Registration No. 333-76746
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Amendment Number 2)
----------------------
US Patriot, Inc.
(Name of Small Business Issuer in its Charter)
South Carolina 5699 57-1107699
-------------------------- -------------------------- ------------------
(State of Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
5401 Forest Drive
Columbia, SC 29206
(803) 790-5294
(Address and telephone number of principal executive offices
and principal place of business)
Phillips N. Dee
5401 Forest Drive
Columbia, SC 29206
(803) 790-5294
(Name, address and telephone number of agent for service)
Copies to:
James G. Dodrill II, Esq.
James G. Dodrill II, P.A.
3360 NW 53rd Circle
Boca Raton, FL 33496
(561) 862-0529 tel
(561) 862-0927 fax
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Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
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If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. (X)
1
If this Form is filed to register additional securities for an
offering pursuant to Rule 462 (b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of earlier effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule
462 (c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( ).
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. ( ).
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM
OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SHARES TO BE BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE <F1> PRICE FEE
- ------------------- ----------- --------- --------- ------------
Common Stock, $.0001 500,000 $0.50 $250,000 $59.75
par value to be sold
by the company
Common Stock,
$.0001 par value to be 1,670,000 $0.50 $835,000 $199.56
sold by selling
shareholders
TOTAL 2,170,000 $1,085,000 $259.31
- ----------------------
<FN>
<F1>
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457.
-------------------------------------------
</FN>
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. We may
not sell these securities 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 in which
the offer or sale is not permitted.
ii
2
PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL 18, 2002
2,170,000 Shares of Common Stock
US PATRIOT, INC.
The Offering:
-------------
This is our initial public offering. We are registering a total
of 2,170,000 shares of our common stock, of which 500,000 are being
offered by the company and 1,670,000 are being offered by selling
shareholders. The shares we are offering are being offered on a self-
underwritten basis and there is no minimum amount that we must sell in
order for this offering to proceed. The selling shareholders will
sell at a price of $0.50 per share until their shares are quoted on
the OTC Bulletin Board and thereafter at prevailing market prices or
at privately negotiated prices. We will sell at a price of $0.50 per
share.
There is no established public market for our common stock and we
have arbitrarily determined the offering price. Although we hope to
be quoted on the OTC Bulletin Board, our common stock is not currently
listed or quoted on any quotation service. There can be no assurance
that our common stock will ever be quoted on any quotation service or
that any market for our stock will ever develop.
Proposed Trading Symbol: OTC Bulletin Board - "USPI"
_________________________________
Investing in our stock involves risks. You should carefully
consider the Risk Factors beginning on page 8 of this prospectus.
We have not authorized anyone else to provide you with different
information. The common stock is not being offered in any state where
the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
______________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
_______________________
The information in this prospectus is not complete and may be
changed. None of these securities may be sold until a registration
statement filed with the Securities and Exchange Commission is
effective. The 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.
The date of this prospectus is April 18, 2002
3
TABLE OF CONTENTS
Page
----
Prospectus Summary 3
The Offering 4
Summary Financial Information 7
Risk Factors 8
Use of Proceeds 14
Determination of Offering Price 16
Dividend Policy 16
Dilution 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Business 23
Management 32
Principal Shareholders 34
Selling Shareholders 35
Description of Securities 37
Indemnification 39
Plan of Distribution 40
Legal Matters 42
Experts 42
Where You Can Find More Information 43
Index to Financial Statements F-1
As used in this prospectus, the terms "we," "us," "our," "the
company," and "US Patriot" mean US Patriot, Inc., a South Carolina
corporation. The term "selling shareholders" means our shareholders
who are offering to sell their shares of US Patriot common stock that
are being registered through this prospectus. The term "common stock"
means our common stock, par value $0.0001 per share and the term
"Shares" means the 2,170,000 shares of common stock being offered
through this prospectus.
2
4
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all of the
information that may be important to you. You should read the entire
prospectus. You should consider the information set forth under "Risk
Factors" and our financial statements and accompanying notes that
appear elsewhere in this prospectus.
US Patriot, Inc. is a company based in Columbia, South Carolina
that sells and services military and law enforcement clothing,
gear and related equipment. The company currently sells through
its one existing retail store in Columbia, and plans to
expand into law enforcement, correction and security uniforms
and soft goods at its current location, and then subsequently
through franchising. The company will serve as the distributor and
wholesale supplier to franchisees for these products.
We were incorporated in South Carolina in 2000. For the fiscal
year ended October 31, 2001, we achieved revenues of approximately
$344,000.
Our office is located at 5401 Forest Drive, Columbia, South
Carolina 29206 and our telephone number is (803) 790-5294.
3
5
The Offering
------------
Securities Offered 2,170,000 shares of common
stock, 500,000 of which are
being offered by us and
1,670,000 shares of which
are being offered by the
selling shareholders; See
"Description of Securities"
Common Stock Outstanding, before offering 5,335,000
Common Stock Outstanding, after offering <F1> Assuming all warrants are
exercised, if we are
successful in selling all
shares we are offering, we
will have 6,170,000 shares
outstanding. If we are only
able to sell 50% of the
shares we are offering, we
will have 5,920,000 shares
outstanding. If we are
only able to sell 10% of
the shares we are offering,
we will have 5,720,000
shares outstanding.
Proposed OTC Bulletin Board Symbol USPI
Use of Proceeds We will use the proceeds
of any sales of our common
stock for general
corporate purposes, which
includes the plan to
establish a franchise sales
effort and a warehousing
and distribution system
for franchisee support. We
will not receive any
proceeds from the sale of
common stock by our
selling shareholders. Of
the shares being
registered for resale to
the public, 335,000 may be
privately acquired by the
selling shareholders by
exercising warrants to
purchase such shares from
us at a price of $0.40 per
share. We will receive
proceeds to the extent
that any of the warrants
are exercised and intend
to use the proceeds from
the exercise of any of the
warrants for general
corporate purposes. See
"Use of Proceeds."
<FN>
<F1>
(1) assumes the exercise of all 335,000 warrants and the sale of all 500,000
shares offered by us.
</FN>
4
6
Dividend Policy We do not intend to pay
dividends on our common
stock. We plan to retain
any earnings for use in
the operation of our
business and to fund
future growth.
5
7
Risk Factors
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The securities offered by this prospectus are highly speculative
and very risky. We have described the material risks that we face
within this prospectus. Before you buy, consider the risk factors
described and the rest of this prospectus. This prospectus also
contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere
in this prospectus. Please refer to "Risks Associated with Forward-
looking Statements" on page 12.
6
8
Summary Financial Information
-----------------------------
The following is a summary of our Financial Statements, which are
included elsewhere in this prospectus. You should read the following
data together with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of this
prospectus as well as with our Financial Statements and the notes
therewith.
(unaudited)
Year ended Three months
October Ended
31,2001 January 31, 2002
---------- ----------------
Statement of Operations Data:
Net Sales $ 343,584 $ 165,298
========== ===========
Gross Profit $ 134,298 $ 69,697
========== ===========
Net Loss $ (19,702) $ (1,832)
========== ===========
Net loss per share
- basic and diluted $ (0.00) $ (0.00)
========== ===========
(unaudited)
As of
January
31, 2002
--------
Balance Sheet Data
Cash and cash equivalents $ 1,474
Total current assets $ 87,690
Total assets $ 131,368
Total current liabilities $ 128,597
Total stockholders' equity (deficit) $ (11,831)
Total liabilities and stockholders' equity (deficit) $ 131,368
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RISK FACTORS
------------
The securities offered are highly speculative. You should purchase
them only if you can afford to lose your entire investment in us. You
should carefully consider the following risk factors, as well as all
other information in this prospectus.
Certain important factors may affect our actual results and could
cause those results to differ significantly from any forward-looking
statements made in this prospectus or otherwise made by us or on our
behalf. For this purpose, any statements contained in this prospectus
that are not statements of historical fact should be considered to be
forward-looking statements. Words such as "may," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the
negatives of those words, identify forward-looking statements. These
statements appear in a number of places in this prospectus and include
statements as to our intent, belief or expectations. These forward-
looking statements are subject to the risks detailed below or
elsewhere in this prospectus, or detailed from time to time in our
filings with the Securities and Exchange Commission. See "Risks
Associated With Forward-Looking Statements" on page 12.
Investors should assume that, even if not specifically stated
within this document, if any of the following risks actually
materialize, our business, financial condition or results of future
operations could be materially and adversely affected. In that case,
the trading price of our common stock could decline, and you may lose
all or part of your investment.
We have limited historical information for you to consider in
assessing whether to purchase our shares which may make it more
difficult for you to analyze the risks associated with investing in
us.
- -------------------------------------------------------------------
We have limited historical operating and financial data for
potential investors to consider in assessing the advisability of an
investment in our company or in evaluating us and our prospects.
Investors should consider the risks and difficulties frequently
encountered by companies like ours that have recently established a
new business enterprise. Our prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by new
businesses in a competitive industry. These risks, expenses and
difficulties include those associated with opening new retail
locations. A task such as this involves the difficulty and time
involved in picking a location management deems desirable, the risk
that management's assessment will be wrong and that such location will
not prove attractive to consumers and the expenses associated with
opening a new retail establishment. Due to the limited history of
undertaking projects such as this, our ability to sell products, and
the level of success, if any, we achieve, is difficult to accurately
project at this time.
We are currently in violation of one of the terms of our installment
loan agreement.
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On November 30, 2000, we entered into a 5-year installment loan
agreement with a financial institution to borrow $100,000 for the
purpose of purchasing inventory and equipment. Inventory,
accounts receivable, furniture and fixtures, equipment, and stockholder's
real property serve as collateral for the loan. The loan agreement
contains certain restrictive terms that require compliance
or constitute events of default. Specifically, the terms of the
significant debt covenants are that we must provide annual financial
statements and that there be no change in ownership greater that 25%
of our common stock. In the event of default, we are given the
opportunity to cure the default once notified of such breach of the
agreement by the financial institution. The default must be cured
within 15 days or as soon as reasonably possible as determined by the
financial institution. If cured within the specified timeframe, no
event of default will have occurred. We have been in violation of
the term requiring that there be no change in ownership of more than
25% for more than one year. While the financial institution has been
informed of the violation, we have not received a notice of
breach requiring that the default be cured. We are current with our
scheduled payments under this note and are currently attempting to secure
financing from another source in order to repay this loan.
If we are unable to secure such other financing and if the lender declares
the note in default and we are unable to cure such default the lender may
decide for foreclose on the collateral. Such events would have a materially
adverse effect on our ability to conduct business.
Our management has little experience operating a company such as ours,
which may lead to errors in decisionmaking that a more experienced
management team would not make.
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We were founded in October of 2000 and only entered our market in
December of 2000. Management has no proven record of success in
establishing and/or running a retail store or in franchising a business
concept. Because our management has little experience running a
company such as ours they may make errors in making decisions that an
experienced management team would not make.
8
10
Because of our chosen target market, we believe that we need to
establish our US Patriot brand and that failure to do so could reduce
our potential income.
- ---------------------------------------------------------------------
Currently the majority of our sales are to military and law
enforcement personnel. We believe that our chosen name, US Patriot,
is an asset that, once established, will contribute to the growth of
our business. Our business strategy includes using the US Patriot
name nationwide. Implementing this strategy requires the commitment
of financial resources that we do not presently have. We believe that
if we are unable to raise and commit resources to establishing our
chosen name we could experience a reduction in our potential income.
Our officers and directors are not required to continue as
shareholders and may not continue to maintain an equity interest in
the company. If they do not continue as shareholders their interests
may not mirror those of shareholders, which could lead to decisions
being made that reduce our revenues or otherwise adversely impact
shareholders.
- ---------------------------------------------------------------------
We are registering some shares of our common stock that are
currently held by our officers and directors. Additionally, there is
no requirement that any of our officers and/or directors retain any of
their shares of our common stock. Accordingly, there is no assurance
that all or any of our officers and/or directors will continue to
maintain an equity interest in the company. If our officers and
directors do not continue as shareholders their interests may become
different than those of shareholders, which could lead to decisions
being made that benefit management but not shareholders. Such
decisions could lead to a reduction in our net income and revenues and
ultimately to the reduction in the value of an investment in our stock.
Currently control of our company is concentrated in two major shareholders
who serve as President and a Director, which may adversely affect the
market price for our stock as well as the ability for unaffiliated
shareholders to influence decisions made by the company.
- --------------------------------------------------------------------------
Currently, two individuals hold 74.98% of our outstanding
common stock. Even if all shares of stock registered hereunder are
sold to unaffiliated individuals, these two individuals will still
hold 69.94% of our outstanding stock. Additionally, nothing prohibits
these two individuals from purchasing additional shares of our stock
in this offering. Accordingly, these two individuals have the
ability to control decisions made by the company to engage in
transactions such as mergers, acquisitions and reorganizations, any of
which could impact the value of an investment in the company.
Additionally, our legal counsel, who is unaffiliated with the company,
is currently the holder of 18.74% of our outstanding common stock
and accordingly may substantially influence our votes. If all shares are
sold in this offering except the shares that such shareholder is offering,
he will then own 16.21% of our outstanding common stock. Furthermore, nothing
prevents him from purchasing additional shares in this offering.
Additionally, having control of our company concentrated in a few
individuals could adversely affect the desirability of owning our
stock and accordingly the market price of our stock.
We face substantial competition from companies that have substantially
greater capital resources than we have.
- ----------------------------------------------------------------------
We face competition from various companies in each product line
we offer. One of these competitors in particular, Galls, is very well
established and has substantial capital resources. All of the
companies which we know serve our markets are larger and have greater
capital resources than we do.
Our outstanding warrants may never be exercised which would reduce the funds
we have available to expedite execution of our business plan.
- ----------------------------------------------------------------------------
9
11
We presently have outstanding warrants to purchase 335,000 shares of
our common stock at a price of $0.40 per share. If all of these warrants
are exercised we will receive proceeds of $134,000. These funds would be
used to expedite execution of our business plan. However, there can be no
assurance that any of the holders of our warrants will ever choose to
exercise any warrants. In that event we would receive no additional funds
from these warrants would likely be forced to seek alternative sources of
funding. In the event we are unable to secure additional funding we may be
unable to execute our business plan at any set timeframe, or at all.
