
and tour agencies to add our resort, wellness spa and cultural center to
their ports-of call or recommendation lists.
We may experience adverse effects or incur liability as a result of our
interests in real estate. We currently own property on the island of
Guanaja in Honduras and intend to acquire and/or lease additional property
on the island. We will therefore be subject to varying degrees of risk
generally related to owning and leasing real estate. These risks include:
o changes in national, regional and local economic conditions,
o changes in local real estate market conditions,
o costs of periodic renovation of our hotel and the periodic replacement
of furniture and equipment in order to stay competitive,
o costs of uninsured and underinsured casualty and other losses, such as
those arising from hurricanes or earthquakes,
o changes in interest rates and in the availability, costs and terms of
financing,
o the ongoing need for capital improvements,
6
o changes in real estate tax rates and other operating expenses,
o the impact of present or future environment legislation and compliance
with environmental laws, and
o adverse changes in zoning and other governmental laws and regulations.
Most of these matters are beyond our control. Additionally, real estate
investments are relatively illiquid, which means that our ability to vary
our business in response to changes in economic and other conditions may be
limited.
Our intended business will be in a regulated industry. The lodging industry
is subject to various government regulations, such as food service, health
and liquor license laws, and building and zoning requirements. We also will
be subject to laws governing our relationships with employees, including
minimum wage requirements, overtime, working conditions and work permit
requirements. We believe that our operations will be in substantial
compliance with these requirements. However, a determination that our
operations are not in compliance with any applicable law could result in
the imposition of fines, an award of damages to private litigants or
significant expense to us in bringing our operations into compliance.
Changes in the economy may adversely affect our operations. The United
States and much of the world is currently experiencing a general economic
downturn. These economic conditions could cause a decrease the demand for
vacation destinations. Any downturn in economic conditions or any price
increases related to the travel and tourism industry, such as higher
airfares, increased gasoline prices or decreased spending by consumers,
could depress discretionary consumer spending and have a material adverse
effect on our business. Any such economic conditions, including recession,
may also adversely affect the future availability of attractive financing
rates for us.
Our resort hotel property will be subject to all operating risks common to
the hotel industry. These risks include, among other things:
o competition from other hotels and resorts,
o reduction in demand for eco-resorts,
o changes in governmental regulation,
o overbuilding in the hotel industry and vacation destinations, which
may adversely affect occupancy and room rates,
o increases in operating costs attributable to inflation and other
factors, which increases have not consistently been, and may not
necessarily in the future be, offset by increased room rates,
o significant dependence on vacation travelers and tourism,
o the seasonality of hotel revenues, especially for resorts,
o the impact of weather on hotel occupancies,
o increases in construction costs,
o increases in energy costs and other expenses of travel, and
o adverse effects of general and local economic conditions.
7
The hotel industry is seasonal. Generally, hotel revenues are greater in
the second and third quarters than in the first and fourth quarters. This
general industry trend can be expected to cause quarterly fluctuations in
our revenues. The market price for our securities, if one exists, may be
subject to volatility as a result of such seasonality.
We will be dependent upon one hotel resort and wellness spa. Our operations
initially will be limited to an eco- resort and wellness spa. Significant
adverse changes in the operating results of any of these initial operations
from our anticipated results could have a material adverse effect on us and
impact our ability to fully implement our business plans.
We will incur significant development risks. While our policies with
respect to development of our resort hotel, wellness spa and cultural
center are intended to limit some of the risks associated with these
activities, any new project development is subject to a number of risks,
including that:
o temporary or construction financing may not be available on favorable
terms, if at all,
o construction costs may exceed original estimates,
o occupancy rates may not be at anticipated levels,
o permanent financing may not be available upon completion of
construction, and
o construction may not be completed on schedule.
We will be subject to property tax changes. We will be responsible for the
payment of real and personal property taxes and assessments. These taxes
and assessments may increase or decrease as property tax rates change and
as the properties are assessed or reassessed by taxing authorities.
We cannot assure you that we will be able to implement successfully our
business model. In order to implement our business model, we will be
required to:
o obtain, develop and adopt appropriate and adequate operating systems,
o attract and retain skilled executive, management and other personnel,
and
o successfully manage growth, including monitoring operations,
controlling costs and maintaining effective quality and service
controls.
Risks Relating to Our Company's Operations
There are potential conflicts of interest between us and our management
team. We borrowed money from certain friends and relatives of our
management to finance our real estate purchases on Guanaja. While our
relationships with these lenders have been amicable, there can be no
assurance that these relationships will remain friendly or, if any one or
more relationships become adversarial, how such adverse change will affect
our management personnel and their own relationships with our company.
We are dependent upon certain of our key personnel. We consider Johnny R.
Thomas, our Chief Executive Officer, and John C. Francis, our Vice
President, to be key
8
to our future success, if any. The loss of the services of either of these
executive officers could have a material adverse effect on our performance.
We presently do not maintain a "key-man" life insurance policy with respect
to any of our executive officers.
Certain conflicts of interest may exist between us and our officers and
directors. Our officers and directors have other business interests to
which they devote their attention and may be expected to continue to do so.
As a result, conflicts of interest may arise that can be resolved only
through their exercise of such judgement as is consistent with their
fiduciary duties to our company.
We are dependent on officers and directors who have no experience in the
management and marketing of an eco-resort could result in delays or
business failure. None of our officers or directors has any experience in
the management and marketing of an eco-resort. We will likely need to rely
on others who understand that business. Because of this lack of experience,
we may overestimate the marketability of our eco-resort and may
underestimate the costs and difficulties of managing the eco- resort. These
difficulties could prevent us from ever becoming profitable.
Control of our company will be held by our management. Upon completion of
the offering, our current management, together with their affiliates,
spouses and spouses' affiliates, will control approximately 56.8% of the
total voting power of our company, if the minimum amount of units are sold
in the offering, or 50.4% of the total voting power, if the maximum amount
of units are sold in the offering. Given their large voting control and
ability to acquire additional shares of our common stock, our management,
if they choose to act in concert, is in the position to elect all of the
members of our board of directors and thereby control the policies of our
company. As such, our management, together with their affiliates, spouses
and spouses' affiliates, will have substantial influence over our company,
which influence may not necessarily be consistent with the interests of our
other stockholders.
Our operations will be conducted in a foreign country and there are risks
inherent in international business activities. These risks include:
o unexpected changes in regulatory requirements,
o anti-American political climate which curtails tourism because of
perceived danger,
o tariffs and other trade barriers,
o difficulties in managing international operations,
o potential adverse tax consequences, including limitations on
repatriation of earnings,
o reduced protection for intellectual property,
o the burdens of complying with foreign laws,
o the ability of key management to obtain permits to work in the foreign
country, and
o the effects of local wage scales, employment customs and other
expenses.
There have been kidnapings and killings of United States citizens in
Honduras. At least six U.S. citizens were killed in Honduras in 2000. A
spokesman for the U.S.
9
Embassy in Honduras was quoted in August 2001 as calling Honduras "a high
risk country in which to live or invest... [and] [we] are concerned for the
security of the 12,000 U.S. citizens who live in the country.... To come to
visit, invest or establish residence in this country represents a lot of
risk due to the crime and fragility of the judicial system." We do not know
what impact statements such as these or additional killings, kidnapings or
other crime perpetrated on U.S. citizens or other foreigners will have on
our operations or ability to finance our proposed activities on Guanaja.
We may become subject to claims regarding foreign laws and regulations
which may be expensive, time consuming and distracting. Because we will
have employees, property and principal business operations in Honduras, we
will be subject to the laws and the court systems of Honduras. We may
become subject to claims based on violations of foreign laws. In addition,
these laws may be changed or new laws may be enacted in the future.
International litigation is often expensive, time consuming and
distracting.
Risks Relating to an Investment in Our Securities
Purchasers of the units being offered pursuant to this prospectus will
experience immediate and substantial dilution from the initial public
offering price in the net tangible book value per share of the common stock
included in their units. Any exercise of options or warrants to purchase
our common stock at a price below the market price of the common stock at
the time of exercise will also be dilutive.
There may be an adverse effect on the market price of our securities
because shares of our common stock are available for future sale. No
prediction can be made as to the effect, if any, that future sales, or the
availability of shares of our common stock for future sale, by us or by our
directors and executive officers will have on the market price of our
securities prevailing from time to time. Sales of substantial amounts of
our securities, including shares issued upon the exercise of options or
warrants, or the perception that such sales could occur, could adversely
affect prevailing market prices for the our securities.
Our securities have no prior market and resale of your securities may be
difficult. There is no public market for our common stock or warrants and
no assurance can be given that a market will develop or that any
securityholder will be able to liquidate their investment without
considerable delay, if at all. While we intend to apply for quotation of
our securities on the Over-the-Counter Bulletin Board, we cannot guarantee
that our application will be approved and that our securities are listed
and quoted for sale. The trading market price of our securities may decline
below the price at which the securities were sold. If a market for our
securities should develop, their market prices may be highly volatile. In
addition, an active public market for our securities may not develop or be
sustained. If selling securityholders sell
10
all or substantial amounts of their securities in the public market, the
market price of our securities could be adversely affected.
The public offering and warrant exercise prices were arbitrarily determined
and may not reflect our value. The public offering price of the units, and
the exercise price and other terms of the warrants, were arbitrarily
determined. The prices do not bear any relationship to our book value,
assets, current or prospective earnings or any other recognized criterion
of value.
We have not and do not intend to pay dividends. We have not paid any
dividends on our common stock to date and do not intend to pay dividends in
the foreseeable future. The payment of dividends will be entirely within
the discretion of our board of directors. Accordingly, you will have to
look to appreciation in the value of your securities to obtain a return on
your investment.
If we redeem the warrants, the value of your investment may be reduced. We
may redeem our class A and class B warrants at a price of $.001 per warrant
upon 30 days' written notice at any time during the warrant exercise
period. If you do not exercise your warrants prior to their expiration or
redemption, you will not be able to purchase the shares of common stock
underlying your warrants. If we call for redemption of any of the warrants,
you will have to (a) exercise the warrants (and pay the exercise price at a
time when it may be disadvantageous for you to do so), (b) sell the
warrants at the current market price when you might otherwise wish to hold
the warrants for possible additional appreciation, or (c) accept the
redemption price, which may be substantially less than the market value of
the warrants at the time of redemption. For five days after the end of the
redemption notice period, we can appoint standby purchasers to exercise any
or all of the warrants which are not exercised. If your warrants are
exercised by standby purchasers, you will not receive the securities issued
upon their exercise, and your ownership interest will be accordingly
reduced.
Our organizational documents authorize our board of directors to issue up
to 8 million preferred shares, and to establish preferences and rights
regarding any such preferred stock. If we issue preferred stock with
preferential dividend rights, this could diminish the cash available for
distribution to the holders of our common stock. In addition, the issuance
of preferred stock could have the effect of delaying or preventing a change
in control of our company, even if a change in control were in our
stockholders' interest.
11
Federal regulations governing "penny stocks" could have a detrimental
effect on holders of our securities. Our securities, when available for
trading, will be subject to the Securities and Exchange Commission rules
that impose special sales practice requirements upon broker-dealers that
sell such securities to parties other than established customers or
accredited investors. For transactions covered by these rules, the broker-
dealer must make a special suitability determination for the purchaser and
receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of purchasers of our
securities to buy or sell in any market that may develop. In addition, the
SEC has adopted a number of rules to regulate "penny Stocks." Because our
securities may constitute "penny stock" within the meaning of these rules,
the rules would apply to us and our securities. The rules may further
affect the ability of owners of our securities to sell their securities in
any market that may develop for them.
If we do not keep this registration statement current, you will not be able
to exercise your warrants. We must keep a registration statement effective
with the SEC for you to exercise your warrants. We may not be able to
maintain a registration statement in effect throughout the period during
which the warrants remain exercisable. Nine months after it becomes
effective, the registration statement of which this prospectus is a part
will no longer be current and, thereby, effective. We intend to keep the
registration statement current and effective with respect to the warrants
for so long as they remain exercisable by filing appropriate post-effective
amendments or filing a new registration statement. However, maintaining an
effective registration statement requires substantial continuing expenses
for legal and accounting fees and we cannot guarantee our ability to keep
the registration statement effective. We will instruct our warrant agent to
suspend the exercise of warrants if this or any future registration
statement with respect to the shares underlying the warrants are no longer
effective.
