U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Fuel Centers, Inc.
(Exact name of registrant as specified in its charter)
Nevada 5541 33-0967648
- ------ ---- ----------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Number Identification No.)
or organization)
9323 Vista Serena, Cypress, California 90630
- -------------------------------------- -----
(Address of registrant's principal executive offices) (Zip Code)
(714) 220-1806
--------------
(Registrant's Telephone Number, Including Area Code)
Michael J. Muellerleile
Stepp Law Group
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- -------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- -------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================== =================== ==================== ======================= ================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate registration
to be registered registered per share offering price fee
- ---------------------------------- ------------------- -------------------- ----------------------- ----------------
Common Stock, $.001 par value 2,910,000 $0.10 $291,000 $76.83
================================== =================== ==================== ======================= ================
The offering price per share for the selling security holders was estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457
of Regulation C.
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, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
Preliminary Prospectus
Fuel Centers, Inc.,
a Nevada corporation
2,910,000 Shares of Common Stock
This prospectus relates to 2,910,000 shares of common stock of Fuel Centers,
Inc., which are issued and outstanding shares of our common stock, acquired by
the selling security holders in private placement transactions which were exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933. Our common stock is presently not traded on any market or securities
exchange, and we have not applied for listing or quotation on any public market.
See "Risk Factors" on pages 5 to 8 for factors to be considered before investing
in the shares of our common stock.
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 the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders 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 where the offer or sale is not
permitted.
The date of this prospectus is September 10, 2001
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary ...........................................................4
Risk Factors..................................................................5
Use of Proceeds...............................................................8
Determination of Offering Price...............................................8
Dilution......................................................................8
Selling Security Holders......................................................9
Plan of Distribution.........................................................10
Legal Proceedings............................................................11
Directors, Executive Officers, Promoters and Control Persons.................11
Security Ownership of Certain Beneficial Owners and Management...............12
Description of Our Securities................................................12
Interest of Named Experts and Counsel........................................13
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities..............................................................13
Organization Within Last Five Years..........................................14
Description of Business......................................................14
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................19
Description of Property......................................................20
Certain Relationships and Related Transactions...............................20
Market for Common Equity and Related Stockholder Matters.....................20
Executive Compensation.......................................................22
Financial Statements.........................................................22
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................................33
Legal Matters................................................................33
Experts......................................................................33
Additional Information.......................................................33
Indemnification of Directors and Officers....................................34
Other Expenses of Issuance and Distribution..................................35
Recent Sales of Unregistered Securities......................................35
Exhibits.....................................................................36
Undertakings.................................................................36
Signatures...................................................................37
Outside Back Cover Page
Dealer Prospectus Delivery Obligation
Until _______, 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 dealers' obligations to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
Prospectus Summary
Our business: We incorporated in Nevada on April 9,
2001. Our principal business address is
9323 Vista Serena, Cypress, California
90630. Our telephone number is
714.220.1806.
We are a new business that has generated
no revenues to date. We began operations
in April 2001. We intend to offer a full
range of business consulting services in
the retail automobile fueling industry.
We anticipate that we will provide
advice and assistance on issues of
business strategy and development of
high-volume, multi-revenue source,
retail automobile fueling centers or
"Superstations." Superstations typically
include retail fueling facilities, quick
service restaurants, car wash facilities
and a convenience store. We intend to
provide services to owners of existing
fueling stations who desire to convert
their facilities into a Superstation, as
well as to parties who are not currently
engaged in the retail sale of motor fuel
but wish to establish fueling
facilities. Many newly established
retail fueling centers are being
developed as Superstations due to
external and internal pressures to meet
the competitive demands of the
marketplace, increase profitability and
comply with increasing government
regulation. We anticipate that a
majority of our revenue will be derived
from fees paid by clients for our
advice, services and business
development products. We intend to
consult with clients and assist them in
understanding customer dynamics,
optimizing the economics of their
business, and structuring their
organizations, processes and systems to
achieve their strategic goals and
maximize their value. In addition to our
consulting services, we may develop, own
and operate our own Superstations.
Number of shares being offered: The selling security holders want to
sell 2,910,000 shares of our common
stock. The offered shares were acquired
by the selling security holders in
private placement transactions, which
were exempt from the registration and
prospectus delivery requirements of the
Securities Act of 1933.
Number of shares outstanding: 6,005,000 shares of our common stock
are issued and outstanding. We have no
other securities issued.
Estimated use of proceeds: We will not receive any of the proceeds
from the sale of those shares being
offered.
4
RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative and involves a significant and substantial number of risks. Any
person who is not in a position to lose the entire amount of his investment
should forego purchasing our common stock.
Risks related to our business:
We have a limited operating history upon which an evaluation of our prospects
can be made.
We were incorporated in April 2001, and have a limited operating history. Our
lack of operating history makes an evaluation of our business and prospects very
difficult. Our prospects must be considered speculative, considering the risks,
expenses, and difficulties frequently encountered in the establishment of a new
business. We cannot be certain that our business will be successful or that we
will generate any revenues.
We have incurred a net loss since inception and expect to incur net losses for
the foreseeable future.
As of June 30, 2001, our losses since inception were approximately $12,932. We
have not generated any revenues. We expect to incur significant operating and
capital expenditures and, as a result, we expect significant net losses in the
future. We will need to generate significant revenues to achieve and maintain
profitability. We may not be able to generate sufficient revenues to achieve
profitable operations.
We anticipate that we primarily engage in short-term consulting contracts with
clients that we obtain, which could negatively impact our business if we fail to
obtain sufficient number of clients.
We intend to provide a significant portion of our services on a non-recurring,
project-by-project basis under contracts of relatively short duration, typically
less than one year. Any client that we obtain without notice or on relatively
short notice may cancel our contract, even if we are not in default under the
contract. Our ability to generate revenues may be negatively impacted if we fail
to obtain a sufficient number of clients and fail to contract a sufficient
number of our services to these clients.
Failing to renew contracts with clients that we obtain may increase our costs
and damage our reputation.
We may not renew contracts with clients that we obtain if we fail to meet their
expectations in the performance of our services, including the quality, cost and
timeliness of our services. Failing to renew those agreements may damage our
reputation and adversely affect our ability to attract and retain clients. If a
client is not satisfied with our services, we intend to spend additional human
and other resources at our own expense to ensure client satisfaction. Such
expenditures will increase our costs, which will typically result in a lower
margin on such contracts.
We may not be able to compete effectively with other providers of retail fuel
consulting services that have more resources and experience than us.
Our industry is significantly competitive. We have competitors that provide some
or all of the services we provide and who are larger and have more resources
than we do. Many of our competitors have significantly greater financial, human
and marketing resources than us. As a result, such competitors may be able to
respond more quickly to new trends and changes in customer demands. Such
competitors may also be able to devote greater resources to the development,
promotion, sale, and support of their services than we do. If we do not compete
effectively with current and future competitors, we may be unable to secure new
and renewed client contracts, or we may be required to reduce our rates in order
to complete effectively. This could result in a reduction in our revenues,
resulting in lower earnings or operating losses.
5
Our officers and directors are engaged in other activities that could have
conflicts of interest with us. Therefore, our officers and directors may not
devote sufficient time to our affairs, which may affect our ability to conduct
operations and generate revenues.
The persons serving as our officers and directors have existing responsibilities
and may have additional responsibilities to provide management and services to
other entities. As a result, conflicts of interest between us and the other
activities of those entities may occur from time to time, in that our officers
and directors shall have conflicts of interest in allocating time, services, and
functions between the other business ventures in which they may be or become
involved and our affairs.
Our ability to forecast future costs and anticipated revenues is limited as a
result of our inability to accurately predict the length of time required to
engage a client and complete an assignment.
The timing of client contracts that we may be able to obtain and service
fulfillment is not predictable with any degree of accuracy. ^ We may be required
to hire new consultants before securing a client engagement. Clients may defer
committing to new assignments for any length of time and for any reason. Such
deferrals could require us to maintain a significant number of under-utilized
consultants during any given period. In addition, failing to procure an
engagement after spending such time and resources could significantly reduce our
limited financial resources, which will hinder our ability to spend resources on
procuring other engagements. We cannot predict whether the investment of time
and resources will result in a new engagement or, if the engagement is secured,
that the engagement will be on terms favorable to us.
Our future financial results are uncertain and our operating results may
fluctuate. Therefore, investors may lose all or part of their investment if our
expanded operations are not profitable.