There has never been a market for our common stock and if an active market
does not develop you may experience difficulty selling your shares if you
wish to do so which could result in you losing your entire investment.
- --------------------------------------------------------------------------
Prior to this offering, there has been no public trading market
for our common stock and there can be no assurances that a public
trading market for the common stock will develop or, if developed,
will be sustained. Although we hope to be accepted for quotations on
the Over the Counter Bulletin Board, there can be no assurance that a
regular trading market will develop for the common stock offered
through this prospectus, or, if developed, that it will be maintained.
Company's that trade on the bulletin board are often referred to
as "penny stocks" and are subject to various regulations involving
certain disclosures to be given to you prior to the purchase of any
penny stocks. These disclosures require you to acknowledge you
understand the risk associated with buying penny stocks and that you
can absorb the entire loss of your investment. Penny stocks are low
priced securities that do not have a very high trading volume.
Consequently, the price of the stock is volatile and you may not be
able to buy or sell the stock when you want and may lose your entire
investment if you wished to sell your stock but were unable to do so
because of the lack of an active trading market.
We have not paid dividends in the past and there is no assurance
of future dividends being paid which may reduce the total return on
any investment you make in the company.
- -------------------------------------------------------------------
We have never paid any dividends and at this time we do not
anticipate paying dividends in the future, but instead plan to retain
any earnings for use in the operation of our business and to fund
future growth. We are under no legal or contractual obligation to
declare or to pay dividends, and the timing and amount of any future
cash dividends and distributions is at the discretion of our Board of
Directors and will depend, among other things, on our future after-tax
earnings, operations, capital requirements, borrowing capacity,
financial condition and general business conditions. There is no
assurance that our management will use any retained earnings in a wise
manner or in a manner that generates additional revenue or earnings.
Accordingly, decisions to retain any earnings may ultimately reduce
the total return on any investment made in the company.
We may require additional financing and could experience reduced
income or revenue or other difficulties in operating our business if
we required such funding and were unable to raise it.
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10
12
At October 31, 2001, we had current assets of $83,074. To assist
us in our cash flow requirements we may determine, depending upon the
prevailing stock price of our shares, to seek subscriptions from the
sale of our securities to private investors, although there can be no
assurance that we will be successful in securing any investment from
private investors at terms and conditions satisfactory to us, if at
all. Based upon our present liquid resources and our present
operating expenses, and if we continue generating revenues from
operations at their present level, we believe we will be able to
maintain our current operations for a minimum of twelve months. If
additional funds are required, but cannot be raised, it could result
in us experiencing reduced income or revenue or other difficulties
operating our business. To the extent that additional funds are
obtained by the sale of equity securities, our shareholders may
sustain significant dilution.
Future sales of our common stock may have a depressive effect upon its
price.
- ----------------------------------------------------------------------
All 5,335,000 of the currently outstanding shares of common stock were
issued at prices lower than the price of the shares of common stock in
this offering. With the exception of the 1,670,000 shares of
common stock being registered in this Registration Statement for our
selling shareholders (including the 335,000 shares of common stock
issuable upon exercise of our outstanding warrants), these shares are
"restricted securities" as that term is defined by Rule 144 of the
Securities Act, and in the future, may be sold in compliance with Rule
144 or pursuant to an effective registration statement. Rule 144
allows a person, subject to certain requirements, who has beneficially
owned restricted securities for a period of one year to, every three
months, sell in brokerage transactions an amount that does not exceed
the greater of (1) 1% of the outstanding number of shares of a
particular class of such securities or (2) the average weekly trading
volume in such securities on all national exchanges and/or reported
through the automated quotation system of a registered securities
association during the four weeks prior to the filing of a notice of
sale by a securities holder. In the future, sales of presently
restricted securities may have an adverse effect on the market price
of our common stock should a public trading market develop for such
shares.
Our shares are "Penny Stocks" which are subject to certain
restrictions that could adversely affect the liquidity of an
investment in us.
- ------------------------------------------------------------
Our shares are "penny stocks" within the definition of that term
contained in Rules 15g-1 through 15g-9 promulgated under the
Securities Exchange Act of 1934, as amended, which imposes sales
practices and disclosure requirements on certain broker-dealers who
engage in certain transactions involving penny stocks. These
additional sales practices and disclosure requirements could impede
the sale of our securities, including securities purchased herein, in
the secondary market. In addition, the liquidity for our securities
may be adversely affected, with related adverse effects on the price
of our securities.
Under the penny stock regulations, a broker-dealer selling penny
stocks to anyone other than an established customer or "accredited
investor" (generally, an individual with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together
with his or her spouse) must make a special suitability determination
for the purchaser and must receive the purchaser's written consent to
the transaction prior to the sale, unless the broker-dealer is
otherwise exempt. In addition, unless the broker-dealer or the
transaction is otherwise exempt, the penny stock regulations require
the broker-dealer to deliver, prior to any transaction involving a
penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock. A broker-dealer is
also required to disclose commissions payable to the broker-dealer and
the Registered Representative and current quotations for the securities.
11
13
A broker-dealer is additionally required to send monthly
statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect
to the limited market in penny stocks.
Risks associated with forward looking statements.
- -------------------------------------------------
This prospectus contains certain forward-looking statements
regarding management's plans and objectives for future
operations, including plans and objectives relating to our planned
marketing efforts and future economic performance. When we use words
like "intend," "anticipate," "believe," "estimate," "plan" or
"expect," we are making forward-looking statements. We have based
these forward-looking statements on our current expectations about
future events and believe that the assumptions and expectations
reflected in such forward-looking statements are reasonable, based on
information available to us on the date of this prospectus, but these
assumptions and expectations may not be correct and we may not take any
action that we presently are planning. The forward-looking statements
are subject to risks, uncertainties and assumptions that are discussed
in the Risk Factor section above as well as throughout this prospectus.
The forward-looking statements and associated risks set forth in this
prospectus include or relate to:
(1) our ability to obtain a meaningful degree of consumer
acceptance for our products now and in the future,
(2) our ability to market our products at competitive prices now
and in the future,
(3) our ability to maintain brand-name recognition for our
products now and in the future,
(4) our ability to maintain an effective distributors network,
(5) our success in forecasting demand for our services now and
in the future,
(6) our ability to maintain pricing and thereby maintain
adequate profit margins,
(7) our ability to achieve adequate intellectual property
protection and
(8) our ability to obtain and retain sufficient capital for
future operations.
12
14
In light of these risks, uncertainties and assumptions, the forward-
looking events discussed in this prospectus might not occur. We are
not undertaking to publicly update or revise any forward-looking
statement if we obtain new information or upon the occurrence of
future events or otherwise.
13
15
USE OF PROCEEDS
---------------
We will use any proceeds raised from the sale of securities we
are offering for general corporate purposes and expediting the execution of
our business plan. Below we have set forth specific items which funds
raised would be allocated towards. There is no minimum amount that
must be sold in order for this offering to proceed. Instead, we
anticipate that the greater the amount we are able to raise through
this offering, the faster we will be able to execute our business plan.
General Corporate purposes include the establishment of a strong
management team and support personnel to build and administer a
wholesale supply system for prospective franchisees, as well as for
selling franchises. Simultaneous undertakings of the supply side as
well as the sales efforts will be funded to accelerate the company's
growth. If we successfully sell all shares registered for sale by us,
we would generate adequate capital to lease, stock and staff a warehouse
facility to support franchises. This scenario would allow us to
contract for larger quantities of product, buying at a greater
discount and warehousing for distribution. These funds would also
allow us to bring production of embroidered and printed uniform and
clothing items under our control immediately rather than in the
future.
If we are able to sell one-half of the shares registered for sale
by us, we would begin sales efforts, and set up the administrative side of our
wholesale sales efforts to receive, execute and track franchise
orders. Hiring would be possible for outside sales, and
administrative tracking of orders from the franchisees. These orders
would be shipped directly from outsourced suppliers and service
providers. In this scenario our office would serve as a clearinghouse
for orders, until enough cash from operations became available to begin
warehousing operations and accordingly take advantage of accompanying
economies of scale.
If we only raise minimal funds through this offering, we would
proceed with our one store, expanding inventory, and establish a
smaller scale system for aiding the first franchisees. Franchise
sales would be handled by our current staff, as would store management
and order tracking. This scenario would slow our development
significantly, but we anticipate that we would not alter our business
plan. We believe that our existing management would be able to handle
the initial sales of franchise's and their establishment, and the
proceeds from these first sales would then be used as capital for
company growth.
We will not receive any proceeds from the sale of securities
being offered by our selling shareholders.
We will receive proceeds to the extent that any holder of a
warrant decides to exercise such warrant and intend to use the
proceeds from the exercise of any of the 335,000 warrants for working
capital and for general corporate purposes; however, there can be no
assurance that all or any portion of these shares will be sold. If
all of the 335,000 warrants are exercised at $0.40, we will receive
gross proceeds of $134,000. Any proceeds received through the
exercise of warrants will be used as set forth above to supplement the
amount we raise through the sale of our common stock.
We expect to incur expenses of approximately $60,000 in
connection with the registration of the shares. In the event that we
are able to raise less than $60,000 through this offering, all funds we
raise will be used to pay these expenses. Accordingly, in order for us to
receive any proceeds we must sell at least 120,000 shares, which equals
24% of the shares registered for sale by us.
14
16
The table below shows how proceeds from this offering would be used for
scenarios where we sell various amounts of the shares and the priority of
the use of net proceeds in the event actual proceeds are not sufficient to
accomplish the uses set forth. While management has developed the
following estimates to the best of its ability, there can be no assurance
that we will spend the use of proceeds exactly as laid out in the table.
Total shares offered by the company 500,000 500,000 500,000 500,000
Percent of total shares offered 25% 50% 75% 100%
Shares sold 125,000 250,000 375,000 500,000
Gross proceeds from offering 62,500 125,000 187,500 250,000
Less: offering expenses 60,000 60,000 60,000 60,000
------------- ------------ ------------ ------------
Net proceeds from offering 2,500 65,000 127,500 190,000
Use of net proceeds
Operating expenses & working capital 2,500 5,000 10,000 10,000
Inventory Expansion 20,000 30,000 50,000
Franchise Sales Effort 25,000 40,000 40,000
Establishing Distribution System (Hiring, Infrastructure) 20,000 20,000
Current Debt Retirement 27,500 70,000
It is possible that no proceeds may be raised from this offering. It is
also possible that some, but not all, of the 500,000 shares offered will be
sold. If fewer than all of the shares are sold, we may ultimately need to
delay or modify our business plan. There can be no assurance that any delay or
modification will not adversely affect our development and ultimately our
chance of success. If we require additional funds to develop our plan, such
funds may not be available on terms acceptable to us, or at all.
The amounts set forth above are estimates developed by our management
for allocation of net proceeds of this offering based upon our current plans
and prevailing economic and industry conditions and assumes that we are able
to sell the numbers of the shares set forth in each column above. Although
we do not currently contemplate material changes in the proposed use of
proceeds set forth above, to the extent that our management finds that
adjustments are required, the amounts shown may be adjusted among the uses
indicated above. Our proposed use of proceeds is subject to changes in
general, economic and competitive conditions, timing and management
discretion, each of which may change the amount of proceeds expended
for the purposes intended. The proposed application of proceeds is also
subject to changes in market conditions and our financial condition in
general. Changes in general, economic, competitive and market conditions
and our financial condition would include, without limitation, the occurrence
of a national economic slowdown or recession, a significant change in the
military and law enforcement clothing, gear, and related equipment industry
and the environment in which we operate, and/or regulatory changes in general.
While our management is not currently aware of the existence or pending threat
of any of the foregoing reasons, we provide you no assurance that one or more
of such events will not occur.
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DETERMINATION OF OFFERING PRICE
-------------------------------
Prior to this offering, there has been no market for our common
stock. The offering price of the shares was arbitrarily determined and
bears no relationship to assets, book value, net worth, earnings,
actual results of operations, or any other established investment
criteria. Among the factors considered in determining the price were
our historical sales levels, estimates of our prospects, the
background and capital contributions of management, the degree of
control which the current shareholders desired to retain, current
conditions of the securities markets and other information.
DIVIDEND POLICY
---------------
It is our present policy not to pay cash dividends and to retain
future earnings for use in the operations of the business and to fund
future growth. Any payment of cash dividends in the future will be
dependent upon the amount of funds legally available, our earnings,
financial condition, capital requirements and other factors that the
Board of Directors may think are relevant.
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DILUTION
--------
Net tangible book value per share represents the amount of our
total tangible assets less total liabilities, divided by the total
number of shares of common stock outstanding. Our net tangible book
value at October 31, 2001 was $(16,699), or $(0.003) per share of
common stock. On November 20, 2001, the Company issued 335,000 shares
for $0.02 per share, increasing the net tangible book value by $6,700,
or $.001 per share, to $(0.002) per share. Our unaudited net tangible
book value at January 31, 2002 was $(11,831) or $(0.002) per share.
Dilution per share represents the difference between the offering price
of $0.50 per share and the net tangible book value per share of common
stock, as adjusted, subsequent to this offering.
After giving effect to the completion of the offering, assumed to have
taken place January 31, 2002, and after
deducting offering expenses estimated to be $60,000, our pro forma net
tangible book value will be $178,169, or $0.031 per share assuming the
sale of all 500,000 shares being offered by the company. This
represents an immediate increase in pro forma net tangible book value
of $0.033 per share to existing shareholders and an immediate dilution
of $0.467 per share, or approximately 93.4% of the offering price, to
investors purchasing shares of common stock in the offering.
Public offering Price per share $ 0.50
Net Tangible Book Value per share before offering $(0.002)
Increase Per Share attributable to sale of these shares $ 0.033
Pro-Forma Net Tangible Book Value after offering $ 0.031
Dilution per share to Public Investors $ 0.469
The following table summarizes as of January 31, 2002, the
number of shares purchased as a percentage of our total outstanding
shares, the aggregate amount paid for such shares, the aggregate
amount paid figured as a percentage of the total amount paid, and the
average amount paid per share for such shares (see "Certain
Transactions" for a description of these transactions). For purposes
of this table, the sale to the public of these shares, is assumed to
have taken place on January 31, 2002 to include the most recent quarters
operating results and the shares issued November 15, 2001.