If we do not qualify the warrants in states other than Nevada, New Mexico,
Missouri, and Oregon you may not be able to exercise your warrants. The
warrants and underlying securities will be saleable only in Nevada, New
Mexico, Missouri, and Oregon. We may decide not to seek, or may not be able
to obtain, registration for the issuance of the underlying securities in
the state where you live during the period when the warrants are
exercisable. While certain exemptions in the securities, or "blue sky,"
laws of certain states might permit the warrants to be transferred,
including a listing in Standard and Poor's or Moody's manuals, even though
the units were not initially registered for sale there, we cannot issue
securities to you upon exercise of your warrants unless either (a) the
securities issuable upon exercise of the warrants are registered in your
state or (b) an exemption from registration is available. We may not be
able to qualify the warrants, in which case the warrants would become
unexercisable and deprived of value. Although we will not knowingly sell
units to you if you reside in a jurisdiction where the units are not
registered or otherwise qualified for sale, you may move to a jurisdiction
in which the warrants and the securities underlying the warrants are not so
registered or qualified.
12
FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus include "forward-looking statements"
within the meaning of such term under of the Securities Act of 1933 and
Securities Exchange Act of 1934. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which could cause actual
financial or operating results, performances or achievements expressed or
implied by such forward-looking statements not to occur or be realized. Such
forward-looking statements generally are based on our best estimates of future
results, performances or achievements, based upon current conditions and
assumptions. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "can," "could," "project," "expect,"
"believe," "estimate," "anticipate," "intend," "continue," "potential," "will,"
"would," "opportunity" or similar terms, variations of those terms or the
negative of those terms or other variations of those terms or comparable words
or expressions.
You should carefully consider such risks, uncertainties and other information,
disclosures and discussions which contain cautionary statements identifying
important factors that could cause actual results to differ materially from
those provided in the forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
DILUTION AND OTHER COMPARATIVE PER SHARE DATA
The following table summarizes as of the date of this prospectus:
o the number of shares of our common stock purchased from us,
o the number of shares purchased as a percentage of our total outstanding
shares,
o the aggregate cash and non-cash consideration for such shares,
o the aggregate consideration as a percentage of total consideration, and
o the average consideration per share for such shares by the present and
public stockholders, assuming the sale of the maximum units offered hereby
and assuming the sale of the minimum units offered hereby, but in both
cases assuming no consideration is deemed to be paid for the warrants
included in the units being offered under this prospectus.
13
Shares of Percentage Percentage Average
common stock of total Aggregate of total consideration
purchased shares consideration consideration per share
------------ ---------- ------------- ------------- -------------
Maximum Offering
Public investors 2,100,000 26.5% $1,050,000 82.7% $ .50
Present stockholders 5,828,924 73.5 219,862(1) 17.3 $ .04
--------- ------ ---------- -----
Total 7,928,924 100.0% $1,269,862 100.0%
========= ====== ========== =====
Minimum Offering
Public investors 1,200,000 17.1% $ 600,000 73.2% $ .50
Present stockholders 5,828,924 82.9 219,862(1) 26.8 $ .04
--------- ------ ---------- -----
Total 7,028,924 100.00% $ 819,862 100.0%
========= ====== ========== =====
(1) Includes non-cash consideration of: (a) $28,800 of rent payments over a
two-year period ending June 30, 2003, for which we issued 57,600 shares of
common stock to an affiliated entity of our executive officers, and (b)
$144,000 of salary over a two year period ending June 30, 2003, for which
we issued 144,000 shares of common stock to each of our two executive
officers. Also includes: (a) 60,000 shares of common stock purchased by our
chief executive officer for $30,000 cash, and (b) 23,324 shares issued to
our chief executive officer in satisfaction of $11,662 of our indebtedness
to him, all issued at $.50 per share.
"Dilution" is the difference between the public offering price of the common
stock and the net tangible book value per share immediately after the offering.
"Net tangible book value" is the amount that results from subtracting our total
liabilities and intangible assets from our total assets. As of June 30, 2001, we
had a net tangible book value for our common stock of $24,841, or less than $.01
per share.
After the sale of the 2.1 million units (the maximum offering), and deducting
estimated expenses of $40,000, and the issuance of a total of 428,924 shares of
our common stock described in note (1) to the above table, for total
consideration of $214,462, the pro forma net tangible book value of our company
at June 30, 2001 would be $1,207,641, or approximately $.15 per share. This
represents an immediate increase in the net tangible book value of $.15 to
existing stockholders and an immediate dilution of $.35 per share to the public
investors in the offering.
After the sale of the 1.2 million units (the minimum offering), and deducting
estimated expenses of $40,000, and the issuance of a total of 428,924 shares of
our common stock described in note (1) to the above table, for total
consideration of $214,462, the pro forma net tangible book value of our company
at June 30, 2001 would be $757,641, or approximately $.11 per share. This
represents an immediate increase in the net tangible book value of $.11 to
existing stockholders and an immediate dilution of $.39 per share to the public
investors in the offering.
14
The following table illustrates the dilution described above:
Maximum Minimum
Public offering price per share $.50 $.50
Net tangible book value per share before offering $.00 $.00
Increase in pro forma net tangible book value per share
attributable to amount invested by the public .15 .11
---- ----
Pro forma net tangible book value per share after offering .15 .11
---- ----
Dilution to public investors $.35 $.39
==== ====
DIVIDEND POLICY
We have never declared or paid any dividends to the holders of our common stock
and we do not expect to pay cash dividends in the foreseeable future. We
currently intend to retain all earnings for use in connection with the
development of our business and for general corporate purposes. Our board of
directors will have the sole discretion in determining whether to declare and
pay dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. Our ability to pay cash
dividends in the future could be limited or prohibited by the terms of financing
agreements that we may enter into or by the terms of any preferred stock that we
may authorize and issue.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2001:
o on an actual basis,
o on a pro forma basis to give effect to:
o the issuance of 144,000 shares of our common stock to each of our two
executive officers in exchange for two years of salary or $72,000 to
each of them, under their employment agreements ending June 30, 2003,
and
o the issuance of 57,600 shares of common stock to an affiliated entity
of our executive officers in exchange for two years of rent, or a
total of $28,800.
o on an as adjusted basis assuming:
o the sale of 1.2 million units (minimum) and 2.1 million units
(maximum), at an assumed initial public offering price of $.50 per
unit, after deducting estimated offering expenses of $40,000.00,
o the holders of all of our $473,000 principal amount of debt incurred
in connection with our real estate acquisitions, and accrued and
unpaid interest on such debt as the date of this prospectus, will
elect to purchase units being offered under this prospectus through
the cancellation of such debt and accrued interest, although we have
no agreements, understandings or commitments with respect to such
elections,
o there are no exercise of any options or warrants to purchase shares of
our common stock, and
15
o a value of $.49 is assigned to the share included in each unit being
offered under this prospectus, with the remaining $.01 assigned to the
class A warrant included in such unit.
June 30, 2001
-------------------------------------------------------
As Adjusted
--------------------------
Actual Pro Forma Minimum Maximum
-------- ----------- --------- -----------
Long-term debt $ -- $ 473,000 $ -- $ --
-------- --------- --------- -----------
Stockholders' equity:
Preferred stock, par value $.001 per share;
8,000,000 shares authorized, no shares issued
and outstanding -- -- -- --
Common stock, par value $.001 per share;
40,000,000 shares authorized, 5,483,324(actual),
5,828,924 (pro forma), 7,028,924 (as adjusted -
minimum) and 7,928,924 (as adjusted -
maximum) shares issued and outstanding 5,483 5,829 7,029 7,929
Additional paid-in capital 41,579 214,033 772,833 1,221,933
Accumulated deficit (22,221) (22,221) (22,221) (22,221)
-------- --------- --------- -----------
Total stockholders' equity 24,841 197,641 757,641 1,047,641
-------- --------- --------- -----------
Total capitalization $ 24,841 $ 670,641 $ 757,641 $ 1,047,641
======== ========= ========= ===========
USE OF PROCEEDS
We will receive $1,050,000 in gross proceeds from the sale of the units being
offered under this prospectus, assuming all 2.1 million units are sold, or
$600,000, if the minimum 1.2 million units are sold. We expect to incur offering
expenses of approximately $40,000, consisting of legal, accounting, printing,
"blue sky" and state filing fees. These offering expenses do not include any
sales commissions which we retain the right to pay to NASD member firms which
would reduce the net proceeds which we receive.
There is no guarantee we will receive any proceeds from this offering. In
addition, we are offering our lenders, who loaned us funds in order to purchase
real property in Honduras, the opportunity to purchase units offered under this
prospectus through the reduction or cancellation of our debt, instead of their
paying cash for such units. In such event, the cash proceeds which we receive
will be reduced with a corresponding decrease in funds allocated to purchase
real property or repay indebtedness. We expect to use the net proceeds
approximately, as follows, although we retain the right in our sole discretion
to change the allocation of proceeds actually received:
Use Minimum Maximum
--- ------- -------
Purchase of real property in Honduras and/or
repay debt (1) $490,000 $ 845,000
Development of real property (2) 20,000 90,000
General and administrative 25,000 25,000
Working capital 25,000 50,000
-------- ----------
Total $560,000 $1,010,000
======== ==========
16
----------
(1) As of the date of this prospectus, we have identified two parcels of land
for the Marble Hill site and three parcels for the eco-resort. We have
closed on two parcels to date at a cost of $445,000 plus closing costs. To
acquire these parcels we have borrowed a total of $473,000 from an
affiliated entity of our two executive officers and from family members of
our chief executive officer. The loans are evidenced by promissory notes
bearing interest at 7% per annum and due and payable on June 30, 2003. We
intend to repay these loans from a portion of the proceeds of this
offering, regardless of the amount of money we raise.
(2) Includes the hiring of consultants, architects, archeologists and
historians to form an advisory group to ensure land is developed consistent
with our theme.
The above listed use of proceeds represents our best estimate of the allocation
of the net proceeds of this offering based upon the current status of our
current plans and current economic condition, both in the United States and
Honduras. Future events, including, the problems, delays, expenses and
complications frequently encountered by development stage companies, as well as
changes in both domestic and foreign regulation, political and competitive
activities affecting our business may make shifts in allocation of funds
necessary or desirable.
Following the sale of the minimum units offered hereby the proceeds will be
released to us from escrow. The temporary investment of proceeds then held will
be made, until used, in FDIC insured bank deposits, securities of any registered
open-end investment company that holds itself out as a money market fund meeting
the applicable conditions of the Investment Company Act, or short-term United
States government securities.
17
PLAN OF OPERATION
We are currently in the development stage and in the process of raising capital.
We had no operations prior to July 2001, and all our activities from inception
to the date of this prospectus were related to our formation, preparation of our
business model and proposed financing. Our ability to commence a business is
contingent upon obtaining adequate financial resources through this offering or
otherwise.
Liquidity and Capital Resources
We are deemed a development stage company. We have financed our operations to
date through the sale of our securities to and loans from our officers and
directors and their family members and affiliates.
From inception through June 30, 2001, cash used to fund operating activities
totaled $14,659. From inception through June 30, 2001, cash provided by
financing activities totaled $46,500.
From inception through June 30, 2001, our sole source of cash and capital has
been from the following transactions:
o In January 2000, we sold and issued to an affiliate of our chief executive
officer 2,960,000 shares of our common stock and 986,667 class A warrants
for total cash proceeds of $2,960,
o In January 2000, we sold and issued to our outside counsel 40,000 shares of
our common stock and 13,333 class A warrants in satisfaction of certain of
our obligations to the firm valued at $40,
o Between August 2000 and February 2001, we borrowed an aggregate of $13,500
from our chief executive officer, all of which has been converted into
equity,
o In April 2001, we sold and issued to an affiliate of our chief executive
officer 2,400,000 shares of our common stock and 800,000 class A warrants
in satisfaction of certain of our obligations to him totaling $2,400,
o In June 2001, we sold and issued to our president 23,124 shares of our
common stock in satisfaction of certain of our obligations to him totaling
of $11,662, and
o In June 2001, we sold and issued to our chief executive officer 60,000
shares of our common stock for total proceeds of $30,000.
Since June 30, 2001, our sole source of cash and capital, has been from the
following transactions:
o In July 2001, we borrowed $72,300 from an affiliate of our chief executive
officer and vice president and our sublessor, Falcon Financial Group LLC,
and issued to the affiliate a promissory note in the principal amount of
$72,300, bearing interest at the rate of 7% per annum and due in June 2003,
o In July 2001, we sold and issued to Falcon Financial Group LLC 57,600
shares of our common stock in satisfaction of certain of our rent
obligations to this affiliate totaling $28,800, and
18
o In July 2001, we borrowed a total of $400,800 from family members and
affiliates of our chief executive officer and issued to these family
members and affiliates promissory notes in the aggregate principal amount
of $400,800, bearing interest at the rate of 7% per annum and due in June
2003.