Our results of operations may vary from period to period because of a variety of
factors, including but not limited to our introduction of new services, changes
in marketing and sales expenditures, competitive pricing pressures, the interest
in and use of our services and general economic and industry conditions that
affect customer demand and preferences. As with any relatively new business
enterprise operating in a specialized and intensely competitive market, we are
subject to many business risks which include, but are not limited to, unforeseen
marketing, promotional and development expenses, unforeseen negative publicity,
competition and our lack of operating experience. Many of the risks may be
unforeseeable or beyond our control. We may not be able to successfully
implement our business plan in a timely or effective manner, or generate
sufficient interest in our services. We may not be able to market and sell
enough services to generate sufficient revenues to continue our operations.
We anticipate that we will need to raise additional capital to develop our own
retail fuel centers. Our failure to raise additional capital will significantly
hinder our ability to develop our own retail fuel centers.
To develop our own retail fuel centers, we will be required to raise additional
funds. We cannot guaranty that we will be able to obtain additional financing at
commercially reasonable rates. Our failure to obtain additional funds would
significantly limit or eliminate our ability to develop our own retail fuel
centers. We anticipate that we may seek additional funding through public or
private sales of our securities. That could include equity securities, or
through commercial or private financing arrangements. Adequate funds may not be
available when needed or on terms acceptable to us. In the event that we are not
able to obtain additional funding on a timely basis, we may be required to limit
any proposed operations or expansion.
Our ability to raise additional capital through the sale of our stock may be
harmed by competing resales of our common stock by the selling security holders.
The price of our common stock could fall if the selling security holders sell
substantial amounts of our common stock. These sales would make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate because the selling security holders may
offer to sell their shares of common stock to potential investors for less than
we do. Moreover, potential investors may not be interested in purchasing shares
of our common stock if the selling security holders are selling their shares of
common stock.
6
We will be subject to extensive government regulation relating to the
development and operation of retail fuel centers, which could add significant
additional costs to our business.
If we develop our own retail fuel centers, we will be subject to extensive
government regulation. We may be responsible for the investigation and clean-up
of contamination resulting from our operations. Current compliance activities
relate to air emissions limitations, waste water and storm water discharges and
other releases of petroleum, petroleum products and wastes. These regulations
would primarily affect the business of retail fuel sales and ancillary services
such as a carwash and car maintenance and repair. Our proposed operations will
be adversely affected if substantial capital investments are required in order
to maintain compliance with federal, state and local regulations. In addition,
third parties and governmental agencies in some cases have the power under such
laws and regulations to require remediation of environmental conditions and, in
the case of governmental agencies, to impose fines and penalties.
Risks related to owning our common stock:
Our officers, directors and principal security holders own approximately 73.27%
of our outstanding shares of common stock, allowing these shareholders control
matters requiring approval of our shareholders.
As a result of such ownership by our officers, directors and principal security
holders, investors will have no control over matters requiring approval by our
security holders, including the election of directors. Such concentrated control
may also make it difficult for our shareholders to receive a premium for their
shares of our common stock in the event we enter into transactions which require
shareholder approval. In addition, certain provisions of Nevada law could have
the effect of making it more difficult or more expensive for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
us.
Because we will be subject to the "penny stock" rules, the level of trading
activity in our stock may be reduced, which may make it difficult for investors
in our common stock to sell their shares.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks, like shares of our common stock, generally are equity
securities with a price of less than $5.00, other than securities registered on
certain national securities exchanges or quoted on Nasdaq. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell these securities to persons other than
established customers and "accredited investors" must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security subject to the penny
stock rules, and investors in our common stock may find it difficult to sell
their shares.
We lack a public market for shares of our common stock, which may make it
difficult for investors to sell their shares.
There is no public market for shares of our common stock. An active public
market may not develop or be sustained. Therefore, investors may not be able to
find purchasers for their shares of our common stock. Should there develop a
significant market for our shares, the market price for those shares may be
significantly affected by such factors as our financial results and introduction
of new products and services. Factors such as announcements of new or enhanced
products by us or our competitors and quarter-to-quarter variations in our
results of operations, as well as market conditions in our sector may have a
significant impact on the market price of our shares. Moreover, the stock market
has experienced extreme volatility that has particularly affected the market
prices of stock of many companies and that often has been unrelated or
disproportionate to the operating performance of those companies.
7
Because we lack a public market for shares of our common stock, the selling
security holders will arbitrarily determine the offering price of the shares.
Therefore, investors may lose all or part of their investment if the price of
their shares is too high.
Our common stock is not publicly traded and we do not participate in an
electronic quotation medium for securities traded outside the Nasdaq Stock
Market. We cannot guaranty that an active public market for our stock will
develop or be sustained. Therefore, the selling security holders may arbitrarily
determine the offering price of shares of our common stock. Accordingly,
purchasers may lose all or part of their investments if the price of their
shares is too high. A purchase of our stock in this offering would be unsuitable
for a person who cannot afford to lose his entire investment.
We are registering 505,000 shares of common stock owned by our officers and
directors. Our officers and directors may sell those shares as soon as possible,
which could significantly decrease the price of our common stock and reduce
their desire to see us succeed.
Our officers and directors may sell those 505,000 shares immediately after they
are registered. In the event that our officers and directors sell those shares,
the price of our common stock could decrease significantly. Also, a conflict of
interest will occur between their duties to us and their personal interests in
selling their shares. We cannot assure you that our officers and directors will
not sell those shares as soon as they are registered.
Information in this prospectus contains "forward looking statements" which can
be identified by the use of forward-looking words such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Among the key factors that have a direct
bearing on our results of operations are the effects of various governmental
regulations, the fluctuation of our direct costs and the costs and effectiveness
of our operating strategy. Other factors could also cause actual results to vary
materially from the future results anticipated by those forward-looking
statements.
Use of Proceeds
- ---------------
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders.
Determination of Offering Price
- -------------------------------
The selling security holders may sell our common stock at prices then prevailing
or related to the then current market price or at negotiated prices.
Dilution
- --------
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
8
Selling Security Holders
- ------------------------
The following table sets forth information concerning the selling security
holders including:
1. the number of shares owned by each selling security holder prior to
this offering;
2. the total number of shares that are to be offered for each selling
security holder; and
3. the total number of shares and the percentage of common stock that
will be owned by each selling security holder upon completion of the
offering.
The shares offered for sale constitute all of the shares known to us to be
beneficially owned by the selling security holders. None of the selling security
holders has held any position or office with us, except as specified in the
following table. Other than the relationships described below, none of the
selling security holders had or have any material relationship with us. None of
the selling security holders is a broker-dealer or an affiliate of a
broker-dealer to our knowledge. Thomas E. Stepp, Jr., Michael J. Muellerleile,
Deron M. Colby, Richard Reincke, Amy Pontillas, Sandie M. Williams, Myra E.
Capoccia, and Lan P. Nguyen are employees of Stepp Law Group, which serves as
our legal counsel.
- ----------------------------- --------------------------------- ---------------------------------- -------------------------------
Name of Selling Security Amount of Shares of Common Amount of Shares of Common Stock Amount of Shares and the
Holder Stock Owned by Selling Security to be Offered by the Selling Percentage of Common Stock
Holder Before the Offering Security Holder Owned by Selling Security
Holder After the Offering is
Complete
- ----------------------------- --------------------------------- ---------------------------------- -------------------------------
John R. Muellerleile,
president, secretary and a
director 3,550,000 500,000 3,050,000 and 50.79%
- ----------------------------------------------------------------------------------------------------------------------------------
John Shukur, treasurer and
a director 50,000 5,000 45,000 and 0.7%
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Thomas E. Stepp, Jr. 400,000 400,000 0
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Michael J. Muellerleile 400,000 400,000 0
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Deron M. Colby 300,000 300,000 0
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Richard C. Reincke 300,000 300,000 0
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Amy M. Pontillas 70,000 70,000 0
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Sandie M. Williams 10,000 10,000 0
- ----------------------------------------------------------------------------------------------------------------------------------
Myra E. Capoccia 10,000 10,000 0
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Lan P. Nguyen 10,000 10,000 0
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Renee McCracken 5,000 5,000 0
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Cynthia Bergendahl 10,000 10,000 0
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John D. Muellerleile 10,000 10,000 0
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Renee Y. Close 10,000 10,000 0
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Jason Ortega 40,000 40,000 0
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Scott Sheman 7,500 7,500 0
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Brad Thompson 5,000 5,000 0
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AV Neely 6,250 6,250 0
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Brad Fisher 2,500 2,500 0
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Alia Neely 12,500 12,500 0
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Wade Neely 6,250 6,250 0
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Scott Michaels 15,000 15,000 0
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Leo Studer 250,000 250,000 0
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William Sterling, Jr. 6,250 6,250 0
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Thomas J. Slosson 5,000 5,000 0
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Jerry A. Cardenas 2,500 2,500 0
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Gary Manley 5,000 5,000 0
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Jason Whitworth 2,500 2,500 0
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Anderson Hinsch 5,000 5,000 0
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Sonny Martinez 37,500 37,500 0
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9
- ----------------------------------------------------------------------------------------------------------------------------------
Jim Mirrotto 5,000 5,000 0
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Jesus Avelar 25,000 25,000 0
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Eric Becker 11,250 11,250 0
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Lyle Neely 100,000 100,000 0
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Tim Neely 120,000 120,000 0
- ----------------------------------------------------------------------------------------------------------------------------------
Ryan Neely 200,000 200,000 0
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Plan of Distribution
- --------------------
The selling security holders may sell our common stock in negotiated
transactions or otherwise. The selling security holders may sell our common
stock at prices then prevailing or at negotiated prices. The shares will not be
sold in an underwritten public offering.