Shares Purchased Total Consideration Paid Average Price
Number Percent Amount Percent per Share
--------- -------- --------- ------- -------------
Existing Shareholders 5,335,000 91.43% $ 17,700 6.61% $0.0033
New Investors 500,000 8.57% $ 250,000 93.39% $0.50
--------- -------- --------- ------- -------------
Total 5,835,000 100.0% $ 267,700 100.0% $0.0459
The following table sets forth the estimated net tangible book
value ("NTBV") per share after the offering (less offering expenses of
$60,000) and the dilution to persons purchasing shares based upon
various levels of sales of the shares being achieved:
Shares outstanding prior to offering: 5,335,000
Total shares offered 500,000 500,000 500,000 500,000
Shares sold 125,000 250,000 375,000 500,000
Public offering price $0.50 $0.50 $0.50 $0.50
Per share increase attributable to
new investors $ 0.000 $ 0.012 $ 0.022 $ 0.033
NTBV per share prior to offering $ (0.002) $ (0.002) $ (0.002) $ (0.002)
--------- --------- --------- ---------
Post offering pro forma NTBV per share $ (0.002) $ 0.010 $ 0.020 $ 0.031
Dilution to new investors $ 0.50 $ 0.490 $ 0.480 $ 0.469
Percent of dilution of the offering price 100.0% 98.0% 96.0% 93.8%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
--------------------
The following is a discussion of our results of operations and
our liquidity and capital resources. To the extent that our analysis
contains statements that are not of a historical nature, these
statements are forward-looking statements, which involve risks and
uncertainties. See "Risks Associated With Forward Looking
Statements". The following should be read in conjunction with our
Financial Statements and the related notes included elsewhere in this
prospectus.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The Company has adopted various accounting policies which govern the
application of accounting principles generally accepted in the United States
in the preparation of the Company's financial statements. The significant
accounting policies of the Company are described in the footnotes to the
financial statements.
Certain accounting policies involve significant judgments and assumptions
by management which have a material impact on the carrying value of certain
assets and liabilities; management considers such accounting policies to be
critical accounting policies. The judgments and assumptions used by management
are based on historical experience and other factors, which are believed to be
reasonable under the circumstances. Because of the nature of the judgments and
assumptions made by management, actual results could differ from these
judgments and estimates which could have a material impact on the carrying
values of assets and liabilities and the results of operations of the Company.
The Company believes that the accounting for income taxes and recognition
of deferred tax assets requires the most significant use of judgment and
estimates in the preparation of its financial statements. Refer to the
summary of significant accounting policies in the footnotes to the financial
statements for a detailed description of the Company's methodology related to
income taxes.
Overview
- --------
US Patriot was incorporated in the state of South Carolina in
2000. We currently operate one company store, and intend to establish
franchises nationwide supported by our management and distribution
services. By partnering with the franchisees in a
relationship that will maximize everyone's investment, we are
committed to providing the franchisees with a quality,
competitively priced range of products for their resale. We believe
that growth will occur through our company owned store as well as
franchises.
At this time we have not entered into any franchise agreements
with any parties in any locations. Our primary markets are military,
law enforcement, security, fire and rescue personnel located
in Columbia, South Carolina. We currently sell uniforms, uniform
accessories, field gear such as holsters, knives and load carrying
equipment, and related casual clothing in our one store, which is
located in Columbia, SC. We also operate a uniform sewing and alterations
shop in the same facility that sews patches on military duty
uniforms, law enforcement tactical uniforms and performs alterations
for dress and duty uniforms for military and law enforcement entities.
Our customers are individuals employed in these fields: local, state
and federal agencies related to the military and law enforcement;
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private law enforcement and security groups; and individual customers
who utilize our products for hunting, outdoor activities and
recreation. We believe that the past year has seen an increased
awareness for military and law enforcement related concerns in our
society. It is our belief that public and private spending in these
areas will increase in the future, and we plan to be well positioned to
capitalize on this anticipated growth. Our current company store
began serving just the military, but has seen an increased demand from
the law enforcement and related agencies' community. As the store has
expanded its product offerings into more law enforcement related items
such as lightweight nylon duty belts, weapons holsters and
accessories, the crossover between our military customers and the
emerging market of law enforcement professionals became increasingly
apparent. With the addition of services like sewing and alterations
we have been able to reach out to more customers, thus expanding our
customer base. The expansion of products and services has been
financed internally from working cash flow to build greater returns
upon the fiscal results of our success. Our store is unique to the
regional market as we sell only new gear, clothing and equipment.
Results and Plan of Operations
- ------------------------------
For the year ended October 31, 2001 we achieved $343,584 in net
sales. This compares to having achieved no net sales during the
period from inception (October 2, 2000) through October 31, 2000.
During that prior period we were solely in the development stage and
had not opened our store. During the year ended October 31, 2001 we
incurred $209,286 as our cost of sales, compared to no cost of sales
during the period from inception through October 31, 2000. Selling,
general and administrative expenses totaled $151,512 during the year
ended October 31, 2001 compared to $3,747 during the period from
inception through October 31, 2000. This increase of $147,765 was the
result of our store opening on December 26, 2000 and having
approximately ten months of operations compared to a period of less
than one month and no operations. Our net loss for the year ended
October 31, 2001 totaled $19,702, compared to a net loss of $2,997 for
the period ended October 31, 2000. This increase of $16,705 was
primarily a result of having approximately ten months of operations
compared to a period of less than one month.
For the three months ended January 31, 2002, we achieved $165,298 in
net sales. This compares to having achieved net sales of only $9,565
during the three months ended January 31, 2001. We attribute this
increase in sales to the store becoming better established in its
market and to the commencement of contract sales to public entities.
During the three months ended January 31, 2002 we incurred $95,601 as
our cost of sales, compared to $5,261 in the same period in the prior
year. Selling, general and administrative expenses totaled $71,004
during the three months ended January 31, 2002 compared to $18,579
during the same period in the prior year. As noted above, the increases over
the prior period for cost of sales and selling, general and administrative
expenses are due to the comparison of three months of operations to the first
month of operations and the respective sales volumes for each period. Our net
loss for the three months ended January 31, 2002 totaled $1,832,
compared to a net loss of $11,502 for the same period in the prior year.
The increase in sales over the three months ended January 31, 2001 is
primarily attributed to the operning of the store on December 26, 2000 and
having 3 months of operations in the first quarter of 2002 as compared to the
first month of operations representing the entire first quarter of 2001.
Management believes even if we are unsuccessful in selling any of
the shares of common stock offered by this prospectus, we will be able
to satisfy our cash requirements for at least the next 12 months.
Fully executing our business plan beyond the present stage,
however, will increase our cash needs and monthly
burn rate and we will not be able to begin complete execution of
our plan until we have raised substantial additional resources or
begun generating greater sales through our existing store.
We do not anticipate that there will be any significant changes
in the number of employees or expenditures from what is discussed in
this prospectus. There can be no assurance, however, that conditions
will not change forcing us to make changes to any of our plan of
operations or business strategies.
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Liquidity and Capital Resources
- -------------------------------
While at this time, our current liabilities are mainly comprised
of current maturities of long term obligations, there can be no
assurance that current liabilities will continue to be less than our
current assets. Our business expansion will require significant
capital resources that may be funded through the sale of our common
stock, the issuance of notes payable or other debt arrangements that
may affect our debt and capital structure.
As of October 31, 2001 we have spent a total of $151,512 in
selling, general and administrative expenses. For the year ended
October 31, 2001 our funds have primarily been generated by sales of
products. Additionally, between October 2, 2000 and June 1, 2001 our
President loaned us $24,482. These advances were formalized in a note
agreement with us on June 1, 2001. The note was issued as a 5-year
term loan that does not bear interest and requires two payments of
principal per year, beginning on December 31, 2002.
On November 30, 2000 we entered into a 5-year installment loan
agreement with a financial institution to borrow $100,000 for the
purpose of purchasing inventory and equipment. The loan bears
interest at the institution's prime rate plus 1%, which was 6% at
October 31, 2001. The note is payable in 60 monthly principal and
interest payments of $2,156. Inventory, accounts receivable,
furniture and fixtures, equipment, and shareholder's real property
serve as collateral for the loan. The loan agreeement contains
certain restrictive terms that require compliance or constitute
events of default. The terms of the significant debt covenants are
that we provide annual financial statements and that there be no change
in ownership greater than 25% of our common stock. We were in compliance
with all terms with the exception of the ownership term as of October 31,
2001. In the event of default, we are given the opportunity to cure the
default once notified of such breach of the agreement by the financial
institution. The default must be cured within 15 days or as soon as
reasonably possible as determined by the financial institution. If cured
within the specified timeframe, no event of default will have occurred. As
of January 2, 2001, we have been in violation of the term requiring that
there by no change in ownership of more than 25% of borrower. While the
financial institution has been informed of the violation, we have not
received a notice of breach requiring the default be cured. We are current
with our scheduled payments.
On October 15, 2001 we entered into a one-year installment loan
of $12,500 with a financial institution to purchase equipment. The
note bears interest at the institution's prime rate plus 1%, which was
6% at October 31, 2001. The note is payable in 12 monthly principal
and interest payments of $1,092. The equipment serves as collateral
for the loan.
We also raised $6,700 through a Regulation D private placement in
November of 2001.
Management believes even if we are unsuccessful in selling any of
the shares of common stock offered by this prospectus, we will be able
to satisfy our cash requirements for at least the next 12 months.
Funds raised through this offering will allow us to expedite our
business plan faster.
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The following are all of our contractual obligations as of October 31,
2001.
Payments Due by Period as of October 31, 2001
---------------------------------------------
Less than 1-3 3-5
Contractual Obligations Total 1 year years years
Long-Term Debt $143,230 $43,872 $61,536 $37,822
Capital Lease Obligations 1,809 696 936 177
Operating Leases 111,125 38,100 73,025 -
Total Contractual Cash Obligations $256,164 $82,668 $135,497 $37,999
The preceding table should be read in conjunction with the footnotes to
the financial statements for a description of provisions that create, increase
or accelerate liabilities, and detail other pertinent data. The payments in
the above table include contractual payments, consisting of principal and
interest where applicable, required under the respective obligations. Refer
to the Liquidity and Capital Resources section of Management's Discussion
and Analysis of Financial Condition and Results of Operation where the
Company's violation of one of its debt covenants is discussed.
Forward Looking Statements
- --------------------------
Certain statements in this report are forward-looking statements
within the meaning of the federal securities laws. Although the
Company believes that the expectations reflected in its forward-
looking statements are based on reasonable assumptions, there are
risks and uncertainties that may cause actual results to differ
materially from expectations. These risks and uncertainties include,
but are not limited to, competitive pricing pressures at both the
wholesale and retail levels, changes in market demand, changing
interest rates, adverse weather conditions that reduce sales at
distributors, the risk of assembly and manufacturing plant shutdowns
due to storms or other factors, and the impact of marketing and cost-
management programs.
Recent Accounting Pronouncements
- --------------------------------
In 2000, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101 - Revenue Recognition in Financial
Statements. This statement addresses the timing of revenue recognition.
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Management believes that they have appropriately recognized revenue in
accordance with the criteria set forth in the statement.
In June 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141- Business Combinations. This FASB addresses
accounting and reporting for all business combinations and defines the
purchase method as the only acceptable method. This statement is
effective for all business combinations initiated after June 30, 2001.
In June 2001, the FASB issued SFAS No. 142 - Goodwill and Other
Intangible Assets. This SFAS addresses how goodwill and other
intangible assets should be accounted for at their acquisition (except
for those acquired in a business combination) and after they have been
initially recognized in the financial statements. The statement is
effective for all fiscal years beginning after December 15, 2001. The
impact of this SFAS will not be material to the Company's financial
statements.
In August 2001, the FASB issued SFAS No. 144 - Accounting for the
Impairment or Disposal of Long-Lived Assets. This SFAS supercedes
prior pronouncements associated with impairment or disposal of long-
lived assets. The SFAS establishes methodologies for assessing
impairment of long-lived assets, including assets to be disposed of by
sale or by other means. This statement is effective for all fiscal
years beginning after December 15, 2001. This SFAS is not expected to
have a material impact on the Company's financial position.
Additional accounting standards that have been issued or proposed
by the FASB that do not require adoption until a future date are not
expected to have a material impact on the consolidated financial
statements upon adoption.
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BUSINESS
GENERAL
- -------
US Patriot Inc. is an owner and potential franchiser of retail
stores that sells, distributes, tailors and services military and law
enforcement related clothing, uniforms, gear and associated soft
goods. These soft goods include tactical field gear such as holsters,
pistol and other types of belts; numerous types of duffle and equipment
bags; military socks, gloves and clothes for various climactic
conditions; and military and law enforcement theme casual wear for all
age groups. We currently operate one company store, and intend to
establish franchises nationwide supported by our management and
distribution company. At this time we have no franchisees. We intend
to partner with our franchisees in a relationship that will maximize
everyone's investment. We are committed to providing our franchisees
with a quality, competitively priced range of products for their
resale. A strategy of serving both the private and public sectors
will provide stability for all levels of the organization. US Patriot
Inc. does not plan to open any more retail stores, our expansion will
be solely through the sale of franchises.
INDUSTRY OVERVIEW
- -----------------
We believe that the market for military and law enforcement
related products offers a tremendous opportunity. It encompasses
individuals, private companies and organizations, and a large part of
the public sector, at all levels of government. Select, targeted
marketing of select product lines towards specific segments is a key
to our gaining immediate penetration. We also believe that the market
is very favorable for franchise opportunities of this type.
Market Segmentation
-------------------
This section identifies the specific markets where we currently sell
our products. All other references in this section are a discussion of
target markets.
The military gear market appeals to a wide spectrum of the
population, with little geographic boundaries. It is our belief
that sales of military gear are higher in the South and near major
military installations, although there are veterans and patriotic
Americans in every town of our country. In urban markets military
gear can be stylish while in the rural areas it is a part of everyday
life due to its functionality and durability. There is even some
crossover with law enforcement requiring military type clothing and
gear in many applications. Individuals use the clothing, cold weather
gear and outdoor equipment for camping and other outdoor recreation.