Almost all of the funds raised through borrowings since June 30, 2001, have been
used by us in connection with our acquisition of two parcels of properties on
the Honduran Bay Island of Guanaja. We anticipate purchasing additional
properties on Guanaja in the future.
Over the next twelve months, we expect to continue to incur expenses relating
to:
o purchase of properties on Guanaja and the development of these properties
for cash and notes totaling between $510,000 and $935,000,
o payment of administrative expenses totaling approximately $25,000, and
o our general working capital needs of approximately $25,000.
We expect to incur significant operating losses over each of the next several
years and expect cumulative losses to increase significantly as we implement our
business plans. We do not expect to receive revenues from operations until, at
the earliest, the fourth quarter of 2002.
We will offer the holders of our outstanding notes due June 30, 2003, the
opportunity to purchase units in the offering made under cover of this
prospectus and make payment for such units by cancellation or reduction in the
amount due under their respective notes. To the extent of such elections, our
outstanding long-term debt will be reduced with a corresponding increase in our
stockholders' equity. We currently do not have any commitments of such elections
from these noteholders and, as of the date of this prospectus, we have not
solicited any such elections.
We believe that existing cash and cash equivalents, together with the net
proceeds of the offering made under this prospectus, assuming that only the
minimum number of units are sold and that the net proceeds from such shares will
total $560,000, will be sufficient to finance our proposed operations for at
least twelve months following the date of this prospectus. Our future liquidity
and capital requirements, however, will depend on numerous factors, including,
among others:
o the cost of acquisitions of additional properties on Guanaja,
o the timing and costs involved in obtaining regulatory approvals, if ever,
and complying with regulatory requirements,
o the timing of future revenues from our commercial activities,
o our ability to raise additional funds, through equity and/or debt
offerings, and
o our ability to successfully compete for customers for our commercial
operations.
If the proceeds of the offering made under this prospectus, together with
currently available funds, are not sufficient to satisfy our spending plans, we
will be required to revise our business model and/or seek additional funding
through borrowings and/or additional sales of our securities. We cannot assure
you that additional funding will become available when needed or that the terms
of such funding will not be on terms adverse to us and our securityholders.
19
PROPOSED BUSINESS
We intend to develop a vacation and tourist destination, featuring an
"eco-resort" and cultural exhibits, on the Honduran island of Guanaja. Guanaja
is one of the Bay Islands located approximately 36 miles off of the Gulf coast
of Honduras. Our intended business operations are anticipated ultimately to
include a resort complex, featuring an environmentally-friendly spiritual and
wellness center, restaurant, traditional fishing expeditions, deep sea diving
and scuba diving. Our intent also is to investigate and possibly develop an
archeological park at a site, which scholars have theorized, was an ancient
ceremonial site where the ancient indigenous people, including the Mayans,
conducted meditation and religious observances. We also intend to market a line
of medicinal herbs and natural healing products, grown and developed on our
properties in Guanaja, as well as complementary third party products.
Our anticipated business operations will revolve around a central theme
involving the harmonious blending of:
o ancient indigenous history and culture, including that of the Mayans,
o local history and culture,
o natural products for healing and spiritual fulfillment, and
o the beauty and natural resources of the island of Guanaja.
Business Plans and Activities
Through our founders, we have located sites on Guanaja that we believe provide
an exemplary venue where we intend to create a mixture of historical,
archaeological, spiritual and enjoyable activities to attract tourists and
visitors seeking an alternative to the common vacation. We have organized a plan
to develop these properties as an attractive and inviting destination revolving
around our central theme.
We only recently began planning this development and no assurance can be given
that we will succeed in completing our business model or that, if completed, in
whole or part, that our plans will result in commercially successful operations.
We discuss in the "Business Model" subsection below, the current anticipated
stages in developing our project. These stages are subject to change by our
management, based upon funding and the various other factors discussed
throughout this prospectus.
We are in the process of acquiring several parcels of real estate on Guanaja, in
two distinct locations. The first group of parcels are contiguous with each
other and are located on the east end, or leeward side of the island, and have
beach access. It is at this location that we intend to construct our eco-resort
and spiritual and wellness center. The second group of parcels also are
contiguous with each other, but are located mid-island, and encompass the Marble
Hill and the Plan Grande sections of Guanaja. It is at this location that we
intend to develop our tourist destination. We will cultivate the herbs and
plants for our line of medicinal and alternative healing products at both
parcels of land and such other sites as we may determine.
20
The Island of Guanaja and Its Historical and Cultural Significance
The Gulf or north coast of Honduras offers over 400 miles of Caribbean coastline
with lush vegetation, white sandy beaches and warm, turquoise waters. The Bay
Islands lie between ten and 40 miles from the Honduran coastline, on the second
largest coral reef in the world. The Bay Islands are an archipelago of eight
islands and 65 cays covering approximately 92 square miles situated in an arc
over 77 miles in length. The three principal Bay Islands are Roatan, Utila and
Guanaja. Roatan is the largest and most developed of the Bay Islands. Utila is
low-lying, swampy and heavily forested. Guanaja has the highest elevation of the
Bay Islands, with a peak rising to approximately 1,400 feet, and has seen
limited development over the past few years.
Tourists from all over the world visit the Bay Islands. Coral reefs, often
within swimming distance of shore, virtually surround most of the Bay Islands
forming natural breakwaters and creating calm pools for diving, fishing,
swimming and sailing. The Bay Islands, with their white, "unspoiled" sand
beaches, their tropical thick forests, and their relaxed Caribbean atmosphere
have become a tourist and vacation destination. The Bay Islands are below the
"hurricane belt" that affects much of the Eastern Caribbean, Gulf of Mexico and
eastern United States, although the Bay Islands occasionally are subject to
tropical cyclones and other severe weather conditions. The average temperature
throughout the year is approximately 86(degree) Fahrenheit, with an average
water temperature of between 77(degree) and 82(degree) Fahrenheit. In 1990, the
entire island of Guanaja was declared a marine national park by the Honduran
government and an array of governmental programs were established to assure that
the ecology and environment, both on land and at sea, are preserved while
appropriate tourism development is encouraged.
The number of visitors to Honduras has increased dramatically over the last few
years, to approximately 475,000 tourists in 2000, generating $262 million in
revenues, a 35% increase in tourist-generated revenues from the amount generated
in 1999. Visitors from North America totaled 163,000 in 2000, a 30% increase
over the number of North American visitors over the prior five years.
Historically, Christopher Columbus first noted the island of Guanaja in European
literature in chronicling his fourth and last voyage to the New World. It was
from Guanaja that Columbus first saw the mainland of the Americas, despite it
being his fourth voyage to the New World. It also was at this time that Columbus
first encountered the local inhabitants who he called Maya.
Columbus called Guanaja the "Island of Pines," when he arrived in 1502. The
island, also referred to in the past as "Bonacca," measures about eleven miles
in length and under four miles in width, comprising a total of 29 square miles.
Much of the island is green and hilly and is covered mostly by Caribbean pine.
There is a paved airstrip on Guanaja, which is serviced by local Honduran and
Central American regional airlines. Air access to the Bay Islands is through the
city of San Pedro Sula, located on the Gulf coast of Honduras. Several major
airlines service the airport at San Pedro Sula, including Continental Airlines,
American Airlines and Taca. Direct flights originate in major United States
cities, such as Houston, Miami, Los Angeles and New Orleans.
21
There are no paved roads on Guanaja. Access to all points on the island is by
boat; in fact, the island has been divided in two by a man-made canal in order
to allow access by water throughout Guanaja. The estimated island population
numbers 10,000. The majority of local islanders speak English and Spanish. The
principal sources of employment on the island include commercial fishing and
tourism.
Recent planned development on Guanaja has included two resorts, a Kempinski
Resort and the Guanaja Reef Club. The Kempinski Resort, to consist of 36 private
dwellings, at an estimated construction cost of $20 million, is scheduled to
open in 2003.
The British scholar Thomas Young in 1847 and the British explorer and adventurer
F.A. Mitchell-Hedges in the early 1930s, discovered a cocoa nut garden on the
Marble Hill section of the island. It appears that this garden was attended to
with great care. They described what existed from the mid 1850's until the
1930's as follows: A continuous low stone wall was discovered in close proximity
to this garden. The stone wall enclosed an almost oval space, extending over a
distance of approximately eight hundred yards, in which, in near perfect
formation, were situated mounds and monolithic stones erected with almost
astronomical precision on a north-south axis. To the south, there was a mound
covered with flat stones, and in front of the mound was a series of
approximately fifty monolithic stones erected in a semi-circle. We intend to
have archeologists investigate and, possibly, recreate this site to what we
believe to be its former site.
Mitchell-Hedges, working under the auspices of the Museum of the American
Indian, Heye Foundation, compared the site to the Stonehenge ruins in England.
However, he felt the site to be older, due to the disintegration of the rock
slabs at the Guanaja site.
Mitchell-Hedges admitted to removing more than 1,100 artifacts from this site.
These artifacts were transferred to the Museum of the American Indian in New
York City. The Museum of the American Indian became a part of the Smithsonian
Institute in 1989, and the Smithsonian has retained possession of these
artifacts to this day.
In April and May 1933, William Duncan Strong, an anthropologist at the
Smithsonian Institute, organized a research project at the site for the purposes
of gathering more information on the Bay Islands and to supplement information
concerning Mitchell-Hedges' artifacts and another archeological reconnaissance
of the Bay Islands by the American Museum of Natural History. Strong noted that
the Marble Hill and Plan Grande sites was the most striking ruin visited by the
Smithsonian research team during its exploration of archaeological sites of the
Bay Islands during 1933.
The Marble Hill site is honey-combed with caves. Part of the cave system
includes what scholars believe to be a sac-tun-na. A sac-tun-na, which literally
means "white stone cave" or "white stone house" in Maya, was believed by the
Mayans to be a cave of creation and considered to be one of the most spiritually
significant environments of the pre-Colombian Mayan inhabitants. Scholars base
their belief and we, in turn, base our belief, that these caves were considered
a
22
sac-tun-na on the caves' natural elements, the impressive stelae formations and
the remains of a large number of offerings left at the site cave. We further
believe that there are few such natural formations in all of Central America
that so thoroughly match the Mayan notion of a sac-tun-na as the cave formations
at the Marble Hill site.
The Eco-Resort and Spiritual and Wellness Center Complex
Since July 1, 2001, through a Honduran subsidiary of which we own a 99.9% equity
interest, we acquired two parcels of real estate and have agreements to acquire
three other parcels on Guanaja. One of the acquired parcels and two parcels to
be purchased will comprise the land on which we intend to develop our eco-resort
and spiritual and wellness center complex. These parcels are adjoining and
receive the benefits of the almost continuous gentle and cooling trade winds.
The three parcels at the eco-resort all have ocean and beach frontage, with
gentle slopes rising several hundred feet to a ridge overlooking the Bay of
Honduras. From this vantage point, one can see all of the smaller cays of the
Bay Islands on the leeward side of the island, local white sand beaches and the
coral reef.
We acquired one parcel of approximately 18 acres for the eco-resort complex at a
cost of approximately $425,000, including legal and other related costs. We have
agreements to acquire the two other parcels of approximately 12 acres and 15
acres, which will give us a total of approximately 45 acres of property for the
complex, for aggregate purchase price of approximately $365,000, of which
$60,000 will be paid at closing and the remaining aggregate purchase price to be
paid over the following eighteen month period. The parcels at the eco-resort
generally have electrical access, mature fruit trees and a variety of tropical
plants. All three of these parcels have access to potable water from fresh water
springs located onsite.
We intend to develop these parcels with the following facilities:
o a spiritual and wellness center,
o a world-class restaurant specializing in native and Caribbean cuisine, and
o a premier-level hotel, consisting of free-standing studio, one- and two
bedroom casitas, homesites.
Each of the facilities is anticipated to be constructed utilizing
Honduran-sourced materials, primarily concrete, as well as mahogany wood,
ceramic and clay tiles and other native materials. We anticipate that the
resort, once fully developed, will have at least 40 casitas with a capacity for
approximately 350 guests. The casitas and spiritual and wellness center will be
arranged along winding paths, comporting to the natural layout of the land,
providing for an added layer of privacy to the center's and resort's guests.
We intend to construct our resort complex in stages. We anticipate constructing
up to 10 casitas in the first stage, limited staff housing and utilizing the
present structure on one of the parcels as a temporary administrative building
and restaurant. A building to house the spiritual and wellness center and the
resort's permanent administrative headquarters, as well as additional casitas
and staff residences, will be constructed in later stages of development.
23
During the first phase of development, we intend to operate a portion of our
resort as a traditional hotel, whereby we rent the casitas on a per diem basis.