The shares may be sold directly or through brokers or dealers. The methods by
which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
Brokers and dealers engaged by selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders, or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser, in amounts to be
negotiated. Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a selling
security holder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to such selling security
holder. Broker-dealers who acquire shares as principal may resell those shares
from time to time in the over-the-counter market or otherwise at prices and on
terms then prevailing or then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive or pay
commissions.
The selling security holders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed the Registration Statement, of which this prospectus forms a part,
with respect to the sale of the shares by the selling security holders. The
selling security holders may not sell any or all of the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
Registration Statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
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 defines a "distribution"
as an offering of securities that is distinguished from ordinary trading
activities by the magnitude of the offering and the presence of special selling
efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
10
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
Legal Proceedings
- -----------------
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
Directors, Executive Officers, Promoters and Control Persons
- ------------------------------------------------------------
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could disrupt our operations, reduce profits and hinder future
development, if suitable replacements are not promptly obtained. We anticipate
that we will enter into employment agreements with each of our key executives.
We cannot guaranty that each executive will remain with us during or after the
term of his or her employment agreement. In addition, our success depends, in
part, upon our ability to attract and retain other talented personnel. Although
we believe that our relations with our personnel are good and that we will
continue to be successful in attracting and retaining qualified personnel, we
cannot guaranty that we will be able to continue to do so. Our officers and
directors will hold office until their resignations or removal.
Our directors and principal executive officers are as specified on the following
table:
========================== ================ ===================================
Name Age Position
- -------------------------- ---------------- -----------------------------------
Jack Muellerleile 59 president, secretary, director
- -------------------------- ---------------- -----------------------------------
K. John Shukur 30 treasurer, director
========================== ================ ===================================
Jack Muellerleile. Mr. Muellerleile is our president, secretary and one of our
directors since our inception. Mr. Muellerleile brings expertise and experience
in commercial real estate, business brokerage, franchising and entrepreneurship
and the oil business. From 1990 to the present, Mr. Muellerleile has been the
owner of Site Location Solutions, a firm specializing in the petroleum, food
service and entertainment industries. During the last ten years, he handled over
275 successful engagements acquiring a location or transaction in each target
area, whether purchase, lease, or joint venture. Mr. Muellerleile is an expert
in lease and purchase analyses and negotiations, major oil company management
thinking and supply contracts and competitive allowances and restaurant and
entertainment related transactions. Mr. Muellerleile enjoyed a distinguished
23-year career with Mobil Oil during which he held thirteen different positions
culminating in responsibility for all real estate activities throughout the
western two-thirds of the United States. He was responsible for the acquisition
and retention, by lease or purchase, of thousands of properties, several hundred
divestments, as well as numerous other business opportunity buy/sell agreements,
lease renewals, exercise of options, market evaluations, competitive analyses
and strategic decision making regarding wide-area distribution agreements.
During the past five years, Mr. Muellerleile has specialized in Superstation
developments that involve multiple profit centers and industry-leading revenues.
Mr. Muellerleile earned his Bachelor of Science degree in business from
University of Missouri in 1964. Mr. Muellerleile is not an officer or a director
of any other reporting company.
11
K. John Shukur. Mr. Shukur is our Treasurer and one of our directors since June
2001. Mr. Shukur has significant experience in the retail food industry. From
1994 to the present, Mr. Shukur has been the operator of Samurai Harry's, a
chain of Japanese-American food restaurants located in Southern California. Mr.
Shukur earned his Bachelor of Science degree in Environmental Analysis and
Design from University of California, Irvine in 1994. Mr. Shukur is not an
officer or a director of any other reporting company.
There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony,
nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 10, 2001 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.
================= =================================== =================================== ====================
Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class
- ----------------- ----------------------------------- ----------------------------------- --------------------
Common Stock John R. Muellerleile
9323 Vista Serena, 3,550,000 shares, president,
Cypress, CA 90630 secretary, director 59.12%
- ----------------- ----------------------------------- ----------------------------------- --------------------
Common Stock K. John Shukur
5 Hidlago 50,000 shares, treasurer,
Rancho Santa Margarita, CA 92688 director 0.83%
- ----------------- ----------------------------------- ----------------------------------- --------------------
Common Stock Thomas E. Stepp, Jr.
1301 Dove Street, Suite 460
Newport Beach, CA 92660 400,000 shares 6.66%
- ----------------- ----------------------------------- ----------------------------------- --------------------
Common Stock Michael J. Muellerleile
1301 Dove Street, Suite 460
Newport Beach, CA 92660 400,000 shares 6.66%
- ----------------- ----------------------------------- ----------------------------------- --------------------
Common Stock All directors and named executive
officers as a group 3,600,000 shares 59.95%
================= =================================== =================================== ====================
Thomas E. Stepp, Jr. and Michael J. Muellerleile are employees of Stepp Law
Group, which serves as our legal counsel.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.
Description Of Our Securities
- -----------------------------
Description of Capital Stock We are authorized to issue 50,000,000 shares of
$.001 par value common stock and 5,000,000 shares of $.001 par value preferred
stock. As of September 10, 2001, 6,005,000 shares of our common stock were
issued and outstanding.
Each shareholder of our common stock is entitled to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
our common stock are entitled to one vote for each share of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of our directors or any other matter. Therefore, the
holders of more than 50% of the shares voted for the election of those directors
can elect all of the directors. The holders of our common stock are entitled to
receive dividends when, as and if declared by our Board of Directors from funds
legally available therefor. Cash dividends are at the sole discretion of our
Board of Directors. In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of our liabilities
and after provision has been made for each class of stock, if any, having any
preference in relation to our common stock. Holders of shares of our common
stock have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to our common stock.
12
Dividend Policy. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our Board of Directors and subject to any restrictions that may be imposed by
our lenders.
Preferred Stock. We are authorized to issue 5,000,000 shares of $.001 par value
preferred stock, of which no such shares are issued and outstanding. We have not
designated the right and preferences of our preferred stock. The availability or
issuance of these shares could delay, defer, discourage or prevent a change in
control.
Our Articles of Incorporation also include a staggered board of director
provision, which provides that the term of office of members of our board of
directors shall be staggered so that members will be elected every third year.
Such provision could delay, defer, discourage or prevent a change in control.
Our Articles of Incorporation also include provisions that require the
affirmative vote of at least two-thirds of the outstanding shares of common
stock held by our shareholders for the approval or authorization of any business
combination, such as a merger or a sale of any substantial part of our assets.
Those provisions are subject to the provisions of any series of preferred stock
which may at the time be issued and outstanding and convertible into shares of
our common stock. The requirement of two-thirds vote could delay, defer,
discourage or prevent a change in control.
Interest of Named Experts and Counsel
- -------------------------------------
No expert or our counsel was hired on a contingent basis, or will receive a
direct or indirect interest in us, except as specified below, or was a promoter,
underwriter, voting trustee, director, officer, or employee of the company, at
any time prior to the filing of this Registration Statement.
Thomas E. Stepp, Jr., Michael J. Muellerleile, Deron M. Colby, Richard C.
Reincke, Amy Pontillas, Sandie M. Williams, Myra E. Capoccia, and Lan P. Nguyen
are employees of Stepp Law Group, which serves as our legal counsel. Thomas E.