Currently we sell to individuals from all walks of life. Our target
markets include organizations ranging from the Boy Scouts to church
groups to high school ROTC units also use the clothing and equipment.
Currently we sell military gear to individuals, Active Army, National
Guard and Army Reserve units, local public and private law enforcement
and College ROTC Departments. We consider all other markets mentioned
as target markets for the future sale of our products.
Law enforcement uniform and equipment products are geared to soft
goods such as clothing, tactical gear and web gear. Tactical and web
gear is used by civilians and professionals to carry equipment in an
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outdoor field environment, from holsters for carrying weapons to a
pistol belt and suspender system known to the military as web gear so
one individual can carry everything from food to ammunition to first
aid supplies. Currently we sell our products of this type to individuals,
and public and private law enforcement. Other examples of tactical gear
would be camouflage clothing and gear such as vests, netting or rainwear.
Officials and personnel of agencies from the local to state level wear
uniforms and accessories daily in the execution of their jobs. Local police,
sheriff's departments, state agents, paramedics and others in these
professions require large quantities of uniforms and accessories as
they are an integral part of their job. All of these organizations and
agencies represent target markets for our products. We are not currently
engaged in the sale of merchandise and products to these markets.
Private security companies are a growing industry in this
country, and they are becoming more professional and sophisticated in
their uniforms and equipment. As the need for security grows, and
more companies and organizations are sub-contracting this task,
numerous private firms have been founded. They are a growing market
and represent one of our targets. Private security companies and
their employees are a target market for our products. We are not
currently engaged in the sale of our products to these entities.
Miscellaneous uniforms are required for other functions,
including restaurant and hospital functions. Depending on a local
franchisees market, these lines will be available to them to target
these sectors also. Smaller demand uniforms are also available for
nationwide organizations such as the Civil Air Patrol, Coast Guard
Auxiliary and other official functions. All of these represent target
markets for our products and services.
Industry Analysis
- -----------------
The industry for retail and end user sales of both military and
law enforcement type equipment is highly fragmented and locally
oriented. We are offering what we believe to be a unique franchise
concept and also a unique retail concept designed with the local
partners' flexibility and effectiveness in consideration. We have the
opportunity to build our company through franchisees, which we
believe will provide a distinct advantage over company owned facilities
due to the fact that each franchisee has a vested interest in their
success. Currently we have not entered into franchise agreements
with any parties in any locations.
By offering the two revenue streams under one roof with the
franchises, we give the franchisees a broader base from which to
operate with two related but distinct markets. The first of the two
revenue streams is from the sale of military clothing and tactical
gear. As previously stated, there are many different markets for
these products, from hunters to soldiers to outdoorsmen. These
military clothing and gear products are also used extensively by law
enforcement. This is where the revenue stream crossover occurs. Law
enforcement and related entity sales are the second revenue stream for
their duty uniforms, accessories and other required items. Customers
doing business with the franchisee for military items will frequently
be related to law enforcement, and this builds the crossover business
for uniforms. This allows the franchisees to enter smaller markets
that might not adequately support each revenue stream
independently for adequate returns. The minimum acceptable market for
a franchisee is one that might not support each revenue stream
independently, though when combined they provide an acceptable return
on investment for the franchisee. Evaluations of all potential
franchisee's markets and situation will determine the minimum
threshold. If neither revenue stream is viewed as stable for a
particular market, then the suitability of that markets strength is
questionable. On the uniform side of the business there is generally
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one uniform supplier for a particular region and our format would
allow the franchisee to compete with the existing outlet and still
fall back on the complementing revenue stream for stability. While
there are many crossover customers for each of these revenue streams,
they also have sales opportunities independently, thus allowing for a
broader customer base. Management believes that they would also be
fairly well protected or positioned in the smaller markets, since
there would be less opportunity for additional competitors in small
and mid-size markets.
In larger markets the two revenue streams could stand
independently and may in fact need to in select situations. This will
be evaluated in the market studies undertaken for franchisees in these
areas. Additionally, some markets would require the establishment of
more than one US Patriot location. Franchisees would have a protected
radius and market and existing franchisees will have be granted a
right of first refusal to open new locations in fragmented markets.
In some lucrative trade areas franchisees may be required to open more
than one location to ensure complete market coverage and to also limit
the markets appeal to local, upstart competitors. Currently we have
not entered into franchise agreements with any parties in any
locations.
COMPANY OVERVIEW
- ----------------
We were incorporated in South Carolina in October 2000 and are
based in Columbia, South Carolina. We sell and service
military and tactical law enforcement clothing, gear and
related equipment. We currently sell through our one existing retail
store in Columbia, and plan to expand into a greater selection of law
enforcement, correction and security duty uniforms and soft goods at
our single company owned location and then subsequently through
franchising. We will serve as the distributor and wholesale supplier
to the franchisees for these products. At this time we have not
entered into any franchise agreements with any parties in any
locations.
Our sole currently operating store is located in Columbia, near
Fort Jackson, one of the United States Army's largest training posts.
This store sells new military equipment, clothing and gear to
soldiers, law enforcement, security personnel, Emergency Medical
Technicians (EMT), hunters and other civilians. Established in
December 2000, this store achieved net sales of $343,584 during the
year ended October 31, 2001. The Columbia SC market for law
enforcement and related entities duty uniforms and accessories is
dominated by a long time local company, Wright-Johnston Uniform
Company, which is headquartered in Columbia, SC. We believe that over
the years this company has continued to raise their margins, and have
been the sole bidder on numerous public bid opportunities. Local law
enforcement agencies, both public and private, have conveyed their
dissatisfaction with Wright-Johnston, citing high prices, complacency
and poor attentiveness to their particular needs. The success of our
current store with the military has been accomplished due to our
competitive prices, aggressiveness and attention to detail in meeting
the needs of both our individual and agency customers. We are
confident that these same attributes can be applied for success in the
law enforcement and related entity duty uniform and accessories
business.
Although at this time we have not entered into any franchise
agreements with any parties for any locations, the appearance and
success of our current store has generated numerous inquiries regarding
franchise opportunities. The franchisees will receive a license to operate
a store in their respective territories combining our two revenue
streams in one location. Their stores will sell new military related
clothing and gear and also professional uniforms. The combined venues
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will provide a related, though distinctly separate and substantial
sales base for the success of the franchises. Franchisees will
benefit from the market research and sales data generated from the
company owned stores. For their initial fee the franchises will
receive a turnkey store set-up, including retail point of sales
system, market study, site selection, store layout, management
procedures and ongoing management support. A key piece of our
strategy is to remain on the same team as the franchisees, both
working towards maximum profitability together. In this context, the
parent company receives no percentage royalty payment or commission
from franchisees. The profits they earn are theirs. Our primary
source of income as the franchisor is through the wholesale
distribution of merchandise to the franchisees. We will warehouse
adequate inventory to supply the franchisees their inventory, an
inventory that can be held at lower levels for greater cost
effectiveness since the parent company will maintain inventory and
push it forward to the stores as needed. By warehousing it ourselves
we control the distribution for greater efficiency. We also assume
the responsibility to supply the franchisees at competitive prices.
As we grow we will increase our buying power and lower our product
acquisition costs, thus increasing our revenue stream while
maintaining competitive pricing for the franchisees.
Objectives
- ----------
Our main objectives are as follows:
1. To develop and create a national chain of franchisees under the
name US Patriot, selling military related clothing, gear and
gifts in conjunction with law enforcement and other related
professional uniforms.
2. To create the systems and foundation of a management and
distribution company to support selling franchises in 2002.
Management systems would include the hiring of a store manager
for our existing store, and the hiring of seasoned sales and
administration managers to oversee the franchise sales and
support efforts as we grow. Included in the management framework
would be an ordering and tracking system for franchisee product
distribution, whether these products come from our facility,
shipped directly from manufacturers, or from other retailers. The
greatest cost in creating these systems is in hiring. A store
manager will cost, with burden, approximately $30,000 annually,
and a sales force will receive a monthly stipend, with the
majority of their compensation coming from sales commissions.
Current company management will undertake responsibility for
numerous roles until internally generated cash flows from store
revenues and franchise fee's allow the hiring of additional
support. The anticipated hard cost for creating and ordering a
tracking system for franchisee support is between $20,000 and
$30,000, with the additional expense of an administrative hire to
oversee these activities.
3. To forge strategic alliances to guarantee adequate, quality
sources of inventory items. Strategic alliances will be sought
with manufacturers and distributors of our products first and
foremost. Currently we have discussed, with no commitments, an
alliance with a large law enforcement, fire and rescue catalog
supplier to be our wholesale provider and distributor for these
related products. An alliance such as this would minimize our
capital outlay for a large portion of our product offerings, as
well as provide the inherent knowledge that comes from a long
established and seasoned distributor.
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Keys to success
- ---------------
We believe that the keys to success for US Patriot, Inc. are:
1. Successful development of a franchise sales and support system to
maximize returns for all parties involved.
2. Targeted marketing efforts with the franchisees to ensure
immediate market penetration.
3. The establishments of strategic public and private sector
alliances to expand our product lines ensure product quality and
maximize sales.
4. The successful management of our one retail store for product
testing and development, cash flow and market research.
5. The establishment of an Internet presence, coordinated with
specific targeted catalogs and mailings to solidify the companies
market presence and reputation.
Products and Services
- ---------------------
We provide military and law enforcement clothing, gear, equipment
and related soft goods for retail sale through our company store, and
intend to provide these in the future through franchises and bid
opportunities. Products are acquired and warehoused in Columbia, SC
for distribution. Currently we operate one retail store facility, in
Columbia, SC, where the administrative office, retail activity and
warehousing occur. As we grow and as sufficient funds are available, we will
evaluate the necessity of establishing a separate warehouse site.
Military gear can be tailored for the franchisees in regard to their
geographic location and law enforcement related uniforms are selected
based on local preferences. By serving a diverse client base our
company is able to make a range of products available through
corporate or the franchisees. As we grow we will consider producing
some items internally, including screen-printing and embroidery.
Products and Service Description
- --------------------------------
Through our store in the Columbia, SC market, we sell military
and related equipment, clothing and uniforms with a direct focus.
Located outside of Fort Jackson, SC, a major Army training post, the
inventory is geared to Army needs and our focus is on
military field uniforms and training aids. Based on local
demographics and market characteristics, the franchisees inventory
would be customized for their maximum profitability. The inventory
falls into two distinct classes as follows:
1. Military Gear: This includes military clothing, boots, boot care
products, gifts and other related products. Gifts include
soldier training items such as binoculars, shooting glasses,
knives, and both casual civilian and military uniform related
clothing items. We plan for our stores to be substitutes for the
traditional Army-Navy stores that sold used surplus items. All
of our products are new. From military cold weather gear to
flashlights, the quality and standard of military gear is tested
and known throughout the country. This product line will be one
of the two major income streams for the franchisees.
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2. Law Enforcement, Corrections, Security and other related
professional uniforms: We are introducing this product line in
the Columbia, SC market. While this market will sustain these
separate, though related, product lines under two roofs the plan
is for franchisees to put both lines in one location. We will
offer the uniformed professional a single source for a variety of
uniforms and accessories, from hats to boots to badges. While a
particular geographic area may use a certain type of uniform, the
design and production of a corporate catalog would allow us to
show them the different uniform options available.
3. An integral part of a military and law enforcement uniform store
is tailoring and alterations. Military customers require
everything from nametapes to rank sewn onto both field and dress
uniforms, and these dress uniforms often require tailoring. Law
enforcement tactical field uniforms have the same requirements as
military field uniforms for patches and nametapes. Law
enforcement and related entities also rely on tailoring and
alterations for duty uniforms. Repairs to uniforms are also
important sewing tasks for the military and law enforcement
communities, as they tend to be rougher on clothing than most
occupations.
STRATEGY
- --------
General
-------
Our strategy is to make our new military and law enforcement
products available nationally through a network of franchises.
By carrying two separate though related product lines, we and our
future franchisees will have a broader foundation for sales.
We will warehouse and distribute products to the franchisees with
product selection based on their unique market situations. We
will also own and operate a single retail store in the Columbia,
SC market for military clothing and equipment as well as law
enforcement and related uniforms and gear. By supporting our stores
and those of the franchisees with product we believe that we will
gain volume buying power and national exposure. This will in turn
support our planned Internet presence and catalog sales. In time
we will seek to gain control of production of certain goods and products.
Marketing Strategy
------------------
Our marketing strategy is geared towards establishing regional
franchises first then expanding outward from there. While we already
have several prospective franchisees in our current region, we will
identify specific markets for initial franchise locations then begin
our search through shows, business brokers and local advertising.
This approach should give us locations that are in closer proximity
and better known in order to refine our strategy and establish our
logistic support. Currently we have not entered into any type of
franchise arrangements with any parties in any locations. Our goal is
to begin selling franchises by the end of 2002.
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Product marketing varies on the inventory items and the markets
served. Law Enforcement and related professions will be targeted with
direct mail, target catalog and specific promotions. Military
clothing and gear apply to military, veterans and civilians.
Marketing guidance for franchisees will be geared to their markets to
include advertising, special promotions and other events. As we find
effective advertising for the company stores, this information, as
well as other data generated from company stores, will be made
available for the franchisees benefit.
The other marketing strategy is focused on Internet and target
catalog sales. This tool will be used for both retail sales and
assisting wholesale accounts with their sale efforts adding another
dimension to our efforts to maximize franchisee sales and profits.
Pricing Strategy
----------------
Our pricing strategy for the franchisee's fees is dictated by
several factors. It is higher than many due to our unique structure
where we act as the wholesaler to the franchisees in lieu of royalties
from their sales. With a proposed franchise fee of $40,000 we can
devote considerable resources to the franchisee's start-up efforts, as
well as generate cash flow for the company to support warehousing
operations.
Pricing of the wholesale inventory items to the franchisees is
dependent on market rates for similar products from other
manufacturers and wholesalers. This is a major part of our commitment
to the franchisees, to supply them their inventory at market pricing.