Within a second portion of the resort, we may offer interests in the casitas to
individual parties and thereafter provide rental management services to these
casitas' interest holders. We also may enter into ventures with hotel and time-
share managers with respect to the casitas.
We anticipate that the motif of the resort will encompass our central theme,
utilizing replicas of Mayan and local art.
The spiritual and wellness center is anticipated to be based on the teaching and
practice of alternative medicines and spirituality, which relies heavily on the
wisdom and traditions of the Native American people. We anticipate that the
facilities will be designed with input and counsel from traditional healers. In
contrast to other spas and wellness centers that focus on a "body beautiful"
approach, we intend for our spiritual and wellness center to reach beyond
physical therapies and offer our guests a place for spiritual rejuvenation. We
believe that our center will have teachers, consultants, advisors and support
staff, along with an overall atmosphere, that will focus on health,
enlightenment, relaxation and spiritual renewal of our visitors. In this regard,
we intend to retain experts on Native American traditional healing and spiritual
methodologies as employees, advisors, consultants and seminar speakers for our
wellness center operations.
We also intend to establish relationships with travel consultants and others who
may be able to direct clients to our facilities as an attractive
tourist/vacation destination. Further, we anticipate establishing associations
with the cruise lines that currently have ports of call at the neighboring Bay
Island of Roatan and elsewhere in the southern Caribbean Sea that could result
in these cruise lines making stopovers on Guanaja in order for their passengers
to experience the island's facilities, including our wellness center and the
cultural center.
Our initial construction at this site will be concentrated on infrastructure
development. This will include constructing a pier large enough for docking by
taxi boats, as well as other boats.
Our Alternative Healing Business
We intend to establish an area on our properties for the cultivation and
eventual harvesting of traditional herbs and other medicinal plants. A
commercial product line will be developed from these herbs and plants. This line
of products will be offered for sale to our hotel and spiritual and wellness
center guests and visitors to our tourist destination. We also intend to market
this line of products in the United States, Latin and South America, Europe and
Asia, subject to obtaining appropriate administrative approvals and
export/import permits, as well as compliance with other governmental laws and
regulations.
We also intend to offer alternative medicinal products that have been developed
by native and other traditional healers. It is our intention to fund the
training of students who will study under the guidance of the leading
practitioners of ancient Mayan and other native healing techniques.
24
In this context, guests of our spiritual and wellness center and visitors to our
tourist destination will be able to observe these students as they learn such
healing methods.
Marble Hill and Plan Grande as a Tourist Destination
We believe that Marble Hill, the entire Plan Grande site and surrounding area
has an intrinsic spiritual significance beyond its archaeological and historic
value, due to the site's natural elements. We believe there is an opportunity to
exploit such spiritual and natural element significance in an environmentally
and culturally friendly manner.
We believe, based on our studies and those of Young, Mitchell-Hedges, Strong and
others, that Marble Hill was a sacred place of healing, a pilgrimage destination
for prayer and rejuvenation among the ancient indigenous population. We intend
to develop the site as an archeological and ecological studies park targeted for
those interested in ancient indigenous cultures and those seeking a spiritual
and healthful experience. We envision the site, once fully developed, will have
numerous gardens and resting places in which visitors may conduct private or
group meditations, prayers, discussions or other spiritual awakenings.
In July 2001, we acquired approximately 3.5 acres of property where the Marble
Hill site is located at a cost of approximately $45,000. We have agreed to
purchase an additional 16 acres at Marble Hill and the surrounding Plan Grande
area currently owned by a business associate of our vice president. This
acquisition is expected to occur in September 2001 for a purchase price of
approximately $275,000, including legal and other closing costs. The seller has
stated that he is willing to accept a promissory note for the purchase price.
Once we have acquired the second parcel of property, we intend to retain
professional archeologists and natives familiar with ancient customs with the
goal of returning the site to its former state, based on our theory of the
site's purpose.
Once the gardens, sac-tun-na and other ancient structures on Marble Hill have
been developed, we intend to construct one or more buildings at our Marble Hill
site as a cultural center. This cultural center will house exhibitions
concerning ancient, historical and current religious, ethnic and cultural art,
traditions and history. We would also display the artifacts taken by Young,
Mitchell-Hedges, Strong and others that are presently in the possession of the
Smithsonian Institute, if we are successful in our discussions concerning the
return to the island of the artifacts currently held by the Smithsonian.
We will market the cultural center and sac-tun-na tours to those individuals,
including guests at our resort and spiritual and wellness center, wishing for
either active or passive involvement with these archaeological sites.
Short-term, part- and full-day, tours of the Marble Hill and Plan Grande sites
and cultural center, will be available. For those individuals desiring more
"hands- on" activities, amateur archaeologist participation supervised by
professionals in Mayan archaeology will also be available. Fees charged to our
guests will be based on the level of participation.
25
Anticipated revenues from our cultural center operations also will be generated
from ticket sales to non-natives for admission to the cultural center and sales
at a retail store located in the center. We intend for this store to sell the
normal array of souvenirs, including books, replicas of artifacts, t-shirts and
other mementos.
We also intend to fund professional archaeological investigation projects on
Marble Hill and the Plan Grande site. This funding will serve two purposes.
First, the funding may create good-will and positive name recognition in
connection with our further dealings with local governmental authorities, local
and international environmental, human rights and scientific groups. Secondly,
any discoveries at the archaeological sites may enhance the cultural experience
of our clients creating additional exposure for our commercial endeavors. We
believe that any positive publicity generated from these archeological
investigations could aid in the promotion of our company and our eco-resort.
Management believes, based on their knowledge of the tourist industry, that
there is a substantial market for archaeological tours to Central America,
including those focusing on Mayan ruins on the Bay Islands of Honduras.
Business Model
We anticipate that our business will be developed in different phases. Set forth
below is a list of developments we anticipate to occur in the first two phases
and the status of such developments. These phases are based upon our currently
proposed plans, assumptions and anticipated funding and revenues. In the event
that our plans change, assumptions change or prove inaccurate, or anticipated
funding and revenues are less or more than anticipated, we likely may be
required to alter development projects and/or revise phases of development.
Status or
Development Commencement Dates
----------- ------------------
PHASE I
A. Theme:
i. Develop an initial series of trademarks, name concepts and
programs revolving around our central theme.................... In progress
ii. Retain advisors, such as architects, healers, shamans,
archeologists and historians, to insure harmony and
consistency between theme and historical fact and accepted
theory......................................................... Fall 2001
B. Eco-Resort:
i. Acquire up to three initial real estate parcels to serve
as a base property............................................. One closed
(approximately 18 acres)
and two pending
(approximately 27 acres)
ii. Acquire options to purchase additional parcels................. Preliminary discussions
26
Status or
Development Commencement Dates
----------- ------------------
C. Alternative Healing:
i. Retain advisors experienced in Mayan medicinal techniques
and tropical herbal plants..................................... Fall 2001
ii. Develop plans for herbal gardens on eco-resort and Marble
Hill properties................................................ Fall 2001
D. Tourist Destination:
i. Acquire two real estate parcels encompassing all of the
Marble Hill section of Guanaja and adjacent land............... One closed (3.5 acres)
and one pending (16.0
acres)
ii. Commence activities to negotiate return of artifacts for
exhibition..................................................... Fall 2001
E. Capital Formation:
i. Fund initial real estate acquisitions though debt financing.... Completed
ii. Commence initial, self-underwritten public offering............ In progress
PHASE II
A. Theme:
i. Utilize information from advisor group to finalize
development concepts, programs and construction................ Spring 2002
B. Eco-Resort:
i. Initiate construction of docking facilities and up to
ten casitas.................................................... Spring 2002
ii. Finalize plans for development of the eastern two parcels...... Fall 2002 - Spring 2003
iii. Plant herbal garden paths...................................... Spring 2002
C. Alternative Healing:
i. Commence planting of herbal gardens on eco-resort and
tourist destination properties................................. Spring 2002
ii. Retain several teachers and shamans and commence training
students in the use of alternative healing methods............. Fall 2002
iii. Trademark product line consistent with theme and commence
licensing/permit procedures.................................... 2001 - 2002
D. Tourist Destination:
i. Restore Marble Hill to its historical and garden state with
meditation access, herbal plantings and walkways............... Spring 2002
ii. Construct initial buildings for use as a training center for
cultural center, with an initial focus on history while
anticipating increased future artifact exhibition.............. Fall 2002
27
Status or
Development Commencement Dates
----------- ------------------
iii. Initiate programs with locals to enhance the area as a tourist
destination.................................................... Summer 2002
iv. Enter into relationships with destination service providers,
such as travel agents, tour boats, etc......................... Fall 2002
E. Capital Formation:
i. Raise capital as needed, likely sources to include traditional
real estate debt and sale of additional equity through exercise
of warrants and/or private placements and public offerings..... Ongoing
Competition
We believe that the principal methods of competition with our resort hotel
complex will be on the basis of:
o our ability to incorporate our central theme into the complex's
infrastructure and available services,
o brand affiliation,
o room rates,
o customer service,
o location, and
o the condition and upkeep of the hotel in general and in relation to other
hotels in the local, regional, national and international markets.
We believe that we will be well positioned in each of these categories. We
intend to emphasize customer service and the newness of our facilities, as well
as our central theme. We also believe that a strong commitment to regular
capital improvements, including the refurbishment of furniture, fixtures and
equipment, will help in our competitive position.
Seasonality
The operations at our resort hotel is anticipated to be seasonal. This
seasonality pattern can be expected to cause fluctuations in our quarterly
revenues and cash flow.
Employees
We are a development stage company and currently have no employees, other than
our two executive officers, Johnny R. Thomas and John C. Francis. We expect to
use outside consultants, advisors, attorneys and accountants as necessary, none
of which will be hired on a salaried basis. We anticipate that, following the
offering made under this prospectus, we may retain one employee in the United
States for administrative work and three persons in Honduras for site
preparation and caretaking.
28
Governmental Regulation
We will be subject to various local governmental regulations in connection with
our development of our eco-resort complex. These regulations include those
relating to construction and zoning permits and variances, and compliance with
environmental and sewage matters. We have retained local counsel to advise us on
these matters and to assist us in compliance with all applicable regulations.
The lodging industry is subject to various government regulations, such as food
service, and health and liquor license laws. We also will be subject to laws
governing our relationships with employees, including minimum wage requirements,
overtime, working conditions and work permit requirements. We believe that our
operations will be in substantial compliance with these requirements.
Our line of medicinal herbs and natural healing products and related marketing
and advertising will be subject to governmental regulation by the various
domestic agencies and authorities of the jurisdictions in which we will market
and sell the product line. This will include, in the United States, the Food and
Drug Administration, which regulates food, medical products and cosmetics. The
advertising and marketing of our products are regulated in the US by the Federal
Trade Commission, which enforces consumer protection laws in regards to truth in
advertising. In addition, the Consumer Product Safety Commission protects the US
public from unreasonable risk of injuries and death associated with consumer
products, and the United States Department of Agriculture regulates food safety
and quality for products sold in the US. Similar types of agencies exist in our
foreign markets.
Our intended markets have regulations concerning product formulation, labeling
and packaging. These laws and regulations will, in all likelihood, require us,
among other things, to conform product labeling to the regulations, and register
or qualify products with the applicable government authority or obtain necessary
approvals or file necessary notifications for the marketing of such products.
Many of our intended markets also regulate product claims and advertising. These
laws regulate the types of claims and representations that can be made regarding
the capabilities of products. For example, in the United States, we will be
unable to make any claim that our products will diagnose, cure, mitigate, treat,
or prevent disease.
Properties
We have acquired or agreed to acquire five parcels of land on Guanaja at two
sites. The first set of parcels, consisting of approximately 19.5 acres, is at
the Plan Grande location and includes Marble Hill. As described above, we have
acquired 3.5 acres and expect to acquire the remaining 16 acres in September
2001. The second set of parcels, consisting of approximately 45 acres, is where
we intend to construct our eco-resort and wellness center. To date, we have
acquired approximately 18 acres and have agreed to acquire an additional 27
acres.
We may be subject to various environmental, health, safety and land use laws,
ordinances, regulations and similar requirements. Pursuant to these laws, a
current or previous owner or
29
operator of real property may be required to investigate and clean up hazardous
or toxic substances or wastes or releases of petroleum products or wastes at
such property, and may be held liable to a governmental entity or to third
parties for associated damages and for investigation and substantial clean-up
costs incurred by such parties in connection with the contamination. Such laws
may impose clean-up responsibility and liability without regard to whether the
owner knew of or caused the presence of the contaminants.
Our offices are located at 1700 West Horizon Ridge Parkway, Suite 202,
Henderson, Nevada 89012.