Stepp, Jr. owns 400,000 shares of our common stock. Michael J. Muellerleile owns
400,000 shares of our common stock. Deron M. Colby owns 300,000 shares of our
common stock. Richard C. Reincke owns 300,000 shares of our common stock. Amy
Pontillas owns 100,000 shares of our common stock. Sandie M. Williams, Myra E.
Capoccia, and Lan P. Nguyen each own 10,000 shares of our common stock.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
- ------------------------------------------------------------------------
Article Seventh of our Articles of Incorporation provides, among other things,
that our directors shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or
redemption by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
13
Section 10 of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 78.7502 of the Nevada Revised Statutes.
Indemnification Agreements. We will enter into indemnification agreements with
each of our executive officers. We will agree to indemnify each such person for
all expenses and liabilities, including criminal monetary judgments, penalties
and fines, incurred by such person in connection with any criminal or civil
action brought or threatened against such person by reason of such person being
or having been our officer or director or employee. In order to be entitled to
indemnification by us, such person must have acted in good faith and in a manner
such person believed to be in our best interests. With respect to criminal
actions, such person must have had no reasonable cause to believe his or her
conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that act and is, therefore, unenforceable.
Organization Within Last Five Years
- -----------------------------------
Transactions with Promoters. Jack Muellerleile was issued 3,550,000 shares of
our common stock in exchange for his services as our promoter. The value of the
services performed by Mr. Muellerleile was approximately $3,550.
Description of Business
- -----------------------
Our Background. We were incorporated in Nevada on April 9, 2001.
Our Business. We are a new business that has generated no revenues to date. We
intend to offer a full range of business consulting services in the retail
automobile fueling industry. We anticipate that we will offer advice and
assistance on issues of business strategy and development of high-volume,
multi-revenue source, retail automobile fueling centers or "Superstations".
Superstations typically include retail fueling facilities, quick service
restaurants, car wash facilities and a convenience store. We intend to provide
services to owners of existing fueling stations who desire to convert their
facilities into a Superstation, as well as to parties who are not currently
engaged in the retail sale of motor fuel but wish to establish fueling
facilities. Many newly established retail fueling centers are being developed as
Superstations due to external and internal pressures to meet the competitive
demands of the marketplace, increase profitability and comply with increasing
government regulation. For example, underground fuel storage tanks and lines
face significant regulation by the state of California to reduce the soil and
groundwater contamination caused by leaks. To eliminate the cost of continuing
to adapt to increasing and changing regulation, we propose entombment of the
underground systems in concrete, which will cost at least $200,000 per location.
We believe that such additional cost can only be accommodated by high revenue
fuel centers such as a Superstation. In addition, California and other states
have mandated that the fuels sold in each particular state be formulated
differently. Producing those unique formulations limits the supply to the
production capacity of the refineries in those states. As a result, when the
refineries are temporarily closed for maintenance procedures, shortages occur
because refined product cannot be shipped from other states. Such closures
strains industry production and results in shortages at retail fuel centers. We
believe that Superstations's high revenues and volume can justify the cost of
adding additional underground fuel storage tanks and fuel inventory, which will
reduce the likelihood of those shortages at the consumer level.
A majority of our revenue will be derived from fees paid by clients for our
advice, services and business development products. We intend to consult with
clients and assist them in understanding customer dynamics, optimizing the
economics of their business, and structuring their organizations, processes and
systems to achieve their strategic goals and maximize their value.
In addition to our consulting services, we may develop, own and operate our own
Superstations. Several retail fuel centers, which have been identified by us,
are available for purchase. In addition, we believe that a significant number of
retail fuel centers will become available due to the current divestiture plans
of Tosco-Phillips, Shell, Chevron-Texaco and Exxon Mobil. However, we do not
have the capital to satisfy the down payment requirements necessary to acquire
those retail fuel centers.
14
We have provided proposed consulting service contracts to several new client
candidates, although none of those agreements have been executed. We have also
attended several meetings with petroleum industry professionals. Based on our
meetings and discussions those professionals and potential clients including
those to whom we have forwarded proposed consulting service contracts, we
believe that we will generate revenues in the fourth quarter of 2001.
During the next twelve months, we intend to accept consulting cases which are
offered to us. If we acquire the necessary equity capital, we intend to acquire
existing operating businesses and develop our own Superstations. We do not
anticipate that we will have any conflicts of interests with clients because
clients that hire us as consultants usually have the target acquisition
identified and secured by a letter of intent or purchase agreement. If clients
do not have a target identified and we identify one for them in their specified
site search area, then we will offer the target location to the client. We will
only consider the location for our own account if the client rejects the
location.
Our Industry. The following discussion concerning our industry is based solely
on the belief of our president who has been involved in the oil and gas industry
since 1964, including 23 years experience as an executive employee of Mobil Oil
Corporation.
We believe the retail petroleum industry has always been and ^ will continue to
be controlled by suppliers of automotive fuels, the fully integrated
multinational oil companies, such as Exxon Mobil. For decades, multinational oil
companies looked upon the retail petroleum business as simply a necessary evil
with which to contend in order to sell the end product generated by their
profitable "upstream" components such as exploration and production,
transportation, and refining. We believe the gas and oil crises of the 1970s
caused the multinational oil companies to reevaluate the retail end of the
business because consumers began noticing what their standard operating
procedures had been and started questioning their routine business practices. As
oil executives focused their attention on the retail portion of the petroleum
industry, it became clear that there was over saturation in the downstream
retail operations in each marketplace, especially in the densely populated key
markets.
As a result, we believe multinational oil companies undertook the following
activities:
o While stabilizing crude oil sources by entering into long-term supply
agreements with the Middle Eastern oil producing countries, they took
measures to undermine the Organization of Petroleum Exporting Countries
(OPEC), thus diminishing its ability to abruptly disturb the flow of
raw materials.
o They commissioned the building of supertankers and placed them in
service among all deep-water ports.
o Refineries were upgraded to enable them to process various types of
crude oil. Over time, those refineries not located in reasonable
proximity to the above mentioned deep-water ports were divested.
o The market place was systematically consolidated. Thousands of gas
stations across the nation simply disappeared. Simultaneously,
consumers were taught to pump their own gas via a price discount
inducement which, eventually, also disappeared.
We believe that the industry has changed significantly from twenty years ago.
While multinational oil companies continue to consolidate, even to the extent
that they are merging with each other, relatively small, independent
owner-operators dominate the retail petroleum business. In the large
metropolitan key markets, we believe that the multinational oil companies have
taken steps to secure control of a strategic number of prime locations making
them company operations where it owns or leases the land, owns the improvements
and operates the business. Currently, company operations amount to far fewer
than the thirty percent level targeted for this type of unit. The sweeping
majority of retail units are "dealer" operated via three party or two party
arrangements. Where the oil company still controls the land and improvements, it
leases the land and improvements to a dealer who owns and operates the business.
These are called three party units because the oil company, acting as two
parties in its roles as landlord and supplier, combines with the dealer as
tenant thus comprising a three party arrangement. Where the oil company does not
control the land and improvements, the arrangement is considered to be one
between two parties.
While three party dealers are still in the overwhelming majority within key
metropolitan markets, we believe their long-term viability is very much in doubt
since they are seriously handicapped on many fronts, including:
15
o Multinational oil companies control the land and improvements and may
increase the rent at will since leases normally expire every three
years or may simply declare the unit "uneconomic", non-renew the
dealer lease and sell the property. When this occurs, the dealer's
business goodwill becomes worthless.
o The land parcel is usually undersized compared to the 35,000 to 60,000
square feet required to develop a modern, new, fully competitive
facility. Therefore, even though federal law requires that the
incumbent dealer be given the first right of refusal when the oil
company sells the land, the undersized land parcel will significantly
hinder the dealer's ability to survive if the dealer exercises the
option without acquiring the necessary additional adjacent land,
assuming the adjacent land is available.
o Encroachment by new two party competition will eventually make it
impossible for the dealer to compete effectively and win the loyalty
of enough customers to enable him to remain in business.
Burdened by ever-increasing costs of doing business and the inability to compete
and win new customers, we believe that the three party dealer arrangement faces
a difficult future and possible extinction in the years ahead. Conversely, we
believe that the future appears promising for two party dealers, especially for
those wise enough to upsize their land parcel sufficiently to accommodate
multiple profit centers thereby reducing the critical reliance upon cash flow
from the sale of gasoline to sustain economic viability.