These require us to better source and negotiate supplier agreements to
make our profit at the wholesale level. An additional benefit of this
is that the cost of goods sold for the company owned stores will be
lowered correspondingly.
Sales Strategy
--------------
The sales strategy for franchise development for US Patriot
revolves around identifying target markets and seeking franchisees
directly through advertisement, shows and other local efforts.
Included will be providing information to the various military
services retirement and separations offices, which assist exiting
personnel with career selection and development. Our personnel plan
includes hiring an experienced sales manager to serve as Director of
Business Development. This individual will be responsible for closing
sales of franchises.
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Product sales will be through our inside sales department. We
will be able to execute wholesale sales through the Internet, fax or
telephone for franchisees and others. Our company, US Patriot, is
the franchisor. In a market where we have an active franchisee,
we will not wholesale our products and merchandise to anyone besides
our respective franchisee in their market. In markets where we have no
active franchisees, then we will act as a wholesaler and sell to
outside entities. At which time we sell a franchise in a particular
market, we will suspend sales to others in that respective market, and
allow the franchisee to pursue these sales with our support. At this time
US Patriot has not entered into any franchise agreements and has no
franchisees.
SUPPLIERS
- ---------
We are dedicated to committing significant resources to
thoroughly research and source our products. As a part of our
commitment to the franchisees to provide their supplies at
competitive, market rates, we must continually search out new
suppliers and products that will maintain our reputation for quality,
but also for allowing greater wholesale margins. It will be up to us
to negotiate deals with major suppliers to ensure adequate supply,
quality of workmanship and also favorable pricing to maximize internal
wholesale profits.
As we grow, we believe that new opportunities for expansion and
product development will surface. We will maintain a vigil for these
opportunities at the right times to bring production under our control
of certain items and products. A prime example here is screen-
printing and embroidery. As our need for these types of products
increases we believe we will be able to enter this market in a way
that also allows us to contract out excess capacity.
Our inventory comes from a variety of manufacturers and
distributors across the country. We have made a commitment to carry
high quality goods and products and a part of this is emphasizing
"Made in the USA". While not an absolute, this is a guidance policy
for the company. When selling military clothing and gear, we offer
two price points for the franchisees and guide them accordingly
for their particular market. The first, higher price point is for
products carrying the military National Stock Number, made in the USA,
and with exceptional quality assurances. The second, lower price
point is for similar products produced overseas. In some markets the
franchisee may be best served carrying the lower priced goods in their
store. We anticipate hiring one full time purchasing agent for the
company to work with these vendors within the next twelve months.
At this time our principal suppliers are as follows:
1. Altama Delta Corporation--Boots
2. Wellco Enterprises--Boots
3. Cove Shoe Co.--Boots
4. Propper International-Uniforms
5. Sta-Brite Inc-Uniform Accessories
6. Ira Green Inc-Uniform Accessories
7. Atlanta Army-Navy-Uniforms and miscellaneous products
8. Rothco Inc-Misc. products
9. Pulley's Inc-Military Gear and Clothing
10. R & B Distributing Inc-Headgear
11. Raine Inc-Holsters, Belts and Nylon Equipment Gear
12. MeyerCo-Knives
COMPETITION
- -----------
Our management believes that we offer a unique concept when
examined as a total package. In many markets the older Army-Navy
surplus stores are folding. Surplus is getting more difficult to
acquire and the age and image of the older stores is one of a dark,
dusty cavern type store. Our stores bring new military type clothing
and gear to these markets, in a bright, modern setting. For the
uniform products, one major uniform supplier, usually with minimal
competition, generally dominates each region. This has traditionally
been a limited market business and has had a high cost of entry. With
the growth in professional law enforcement and related fields, this
market has experienced rapid growth. Public bid opportunities
combined with personal spending in these fields make it a viable
product line. With the establishment of a corporate warehouse and
inventory, our franchisees would be able to minimize their investment
while having the product lines at their easy access.
We know of no companies currently offering franchise
opportunities for these types of products. Neither principle product
line nor industry has seen significant consolidation. This opens the
door for our franchisees to enter these local markets and succeed.
Our company owned stores have limited competition in their market and
even though there is limited local competition, our concept, approach
and service has distinguished our stores for immediate market
penetration.
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There are two catalog companies with several retail stores with
whom we would compete in the mail order business and in the local
trade areas in which they have stores. US Cavalry has a tremendous
catalog and Internet presence with two retail locations near major
Army installations. Additionally, Ranger Joe's of Columbus, GA has
two retail stores in Georgia and a catalog geared towards field
operations equipment. Their customer service is good and they have a
loyal following in the Army community. Both of these entities have
substantially greater revenue, financial and other resources than we
do.
Additionally, there are several catalog companies geared towards
outdoorsmen and hunters with whom we overlap to a certain extent for
some of the military related clothing and gear. Additionally there is
Gall's, a law enforcement catalog. On the Internet there are
literally hundreds of virtual storefronts, though these are not major
players and their numbers are decreasing as the Internet retailer
shakeout is currently underway.
In the wholesale arena there are several companies in the country
who sell military and law enforcement related equipment. The military
wholesale companies are primarily engaged in trade with Army/Navy
stores selling used merchandise, foreign military surplus and foreign
made products. These same companies also sell some limited law
enforcement related equipment with the same characteristics mentioned.
LEGAL PROCEEDINGS
- -----------------
As of the date of this prospectus, we are not a party to any
legal proceedings.
EMPLOYEES
- ---------
As of the date of this prospectus we have 3 full-time employees,
including 2 in sales and 1 in administration. We presently have no
labor union contract between us and any union and we do not anticipate
unionization of our personnel in the foreseeable future. From time to
time, we hire part time employees, ranging from a minimum of 4 to a
maximum of 12.
DESCRIPTION OF PROPERTY
- -----------------------
Our principal facility is a 3,500 square foot facility located at
5401 Forest Drive, Columbia South Carolina. We lease this facility
through September 30, 2004 at $3,175 per month.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- -----------------------------------------------------------
AND/FINANCIAL DISCLOSURE.
- -------------------------
We have had no disagreements with our accountants on accounting
and financial disclosure.
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MANAGEMENT
----------
Directors and Executive Officers
Our directors, executive officers and key employees are as follows:
Name: Age Position Director since
- ------------------------------------------------------------------------------
Phillips N. Dee 36 President and Chairman 2000
Scott Massey 31 Director 2000
Phil Dee, President and Chairman of the Board of Directors. Mr. Dee
has served as our President and Chairman since inception and has spent
the past ten years creating new business ventures for others and
himself. As the Market Research Analyst for a northern real estate
investment group he gained valuable experience in investment
strategies. Additionally, he worked as Corporate Marketing Director
for Crowder Construction Company of Charlotte, NC, directing the
marketing efforts for five divisions in three states. He gained
valuable leadership development while serving as an Armor Officer with
the United States Army. He has also built several successful small
businesses, both retail and manufacturing/distribution. From 1995
through 1998 he served as an Army officer. Upon leaving the active
Army, from October 1998 through October 2000, Mr. Dee founded and
managed Big Sky Ice Company in Charlotte, NC. In October of 2000 he
sold Big Sky Ice and founded US Patriot Inc. He holds a MA in Economic
Geography and BA in Geography from University of North Carolina.
Scott Massey, Director. Mr. Massey is a key strategist in guiding
the growth of the company. From 1992 to 1998 he was an officer with
the United States Army, commissioned into the Armor Corps and serving
as a combat unit commander in both Europe and the United States. Upon
leaving the active Army in 1998 he worked with MITEK, a subsidiary of
Johnson & Johnson, as a regional sales representative. He is a 1992
graduate of The Citadel with a BA in history.
Directors' Remuneration
- -----------------------
Our directors are presently not compensated for serving on the
board of directors.
Executive Compensation
- ----------------------
Employment Agreements
- ---------------------
We have not entered into any employment agreements.
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Table
- -----
Other Restricted Securities All
Name and Inception Annual Stock Underlying LTIP Other
Principal Position Through Salary Bonus Compensation Awards Options Payouts Compensation
- ------------------ --------- ------ ----- ------------ ---------- ---------- ------- ------------
Phillips N. Dee, October $23,500 - - - - - -
President 31, 2001
We have not issued any grants of stock options in the past fiscal
year.
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PRINCIPAL SHAREHOLDERS
----------------------
Percent After Percent After Percent After
Number of Percent Offering if Offering if Offering if
Name and Address of Shares Before All Company One-Half 10% of
Beneficial Owner Owned Offering Shares Sold <F1> Company Company
- ---------------- --------- -------- --------------- Shares Sold <F1> Shares Sold <F1>
--------------- ---------------
Phillips N. Dee 2,000,000 37.49% 32.41% 33.78% 34.97%
C/O US Patriot, Inc.
Scott Massey 2,000,000 37.49% 32.41% 33.78% 34.97%
C/O US Patriot
Jim Dodrill 1,000,000 18.74% 16.21% 16.89% 17.48%
3360 NW 53rd Circle
Boca Raton, FL 33496
All Directors and 4,000,000 74.98% 64.82% 67.56% 69.94%
Officers as a Group
(2 Persons)
_____________
<FN>
<F1>
(1) Assumes the exercise of all warrants and that the principal
shareholders retain all shares of stock they own and the sale
of all shares offered hereunder.
</FN>
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SELLING SHAREHOLDERS
--------------------
All shareholders other than Messrs. Dee, Massey and Dodrill
purchased their shares in an offering under Regulation D, Rule 504
of the Securities Act of 1933, as amended. Messers Dee, Massey and
Dodrill all received their shares pursuant to Section 4(2) of the
Securities Act of 1933, as amended. Mr. Dee, our President and
Chairman of our Board of Directors purchased his shares from the
company. Mr. Massey, one of our directors, purchased his shares
from the Company by delivering a note payable to the company in the
principal amount of $5,000. Mr. Dodrill, our company counsel,
received his shares in lieu of payment for services rendered.
Ownership of Shares Number of Ownership of shares of
of Common Stock Prior to Shares Common Stock After
Offering Offered Offering
-------- ------- --------
selling shareholder Shares<F1> Percentage Hereby Shares Percentage
---------- ---------- ------ ------ ----------
Phillips N. Dee<F2> 2,000,000 37.49 250,000 1,750,000 28.36%
Scott Massey<F3> 2,000,000 37.49 250,000 1,750,000 28.36%
Jim Dodrill<F4> 1,000,000 18.74 500,000 500,000 8.10%
William Bauer<F5> 50,000 * 50,000 0 *
Peggy Bauer<F5> 50,000 * 50,000 0 *
Greggory Colegrove<F5> 50,000 * 50,000 0 *
Jeffrey Colegrove<F5> 50,000 * 50,000 0 *
James Foxworthy<F5> 50,000 * 50,000 0 *
Melissa Foxworthy<F5> 50,000 * 50,000 0 *
Judith Cooper<F6> 25,000 * 25,000 0 *
Larry Higgins<F6> 25,000 * 25,000 0 *
D.T. Kimble<F6> 25,000 * 25,000 0 *
Kay Kimble<F6> 25,000 * 25,000 0 *
Ania Kwalik<F6> 25,000 * 25,000 0 *
Albert Massey<F6> 25,000 * 25,000 0 *
Diane Massey<F6> 25,000 * 25,000 0 *
Richard Weinacker<F6> 25,000 * 25,000 0 *
Bruce West<F7> 15,000 * 15,000 0 *
Pamela West<F7> 15,000 * 15,000 0 *
Pete Baldwin<F8> 10,000 * 10,000 0 *
Sandra Dee<F8> 10,000 * 10,000 0 *
Gordon English<F8> 10,000 * 10,000 0 *
David Gable<F8> 10,000 * 10,000 0 *
Harry Hunter<F8> 10,000 * 10,000 0 *
Brenda Jellicorse<F8> 10,000 * 10,000 0 *
Steve Jellicorse<F8> 10,000 * 10,000 0 *
Jean Jones<F8> 10,000 * 10,000 0 *
Mike Jones<F8> 10,000 * 10,000 0 *
Bert Kemp<F8> 10,000 * 10,000 0 *
Kristy Massey<F8> 10,000 * 10,000 0 *
Angela Post<F8> 10,000 * 10,000 0 *
James Post<F8> 10,000 * 10,000 0 *
Jim Winders<F8> 10,000 * 10,000 0 *
Total 5,670,000 1,670,000 4,000,000
_______________________
* Indicates less than 1%
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1) Assumes that all warrants are exercised and all shares are sold
pursuant to this offering and that no other shares of common stock
are acquired or disposed of by the selling shareholders prior to the
termination of this offering. Because the selling shareholders may
sell all, some or none of their shares or may acquire or dispose of
other shares of common stock, no reliable estimate can be made of
the aggregate number of shares that will be sold pursuant to this
offering or the number or percentage of shares of common stock that
each shareholder will own upon completion of this offering.
2) Mr. Dee is our President and Chairman of the Board of Directors.
3) Mr. Massey is currently one of our directors.
4) Mr. Dodrill is our company counsel.
5) Includes warrants to purchase 25,000 shares of common stock that
may be acquired at an exercise price of $0.40 per share commencing
90 days following the date of this prospectus.
6) Includes warrants to purchase 12,500 shares of common stock that
may be acquired at an exercise price of $0.40 per share commencing
90 days following the date of this prospectus.
7) Includes warrants to purchase 7,500 shares of common stock that
may be acquired at an exercise price of $0.40 per share commencing
90 days following the date of this prospectus.
8) Includes warrants to purchase 5,000 shares of common stock that
may be acquired at an exercise price of $0.40 per share commencing
90 days following the date of this prospectus.
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DESCRIPTION OF SECURITIES
General
- -------
Our authorized capital stock consists of 100,000,000 shares of
common stock, par value $0.0001 per share, and 20,000,000 shares of
preferred stock, par value $.0001 per share. As of the date of this
prospectus, 5,335,000 shares of common stock and no shares of
preferred stock were outstanding. We presently act as the transfer
agent for our common stock but anticipate that in the future we will
use Computershare Trust Company of Denver, CO as our transfer agent
Common Stock
- ------------
We are authorized to issue 100,000,000 shares of our common
stock, $0.0001 par value, of which 5,335,000 shares are issued and
outstanding as of the date of this prospectus. Except as provided by
law or our certificate of incorporation with respect to voting by
class or series, holders of common stock are entitled to one vote on
each matter submitted to a vote at a meeting of shareholders.