Legal Proceedings
We currently are not a party to any legal proceedings.
MANAGEMENT
Executive Officers and Directors
Our current executive officers and directors, and their ages and principal
positions with our company are as follows:
Age Title
--- -----
Johnny R. Thomas 60 Chief Executive Officer, President,
Treasurer and Director
John C. Francis 52 Vice President, Chief Financial Officer
and Director
Set forth below is a brief description of the business experience and background
of our executive officers and directors, based upon information they have
provided us.
Johnny R. Thomas has served as chief executive officer, president, treasurer and
a director of our company since our formation in January 2000, originally as a
"blank check" development stage company. Dr. Thomas received his Ph.D. degree in
genetics/plant breeding from Oregon State University in 1966. Dr. Thomas has
been a managing member of Falcon Financial Group LLC, a privately-held company
engaged in providing assistance and advice to private companies on capital
formation and introductions to investment banking firms, since January 2000. He
also is chief executive officer, president, treasurer and sole director of Twin
Lakes, Inc., a "blank check" development stage company. Twin Lakes has filed a
Registration Statement on Form SB-2 (No. 333-45766). However, Twin Lakes has
determined not to currently proceed with the proposed public offering, nor with
any merger, aquisition or other transaction. The Twin Lakes registration
statement contemplated an offering of 600,000 units at $.02 per unit, each unit
to consist of one share of Twin Lakes common stock and one class A warrant
exercisable for one share of Twin Lakes common stock and one class B warrant.
Dr. Thomas served as chairman of the board and chief executive officer (from
April 1994 to February 1999), president (April 1994 through December 1997) and a
director (from September 1993 to February 1999) of AgriBioTech, Inc., a
publicly-held, vertically integrated developer, producer, marketer and
distributor of forage and cool-season turfgrass seed. AgriBioTech and several of
its subsidiaries filed a voluntary petition for bankruptcy in January 2000,
approximately eleven months following Dr. Thomas' departure from the company.
Dr. Thomas also was president, chairman of the board and chief executive officer
of FiberChem, Inc. (now known as Decision Link, Inc.), from its inception in
December 1986 through March 1994 , a publicly-held company engaged in remote
asset monitoring applications.
30
John C. Francis, has served as vice president, chief financial officer and a
director of our company since July 1, 2001. Mr. Francis has been a managing
member of Falcon Financial Group LLC since January 2000. He served as chief
financial officer (from April 1994 to April 1996), vice president, secretary and
a director (April 1994 through January 1999) of AgriBioTech, Inc. AgriBioTech
and several of its subsidiaries filed a voluntary petition for bankruptcy in
January 2000, approximately eleven months following Mr. Francis' departure from
the company. Mr. Francis also was vice president, chief financial officer and a
director of FiberChem, Inc., now known as Decision Link, Inc., from its
inception in December 1986 through March 31, 1994. He also served as director of
marketing (from September 1993 through December 1993) and a director (from
January 1990 through March 1994) of FCI Environmental, Inc., a wholly-owned
subsidiary of FiberChem. Mr. Francis also serves as chief executive officer,
president and sole director of Hunapu, Inc., a "blank check" development stage
company.
Each of our directors has been elected to serve until the next annual meeting of
our stockholders, unless he shall resign, become disqualified, disabled or shall
otherwise be removed from office.
Executive Compensation
From our inception through June 30, 2001, we did not pay compensation to our
officers and directors. We entered into substantially identical employment
agreements, each dated as of July 1, 2001, with Johnny R. Thomas, our chief
executive officer, and John C. Francis, our vice president and chief financial
officer. These employment agreements provide that Messrs. Thomas and Francis
shall devote such time and effort as may be reasonably required to perform their
duties without a requirement to devote a specific number of hours. These
employment agreements are for a two-year term, which we may terminate for cause
without notice. In connection with their entering into their employment
agreement, we issued to each of Messrs. Thomas and Francis 144,000 shares of our
common stock valued at $.50 per share. Bonuses may be paid at the sole
discretion of our board of directors. The agreements provide for each employee
to receive three weeks of vacation per year and to receive all benefits
available to our employees.
The employment agreements provide that in the event there is a material change
in ownership or management, where the employee is terminated, or, at the
employee's sole discretion, there is a significant change in his duties,
responsibilities, principal place of employment or compensation, the employee
may terminate without justification for one year following such change of
control. The employees agreed not to compete with us during the period of their
employment and for a two-year period thereafter.
Limitation on Liability and Indemnification Matters
As authorized by the Nevada General Corporation Law, our certificate of
incorporation provides that none of our directors shall be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:
o any breach of the director's duty of loyalty to us or our stockholders,
31
o acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law,
o unlawful payments of dividends or unlawful stock redemptions or
repurchases, or
o any transaction from which the director derived an improper personal
benefit.
This provision limits our rights and the rights of our stockholders to recover
monetary damages against a director for breach of the fiduciary duty of care
except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his or her duty of care. In addition, our certificate of
incorporation provides that if the Nevada General Corporation Law is amended to
further limit the liability of a director, then the liability of the directors
shall be eliminated or limited to the fullest extent permitted by such
amendment. These provisions will not alter the liability of directors under
federal securities laws.
Our certificate of incorporation further provides for the indemnification of any
and all persons who serve as our director, officer, employee or agent to the
fullest extent permitted under the Nevada General Corporation Law.
When sufficient cash is available, we anticipate obtaining a policy of insurance
under which our directors and officers will be insured, subject to the limits of
the policy, against certain losses arising from claims made against our
directors and officers by reason of any acts or omissions covered under this
policy in their capacities as directors or officers, including liabilities under
the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons under the above
provisions, or otherwise, we have been advised that in the opinion of the SEC,
indemnification is against public policy as expressed in the Securities Act, and
is unenforceable.
Certain Relationships and Related Transactions
On January 20, 2000, upon the formation of the company, Johnny R. Thomas,
founder, a director and chief executive officer of our company, purchased
through Estancia LLC, an entity established by Dr. Thomas for estate planning
purposes, 2,960,000 shares of our common stock from the company for an aggregate
purchase price of $2,960, or $.001 per share. Dr. Thomas tendered a recourse
promissory note to the company for these shares which was paid in June 2000 when
the company opened a bank account. On March 31, 2001, Estancia LLC sold, at a
price of $.001 per share, 1,444,000 shares of our common stock to Excalibur
Trust, of which John C. Francis is a trustee and beneficiary, and 72,000 shares
of our common stock to Snow Becker Krauss P.C., our legal counsel. On July 1,
2001, John C. Francis became vice president, chief financial officer and a
director of our company.
Between August 23, 2000 and February 17, 2001, we borrowed a total of $13,500
from Johnny R. Thomas. These loans were repayable one year from date of the
loans and bore interest at 6%
32
per annum. As of December 31, 2000, and June 30, 2001, we had accrued a total of
$784 in interest charges.
On April 1, 2001, we issued 2,400,000 shares of common stock to Manzano Limited
Partners, a family limited partnership of Johnny R. Thomas' family members, in
satisfaction of $2,400 principal amount of indebtedness, or $.001 per share. On
June 29, 2001, we issued an additional 22,200 shares of common stock to Dr.
Thomas in satisfaction of the remaining $11,100 of indebtedness we owed him, as
well as 1,124 shares in satisfaction of $562 of accrued interest. Between June
22, and 29, 2001, Dr. Thomas purchased 60,000 shares of common stock for $30,000
cash, or $.50 per share, in order to fund our working capital.
We are renting office space, telephone and secretarial services from Falcon
Financial Group LCC. This is the location at which we currently have our
principal offices. Falcon is an entity controlled by our chief executive officer
and vice president; the landlord is a non-affiliated third party. On July 1,
2001, we entered into a sublease with Falcon whereby we agreed to pay Falcon
$1,200 per month rent over a two-year period or an aggregate of $28,800. We
issued an aggregate of 57,600 shares of common stock to Falcon in full
satisfaction of our rent obligation.
33
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of shares of our common stock, as of the date of this
prospectus and as adjusted to reflect the sale by us of the minimum and maximum
number of units offered under this prospectus, by:
o each person known by us to beneficially own 5% or more of our common stock,
o each of our executive officers and directors, and
o all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power. Under SEC rules, a person is deemed to be
the beneficial owner of securities which may be acquired by such person upon the
exercise of options and warrants or the conversion of convertible securities
within 60 days from the date on which beneficial ownership is to be determined.
Each beneficial owner's percentage ownership is determined by dividing the
number of shares beneficially owned by that person by the base number of
outstanding shares, increased to reflect the beneficially-owned shares
underlying options, warrants or other convertible securities included in that
person's holdings, but not those underlying shares held by any other person.
For the purposes of the table, the base number of outstanding shares are:
o prior to the offering: 5,828,924,
o completion of the offering, if the minimum number of units are sold:
7,028,924, and
o completion of the offering, if the maximum number of units are sold:
7,928,924.
Except as otherwise indicated in the notes to the following table,
o we believe that all shares are beneficially owned, and investment and
voting power is held by, the persons named as owners, and
o the address for each beneficial owner listed in the table, except where
otherwise noted, is c/o Crest View, Inc., 1700 West Horizon Ridge Parkway,
Henderson, Nevada 89012.
Percentage of Shares
Beneficially Owned
Amount and ------------------------------------
Nature of Completion Completion
Beneficial Prior to of Minimum of Maximum
Name of Stockholder Ownership Offering Offering Offering
------------------- --------- -------- -------- --------
Johnny R. Thomas (1)................ 2,210,457 (2) 35.0 (2) 29.4 (2) 26.3 (2)
John C. Francis (3)................. 2,774,135 (4) 42.5 (4) 35.9 (4) 32.1 (4)
All executive officers and
directors as a group
(two persons).................. 4,926,792 (5) 70.3 (5) 60.0 (5) 54.1 (5)
----------
(1) Dr. Thomas is our chief executive officer, president, treasurer and a
director of our company.
(2) Represents (a) 1,444,000 shares of our common stock owned by Estancia LLC,
an entity established by Dr. Thomas for estate planning purposes and of
which Dr. Thomas is the
34
manager, (b) 481,333 shares of our common stock issuable upon exercise of
class A warrants owned by Estancia LLC, (c) 57,800 shares of our common
stock owned by Falcon Financial Group LLC, an entity in which Dr. Thomas
and John C. Francis each own a 50% equity interest, and (d) 227,324 shares
of our common stock owned of record by Dr. Thomas. The number of shares
beneficially owned by Dr. Thomas and his percentage of shares beneficially
owned, as reflected in the table above, do not include (a) 250,000 shares
of our common stock owned by an entity created by Dr. Thomas' spouse for
estate tax purposes, and which are her sole and separate property, and (b)
481,333 shares of our common stock issuable upon exercise of class B
warrants, which class B warrants are only issuable upon exercise of the
class A warrants owned by Estancia LLC. If such issuable shares were
included in Dr. Thomas' beneficial ownership, Dr. Thomas' amount of shares
beneficially owned would be 2,941,790 and his percentage beneficial
ownership would be 43.3% prior to the offering, 36.8% after the offering in
which only the minimum number of units are sold, and 33.1% after the
offering in which the maximum number of units are sold.
(3) Mr. Francis is vice president, chief financial officer and a director of
our company.
(4) Represents (a) 501,000 shares of our common stock owned by Excalibur
Trust, an entity established by Mr. Francis for estate planning purposes
and of which Mr. Francis is a trustee and beneficiary, which shares were
originally issued in January 2000, (b) 167,000 shares of our common stock
issuable upon exercise of class A warrants owned by Excalibur Trust, (c)
699,999 shares of our common stock owned by Camelot FLP, a family limited
partnership in which Mr. Francis has voting and disposition power over and
a beneficial interest, (d) 233,333 shares of our common stock issuable upon
exercise of warrants owned by Camelot FLP, (e) 57,800 shares of our common
stock owned by Falcon Financial Group LLC, an entity in which Mr. Francis
and Johnny R. Thomas each own a 50% equity interest, (f) 144,000 shares of
common stock owned of record by Mr. Francis, (g) 201,000 shares of our
common stock owned by Tea Cups FLP, a family limited partnership in which
the wife of Mr. Francis has voting and disposition power over and a
beneficial interest, (h) 67,000 shares of our common stock issuable upon
exercise of class A warrants owned by Tea Cups FLP, (i) 470,503 shares of
our common stock owned by Unicorn Trust, a trust in which the wife of Mr.