Some dealers have adjusted to changing conditions to embrace the two party
arrangement. Currently, after five or more years of experiment, the new breed of
two party dealer has fashioned a multi-phase marketing system which offers its
customers a combination of products and service at value prices in a neat,
clean, attractively landscaped, spacious, well lit and safe "one stop shopping"
environment which dominates the trade area into which the concept is introduced.
As a result, significantly increased volumes through each profit center combine
to create significantly increased cash flows through the project as a whole.
Appropriately, these two-party units have become known as Superstations.
We believe that the multinational oil companies are very supportive of the
Superstation concept. However, after having spent the last two decades
simplifying their "downstream" retail operations, the multinational oil
companies are opposed to creating Superstation units for their own account
because they are content to supply high-priced wholesale product into
underground tanks which they do not own and therefore have no liability.
Moreover, their brand is positioned within a $3-$5 million development in which
they have almost zero dollars invested.
The Superstation Concept. Superstations are enhanced one-stop shopping
experiences in well-lit, clean, safe and convenient locations. While the
majority of Superstation retail revenues are derived from the sale of gasoline,
Superstations also provide a variety of merchandise and other services designed
to meet the non-fuel needs of customers. Sales of these additional products are
an important source of revenue, contribute to increased profitability and serve
to increase customer traffic. Products and services offered at each Superstation
vary according to the area's demographic make-up and may include ancillary
products and services such as propane fuel, food service, car wash and detail
services, car maintenance, ATM and check-cashing services, dry cleaning and
laundry services, in addition to traditional products and services offered by
convenience stores. We believe that convenience stores present significant
additional profit opportunities based upon their strategic locations in high
traffic areas.
Store interiors range from 600 to 2,800 square feet of retail space and
typically provide gasoline consoles with controls and a variety of convenience
store merchandise such as tobacco products, beer, wine, soft drinks, coffee,
snacks, dairy products and baked goods. Superstations generally have lighted
canopies that extend over the multi-pump fuel islands to provide added security
and protection from the elements for customers and employees.
Superstations are open seven days a week, 24 hours a day, and emphasize
convenience to the customer through location, merchandise selection, and
service. The Superstations sell groceries, tobacco products, take-out foods and
beverages including alcoholic beverages where local laws permit, dairy products,
and non-food merchandise such as money orders, telephone calling cards, lottery
tickets, health and beauty aids and magazines. Food service in the Superstation
will vary from pre-packaged sandwiches and fountain drinks to full quick service
restaurants, and some may have limited in-store seating.
Fuel Suppliers. Two party Superstation owners must negotiate with wholesale fuel
suppliers to for their motor fuel inventory, identity, credit card other
proprietary items at their locations. The actual sale of the motor fuel to the
public is conducted by the operators of the Superstations pursuant to gas-only
16
store contracts that generally obligate the supplier to provide the motor fuel
inventory, while the store operators agree to collection and remittance
procedures. Superstation owners may be compensated in the form of negotiated
rebates or competitive allowances based on the volume of fuel sold. The gas-only
store supply contract usually grants the oil company the right of first refusal
to purchase the Superstation if it is ever offered for sale.
Our Business Strategy. Increasingly, the competitive advantage in retail fuel
consulting will be gained by those consulting firms like ours, which:
o are able to marshal the necessary expertise and resources to offer
comprehensive skill sets and packaged solutions to clients;
o have the vision, strength and consistency to advise clients along the
entire service continuum, from strategy to selection to implementation
to operation;
o offer the flexibility to meet the challenges of the rapidly evolving
retail fuel market; and
o have assets to bring total solutions including offerings which
address the clients' need for market expansion and capital replacement.
Our Marketing Strategy. We market our services to parties who own or wish to own
retail fuel centers, which include existing owner-operators with expansion plans
and service providers associated with Superstations, such as attorneys,
accountants, real estate developers and architects. We also intend to develop
relationships with business brokers who regularly advertise locations for sale
in newspapers and trade journals. We believe that those business brokers as well
as real estate brokers who list properties for sale will become sources of
referrals. In addition, we believe that referrals will be generated from trade
associations such as the 76 Marketers Alliance which was formed to negotiate
with Tosco-Phillips for the purchase of the land beneath existing 76 brand gas
stations.
A variety of business development and marketing channels are used to communicate
directly with current and prospective clients, including on-site presentations,
industry seminars and industry-specific articles. After we have established a
client base, we expect a significant portion of our future business to arise
from prior client contracts. Our clients may expand the scope of their initial
contracts to include complementary activities such as site acquisition,
facilities layout and design analysis, profit center research and analysis,
competitive survey report, negotiation services, coordination of city
redevelopment activities and other types of activities.
If we develop our own Superstations, our market strategy will generally
emphasize national brands value priced at sites possessing high vehicular car
counts or very low competition. Due to the geographic distribution of our
proposed stores and the variety of trade names under which they may operate, the
use of advertising will be limited to location signage, point-of-sale
promotional materials, local newspaper and billboard advertising, and locally
distributed flyers. Branded locations often have higher fuel sales volumes, in
gallons, than non-branded outlets due to the advertising and promotional
activities of the respective oil company and the acceptance of such oil
company's proprietary credit cards. The increased customer traffic associated
with higher fuel sales also tends to increase merchandise sales volumes.
However, the fuel purchased for a branded location is usually more expensive
than fuel purchased for an unbranded location.
Our Growth Strategy. Our ability to generate internal growth will be affected
by, among other factors, our success in:
o expanding the range of services we offer to customers to address their
evolving needs;
o attracting new customers;
o increasing the number of projects performed for existing customers;
o hiring, training, and retaining employees;
o opening our own facilities;
o expanding our service areas; and
o reducing operating and overhead expenses.
Many of the factors affecting our ability to generate internal growth may be
beyond our control, and we cannot be certain that our strategies will be
successful or that we will be able to generate cash flow sufficient to fund our
operations and to support internal growth. Our inability to achieve internal
growth could materially and adversely affect our business, financial condition
and results of operations.
17
Our Competition. The principal methods of competition in business development
consulting include the quality and types of services and products that the
consultant provides its clients and their cost. The changing business
environment has also produced an evolving range of strategic and operating
options for fuel retailers and marketers, many of which are unfamiliar with an
industry that had long operated under a direct operation and control of the oil
supplier. In response, independent fuel retailers are formulating and
implementing new strategies and tactics, including developing ancillary products
and services, re-inventing the convenience store image and engaging in target
marketing programs. We believe that fuel retailers or those interested in
entering the fuel retail market will continue to turn to outside consultants to
assist in this vast array of initiatives because outside consultants are better
equipped to deal with the ever evolving fuel retail market and are capable of
developing better solutions more quickly and cost-effectively. By employing
outside expertise, fuel retailers can often improve their ability to compete by
more rapidly deploying new processes. In strategic consulting services, we may
compete with nationally and internationally with consulting firms, and specialty
consulting firms and the consulting groups of international accounting firms
such as KPMG LLP, Ernst & Young LLP, Deloitte & Touche LLP,
PricewaterhouseCoopers, LLP and Arthur Andersen & Company.
In addition to our consulting services, we may develop, own and operate our own
Superstations. Many of the principal competitors are integrated multinational
oil companies that are substantially larger and better known than us. Because of
their diversity, integration of operations, larger capitalization and greater
resources, these major oil companies will be better able to withstand volatile
market conditions, compete on the basis of price and more readily obtain refined
oil in times of shortages. Certain larger competitors have refineries that are
larger and more complex and, as a result, could have lower per barrel costs or
higher margins per barrel of throughput. The principal competitive factors
affecting our retail marketing operations are locations of stores, product
price, pay-at-the-pump capability, the quality, appearance and cleanliness of
stores and brand identification. Competition from large integrated oil companies
is expected to continue.
Government Regulation. We are subject to federal, state and local laws and
regulations applied to businesses, such as payroll taxes on the state and
federal levels. ^ In general our consulting activities are not subject to
licensing or other regulatory requirements. However, in the event that that we
develop our own retail fuel centers, we may be responsible for the investigation
and clean up of contamination resulting from our operations. Current compliance
activities relate to air emissions limitations, waste water and storm water
discharges and solid and hazardous waste management activities. In connection
with certain of these compliance activities and for other reasons, we may be
engaged in various investigations and, where necessary, remediation of soils and
ground water relating to discharges and other releases of petroleum, petroleum
products and wastes. These regulations primarily affect our principal business
of retail fuel sales and ancillary services concerning such as a carwash and car
maintenance and repair. ^ We anticipate however that substantial capital
investments will be required in order to maintain compliance with federal, state
and local regulations, including new Environmental Protection Agency regulations
regarding low sulfur gasoline.