Subject to any prior rights to receive dividends to which the
holders of shares of any series of the preferred stock may be
entitled, the holders of shares of common stock will be entitled to
receive dividends, if and when declared payable from time to time by
the board of directors, from funds legally available for payment of
dividends. Upon our liquidation or dissolution, holders of shares of
common stock will be entitled to share proportionally in all assets
available for distribution to such holders.
Preferred Stock
- ---------------
The board of directors has the authority, without further action
by our shareholders, to issue up to 20,000,000 shares of preferred
stock, par value $.0001 per share, in one or more series and to fix
the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. No shares
of preferred stock are currently issued and outstanding. The issuance
of preferred stock could adversely affect the voting power of holders
of common stock and, depending on the rights, preferences, privileges
and restrictions set by our board of directors, could have the effect
of delaying, deferring or preventing a change of our control. For
example, if our board of directors authorized the issuance of
preferred stock having preferential voting rights, the holder of such
preferred stock could potentially influence any votes regarding a
change of control to a much greater extent than would otherwise be
achievable based on such holder's pro rata percentage ownership of our
securities
Warrants
- --------
Certain shares of common stock offered by US Patriot on November
20, 2001 had warrants attached. We presently have 335,000 warrants
outstanding. Each warrant entitles the holder thereof to purchase one
share of common stock at a price per share of $0.40 beginning 90 days
following the effectiveness of this registration statement and ending
on November 20, 2004. Each unexercised warrant is redeemable by us at
a redemption price of $0.001 per warrant at any time, upon 30 days
written notice to holders thereof, if (a) our common stock is traded
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on the Over the Counter Bulletin Board and (b) the Market Price
(defined as the average closing bid price for twenty (20) consecutive
trading days) equals or exceed 120% of the exercise price.
Pursuant to applicable federal and state securities laws, in the
event a current prospectus is not available, the warrant holders may
be precluded from exercising the warrants and we would be precluded
from redeeming the warrants. There can be no assurance that we will
not be prevented by financial or other considerations from maintaining
a current prospectus. Any warrant holder who does not exercise prior
to the redemption date, as set forth in our notice of redemption, will
forfeit the right to purchase the common stock underlying the
warrants, and after the redemption date or upon conclusion of the
exercise period, any outstanding warrants will become void and be of
no further force or effect, unless extended by our Board of Directors.
The number of shares of common stock that may be purchased with
the warrants is subject to adjustment upon the occurrence of certain
events, including a dividend distribution to our shareholders or a
subdivision, combination or reclassification or our outstanding shares
of common stock. The warrants do not confer upon holders any voting
or any other rights as our shareholders.
We may at any time, and from time to time, extend the exercise
period of the warrants, provided that written notice of such extension
is given to the warrant holders prior to the expiration date then in
effect. Also, we may reduce the exercise price of the warrants for
limited periods or through the end of the exercise period if deemed
appropriate by the Board of Directors. Any extension of the term
and/or reduction of the exercise price of the warrants will be subject
to compliance with Rule 13e-4 under the Exchange Act including the
filing of a Schedule 14E-4. Notice of any extension of the exercise
period and/or reduction of the exercise price will be given to the
warrant holders. We do not presently contemplate any extension of the
exercise period or any reduction in the exercise price of the
warrants. The warrants are also subject to price adjustment upon the
occurrence of certain events including subdivisions or combinations of
our common stock.
Market for Common Equity and Related Shareholder Matters
- --------------------------------------------------------
There is no established public market for our common stock and we
have arbitrarily determined the offering price. Although we hope to
be quoted on the OTC Bulletin Board, our common stock is not currently
listed or quoted on any quotation service. There can be no assurance
that our common stock will ever be quoted on any quotation service or
that any market for our stock will ever develop or, if developed, will
be sustained.
As of January 14, 2002, there were 33 shareholders of record of
our common stock and a total of 5,335,000 shares outstanding.
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INDEMNIFICATION
Article 11 of our Articles of Incorporation includes certain
provisions permitted by the South Carolina Revised Statutes, which
provides for indemnification of directors and officers against certain
liabilities. Pursuant to our Articles of Incorporation, our officers
and directors are indemnified, to the fullest extent available under
South Carolina Law, against expenses actually and reasonably incurred
in connection with threatened, pending or completed proceedings,
whether civil, criminal or administrative, to which an officer or
director is, was or is threatened to be made a party by reason of the
fact that he or she is or was one of our officers, directors,
employees or agents. We interpret this Article 11 to include
indemnification against liability under the Securities Act. We may
advance expenses in connection with defending any such proceeding,
provided the indemnitee undertakes to repay any such amounts if it is
later determined that he or she was not entitled to be indemnified by
us.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions or otherwise,
we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.
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PLAN OF DISTRIBUTION
Upon effectiveness of this registration statement, we will
conduct the sale of the shares we are offering on a self-underwritten,
no minimum basis. This means that we do not have an underwriter and
that we will sell the shares directly to investors. This also means
that there is no minimum amount that we must sell in order for this
offering to proceed. Participating on our behalf in the distribution
is Phillips N. Dee, our Principal Executive Officer, President and
Principal Financial Officer who is exempt from registration as a broker
dealer under Rule 3a4-1 of the Securities Exchange Act. There can
be no assurance that we will sell all or any of the shares offered.
We have no arrangement or guarantee that we will sell any shares.
All subscription checks shall be made to the order of US Patriot.
We will sell at a price of $0.50 per share.
While we do not anticipate utilizing any registered securities
broker-dealers in connection with any sales of the shares and have no
arrangements to use any broker-dealers, we may, in our discretion,
accept subscriptions for shares through broker-dealers that are
members of the National Association of Securities Dealers, Inc. and
are willing to, in connection with such sales, pay a commission of up
to 10% of the price of each share sold. No officers or directors
shall receive any commissions or compensation for their sale of the
shares pursuant to the terms hereof.
Our Officers and Directors will be permitted to purchase shares
in this offering at the same price as that at which the shares are
offered to outside investors. There is no limitation regarding the
number of shares which they may purchase.
The selling shareholders will sell at a price of $0.50 per share
until our shares are quoted on the OTC Bulletin Board and thereafter
at prevailing market prices or at privately negotiated prices. The
selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading
facility on which the shares are then traded or in private
transactions. The selling shareholders may use any one or more
of the following methods when selling shares:
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
* block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
* an exchange distribution in accordance with the rules of the
applicable exchange;
* privately negotiated transactions;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
40
42
The selling shareholders may also sell shares under Rule 144
under the Securities Act, if available, rather than under this
prospectus.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the shares may
not be sold unless they have been registered or qualified for sale in
such state or an exemption from such registration or qualification
requirement is available and complied with.
The selling shareholders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling
shareholder defaults on a margin loan, the broker may, from time to
time, offer and sell the pledged shares.
Broker-dealers engaged by the selling shareholders may arrange
for other brokers-dealers to participate in sales. Broker-dealers may
receive commissions or discounts from the selling shareholders (or, if
any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling shareholders do
not expect these commissions and discounts to exceed what is customary
in the types of transactions involved.
The selling shareholders and any broker-dealers or agents that
are involved in selling the shares may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the shares purchased by them
may be deemed to be underwriting commissions or discounts under the
Securities Act.
We will pay all of the expenses incident to the registration,
offering and sale of the shares to the public, but will not pay
commissions and discounts, if any, of underwriters, broker-dealers or
agents, or counsel fees or other expenses of the selling shareholders.
We have also agreed to indemnify the selling shareholders and related
persons against specified liabilities, including liabilities under the
Securities Act.
We have advised the selling shareholders that while they are
engaged in a distribution of the shares included in this prospectus
they are required to comply with Regulation M promulgated under the
Securities Exchange Act of 1934, as amended. With certain exceptions,
Regulation M precludes the selling shareholders, any affiliated
purchasers, and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to
induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution
of that security. All of the foregoing may affect the marketability
of the shares offered hereby in this prospectus.
41
43
LEGAL MATTERS
The Law Office of James G. Dodrill II, PA of Boca Raton, Florida
will give an opinion for us regarding the validity of the common stock
offered in this prospectus. Mr. James Dodrill, president of The Law
Office of James G. Dodrill II, PA is the holder of 1,000,000 shares of
our common stock, which were received in January 2001 in lieu of
payment for services rendered. Mr. Dodrill is a selling shareholder
under this registration statement and 500,000 of his shares are being
registered hereunder.
EXPERTS
The financial statements as of and for the year ended October 31,
2001 and for the period from inception through October 31, 2000
included in this prospectus have been so included in reliance on the
report of Elliott Davis, LLC independent accountants, given on the
authority of said firm as certified public accountants.
42
44
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement under the Securities Act
with respect to the securities offered hereby with the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. This prospectus, which is
a part of the registration statement, does not contain all of the
information contained in the registration statement and the exhibits
and schedules thereto, certain items of which are omitted in accordance
with the rules and regulations of the Commission. For further
information with respect to US Patriot, Inc. and the securities
offered hereby, reference is made to the registration statement,
including all exhibits and schedules thereto, which may be inspected
and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N. W., Room 1024, Washington, D. C.
20549 at prescribed rates during regular business hours. You may
obtain information on the operation of the public reference facilities
by calling the Commission at 1-800-SEC-0330. Also, the SEC maintains
an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the Commission at http://www.sec.gov. Statements
contained in this prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an
exhibit to the registration statement, each such statement being
qualified in its entirety by such reference. We will provide, without
charge upon oral or written request of any person, a copy of any
information incorporated by reference herein. Such request should be
directed to us at US Patriot, Inc. 5401 Forest Drive, Columbia South
Carolina 29206 Attention: Phillips N. Dee, President.
We do not currently file reports with the Securities and Exchange
Commission. Following the effectiveness of this registration
statement, we will file reports and other information with the
Commission. All of such reports and other information may be inspected
and copied at the Commission's public reference facilities described
above. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of
such site is http://www.sec.gov. In addition, we intend to make
available to our shareholders annual reports, including audited
financial statements, unaudited quarterly reports and such other
reports as we may determine and will voluntarily send an annual report
to each shareholder subsequent to filing of such annual report with the
Commission.
43
45
US PATRIOT, INC.
REPORT ON FINANCIAL STATEMENTS
FOR THE YEAR ENDED
OCTOBER 31, 2001
AND THE PERIOD FROM
OCTOBER 2, 2000 (INCEPTION) TO
OCTOBER 31, 2000
F-1
46
US PATRIOT, INC.
COLUMBIA, SOUTH CAROLINA
CONTENTS
--------
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
FINANCIAL STATEMENTS
Balance sheet F-4
Statements of operations F-5
Statements of changes in stockholders' equity (deficit) F-6
Statements of cash flows F-7
NOTES TO FINANCIAL STATEMENTS F-8 - F-13
F-2
47
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
US Patriot, Inc.
Columbia, South Carolina
We have audited the accompanying balance sheet of US Patriot,
Inc. as of October 31, 2001 and the related statements of
operations, changes in stockholders' equity and cash flows for the
year ended October 31, 2001 and the period from October 2, 2000
(inception) to October 31, 2000. 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 audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit 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 US Patriot, Inc. as of October 31, 2001 and the results of its
operations, changes in stockholders' equity and its cash flows for
the year ended October 31, 2001 and the period from October 2,
2000 (inception) to October 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
Elliott Davis, LLC
November 27, 2001
Columbia, South Carolina
F-3
48
US PATRIOT, INC.
BALANCE SHEET
OCTOBER 31,2001
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 3,541
Accounts receivable 930
Deferred tax asset 879
Inventories 77,724
-----------
Total current assets 83,074
PROPERTY AND EQUIPMENT-
Net of accumulated depreciation 33,882
-----------
OTHER ASSETS
Accrued interest 334
Deferred tax asset 4,830
Building and utility deposits 3,689
-----------
$ 125,809
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of notes payable $ 96,221
Current portion of capital lease obligation 602
Current portion of related party note payable 4,896
Accounts payable 4,599
Accrued expenses 13,312
Sales tax payable 2,294
-----------
Total current liabilities 121,924
-----------
LONG-TERM DEBT
Capital lease obligation 998
Related party note payable 19,586
-----------
Total long-term debt 20,584
-----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - $.0001 par value;
20,000,000 shares authorized; none issued -
Common stock - $.0001 par value;
100,000,000 shares authorized; 5,000,000 shares issued 500
Additional paid-in-capital 10,500
Stock subscription receivable (5,000)
Accumulated deficit (22,699)
------------
Total stockholders' equity (deficit) (16,699)
------------
$125,809
============
See notes to financial statements which are an integral part of this statement.
F-4
49
US PATRIOT, INC.
STATEMENT OF OPERATIONS
October 2,
For the 2000
year ended (inception) to
October 31, October 31,
2001 2000
---------- --------------
NET SALES $ 343,584 $ -
COST OF SALES 209,286 -
----------- --------------
Gross profit 134,298 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 151,512 3,747
----------- --------------
Loss from operations (17,214) (3,747)
INTEREST EXPENSE (7,447) -
----------- --------------
Net loss before income tax benefit (24,661) (3,747)
INCOME TAX BENEFIT 4,959 750
----------- --------------
Net loss $ (19,702) $ (2,997)
=========== ==============
LOSS PER COMMON SHARE $ - $ -
=========== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,333,333 1,000,000
=========== ==============
See notes to financial statements which are an integral part of this statement.