Francis is the trustee, and (j) 232,500 shares of our common stock issuable
upon exercise of class A warrants owned by Unicorn Trust. Mr. Francis
disclaims any beneficial ownership with respect to all shares and all
shares underlying the warrants owned by Tea Cups FLP and Unicorn Trust, in
which Mr. Francis has no pecuniary interest. The number of shares
beneficially owned by Mr. Francis and his percentage of shares beneficially
owned, as reflected in the table above, do not include the aggregate
699,833 shares of common stock issuable upon exercise of class B warrants,
which class B warrants are only issuable upon exercise of the class A
warrants owned by Excalibur Trust, Camelot FLP, Tea Cups FLP and Unicorn
Trust. If such issuable shares were included in Mr. Francis' beneficial
ownership, Mr. Francis' amount of shares beneficially owned, prior to
disclaiming beneficial ownership of all securities owned by Tea Cups FLP
and Unicorn Trust, would be 3,475,968 and his percentage beneficial
ownership would be 48.1% prior to the offering, 41.2% after the offering in
35
which only the minimum number of units are sold, and 37.3% after the
offering in which the maximum number of units are sold.
(5) Includes shares of our common stock beneficially owned by our executive
officers and directors, including those shares described in notes (2) and
(4) above. The number of shares beneficially owned by our executive
officers and directors as a group and the group's percentage of shares
beneficially owned, as reflected in the table above, do not include the (a)
1,181,166 shares of common stock issuable upon exercise of class B
warrants, which class B warrants are only issuable upon exercise of the
class A warrants owned by Estancia LLC, Excalibur Trust, Camelot FLP, Tea
Cups FLP and Unicorn Trust, prior to any disclaimer of beneficial ownership
nor (b) the 250,000 shares owned by the entity created by Dr. Thomas'
spouse for estate tax purposes. If such issuable shares were included in
the group's beneficial ownership, the group's amount of shares beneficially
owned would be 6,357,958 and its percentage beneficial ownership would be
77.6% prior to the offering, 67.7% after the offering in which only the
minimum number of units are sold, and 61.8% after the offering in which the
maximum number of units are sold.
36
DESCRIPTION OF SECURITIES
General
We have authorized 40 million shares of common stock, par value $.001 per share,
and 8 million shares of preferred stock, par value $.001 per share, whose rights
and designation(s) have not yet been established. We had 5,828,924 shares of our
common stock outstanding as of the date of this prospectus, which are held by 61
holders of record. We currently have outstanding no shares of preferred stock.
All shares of common stock currently outstanding are validly issued, fully paid
and non-assessable.
Units
Each unit consists of one share of our common stock and one-third of one class A
redeemable warrant. Upon the completion of the minimum offering, the common
stock and the warrants which comprise the units will be immediately detachable
and separately transferable. Each class A warrant is exercisable to purchase of
one share of our common stock and one class B warrant.
Common Stock
Each share of our common stock entitles its holder to one vote upon all matters
on which holders of our common stock are entitled to vote under applicable law
or otherwise. Stockholders are not permitted to vote their shares cumulatively.
Accordingly, the holders of more than 50% of the issued and outstanding shares
of common stock can elect all of our directors. Holders of common stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of our liquidation, dissolution or winding
up, whether voluntary or involuntary, each share of common stock will be
entitled to share ratably in any assets available for distribution to holders of
our equity securities after satisfaction of all liabilities and after providing
for each class of stock, if any, having preference over the common stock.
The rights of the holders of common stock are subject to any rights that may be
fixed for holders of preferred stock, when and if any preferred stock is issued.
All outstanding shares of common stock are, and the shares underlying all
options and warrants will be, duly authorized, validly issued, fully paid and
non-assessable.
Class A Redeemable Warrants
Each class A warrant is exercisable to purchase from us, for cash, one share of
common stock at a price of $6.00 per share and one class B redeemable warrant,
subject to adjustment as described below. The class A warrants are exercisable
for four years from the date of this prospectus. At our option, we may reduce
the exercise price of the class A warrants upon 30 days written notice from time
to time for such period(s) as we, in our sole discretion, may chose; provided
that no such period shall be for less than fifteen days nor more than 90 days.
We also may extend the exercise period, at our sole option.
37
As of the date of this prospectus, we have authorized 2,500,000 class A
warrants, of which 1,800,000 were issued and held by 59 warrantholders. We have
the right to redeem the class A warrants at a price of $.001 per warrant on at
least 30 days prior notice at any time during the exercise period. If you do not
exercise your warrants prior to their expiration or redemption, you will forfeit
your right to purchase the underlying shares of common stock and class B
warrants. We may appoint standby purchasers to exercise any or all of the
warrants which are not exercised at the end of the 30-day notice period for a
five-day period thereafter.
Upon the completion of this offering, the class A warrants included in the units
being offered will be detachable from the common stock and exercisable. The
holder of a class A warrant may exercise the warrant during the exercise period
by surrendering the warrant certificate, with the form of election to purchase
on the reverse side of the class A warrant certificate properly completed, and
executed, together with the payment of the applicable aggregate exercise price,
to the warrant agent. The class A warrants may be exercised in whole at any time
or in part from time to time. A new class A warrant certificate will be issued
for the remaining warrants. No fractional shares or class B warrants will be
issued upon the exercise of class A warrants.
The exercise price and the number of shares of common stock and class B warrants
purchasable upon exercise of the class A warrants will be adjusted in proportion
to any stock dividends, stock splits, combinations, reclassifications and other
similar events. No such adjustments will be made upon the issuance of shares of
common stock for any other reason. No adjustment of the exercise price will be
made until cumulative adjustments amount to $.05 or more. No adjustments as to
dividends will be made upon any exercise of class A warrants.
The warrants do not confer upon their holders voting or pre-emptive rights or
any other rights (including the right to participate in the distribution of the
company's assets in the event of its liquidation, dissolution or winding up) as
a stockholder of the company.
We must have a current registration statement on file with the SEC in order to
continue the registration of the common stock and class B warrants underlying
the class A warrants, and, accordingly, we will need to file post-effective
amendments to the registration statement of which this prospectus is a part when
subsequent events require. There can be no assurance that such registration
statement can or will be kept current, and if it is not kept current, the class
A warrants will not be exercisable and may be deprived of value. In addition,
the common stock issuable upon the exercise of the class A warrants cannot be
sold in various jurisdictions without the registration in such jurisdictions of
the common stock in accordance with local law, or the availability of an
exemption from such registration. We may find it impractical or impossible to
qualify the common stock in those jurisdictions where we do not initially
qualify this offering. Class A warrant holders who are residents of
jurisdictions in which we do not qualify the common stock underlying the class A
warrants for sale will have no choice but to sell their class A warrants or to
let them expire.
38
Class B Redeemable Warrants
Each class B warrant is exercisable to purchase from the company, for cash, one
share of common stock at a price of $9.00 per share, subject to adjustment as
described below. The class B warrants are exercisable for five years from the
date of this prospectus. At our option, we may reduce the exercise price of the
class B warrants upon 30 days written notice from time to time for such
period(s) as we, in our sole discretion, may chose; provided that no such period
shall be for less than fifteen days nor more than 90 days. We also may extend
the exercise period, at our sole option.
As of the date of this prospectus, we have authorized 2,500,000 class B
warrants, none of which were issued and outstanding. We have the right to redeem
the class B warrants at a price of $.001 per warrant on at least 30 days prior
notice at any time during the exercise period. If you do not exercise your
warrants prior to their expiration or redemption, you will forfeit your right to
purchase the underlying shares of common stock. We may appoint standby
purchasers to exercise any or all of the warrants which are not exercised at the
end of the 30-day notice period for a five-day period thereafter.
Upon the completion of this offering and the exercise of any class A warrants,
the class B warrants will immediately be exercisable. The holder of a class B
warrant may exercise the warrant during the exercise period by surrendering the
warrant certificate, with the form of election to purchase on the reverse side
of the class B warrant certificate properly completed and executed, together
with the payment of the applicable aggregate exercise price, to the warrant
agent. The class B warrants may be exercised in whole at any time or in part
from time to time. A new class B warrant certificate will be issued for the
remaining warrants. No fractional shares will be issued upon the exercise of
class B warrants.
The exercise price and the number of shares of common stock purchasable upon
exercise of the class B warrants will be adjusted in proportion to any stock
dividends, stock splits, combinations, reclassifications and other similar
events. No such adjustments will be made upon the issuance of shares of common
stock for any other reason. No adjustment of the exercise price will be made
until cumulative adjustments amount to $.05 or more. No adjustments as to
dividends will be made upon any exercise of class B warrants.
The warrants do not confer upon their holders voting or pre-emptive rights or
any other rights (including the right to participate in the distribution of the
company's assets in the event of its liquidation, dissolution or winding up) as
a stockholder of the company.
We must have a current registration statement on file with the SEC in order to
continue the registration of the common stock underlying the class B warrants,
and accordingly, we will need to file post-effective amendments to the
registration statement of which this prospectus is a part when subsequent events
require. There can be no assurance that such registration statement can or will
be kept current, and if it is not kept current, the class B warrants will not be
exercisable and may be deprived of value. In addition, the common stock issuable
upon the exercise of the class B warrants cannot be sold in various
jurisdictions without the registration in such
39
jurisdictions of the common stock in accordance with local law, or the
availability of an exemption from such registration. We may find it impractical
or impossible to qualify the common stock in those jurisdictions where we do not
initially qualify this offering. Class B warrant holders who are residents of
jurisdictions in which we do not qualify the common stock underlying the class B
warrants for sale will have no choice but to sell their class B warrants or to
let them expire.
Serial Preferred Stock
Our board of directors is authorized by our certificate of incorporation to
issue up to 8 million shares of one or more series of serial preferred stock. No
shares of serial preferred stock have been authorized or designated for future
issuance by our board. In addition, we have no present plans to issue any such
shares.
In the event that our board of directors does authorize, designate and issue
shares of serial preferred stock, it may exercise its discretion in establishing
the terms of such serial preferred stock. In the exercise of such discretion,
our board may determine the voting rights, if any, of the series of serial
preferred stock being issued, which could include the right to vote separately
or as a single class with our common stock and/or other series of serial
preferred stock; to have more or less voting power per share than that possessed
by our common stock or other series of serial preferred stock; and to vote on
certain specified matters presented to the shareholders or on all of such
matters or upon the occurrence of any specified event or condition. On our
liquidation, dissolution or winding up, the holders of serial preferred stock
may be entitled to receive preferential cash distributions fixed by our board
when creating the particular series of preferred stock before the holders of our
common stock are entitled to receive anything. Serial preferred stock authorized
by our board could be redeemable or convertible into shares of any other class
or series of our capital stock.
The issuance of serial preferred stock by our board of directors could adversely
affect the rights of holders of our common stock by, among other things,
establishing preferential dividends, liquidation rights or voting powers. The
issuance of serial preferred stock could be used to discourage or prevent
efforts to acquire control of us through the acquisition of shares of our common
stock.
State Blue Sky Information
We are offering these units for sale in the States of Nevada, New Mexico,
Missouri and Oregon. Additionally, we believe that the units, upon completion of
this offering, and the common stock and warrants comprising the units, once they
become separately transferable, will be eligible for sale on a secondary market
basis in other states based upon the registration of the securities in such
states, a listing in Standard and Poor's or Moody's manuals, or the availability
of an applicable exemption from the state's registration requirements, subject,
in each case, to the exercise of the broad discretion and powers of the
securities commission or other administrative bodies having jurisdiction in each
state and any changes in statutes and regulations which may
40
occur after the date of this prospectus. We will amend this prospectus to
disclose additional states, if any, in which our securities will be eligible for
resale in the secondary trading market.
Transfer and Warrant Agent
______________________ will act as our transfer agent and warrant agent upon the
completion of the offering made under this prospectus.
41
PLAN OF DISTRIBUTION
We are offering the 2.1 million units on a self underwritten, best efforts 1.2
million units minimum and 2.1 million units maximum basis. The minimum number of
units which can be purchased by any one investor is 120, and the total number of
units purchased by any one investor must be in multiples of three.
If the minimum 1.2 million units are sold on or before __________, 2001 (90 days
from the date of this prospectus, unless we extend it for up to an additional 90
days) the proceeds from the sale of such units will immediately be released to
us. If 1.2 million units are not sold by such date, all subscription funds will
be returned to the persons who subscribed to the offering, with interest, if
any. If we reach the minimum offering threshold of 1.2 million units, we will
continue to offer units until the maximum 2.1 million units are sold, the
offering period ends, or the offering is terminated, whichever first occurs. All
of the proceeds received, are required to be promptly deposited in an escrow
account at Southwest Escrow Company, 401 North Buffalo, Suite 205, Las Vegas
89145.
Lenders who financed our acquisition of real property in Honduras will be given
the opportunity to purchase units offered under this prospectus through the
reduction or cancellation of our debt to them, rather than by paying cash for
their units. In such event, the cash proceeds which we receive from this
offering will be reduced by an amount equal to the debt so reduced or canceled.