In addition, underground fuel storage tanks and lines face significant
regulation by the state of California to reduce the soil and groundwater
contamination caused by leaks. Further, California and other states have
mandated that the fuels sold in each particular state be formulated differently.
Our Website www.fuelcenters.com. Our current website provides a general
description of our services and our address, telephone number and e-mail
address. If we generate revenues, we intend to further develop the website to
market our products and services. If we generate significant revenues, we plan
to expand and design our website to function as a community for our clients. A
community website allows interaction and exchange of information between our
clients. For example, our proposed community website would allow our clients to
interact regarding new government regulation and compliance, experiences with
the major oil companies and gasoline suppliers and economic news and trends
affecting the oil industry. Our proposed community website could be developed to
allow users to interact with and obtain advice from other users.
Our Intellectual Property. We do not presently own any patents, trademarks,
licenses, concessions or royalties. Our success may depend in part upon our
ability to preserve our trade secrets, obtain and maintain patent protection for
our technologies, products and processes, and operate without infringing upon
the proprietary rights of other parties. However, we may rely on certain
proprietary technologies, trade secrets, and know-how that are not patentable.
Although we may take action to protect our unpatented trade secrets and our
proprietary information, in part, by the use of confidentiality agreements with
our employees, consultants and certain of our contractors, we cannot guaranty
that:
18
o these agreements will not be breached;
o we would have adequate remedies for any breach; or
o our proprietary trade secrets and know-how will not otherwise become
known or be independently developed or discovered by competitors.
We cannot guaranty that our actions will be sufficient to prevent imitation or
duplication of either our products and services by others or prevent others from
claiming violations of their trade secrets and proprietary rights.
We own the Internet domain name www.fuelcenters.com. Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as ".org", or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third parties from acquiring domain names that
infringe upon or otherwise decrease the value of our domain names.
Our Research and Development. We are not currently conducting any research and
development activities, other than the development of our website. We do not
anticipate conducting such activities in the near future.
Employees. As of September 10, 2001, we had one full time and one part time
employee. We believe that our relations with our employees are good.
We are not a party to any collective bargaining agreements.
Facilities. Our headquarters are located at 9323 Vista Serena, Cypress,
California 90630. We believe that our facilities are adequate for our needs and
that additional suitable space will be available on acceptable terms as
required. We do not own any real estate.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------
Our Plan of Operation for the Next Twelve Months. We have not yet generated any
revenues from operations. In our management's opinion, to effectuate our
business plan in the next twelve months, the following events should occur or we
should reach the following milestones in order for us to become profitable:
1. We must continue to market our consulting services and obtain
consulting agreements. We have provided proposed consulting service
contracts to several new client candidates, although none of those
agreements have been executed. Based on our meetings and discussions
with potential clients including those to whom we have forwarded
proposed consulting service contracts, we believe that some of those
potential clients will retain us to provide consulting services. Within
three to six months, we should be providing consulting services to
multiple clients.
2. We must continue to attend meetings with petroleum industry
professionals and develop relationships with those professionals. We
believe that major oil company executives can provide lists of
properties considered surplus along with the name of the client
candidate, which they believe may benefit from our services. Within
three to six months, we should have knowledge of several additional
properties considered surplus by major oil companies.
3. We must develop relationships with business brokers who advertise
locations for sale in newspapers and trade journals as well as real
estate brokers who list properties for sale. We believe that those
brokers will become sources of referrals. Within six to nine months, we
should have developed relationships with several brokers who will be
sources of referrals.
4. We must develop our website for use as a marketing tool to inform and
persuade customers to engage our services. Within six to nine months,
we should have developed our website to provide information about our
services as well as our beliefs about the industry.
19
5. We must seek joint venture partners for our development of
Superstations. We will seek partners who are willing to contribute
capital for the development of Superstations and we will furnish the
deal making and operational expertise. During the next twelve months,
we want to develop relationships with potential joint venture partners.
Since our inception, we have marketed our services to owners and operators of
retail fueling stations, whom we believe are potential clients. Based on our
meetings and discussions with those potential clients, including those to whom
we have forwarded proposed consulting service contracts, we believe that we will
generate revenues in the fourth quarter of 2001. Our belief is also based on the
discussions that we have had with petroleum industry professionals. Our plan of
operation is materially dependent on our ability to generate revenues. Any
revenues generated will be used to expand our operations.
We have cash of $18,890 as of June 30, 2001. In the opinion of management,
available funds will satisfy our working capital requirements through January
2002. Our forecast for the period for which our financial resources will be
adequate to support our operations involves risks and uncertainties and actual
results could fail as a result of a number of factors. We anticipate that we may
need to raise additional capital to expand our operations. Such additional
capital may be raised through public or private financing as well as borrowings
and other sources. We cannot guaranty that additional funding will be available
on favorable terms, if at all. If adequate funds are not available, then our
ability to expand our operations may be adversely affected. If adequate funds
are not available, we believe that our officers and directors will contribute
funds to pay for our expenses. Therefore, we have not contemplated any plan of
liquidation in the event that we do not generate revenues.
We are not currently conducting any research and development activities, other
than the development of our website. We do not anticipate conducting such
activities in the near future. We do not anticipate that we will purchase or
sale of any significant equipment. In the event that we generate significant
revenues and expand our operations, then we may need to hire additional
employees or independent contractors as well as purchase or lease additional
equipment.
Description of Property
- -----------------------
Property held by us. As of the date specified in the following table, we held
the following property:
============================================= ===============================
Property June 30, 2001
- --------------------------------------------- -------------------------------
Cash $18,890
- --------------------------------------------- -------------------------------
Property and Equipment, net $0
============================================= ===============================
Our Facilities. Our headquarters are located at 9323 Vista Serena, Cypress,
California 90630. Jack Muellerleile, our president, secretary and one of our
directors, currently provides office space to us at no charge. We do not have a
written lease or sublease agreement and Mr. Muellerleile does not expect to be
paid or reimbursed for providing office facilities.
Certain Relationships and Related Transactions
- ----------------------------------------------
Jack Muellerleile, our president, secretary, and one of our directors, is the
father of Michael J. Muellerleile, one of our shareholders and an employee of
Stepp Law Group, which serves as our legal counsel.
Jack Muellerleile, our president, secretary and one of our directors, currently
provides office space to us at no charge.
With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:
o disclosing such transactions in prospectus' where required;
o disclose in any and all filings with the Securities and Exchange
Commission, where required;
o obtain uninterested directors consent; and
o obtainshareholder consent where required.
Market for Common Equity and Related Stockholder Matters
- --------------------------------------------------------
20
Reports to Security Holders. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. The requirements to
which we would be subject if our securities were so listed typically include the
timely disclosure of a material change or fact with respect to our affairs and
the making of required filings. Although we are not required to deliver an
annual report to security holders, we intend to provide an annual report to our
security holders, which will include audited financial statements.
When this registration statement becomes effective, we will be a reporting
company pursuant to the Securities Exchange Act of 1934. We will be required
file annual, quarterly and periodic reports with the Securities and Exchange
Commission. The public may read and copy any materials filed with the Securities
and Exchange Commission at the Security and Exchange Commission's Public
Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may
also obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
There are no shares of our common stock that can be sold pursuant to Rule 144.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. There are no outstanding shares of
our common stock that we have agreed to register under the Securities Act for
sale by security holders. The approximate number of holders of record of shares
of our common stock is thirty-six.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form including language, type,
size and format, as the Securities and Exchange
Commission shall require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny
stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
21
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
Executive Compensation
- ----------------------
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our Chief
Executive Officer and our other executive officers whose total annual salary and
bonus are anticipated to exceed $50,000 during the year ending December 31,
2001. Our Board of Directors may adopt an incentive stock option plan for our
executive officers which would result in additional compensation.
=================================== ======= ============= ============= ===================== =====================
Name and Principal Position Year Annual Bonus ($) Other Annual All Other
Salary ($) Compensation ($) Compensation
- ----------------------------------- ------- ------------- ------------- --------------------- ---------------------
Jack Muellerleile - president, 2001 None None None None
secretary
- ----------------------------------- ------- ------------- ------------- --------------------- ---------------------
K. John Shukur - treasurer 2001 None None None None
=================================== ======= ============= ============= ===================== =====================
Compensation of Directors. Our current directors are also our employees and
receive no extra compensation for their service on ourboard of directors.