F-5
50
US PATRIOT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY (DEFICIT)
For the year ended October 31, 2001 and the period from October 2, 2000 (inception) to October 31, 2000
Preferred stock Common stock Additional Stock Total
--------------- ------------- paid-in subscriptions Accumulated Stockholder's
Shares Dollars Shares Dollars capital receivable deficit equity (deficit)
------ ------- --------- ------- ---------- ------------- ----------- ---------------
ISSUANCE OF COMMON STOCK,
OCTOBER 2, 2000 - $- 1,000,000 $100 $900 $(1,000) $ - $ -
Net loss - - - - - - (2,997) (2,997)
------ ------- --------- ------- ---------- ------------- ----------- ---------------
BALANCE, OCTOBER 31, 2000 - - 1,000,000 100 900 (1,000) (2,997) (2,997)
Issuance of common stock,
January 2, 2001 - - 3,000,000 300 7,200 (7,500) - -
Common stock issued for
professional fees,January 2, 2001 - - 1,000,000 100 2,400 - - 2,500
Stock subscriptions paid,
June 1, 2001 - - - - - 3,500 - 3,500
Net loss - - - - - - (19,702) (19,702)
------- ------- --------- ------- ---------- ------------- ----------- ---------------
BALANCE, OCTOBER 31, 2001 - $- 5,000,000 $500 $10,500 $(5,000) $(22,699) $(16,699)
======= ======= ========= ======= ========== ============= =========== ===============
See notes to financial statements which are an integral part of this statement.
F-6
51
US PATRIOT, INC.
STATEMENTS OF CASH FLOWS
October 2,
For the 2000
year ended (inception) to
October 31, October 31,
2001 2000
----------- --------------
OPERATING ACTIVITIES
Net loss $(19,702) $(2,997)
Adjustments to reconcile net loss to net cash
used for operating activities
Depreciation 5,332 -
Deferred taxes (4,959) (750)
Professional fees provided in exchange for stock 2,500 -
Changes in deferred and accrued amounts
Accounts receivable (930) -
Inventories (77,724) -
Building and utility deposits 287 (3,976)
Accrued interest (334) -
Accounts payable 4,599 -
Accrued expenses 10,402 2,910
Sales tax payable 2,294 -
----------- --------------
Net cash used for operating activities (78,235) (4,813)
----------- --------------
INVESTING ACTIVITIES
Purchase of property and equipment (33,792) (3,822)
----------- --------------
Net cash used for investing activities (33,792) (3,822)
----------- --------------
FINANCING ACTIVITIES
Payment of stock subscription 3,500 -
Proceeds from related party note payable 15,847 8,635
Proceeds from notes payable 112,500 -
Principal payments on notes payable (16,279) -
----------- --------------
Net cash provided by financing activities 115,568 8,635
----------- --------------
Increase in cash and cash equivalents 3,541 -
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD - -
----------- --------------
END OF PERIOD $3,541 $ -
=========== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $7,447 $ -
=========== ==============
NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired through capital lease $1,600 $ -
=========== ==============
Stock issued for subscriptions receivable $7,500 $1,000
=========== ==============
See notes to financial statements which are an integral part of this statement.
F-7
52
US PATRIOT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of the operations
US Patriot, Inc. (the "Company") was incorporated in the State
of South Carolina on October 2, 2000. From inception through
December 26, 2000, the Company had not yet commenced
operations and no revenue was derived. The Company sells and
services military and law enforcement clothing, gear and
related equipment from a leased retail facility located in
Columbia, South Carolina. Accordingly, the Company was
considered a development stage enterprise for the period from
October 2, 2000 to October 31, 2000.
Basis of accounting
These financial statements are prepared on the accrual basis
of accounting which is in conformity with accounting
principles generally accepted in the United States of America.
Cash and cash equivalents
The Company considers all liquid, non-equity investments with
an original maturity of three months or less to be cash
equivalents.
Inventories
Inventories are valued at the lower of cost (determined on
first-in, first-out method) or market (net realizable value).
Property and equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated
life of each asset. The carrying amount of all property and
equipment is evaluated periodically to determine if adjustment
to the useful life is warranted. Following are the useful
lives by asset class:
Computer equipment 3 years
Leasehold improvements 3 years
Sewing equipment 5 years
Furniture and fixtures 7 years
Income taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred
income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year
end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are
expected to affect taxable income. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Income
tax expense is the tax payable (refundable) for the period and
the change during the period in deferred tax assets and
liabilities.
F-8
53
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
- --------------------------------------------------------------
Advertising costs
The Company expenses advertising costs as they are incurred.
Advertising costs for the year ended October 31, 2001 and the
period ended October 31, 2000, were $2,765 and $0,
respectively.
Estimates
The financial statements include estimates and assumptions
that affect the Company's financial position and results of
operations and disclosure of contingent assets and
liabilities. Actual results could differ from these
estimates.
Loss per common share
Basic loss per common share is computed by dividing the net
loss by the weighted average number of common shares
outstanding during the year. The Company did not issue any
potentially dilutive securities from inception to October 31,
2001 and, as such, diluted earnings per share is equal to
earnings per share.
Revenue recognition
Sales of goods are recorded when inventory is shipped or
delivered and title transfers. The majority of inventory is
sold in the retail location. Inventory is primarily received
FOB destination and shipped FOB shipping point. Sales of
services, which began in October 2001, are recorded upon
delivery of the finished product. Shipping and handling
charges are expensed when incurred and amounted to $2,187 and
$0 for the year ended October 31, 2001 and the period ended
October 31, 2000, respectively.
Sales returns and allowances
The Company's policy is to honor manufacturer's warranties,
which are for material and workmanship defects as defined by
the manufacturer. The Company's policy is to not accept
returns or exchanges in which they cannot be credited or
reimbursed by the manufacturer. Accordingly, the Company has
not recorded a reserve for returns and allowances at October
31, 2001.
Concentration of credit risk
The Company sells goods and services to military and law
enforcement personnel primarily located in Columbia, South
Carolina.
Stock-based compensation
The Company accounts for its non-employee stock compensation
under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based compensation." Accordingly,
transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received.
NOTE 2 - INVENTORIES
- --------------------
The Company's inventory consisted of the following at October 31,
2001:
Military apparel and accessories $ 80,012
Allowance for excess and slow moving inventory (2,288)
---------
$ 77,724
=========
F-9
54
NOTE 3 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consists of the following at October 31, 2001:
Computer equipment $ 5,781
Leasehold improvements 6,486
Sewing equipment 17,956
Furniture and fixtures 8,991
--------
39,214
Less accumulated depreciation (5,332)
--------
$ 33,882
========
Included in sewing equipment is an asset acquired under a capital
lease for $1,600. The carrying value of this asset was $1,333 at
October 31, 2001.
NOTE 4 - NOTES PAYABLE
- ----------------------
On November 30, 2000, the Company entered into a 5-year
installment loan agreement with a financial institution to borrow
$100,000 for the purpose of purchasing inventory and equipment. The
loan bears interest at the institution's prime rate plus 1%, which
was 6% at October 31, 2001. The note is payable in 60 monthly
principal and interest payments of $2,156. Inventory, accounts
receivable, furniture and fixtures, equipment, and stockholder's real
property serve as collateral for the loan. The loan agreement
contains certain restrictive terms that require compliance or
constitute events of default. The terms of the significant debt
covenants are that the Company provide annual financial statements
and that there be no change in ownership greater that 25% of the
Company's common stock. The Company was in compliance with all terms
with the exception of the ownership term as of October 31, 2001. In
the event of default, the Company is given the opportunity to cure
the default once notified of such breach of the agreement by the
financial institution. The default must be cured within 15 days or
as soon as reasonably possible as determined by the financial
institution. If cured within the specified timeframe, no event of
default will have occurred. As of January 2, 2001, the Company has
been in violation of the term requiring that there be no change in
ownership of more than 25% of the borrower. While the financial
institution has been informed of the violation, the Company has not
received a notice of breach requiring that the default be cured. As
a result of the violation, the note has been classified as current.
In the event that a notification of breach is not issued by the
financial institution, the scheduled principal payments of the note
have been detailed below to reflect its maturity. The Company was
current with its scheduled payments as of October 31, 2001.
On October 15, 2001, the Company entered into a one-year
installment loan of $12,500 with a financial institution to purchase
equipment. The note bears interest at the institution's prime rate
plus 1%, which was 6% as October 31, 2001. The note is payable in 12
monthly principal and interest payments of $1,092. The equipment is
collateral for the note.
Future maturities on the notes detailed above are as follows for
the years ending October 31:
2002 $ 30,133
2003 19,603
2004 21,794
2005 24,229
2006 462
----------
$ 96,221
==========
F-10
55
NOTE 5 - INCOME TAXES
- ---------------------
At October 31, 2001, the Company has available for income tax
purposes, the following net operating loss carryforwards:
Amount Expiration
------ ----------
Federal $ 21,946 2021
State 1,155 2021
Deferred tax assets are as follows at October 31, 2001:
Current $ 879
Long-term 4,830
--------
$ 5,709
========
At October 31, 2001, the deferred tax asset consists primarily of
the value of net operating loss carryforwards. Management has not
recorded a valuation allowance as they are of the opinion that it is
more likely than not that all of the deferred tax assets will be
realized.
Reconciliation of the statutory federal income tax rate to the
Company's effective tax rate is as follows for the year ended October
31, 2001 and period ended October 31, 2000:
2001 2000
---- ----
U.S. Statutory rate 34.0% 34.0%
State income tax benefit, net of federal tax 3.3 3.3
Tax effect of lower brackets (18.0) (18.0)
All other, net .8 .7
---- ----
20.1% 20.0%
==== ====
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
From October 2, 2000 to June 1, 2001, the original stockholder
loaned the Company $24,482. This was formalized in a note agreement
with the Company on June 1, 2001. The note was issued as a 5-year
term loan that does not bear interest and requires two payments of
principal per year, beginning on December 31, 2002. Future
maturities on the note are as follows for the years ending October
31:
2002 $ 4,896
2003 4,896
2004 4,896
2005 4,896
2006 4,898
---------
$ 24,482
=========
F-11
56
NOTE 6 - RELATED PARTY TRANSACTIONS, Continued
- ----------------------------------------------
On March 1, 2001, the Company entered into a 4-year equipment
lease with the son of the original stockholder. Ownership of the
equipment will transfer to the Company at the expiration of the term,
and accordingly, the lease is being accounted for as a capital lease.
The equipment and the related liability under the capital lease were
recorded at the present value of the future payments due under the
leases, as determined with an 8.5% discount rate. The lease is
payable in monthly installments of $39 including interest. Payments
totaling $312, including principal of $228 and interest of $84, were
due but not paid in 2001.
The following is a schedule of the future minimum lease payments
under the capital lease together with the present value of the net
minimum lease payments as of October 31, 2001:
2002 $ 696
2003 468
2004 468
2005 177
--------
Total minimum lease payments 1,809
Less the amount representing interest (209)
--------
Present value of net minimum lease payments $ 1,600
========
On August 1, 2001, the Company issued 1,000,000 shares of common
stock to an attorney in exchange for present and future legal
services for an agreed upon value of $2,500. This amount was
expensed as of the issuance date.
At October 31, 2001, the Company held a note for stock
subscriptions totaling $5,000 from a director of the Company. The
note accrues interest annually at 8% and all payments of interest are
due upon the maturity of the note on January 2, 2004. This note
arose from the stock issued January 2, 2001 and is shown on the
balance sheet as a reduction in stockholders' equity (deficit).
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
- ---------------------------------------
On August 1, 2001, the Company reduced the par value of its
common stock from $.10 per share to $.0001 per share. The effect was
treated as a 1,000-for-1 stock split. The Company also authorized
20,000,000 preferred shares at $.0001 per share with attributes to be
determined by the Board of Directors. No preferred shares were
issued. For the period ended October 31, 2000 and the year ended
October 31, 2001, weighted average common shares have been
retroactively adjusted for this reduction in par value as if it
occurred on October 2, 2000.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
On October 1, 2001, the Company entered into a 3-year lease
agreement for $3,175 per month. The lease required a deposit of
$3,375 which is refundable to the Company upon termination of the
agreement. Future minimum lease payments are as follows for the
years ending October 31:
2002 $ 38,100
2003 38,100
2004 34,925
----------
$ 111,125
==========
F-12
57
NOTE 9 - SUBSEQUENT EVENTS
- --------------------------
On November 15, the Company issued 335,000 shares of common stock
for $6,700. Each share issued was accompanied by a stock purchase
warrant. Each warrant represents the right to purchase one share of
the Company's common stock at a price of $0.40 per share no earlier
than 90 days after the effective date of the Company's filing of an
SB-2 registration statement with the Securities and Exchange
Commission. Each warrant expires on the three year anniversary of
the effective date. Each unexercised warrant may be redeemed by the
Company at a price of $0.001 per warrant at anytime, upon 30 days
written notice to the holders thereof, if the Company's common stock
is traded on the Over the Counter Bulletin Board and the market price
equals or exceeds 120% of the exercise price. Sixty thousand of
these shares were issued to relatives' of stockholders.
F-13
58
US PATRIOT, INC.
BALANCE SHEETS
(Unaudited)
January 31, October 31,
2002 2001
----------- -------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $1,474 $3,541
Accounts receivable 15,434 930
Deferred tax asset 879 879
Inventories 69,903 77,724
-------- --------
Total current assets 87,690 83,074
-------- --------
PROPERTY AND EQUIPMENT-
Net of accumulated depreciation 33,992 33,882
-------- --------
OTHER ASSETS
Accrued interest 434 334
Deferred tax asset 5,578 4,830
Building and utility deposits 3,674 3,689
-------- --------
$131,368 $125,809
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of notes payable $87,904 $96,221
Advances from stockholder 700 602
Current portion of related party note payable 7,720 4,896
Accounts payable 21,947 4,599
Accrued expenses 6,069 13,312
Sales tax payable 4,257 2,294
------- -------
Total current liabilities 128,597 121,924
------- -------
LONG-TERM DEBT
Capital lease obligation 900 998
Related party note payable 13,702 19,586
------- -------
Total long-term debt 14,602 20,584
------- -------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - $.0001 par value;
20,000,000 shares authorized; none issued - -
Common stock - $.0001 par value;
100,000,000 shares authorized;
5,335,000 and 5,000,000 shares
issued at January 31, 2002 and
October 31, 2002, respectively 533 500
Additional paid-in-capital 17,167 10,500
Stock subscription receivable (5,000) (5,000)
Accumulated deficit (24,531) (22,699)
-------- --------
Total stockholders' equity (deficit) (11,831) (16,699)
-------- --------
$131,368 $125,809
========= =========
See notes to financial statements.