As of the date of this prospectus, we have not solicited such purchases of units
by our lenders and we do not know if any of our lenders will purchase units
through such reductions or cancellations of our obligations to them.
The holders of the warrants who exercise such warrants may sell the common stock
purchased upon their exercise from time to time in public transactions, on or
off the NASD's OTC Bulletin Board, or in private transactions, at prevailing
market prices or at privately negotiated prices. They may sell their shares in
the following types of transactions:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o face-to-face transactions between sellers and purchasers without a
broker-dealer; and
o or otherwise.
The 700,000 class A warrants being offered by this prospectus are being offered
and 700,000 class B warrants issuable upon exercise of the class A warrants will
be offered by the holders of these securities and may be sold by these holders
in the over-the-counter market, or privately, or through broker-dealers selected
by these holders, or as principals.
The units will be sold by our executive officers who will not receive
commissions and who will be registered as sales representatives where required
under state securities laws. We may also
42
retain NASD member firms to sell units and pay them customary sales commissions
subject to our first filing this prospectus with the NASD. A market may never
develop for the shares. We have arbitrarily set the offering price of the units,
warrants and shares of common stock.
We will pay all expenses incident to the registration of the securities covered
by this prospectus. We will not pay, among other expenses, commissions and
discounts of brokers, dealers or agents.
The sale of the common stock and warrants are subject to the prospectus delivery
and other requirements of the Securities Act. To the extent required, we will
use our best efforts to file and distribute, during any period in which offers
or sales are being made, one or more amendments or supplements to this
prospectus or a new registration statement to describe any material information
with respect to the plan of distribution not previously disclosed in this
prospectus, including, but not limited to, the number of securities being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Under the Exchange Act and the regulations thereunder, any person engaged in a
distribution of our securities offered by this prospectus may not simultaneously
engage in market-making activities with respect to our common stock during the
applicable "cooling off" period five business days prior to the commencement of
this distribution.
CERTAIN MARKET INFORMATION
This offering is the initial public offering of the our securities and,
accordingly, there has been, and there currently is, no public trading market
for our units, common stock or warrants. A public trading market may never
develop or, if one develops, may not be sustained.
SHARES ELIGIBLE FOR FUTURE SALE
We will have 7,928,924 shares of our common stock and 2.5 million class A
warrants issued and outstanding following the completion of the offering made
under this prospectus, assuming all of the units offered for sale in the
offering are sold, or 7,028,924 shares of our common stock and 2.2 million class
A warrants issued and outstanding, assuming the minimum number of the units
offered for sale in the offering are sold. Of such securities, 2.1 million
shares and 700,000 shares issuable upon exercise of class A warrants, assuming
the maximum number of units offered by this prospectus are sold in the offering,
or 1.2 million shares and 400,000 shares issuable upon exercise of class A
warrants, assuming the minimum number of units offered by this prospectus are
sold in the offering, will be freely tradable without restriction or further
registration under the Securities Act, except for any shares purchased by any
affiliate of us and assuming we are able to keep effective our registration
statement with respect to the shares of our common stock issuable upon exercise
of the class A warrants included in the units sold in the offering.
43
An affiliate of ours is generally a person who has a controlling position with
regard to us. Any shares of common stock purchased by our affiliates in the
offering will be subject to the resale limitations of Rule 144 promulgated under
the Securities Act.
All of the remaining 5,828,924 remaining shares of our common stock that will be
outstanding following the offering, as well as the 1.8 million shares of our
common stock issuable upon exercise of our currently outstanding class A
warrants, are restricted securities as that term is defined under Rule 144.
Approximately 3 million of these outstanding shares of our common stock, as well
as 1 million class A warrants and the shares issuable upon exercise of such
warrants, are immediately eligible for sale and the remaining 2,828,924 shares,
800,000 class A warrants and the shares issuable upon exercise of such warrants
will become eligible, at various times following the date of this prospectus,
subject to the resale provisions of Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days after the
date of this prospectus, a person or group of persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year,
including the holding period of any prior owner except an affiliate of ours,
would be entitled to sell, within any three month period, a number of shares
that does not exceed the greater of:
o 1% of the number of then outstanding shares of our common stock, or
o the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale;
provided, that, public information about us as required by Rule 144 is available
and the seller complies with manner of sale provisions and notice requirements.
The volume limitations described above, but not the one-year holding period,
also apply to sales of our non-restricted securities by our affiliates. A person
who is not an affiliate, has not been an affiliate within three months before
the sale and has beneficially owned the restricted securities for at least two
years, is entitled to sell the restricted shares under Rule 144 without regard
to any of the limitations described above.
Before this offering, there was no public market for our securities. We cannot
predict the effect, if any, that sales of, or the availability for sale of, our
securities stock will have on the market price of our securities prevailing from
time to time. Nevertheless, the possibility that substantial amounts of our
common stock and class A warrants might enter the public market through Rule 144
sales, or otherwise, could adversely affect the prevailing market price of our
securities and could impair our ability to raise capital in the future through
the sale of securities.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form SB-2, including exhibits and schedules thereto, under the
Securities Act with respect to the securities to be sold in the offering made
under this prospectus. This prospectus which constitutes a part of the
registration statement and does not contain all the information set forth in the
registration statement and the exhibits filed with it. For further information
with respect to us and the securities to be sold in the offering, reference is
made to the registration statement and to
44
the exhibits filed with it. Statements contained in this prospectus as to the
contents of any contract, agreement or other document referred to, are not
necessarily complete. In each instance, we refer you to the copy of the
contracts, agreements and or other documents filed as exhibits to the
registration statement, and these statements are deemed qualified in their
entirety by reference to the contract or document.
You may inspect, without charge, all or any portion of the registration
statement or any reports, statements or other information we file with the SEC
at the SEC's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549 and at the regional offices of the SEC
located at Seven World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of these documents may also be obtained from the SEC's
Public Reference Room at 450 Fifth Street, NW, Room 1024, Washington, D.C. 20549
upon payment of the prescribed fees. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, registration statements and other filings we make with the SEC
through its Electronic Data Gathering, Analysis and Retrieval, or EDGAR, system
are publicly available through the SEC's site located at www.sec.gov. The
registration statement, including all exhibits and schedules and amendments, has
been filed with the commission through the EDGAR system.
On the date of this prospectus, we will become subject to the reporting
requirements of the Exchange Act and, in accordance with these requirements,
will file reports, proxy statements and other information with the SEC. We
intend to furnish our stockholders with annual reports containing audited
financial statements and other periodic reports as we deem appropriate or as may
be required by law.
LEGAL MATTERS
The validity of the issuance and sale of the units being offered by this
prospectus is being passed on for us by Snow Becker Krauss P.C., 605 Third
Avenue, New York, New York. Snow Becker Krauss P.C. owns 112,000 shares of our
common stock and 33,333 class A warrants. Elliot H. Lutzker, a member of Snow
Becker Krauss P.C., is our corporate secretary.
EXPERTS
The financial statements included in the registration statement of which this
prospectus is a part, have been included herein in reliance on the report of
Lazar Levine & Felix LLP, independent accountants, given on the authority of
that firm as an expert in accounting and auditing.
45
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditor's Report............................................. F-1
Financial Statements:
Balance Sheets as of June 30, 2001 and 2000.............................. F-2
Statements of Operations Cumulative During the Development Stage
(January 20, 2000 to June 30, 2001), for the Year Ended
June 30, 2001 and From Inception (January 20, 2000) to
June 30, 2000....................................................... F-3
Statements of Stockholders' Equity (Deficit) for the Period from
Inception (January 20, 2000) to June 30, 2001....................... F-4
Statements of Cash Flows Cumulative During the Development Stage
(January 20, 2000 to June 30, 2001), for the Year Ended
June 30, 2001 and From Inception (January 20, 2000) to
June 30, 2000....................................................... F-5
Notes to Financial Statements ........................................... F-6
46
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Crest View, Inc.
Henderson, Nevada
We have audited the accompanying balance sheets of Crest View, Inc. (a
development stage company), as of June 30, 2001 and 2000, and the related
statements of operations, shareholders' equity and cash flows for the period
from inception January 20, 2000 to June 30, 2000, the year ended June 30, 2001
and the cumulative period from inception, January 20, 2000 through June 30,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assuance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Crest View, Inc. (a development
stage company) and the results of its operations and its cash flows for the
periods mentioned in conformity with accounting principles generally accepted in
the United States of America.
LAZAR LEVINE & FELIX LLP
New York, New York
August 20, 2001
F - 1
CREST VIEW, INC.
(A Development Stage Company)
BALANCE SHEETS
June 30,
2001 2000
-------- -------
- ASSETS -
CURRENT ASSETS:
Cash $ 31,841 $ 2,900
-------- -------
TOTAL ASSETS $ 31,841 $ 2,900
======== =======
- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) -
CURRENT LIABILITIES:
Accrued expenses $ 7,000 $ --
-------- -------
TOTAL CURRENT LIABILITIES 7,000 --
-------- -------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $.001 par value; 8,000,000 shares
authorized, none issued -- --
Common stock, $.001 par value; 40,000,000 shares
authorized, 5,483,324 and 3,000,000 shares issued
and outstanding in 2001 and 2000, respectively 5,483 3,000
Additional paid-in capital 41,579 --
Deficit accumulated during the development stage (22,221) (100)
-------- -------
24,841 2,900
-------- -------
$ 31,841 $ 2,900
======== =======
The accompanying notes are an integral part of these financial statements
F - 2
CREST VIEW, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
During the
Development Stage From Inception
(January 20, 2000 For the (January 20, 2000)
to Year Ended to
June 30, 2001) June 30, 2001 June 30, 2000
-------------- ------------- -------------
REVENUES $ -- $ -- $ --
-------- -------- -----
COSTS AND EXPENSES:
Filing fees 5,306 5,206 100
Professional fees 11,000 11,000 --
Other expenses 5,353 5,353 --
Interest expense 562 562 --
-------- -------- -----
22,221 22,121 100
-------- -------- -----
NET LOSS $(22,221) $(22,121) $(100)
======== ======== =====
The accompanying notes are an integral part of these financial statements
F - 3
CREST VIEW, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
Accumulated
Common Stock Additional During the Stockholders'
-------------------- Paid-In Development Equity
Number Amount Capital Stage (Deficit)
--------- ------ ------- -------- --------
At inception, January 20, 2000 -- -- -- -- --
Issuance of units 3,000,000 $3,000 -- -- $ 3,000
Net loss for period ended June 30, 2000 -- -- -- $ (100) (100)
--------- ------ ------- -------- --------
BALANCE AT JUNE 30, 2000 3,000,000 3,000 -- (100) (100)
Repayment of officer's loans 2,422,200 2,422 $11,078 -- 13,500
Payment of interest accrued 1,124 1 561 -- 562
Issuance of shares for cash 60,000 60 29,940 -- 30,000
Net loss for year ended June 30, 2001 -- -- -- (22,121) (22,121)
--------- ------ ------- -------- --------
BALANCE AT JUNE 30, 2001 5,483,324 $5,483 $41,579 $(22,221) $ 24,841
========= ====== ======= ======== ========
The accompanying notes are an integral part of these financial statements
F - 4
CREST VIEW, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
During the
Development Stage From Inception
(January 20, 2000 For the (January 20, 2000)
to Year Ended to
June 30, 2001) June 30, 2001 June 30, 2000
-------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(22,221) $(22,121) $ (100)
Adjustments to reconcile net loss to net cash
used by operating activities:
Compensatory stock-interest 562 562 --
Changes in assets and liabilities:
Increase in accrued expenses 7,000 7,000 --
-------- -------- -------
Net cash utilized by operating activities (14,659) (14,559) (100)
-------- -------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from officer's loans 13,500 13,500 --
Sale of units 33,000 30,000 3,000
-------- -------- -------
Net cash provided by financing activities 46,500 43,500 3,000
-------- -------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 31,841 20,941 2,900
Cash and cash equivalents at beginning
of period -- 2,900 --
-------- -------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 31,841 $ 31,841 $ 2,900
======== ======== =======
Supplemental Disclosures of Non-Cash
Financing Activities:
During the year ended June 30, 2001, the Company issued 2,400,000 shares of its
common stock in full payment of $2,400 of officer's loans; 22,200 shares in full
payment of $11,100 of officer's loans as well as 1,124 shares of common stock in
satisfaction of interest accrued on such loans of $562.