Employment Contracts. We anticipate that we will enter into an employment
agreement with Jack Muellerleile, although we do not currently know the terms of
that employment agreement.
Stock Option Plan. We anticipate that we will adopt a stock option plan,
pursuant to which shares of our common stock will be reserved for issuance to
satisfy the exercise of options. The stock option plan will be designed to
retain qualified and competent officers, employees, and directors. Our Board of
Directors, or a committee thereof, shall administer the stock option plan and
will be authorized, in its sole and absolute discretion, to grant options
thereunder to all of our eligible employees, including officers, and to our
directors, whether or not those directors are also our employees. Options will
be granted pursuant to the provisions of the stock option plan on such terms,
subject to such conditions and at such exercise prices as shall be determined by
our Board of Directors. Options granted pursuant to the stock option plan shall
not be exercisable after the expiration of ten years from the date of grant.
Financial Statements
- --------------------
22
FUEL CENTERS, INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
JUNE 30, 2001
23
FUEL CENTERS, INC.
(a development stage company)
CONTENTS
PAGE
----
Independent Auditor's Report 1
Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6
24
Independent Auditor's Report
To the Stockholders of
Fuel Centers, Inc.
I have audited the accompanying balance sheet of Fuel Centers, Inc. (a
development stage company) as of June 30, 2001, and the related statements of
operations, changes in stockholders' equity, and cash flows for the period April
9, 2001 (inception) through June 30, 2001. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fuel Centers, Inc.
(a development stage company) as of June 30, 2001, and the results of its
operations and its cash flows for the period April 9, 2001 (inception) through
June 30, 2001 in conformity with generally accepted accounting principles.
/s/ Quintanilla
A Professional Accountancy Corporation
Laguna Niguel, California
August 8, 2001
25
FUEL CENTERS, INC.
(a development stage company)
BALANCE SHEET
JUNE 30, 2001
ASSETS
------
Current assets
Cash $ 18,980
Other current assets ---
----------------
Total current assets 18,980
Other assets ---
----------------
Total assets $ 18,980
================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 7,217
----------------
Total current liabilities 7,217
----------------
Contingencies
Stockholders' Equity
Preferred stock, $.001 par value;
Authorized shares-- 5,000,000
Issued and outstanding shares-- 0 ---
----------------
Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 6,005,000 6,005
Additional paid-in capital 18,690
Deficit accumulated during the development stage (12,932)
-----------------
Total stockholders' equity 11,763
----------------
Total liabilities and stockholders' equity $ 18,980
================
See accompanying notes to financial statements.
26
FUEL CENTERS, INC.
(a development stage company)
STATEMENT OF OPERATIONS
APRIL 9, 2001 (INCEPTION) THROUGH JUNE 30, 2001
Revenues
Consulting fees $ ---
Less: returns and allowances ---
------------------
Net revenues ---
-----------------
Operating expenses
Consulting services 3,550
Legal and professional fees 8,682
Occupancy 545
Office expense 155
-----------------
Total operating expenses 12,932
-----------------
Loss from operations (12,932)
-----------------
Provision for income tax expense (benefit) ---
-----------------
Net loss/Comprehensive loss $ (12,932)
==================
Net income per common share-- basic and diluted $ ---
==================
Weighted average of common shares-- basic and diluted 5,080,140
==================
See accompanying notes to financial statements.
27
FUEL CENTERS, INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
APRIL 9, 2001 (INCEPTION) THROUGH JUNE 30, 2001
Common Stock Additional
------------- ---------- Paid-In Accumulated
Shares Amount Capital deficit Total
------------ ----------- ----------- ------------- ------------
Balance, April 9, 2001 --- $ --- $ --- $ --- $ ---
Issuance of common stock,
April 10, 2001 5,050,000 5,050 --- --- 5,050
Issuance of common stock,
June 17, 2001 25,000 25 475 --- 500
Issuance of common stock,
June 28, 2001 930,000 930 17,670 --- 18,600
Cost of occupancy
contributed by officer --- --- 545 --- 545
Net loss/Comprehensive loss --- --- --- (12,932) (12,932)
------------ ----------- ----------- ------------- ------------
Balance, June 30, 2001 6,005,000 $ 6,005 $ 18,690 $ (12,932) $ 11,763
============ =========== =========== ============= ============
See accompanying notes to financial statements.
28
FUEL CENTERS, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
APRIL 9, 2001 THROUGH JUNE 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (12,932)
Adjustments to reconcile net loss to net cash used
in operating activities
Cost of consulting services paid with common stock 3,550
Cost of legal services paid with common stock 1,500
Occupancy cost contributed by officer 545
Changes in operating assets and liabilities
Increase in accounts payable and accrued expenses 7,217
-----------------
Net cash used in operating activities (120)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES ---
-----------------
Net cash provided by investing activities ---
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 19,100
-----------------
Net cash provided by financing activities 19,100
-----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,980
CASH AND CASH EQUIVALENTS, beginning of period ---
-----------------
CASH AND CASH EQUIVALENTS, end of period $ 18,980
=================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ ---
=================
Interest paid $ ---
=================
Non-cash financing activities
During the period April 9, 2001 (inception) through June 30, 2001, the
Company issued 5,050,000 to its President and third parties for Services
valued at $5,050.
See accompanying notes to financial statements.
29
FUEL CENTERS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
Note 1 - BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Business Description - Fuel Centers, Inc. (the "Company") was
incorporated in the state of Nevada on April 9, 2001 and upon incorporation,
adopted a fiscal year ending December 31st. The Company is business consulting
firm that specializes in strategy and development of high-volume, multi-revenue
source, retail fuel service stations for the automobile industry. The Company is
headquartered in Cypress, California.
Cash and Cash Equivalents - For purposes of the balance sheet and
statement of cash flows, the Company considers all highly liquid debt
instruments purchased with maturity of three months or less to be cash
equivalents.
Fair Value of Financial Instruments - The carrying value of cash and
accounts payable and accrued expenses approximate their fair value due to the
short period to maturity of these instruments.
Recognition of Revenues and Costs of Goods Sold - The Company records
revenues of its consulting services when they are complete and collectibility is
reasonably assured. The Company will also provide an allowance for returns when
experience is established. Cost of goods sold consists primarily of the payroll
and related expenses of personnel used.
Income Taxes - The Company recognizes deferred tax assets and
liabilities based on differences between the financial reporting and tax bases
of assets and liabilities using the enacted tax rates and laws that are expected
to be in effect when the differences are expected to be recovered. The Company
provides a valuation allowance for deferred tax assets for which it does not
consider realization of such assets to be more likely than not.
Net Loss per Common Share - The Company has adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 requires the reporting of basic and diluted earnings/loss per
share. Basic loss per share is calculated by dividing net loss by the weighted
average number of outstanding common shares during the period.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
30
FUEL CENTERS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 2 - CONTINGENCIES
As shown in the accompanying financial statements, the Company has
incurred a net operating loss of $12,932 since inception through June 30, 2001.
The Company is subject to those risks associated with development stage
companies. The Company has sustained losses since inception and additional
financing will be required by the Company to fund its development activities and
to support operations. However, there is no assurance that the Company will be
able to obtain additional financing. Furthermore, there is no assurance that
rapid technological changes, changing customer needs, fuel consumption and
pricing, and evolving automobile industry standards will enable the Company to
provide services on a continual and timely basis so that profitable operations
can be attained.
NOTE 3 - ACCRUED EXPENSES
Accrued Wages and Compensated Absences - The Company currently does not
have any employees. The majority of development costs and services have been
provided to the Company by outside, third party vendors. As such, there is no
accrual for wages or compensated absences as of June 30, 2001.
NOTE 4 - COMMON STOCK
On April 10, 2001, the Company issued 3,550,000 shares of its common
stock to an officer and founder for consulting services and 1,500,000 shares of
its common stock to various individuals for legal services rendered in
connection with the initial organization costs incurred. Since there was no
readily available market value at the time the services were rendered, par value
of $0.001 per share was considered as a reasonable estimate of fair value by all
parties. These amounts are shown in the accompanying statement of operations for
the period April 9, 2001 (inception) through June 30, 2001 and the consulting
services performed by the officer and founder are considered additional
contributions of capital by the Company.