F-14
59
US PATRIOT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months Three months
ended ended
January 31, January 31,
2002 2001
------------ ------------
NET SALES $ 165,298 $ 9,565
COST OF SALES 95,601 5,261
----------- -----------
Gross profit 69,697 4,305
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 71,004 18,579
----------- -----------
Loss from operations (1,307) (14,275)
INTEREST EXPENSE 1,272 1,925
----------- -----------
Loss before income tax benefit (2,579) (16,200)
INCOME TAX BENEFIT 747 4,698
----------- -----------
Net loss $ (1,832) $ (11,502)
=========== ===========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.00) $ (0.00)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,279,167 4,955,556
=========== ===========
See notes to financial statements.
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US PATRIOT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY (DEFICIT)
for the quarters ended January 31, 2002 and 2001
(unaudited)
Preferred stock Common stock Additional Stock Total
--------------- ------------- paid-in subscriptions Accumulated Stockholder's
Shares Dollars Shares Dollars capital receivable deficit equity (deficit)
------ ------- --------- ------- ---------- ------------- ----------- ---------------
BALANCE, NOVEMBER 1, 2000 - - 1,000,000 100 900 (1,000) (2,997) (2,997)
Issuance of common stock,
January 2, 2001 - - 3,000,000 300 7,200 (7,500) - -
Common stock issued for
professional fees,January 2, 2001 - - 1,000,000 100 2,400 - - 2,500
Net loss - - - - - - (11,502) (11,502)
------- ------- --------- ------- ---------- ------------- ----------- ---------------
BALANCE, JANUARY 31, 2001 - $- 5,000,000 $500 $10,500 $(8,500) $(14,499) $(11,999)
======= ======= ========= ======= ========== ============= =========== ===============
BALANCE, NOVEMBER 1, 2001 - $- 5,000,000 $500 $10,500 $(5,000) $(22,699) $(16,699)
Issuance of common stock,
November 15, 2001 - - 335,000 $ 33 6,667 - - 6,700
Net loss - - - - - - (1,832) (1,832)
------- ------- --------- ------- ---------- ------------- ----------- ---------------
BALANCE, JANUARY 31, 2001 - $- 5,335,000 $533 $17,167 $(5,000) $(24,531) $(11,831)
======= ======= ========= ======= ========== ============= =========== ===============
See notes to financial statements.
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US PATRIOT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
For the For the
quarter ended quarter ended
January 31, January 31,
2002 2001
----------- --------------
OPERATING ACTIVITIES
Net loss $ (1,832) $(11,502)
Adjustments to reconcile net loss to net cash
used for operating activities
Depreciation 2,029 753
Deferred taxes (748) (4,698)
Professional fees provided in exchange for stock - 2,500
Changes in deferred and accrued amounts
Accounts receivable (14,504) -
Inventories 7,821 (70,740)
Building and utility deposits 15 -
Accrued interest (100) (33)
Accounts payable 17,348 2,057
Accrued expenses (7,243) 5,437
Sales tax payable 1,963 -
----------- --------------
Net cash provided by (used for)
operating activities 4,749 (76,226)
----------- --------------
INVESTING ACTIVITIES
Purchase of property and equipment (2,139) (15,637)
----------- --------------
Net cash used for investing activities (2,139) (15,637)
----------- --------------
FINANCING ACTIVITIES
Proceeds from stock issuance 6,700 -
Advances from stockholder - 3,847
Proceeds from notes payable - 100,000
Principal payments on related party note payable (3,060) -
Due to stockholder (8,317) -
----------- --------------
Net cash provided by (used for)
financing activities (4,677) 103,847
----------- --------------
(Decrease) increase in cash
and cash equivalents (2,067) 11,984
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 3,541 -
----------- --------------
END OF PERIOD $ 1,474 $ 11,984
=========== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ - $ 1,328
=========== ==============
NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired through capital lease $ - $ -
=========== ==============
Stock issued for subscriptions receivable $ - $ 7,500
=========== ==============
See notes to financial statements.
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62
US Patriot, Inc.
Notes to Unaudited Financial Statements
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10QSB and item
310 (b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly they do not include all information and footnotes required
by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for
a fair presentation have been included.
NOTE 2 - NET INCOME PER SHARE
- -----------------------------
Net income per share is computed on the basis of the weighted average
number of common shares outstanding in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share (EPS)".
The treasury stock method is used to compute the effect of stock
options on the weighted average number of common shares outstanding
for the diluted method. Since the Company incurred a loss, securities
that could potentially dilute basic EPS in the future that were not
included in the computation of diluted EPS because to do so would have
been antidilutive using the treasury stock method.
On November 15, 2001, the Company issued 335,000 shares of common
stock for $6,700. Each share issued was accompanied by a stock
purchase warrant. Each warrant represents the right to purchase one
share of the Company's common stock at a price of $0.40 per share no
earlier than 90 days after the effective date of the Company's filing
of an SB-2 registration statement with the Securities and Exchange
Commission. Each warrant expires on the three year anniversary of the
effective date. Each unexercised warrant may be redeemed by the
Company at a price of $0.001 per warrant at anytime, upon 30 days
written notice to the holders thereof, if the Company's common stock
is traded on the Over the Counter Bulletin Board and the market price
equals or exceeds 120% of the exercise price. Sixty thousand of these
shares were issued to relatives' of stockholders.
NOTE 3 - ACCOUNTS RECEIVABLE
- ----------------------------
In the quarter ended January 31, 2002, the Company recorded a
receivable resulting from a contractual sale to a government agency.
The Company extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure
to losses on accounts receivable is principally dependent on each
customer's financial condition. The Company monitors its exposure to
credit losses and if needed maintains allowances for anticipated
losses. There was no allowance for anticipated losses at January 31,
2002. As a result of this sale, the Company has a related payable
balance of $ 11,540 on January 31, 2002.
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63
No dealer, salesman or other
person is authorized to give any
information or to make any
representations not contained in
this prospectus in connection with
the offer made hereby, and, if
given or made, such information or
representations must not be relied
upon as having been authorized by
US Patriot. This prospectus does
not constitute an offer to sell or
a solicitation to an offer to buy
the securities offered hereby to
any person in any state or other
jurisdiction in which such offer or
solicitation would be unlawful.
Neither the delivery of this
prospectus nor any sale made
hereunder shall, under any
circumstances, create any
implication that the information
contained herein is correct as of
any time subsequent to the date
hereof.
Until _________ __, 2002 (90 days
after the date of this prospectus)
all dealers that effect
transactions in these securities,
whether or not participating in
this offering, may be required to
deliver a prospectus . This is in
addition to the dealer's obligation
to deliver a prospectus when acting
as underwriters and with respect to
their unsold allotments or
subscriptions.
- ---------------------------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary..................... 3 US Patriot, Inc.
The Offering........................... 4
Summary Financial Data................. 7
Risk Factors........................... 8
Use of Proceeds........................ 14
Determination of Offering Price........ 16
Dividend Policy........................ 16 2,170,000 SHARES
Dilution............................... 17
Management's Discussion and Analysis... 18
Business............................... 23
Management............................. 32
Principal Shareholders................. 34
Selling Shareholders................... 35
Description of Securities.............. 37 ------------
Indemnification........................ 39
Plan of Distribution................... 40 PROSPECTUS
Legal Matters.......................... 42
Experts................................ 42 ------------
Where You Can Find More
Information............................ 43
Financial Statements................... F-1
- ---------------------------------------------
April 18, 2002
41
64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 11 of our Articles of Incorporation includes certain
provisions permitted by the South Carolina Revised Statutes, which
provides for indemnification of directors and officers against certain
liabilities. Pursuant to our Articles of Incorporation, our officers
and directors are indemnified, to the fullest extent available under
South Carolina Law, against expenses actually and reasonably incurred
in connection with threatened, pending or completed proceedings,
whether civil, criminal or administrative, to which an officer or
director is, was or is threatened to be made a party by reason of the
fact that he or she is or was one of our officers, directors,
employees or agents. We may advance expenses in connection with
defending any such proceeding, provided the indemnitee undertakes to
repay any such amounts if it is later determined that he or she was
not entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions or otherwise,
we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We estimate that expenses in connection with this registration
statement will be as follows:
SEC registration fee $ 260
Legal fees and expenses $ 50,000
Accounting fees and expenses $ 6,000
Miscellaneous $ 3,740
---------
Total $ 60,000
We will pay all of the expenses incident to the registration,
offering and sale of the shares to the public, but will not pay
commissions and discounts, if any, of underwriters, broker-dealers or
agents, or counsel fees or other expenses of the selling shareholders.
Selling shareholders will not pay any of the expenses incident to
registration. We will incur the above expenses even if we are unable
to sell any shares in this offering.
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities
sold by US Patriot, Inc. within the past three years that were not
registered under the Securities Act. The issuances described hereunder
were made in reliance upon the exemptions from registration set forth in
Section 4(2) and Regulation D of the Securities Act relating to sales by
an issuer not involving any public offering. None of the foregoing
transactions involved a distribution or public offering.
All shareholders other than Messrs. Dee, Massey and Dodrill purchased
their shares in an offering under Regulation D, Rule 504 of the
Securities Act of 1933, as amended. All investors were given access
to corporate books and records as well as the ability to ask questions
of the company's management. No general solicitation or advertising
was used in approaching the investors as all had preexisting
relationships with company management.
Messrs Dee, Massey and Dodrill were each issued shares in reliance on
the exemption from registration set forth in Section 4(2) of the
Securities Act relating to sales by an issuer not involving any public
offering. Mr. Dee, our President and Chairman of our Board of
Directors purchased his shares from the company. Mr. Massey, one of
our directors, purchased his shares from the company by delivering a
note payable to the company in the principal amount of $5,000. Mr.
Dodrill, our company counsel, received his shares in lieu of payment
for legal services rendered. Messrs Dee, Massey and Dodrill are all
sophisticated, accredited investors who had access to corporate books
and records as well as either being involved in management of the
company or having the ability to ask questions of the company's
management. All shares issued under the 504 and all shares issued to
Messrs Dee, Massey and Dodrill have been and will remain restricted
and may not be transferred unless and until the effectiveness of this
registration statement or pursuant to another applicable exemption.
Date Name # of Shares Total Price
- ---- ---- ----------- -----------
1/2/01 Phillips N. Dee 2,000,000 $5,000
1/2/01 Scott Massey 2,000,000 *
1/2/01 Jim Dodrill 1,000,000 **
11/15/01 William Bauer 25,000 $500
11/15/01 Peggy Bauer 25,000 $500
11/15/01 Greggory Colegrove 25,000 $500
11/15/01 Jeffrey Colegrove 25,000 $500
11/15/01 James Foxworthy 25,000 $500
11/15/01 Melissa Foxworthy 25,000 $500
11/15/01 Judith Cooper 12,500 $250
11/15/01 Larry Higgins 12,500 $250
11/15/01 D.T. Kimble 12,500 $250
11/15/01 Kay Kimble 12,500 $250
II-2
66
11/15/01 Ania Kwalik 12,500 $250
11/15/01 Albert Massey 12,500 $250
11/15/01 Diane Massey 12,500 $250
11/15/01 Richard Weinacker 12,500 $250
11/15/01 Bruce West 7,500 $150
11/15/01 Pamela West 5,000 $100
11/15/01 Pete Baldwin 5,000 $100
11/15/01 Sandra Dee 5,000 $100
11/15/01 Gordon English 5,000 $100
11/15/01 David Gable 5,000 $100
11/15/01 Harry Hunter 5,000 $100
11/15/01 Brenda Jellicorse 5,000 $100
11/15/01 Steve Jellicorse 5,000 $100
11/15/01 Jean Jones 5,000 $100
11/15/01 Mike Jones 5,000 $100
11/15/01 Bert Kemp 5,000 $100
11/15/01 Kristy Massey 5,000 $100
11/15/01 Angela Post 5,000 $100
11/15/01 James Post 5,000 $100
11/15/01 Jim Winders 5,000 $100
* Issued in exchange for a note payable in the principal amount of
$5,000.
** Issued in connection with services rendered valued at $2,500.
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67
ITEM 27. EXHIBITS
Exhibit Number Description
- -------------- -----------
3.1 Articles of Incorporation of US Patriot, Inc.
3.2 Bylaws of US Patriot, Inc.
4.1 Specimen certificate of the Common Stock of US
Patriot, Inc.
4.2 Specimen certificate of the Warrants of US
Patriot, Inc.
5.1 Opinion of Law Office of James G. Dodrill II,
P.A. as to legality of securities being registered
10.1 Lease of Business Property entered into
October 1, 2001 between US Patriot, Inc. and Covold
Partners.
10.2 Promissory Note dated November 30, 2000 with
SouthTrust Bank.
10.3 Promissory Note dated October 11, 2001 with
SouthTrust Bank.
23.1 Consent of Elliott Davis LLC
23.2 Consent of James G. Dodrill II
(included in Exhibit 5.1)
II-4
68
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and as expressed in the Act
and is, therefore, unenforceable.
The Company hereby undertakes to:
(1) 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;
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 Securities Act, 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) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(4) For determining any liability under the Securities Act,
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 Company under
Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part
of this registration statement as of the time the Commission
declared it effective.
(5) For determining any liability under the Securities Act,
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.
(6) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to our
directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised by the
Securities and Exchange Commission that 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 us of expenses incurred or paid by one of
our directors, officers or controlling persons in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether
II-5
69
such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-6
70
Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable ground to believe that it
meets all of the requirements for filing on Form SB-2 and authorized
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Columbia state
of South Carolina, on April 18, 2002.
US PATRIOT, INC.
By: /s/ Phillips N. Dee
------------------------
Phillips N. Dee
Principal Executive Officer, President,
Principal Financial Officer,
Principal Accounting Officer and
Director
In accordance with the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in
the capacities indicated on April 18, 2002.
By: /s/ Phillips N. Dee Principal Executive Officer, President,
---------------------- Principal Financial Officer,
Phillips N. Dee Principal Accounting Officer and
Director
By: /s/ Scott Massey Director
--------------------
Scott Massey
71