The accompanying notes are an integral part of these financial statements
F - 5
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
NOTE 1: DESCRIPTION OF COMPANY
Crest View, Inc. ("the Company"), was organized in the state of Nevada on
January 20, 2000. The Company was formed to serve as a vehicle to raise capital
to acquire a business and, as of June 30, 2001 was considered a "blank check"
company inasmuch as the Company was not generating revenues and did not own an
operating business. The Company has no employees and no material assets.
Administrative services are currently being provided by an entity controlled by
an officer of the Company. The Company's efforts, through June 30, 2001, were
limited to organizational activities. In July 2001, the Company entered into an
agreement to develop a vacation and tourist destination featuring an
"eco-resort," wellness center and cultural exhibits, on the Honduran island of
Guanaja (see Note 6).
The Company is considered as being in the development stage, since its
inception, in accordance with Statement of Financial Accounting Standards No. 7,
and its fiscal year end is June 30.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies are in accordance with accounting principles
generally accepted in the United States of America. Outlined below are those
policies considered particularly significant.
(a) Use of Estimates:
In preparing financial statements in accordance with accounting principles
generally accepted in the United States of America, management makes
certain estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
While actual results could differ from those estimates, management does not
expect such variances, if any, to have a material effect on the financial
statements.
(b) Statements of Cash Flows:
For purposes of the statements of cash flows the Company considers all
highly liquid investments purchased with a remaining maturity of three
months or less to be cash equivalents.
F - 6
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(Continued)
NOTE 3: LOANS PAYABLE - OFFICER
On August 23, 2000 and September 7, 2000, the Company received $6,000 and
$5,000, respectively from an officer of the Company. These loans are repayable
one year from the date of receipt with interest at 6% per annum. On February 17,
2000, the Company received additional loans from this officer aggregating
$2,500. As of June 30, 2001, the Company had repaid the principal amount and all
interest accrued on such loans, through the issuance of 2,423,324 shares of its
common stock to this officer.
NOTE 4: STOCKHOLDERS' EQUITY
As of June 30, 2000, the Company had issued an aggregate of 3,000,000 units at a
price of $.001 per unit, with each unit consisting of one share of common stock
and one-third (1/3) Class A Redeemable Common Stock Purchase Warrant, for cash
proceeds of $3,000. The holder of 3 units is entitled to exercise one Class A
Warrant to purchase one share of common stock and one Class B Redeemable Common
Stock Purchase Warrant at a price of $6.00 per share. One class B Warrant
entitles the holder to purchase one share of Common stock at a price of $9.00
per share.
In June 2001, the Company issued 60,000 shares of its common stock for cash
proceeds of $30,000. See Note 3 for additional detail on issuances of common
stock.
The Company is in the process of filing a registration statement on Form SB-2,
with the Securities and Exchange Commission, to register 3,500,000 shares of its
common stock. The Company intends to offer for sale, 2,100,000 units (each unit
consisting of one share of common stock and one-third (1/3) Class A Redeemable
Common Stock Purchase Warrant) at a per unit price of $.50 on a
self-underwritten, best efforts, 1,200,000 units minimum and 2,100,000 units
maximum, basis.
F - 7
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(Continued)
NOTE 5: COMMITMENTS
(a) Employment agreements:
The Company entered into substantially identical employment agreements,
each dated as of July 1, 2001, with its Chief Executive Officer, and its
Vice President/Chief Financial Officer. These two-year employment
agreements provide that these two officers shall devote such time and
effort as may be reasonably required to perform their duties without a
requirement to devote a specific number of hours and may be terminated for
cause without notice. The officers shall each receive a salary of $36,000
per year payable through the issuance of an aggregate of 144,000 shares of
Company common stock valued at $.50 per share, all of which shares vested
upon commencement of the agreements. Bonuses may be paid at the sole
discretion of the board of directors. The agreements provide for each
employee to receive two weeks of vacation per year and to receive all
benefits available to all employees. The employees have agreed not to
compete with the Company during the period of their employment and for a
two-year period thereafter.
(b) Lease:
On July 1, 2001, the Company entered into a sublease for office space with
Falcon Financial Group, LLC, an entity controlled by the Company's two
executive officers, whereby the Company agreed to pay this entity $1,200
per month rent over a two-year period or an aggregate of $28,800. The
Company has issued an aggregate of 57,600 shares of common stock to this
entity in full satisfaction of its rent obligation.
NOTE 6: SUBSEQUENT EVENTS
In connection with the plans to develop a vacation and tourist resort (see Note
1), since July 1, 2001, through a Honduran subsidiary, the Company has acquired
two parcels of real estate and has entered into agreements to purchase three
other parcels of land on the island of Guanaja.
One parcel of land of approximately 18 acres to be used for the resort was
acquired at a total cost of approximately $425,000. The funds to do this
acquisition were borrowed from an affiliate entity. Two other parcels are under
contract (approximately 12 acres and 15 acres) to be used for the wellness
center at a total aggregate cost of $365,000. The Company also acquired a parcel
of land (approximately 3.5 acres) at another site at a cost of approximately
$45,000. Funds for this acquisition were also borrowed from Falcon Financial
Group LLC. The Company has also agreed to purchase an additional 16 acres at
this second site.
F - 8
We have not authorized any dealer, salesperson or other person to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus
does not constitute an offer to sell or buy any securities in any jurisdiction
where it is unlawful to do so. The information contained in this prospectus is
current only as of its date
Until ____________, 2001 (90 days from the date funds and securities are
released from escrow), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
2,100,000 Units
3,500,000 Shares of Common Stock
Crest View, Inc.
September ___, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The following statutes and by-law provisions are the only statutes, charter
provisions, by- laws, contracts or other arrangements known to the registrant
that insure or indemnify a controlling person, director or officer of the
registrant in any manner against liability which he or she may incur in his or
her capacity as such.
Article EIGHTH of the registrant's Articles of Incorporation provides that:
The registrant may, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Article VI of the registrant's By-laws provides that:
On the terms, to the extent, and subject to the condition prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise which any director or officer of the registrant
served in any capacity at the request of the registrant, by reason of the fact
that he, his testator or intestate, was a director or officer of the registrant,
or served such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys, fees,
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, and (b) the registrant may pay, in advance of final
disposition of any such action or proceeding, expenses incurred by such person
in defending such action or proceeding.
On the terms, to the extent, and subject to the conditions prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the registrant shall
II - 1
indemnify any person made a party to an action by or in the right of the
registrant to procure a judgment in its favor, by reason of the fact that he,
his testator or intestate, is or was a director or officer of the registrant,
against the reasonable expenses, including attorneys, fees, actually and
necessarily incurred by him in connection with the defense of such action, or in
connection with an appeal therein, and (b) the registrant may pay, in advance of
final disposition of any such action, expenses incurred by such person in
defending such action or proceeding.
Section 78.751 of the Nevada General Corporation Law ("GCL"), provides
that:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if 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, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if 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. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified
II - 2
by the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
II - 3
Section 78.752 of the GCL provides that:
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection nay provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the terms
and conditions of any insurance or other financial arrangement made pursuant to
this section and the choice of the person to provide the insurance or other
financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal liability
for his action, even if a director approving the insurance or other
financial arrangement is a beneficiary of the insurance or other
financial arrangement.
II - 4
5. A corporation or its subsidiary which provides self-insurance for itself
or for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of the Nevada Revised Statutes.
Item 25. Other Expenses of Issuance and Distribution.
SEC Registration Fee........................................ $ 4,771.00
Printing Expenses........................................... 2,000.00
Legal Fees and Expenses..................................... 25,000.00
State Securities Qualification Fees and Expenses............ 3,000.00
Accounting and Auditing Fees and Expenses................... 5,000.00
Miscellaneous............................................... 229.00
-----------
Total....................................................... $ 40,000.00
===========
Item 26. Recent Sales of Unregistered Securities.
(a) As of January 20, 2000, the registrant issued, in a private
transaction, an aggregate of 2,960,000 shares of its common stock and warrants
to purchase an additional 986,667 shares of the registrant's common stock to
Estancia LLC, an entity established for estate planning purposes by Johnny R.
Thomas, the registrant's founder, for the aggregate consideration of $3,256. The
registrant believes that these securities were issued in a transaction not
involving any public offering in reliance upon exemptions from registration
provided by Section 4(2) of the Act.
(b) As of January 20, 2000, the registrant issued, in a private
transaction, an aggregate of 40,000 shares of its common stock and warrants to
purchase an additional 13,333 shares of the registrant's common stock to Snow
Becker Krauss P.C., the registrant's outside counsel, in connection with legal
services being rendered to registrant and valued at $44. The registrant believes
that these securities were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Act.
(c) On April 1, 2001, the registrant issued, in a private transaction, an
aggregate of 2,400,000 shares of its common stock and warrants to purchase an
additional 800,000 shares of the registrant's common stock to Manzano Limited
Partners, a family limited partnership consisting of family members of the
registrant's founder, in exchange for the cancellation of $2,680 of indebtedness
due the registrant's founder. The registrant believes that these securities were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Act.
(d) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 23,324 shares of its common stock to the
registrant's founder in exchange for $11,662 of indebtedness due the
registrant's founder. The registrant believes that these securities
II - 5
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Act.
(e) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 60,000 shares of its common stock to the
registrant's founder for $30,000. The registrant believes that these securities
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Act.
(f) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 57,600 shares of its common stock to an entity
owned by the registrant's founder and vice president in connection with a
sublease for the Registrant's current principal executive offices and valued at
$28,800. The registrant believes that these securities were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Act.
(g) Effective July 1, 2001, the registrant issued, in a private
transaction, an aggregate of 144,000 shares of its common stock to each of the
registrant's founder and vice president in connection with their two-year
employment agreements with the registrant. The registrant believes that these
securities were issued in a transaction not involving a public offering in
reliance upon an exemption from registration provided by Section 4(2) of the
Act.
Item 27. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation. *
3.2 By-Laws. *
4.1 Specimen common stock certificate. *
4.2 Specimen class A warrant certificate. *
4.3 Specimen class B warrant certificate. *
5.1 Opinion of Snow Becker Krauss P.C. +
10.1 Form of Escrow Agreement, to be entered into between Crest
View Inc. and Southwest Escrow Company.+
10.2 Form of Promissory Notes made on August 23, 2000,
September 7, 2000 and February 17, 2001.
10.3 Employment Agreement, dated as of July 1, 2001, between Crest
View Inc. and Johnny R. Thomas.
10.4 Employment Agreement, dated as of July 1, 2001, between Crest
View Inc. and John C. Francis.
II - 6
10.5 Exchange Agreement, dated April 1, 2001, between Crest View Inc. and
Johnny R. Thomas.
10.6 Exchange Agreement, dated June 29, 2001, between Crest View Inc. and
Johnny R. Thomas.
10.7 Sublease Agreement, dated as of July 1, 2001, between Crest View Inc.
and Falcon Financial Group LLC.
10.8 Form of promissory note issued to real property lenders.
23.1 Consent of Snow Becker Krauss P.C. (included in legal opinion
filed as Exhibit 5.1). +
23.2 Consent of Lazar Levine & Felix LLP.
----------
* Previously filed.
+ To be filed by amendment.
Item 28. Undertakings.
The registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer 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 small business issuer of
expenses incurred or paid by a Director, officer or controlling person of the
small business issuer 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 small business issuer will,
unless in the
II - 7
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.
(5) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Act as part of this registration statement as of the time the
Commission declared it effective.
(6) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II - 8
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Henderson, State of Nevada on September 17, 2001.
CREST VIEW, INC.
By: /s/ Johnny R. Thomas
-----------------------------
Johnny R. Thomas, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Signature Title Date
--------- ----- ----
/s/ Johnny R. Thomas Chairman of the Board,
-------------------------- President, Treasurer
Johnny R. Thomas (Principal Executive Officer) September 17, 2001
/s/ John C. Francis Vice President, Chief
-------------------------- Financial Officer
John C. Francis and Director (Principal
Accounting and
Financial Officer) September 17, 2001
II - 9
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.2 Form of Promissory Notes made on August 23, 2000, September 7, 2000
and February 17, 2001.
10.3 Employment Agreement, dated as of July 1, 2001, between Crest
View Inc. and Johnny R. Thomas.
10.4 Employment Agreement, dated as of July 1, 2001, between Crest
View Inc. and John C. Francis.
10.5 Exchange Agreement, dated April 1, 2001, between Crest View Inc. and
Johnny R. Thomas.
10.6 Exchange Agreement, dated June 29, 2001, between Crest View Inc. and
Johnny R. Thomas.
10.7 Sublease Agreement, dated as of July 1, 2001, between Crest View
Inc. and Falcon Financial Group LLC.
10.8 Form of promissory note issued to real property lenders.
23.2 Consent of Lazar Levine & Felix LLP.
II - 10