On June 30, 2001, the Company completed a "best efforts" offering of
its common stock pursuant to the provisions of Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D promulgated by the Securities and
Exchange Commission. In accordance with the Private Placement Memorandum
Offering, which was initiated on June 11, 2001, the Company issued 955,000
shares of its common stock at $0.02 per share for a total of $19,100 from June
17th - June 30th 2001.
31
FUEL CENTERS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 5 - INCOME TAXES
At June 30, 2001, the Company has available for federal income tax
purposes a net operating loss carryforward of approximately $12,932, expiring
2016, that may be used to offset future taxable income. Therefore, no provision
for income taxes has been provided.
In addition, the Company has deferred tax assets of approximately
$3,000 at June 30, 2001. The Company has not recorded a benefit from its net
operating loss carryforward because realization of the benefit is uncertain and,
therefore, a valuation allowance of ($3,000) has been provided for the deferred
tax assets.
NOTE 6 - RELATED PARTY TRANSACTIONS
On April 10, 2001, the Company issued 3,550,000 shares of its common
stock to a current officer for services as described in Note 4.
The Company occupies office space provided by its officer. Accordingly,
occupancy costs have been allocated to the Company based on the square foot
percentage assumed multiplied by the officer's total monthly costs. These
amounts are shown in the accompanying statement of operations for the period
April 9, 2001 (inception) through June 30, 2001 and are considered additional
contributions of capital by the officer and the Company.
32
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
- -------------------------------------------------------------------------
In June 2001, our Board of Directors appointed Quintanilla Accountancy
Corporation, independent accountant, to audit our financial statements for the
period from April 9, 2001, our date of formation, through June 30, 2001. Prior
to our appointment of Quintanilla Accountancy Corporation as our auditor, our
financial statements had not been audited.
There have been no disagreements with our accountant since our formation
required to be disclosed pursuant to Item 304 of Regulation S-B.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by the
selling security holders has been passed upon by Stepp Law Group, located in
Newport Beach, California.
EXPERTS
Our financial statements for the period from April 9, 2001, our date of
formation, through June 30, 2001, appearing in this prospectus which is part of
a Registration Statement have been reviewed and audited, respectively, by
Quintanilla Accountancy Corporation, and are included in reliance upon such
reports given upon the authority of Quintanilla Accountancy Corporation, as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 with respect to the
common stock offered by the selling security holders. This prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
regarding us and our common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement.
33
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
- -----------------------------------------
Article Seventh of our Articles of Incorporation provides, among other things,
that our directors shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or
redemption by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Our Articles of Incorporation provides that we will indemnify our directors to
the extent permitted by Nevada Revised Statutes, including circumstances in
which indemnification is otherwise discretionary under the Nevada Revised
Statutes. Our Articles of Incorporation also provides that to the extent that
Nevada Revised Statutes is amended to permit further indemnification, we will so
indemnify our directors.
Section 78.7502 of the Nevada Revised Statutes provides that a corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to or is involved in any pending, threatened, or completed
civil, criminal, administrative, or arbitration action, suit, or proceeding, or
any appeal therein or any inquiry or investigation which could result in such
action, suit, or proceeding, because of his or her being or having been our
director, officer, employee, or agent or of any constituent corporation absorbed
by us in a consolidation or merger or by reason of his or her being or having
been a director, officer, trustee, employee, or agent of any other corporation
or of any partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or such enterprise, serving as such at our request or of any such
constituent corporation, or the legal representative of any such director,
officer, trustee, employee, or agent, from and against any and all reasonable
costs, disbursements, and attorney's fees, and any and all amounts paid or
incurred in satisfaction of settlements, judgments, fines, and penalties,
incurred or suffered in connection with any such proceeding.
Section 10 of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 78.7502 of the Nevada Revised Statutes.
Indemnification Agreements. We anticipate that we will enter into
indemnification agreements with each of our executive officers pursuant to which
we will agree to indemnify each such officer for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by such
34
person in connection with any criminal or civil action brought or threatened
against such person by reason of such person being or having been our officer or
director or employee. To be entitled to indemnification by us, such officer must
have acted in good faith and in a manner such officer believed to be in our best
interests and, with respect to criminal actions, such person must have had no
reasonable cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Other Expenses of Issuance and Distribution
- -------------------------------------------
We will pay all expenses in connection with the registration and sale of the
common stock by the selling security holders. None of the expenses will be borne
by the selling security holders. The estimated expenses of issuance and
distribution are set forth below.
========================================= ==================== ================
Registration Fees Approximately $76.83
- ----------------------------------------- -------------------- ----------------
Transfer Agent Fees Approximately $650.00
- ----------------------------------------- -------------------- ----------------
Costs of Printing and Engraving Approximately $500.00
- ----------------------------------------- -------------------- ----------------
Legal Fees Approximately $5,000.00
- ----------------------------------------- -------------------- ----------------
Accounting Fees Approximately $2,500.00
========================================= ==================== ================
Recent Sales of Unregistered Securities
- ---------------------------------------
There have been no sales of unregistered securities within the last three years
which would be required to be disclosed pursuant to Item 701 of Regulation S-B,
except for the following:
In June 2001, we issued 955,000 shares of our common stock to twenty-seven
investors for $0.02 per share. The shares were issued in a transaction which we
believe satisfies the requirements of that exemption from the registration and
prospectus delivery requirements of the Securities Act of 1933, which exemption
is specified by the provisions of Section 4(2) of that act and Rule 506 of
Regulation D promulgated pursuant to that act by the Securities and Exchange
Commission. Specifically, the offer was made to "accredited investors", as that
term is defined under applicable federal and state securities laws, and no more
than 35 non-accredited investors. We believe that each purchaser who was not an
accredited investor has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment. Each investor was given adequate access to sufficient information
about us to make an informed investment decision. There were no commissions paid
on the sale of these shares. The net proceeds to us were $19,100.
On April 11, 2001, we issued 1,500,000 shares of our common stock to Thomas E.
Stepp, Jr.; Michael Muellerleile; Deron Colby; Richard Reincke; Amy Pontillas;
Sandie M. Williams; Myra E. Capoccia; and Lan P. Nguyen, in a transaction which
we believe satisfies the requirements of that certain exemption from the
registration and prospectus delivery requirements of the Securities Act of 1933,
which exemption is specified by the provisions of Section 4(2) of the Securities
Act of 1933, as amended. The shares were issued in exchange for legal services
provided to us, which were valued at $1,500.
On April 11, 2001, we issued 3,550,000 shares of our common stock to Jack
Muellerleile, our president, secretary and one of our directors. We believe that
Mr. Muellerleile has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment. In addition, Mr. Muellerlile had sufficient access to material
information about us because he was our president, secretary and one of our
directors. The shares were issued in a transaction which we believe satisfies
the requirements of that certain exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933, which exemption is
specified by the provisions of Section 4(2) of the Securities Act of 1933, as
amended. The shares were issued in exchange for services provided to us, which
were valued at $3,550.
35
Exhibits
- --------
Copies of the following documents are filed with this Registration Statement
as exhibits:
Exhibit No.
- -----------
1. Underwriting Agreement (not applicable)
3.1 Articles of Incorporation*
3.2 Bylaws*
5. Opinion Re: Legality
8. Opinion Re: Tax Matters (not applicable)
11. Statement Re: Computation of Per Share Earnings**
15. Letter on unaudited interim financial information
(not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel***
24. Power of Attorney is included on the Signature Page
of the Registration Statement
* Included in Registration Statement on Form SB-2, which was filed on
August 10, 2001.
** Included in Financial Statements
*** Included in Exhibit 5
Undertakings
- ------------
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 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
our director, officer or controlling person in the successful defense of any
action, suit or proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To specify in the prospectus any facts or events
arising after the effective date of the Registration
Statement or most recent post-effective amendment
thereof which, individually or in the aggregate,
represent a fundamental change in the information
set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered, if the
total dollar value of securities offered would not
exceed that which was registered, and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b), Section 230.
424(b) of Regulation S-B, if, in the aggregate, the
changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
36
(iii) To include any additional or changed material
information with respect to the plan of distribution
not previously disclosed in the Registration
Statement or any material change to such information
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
37
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on our behalf by the undersigned, in the city of Cypress,
California, on September 10, 2001.
Fuel Centers, Inc.
a Nevada corporation
By /s/ Jack Muellerleile
-------------------------------------
Jack Muellerleile
Its: principal executive officer
president, secretary, and a director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated:
/s/ Jack Muellerleile September 10, 2001
- --------------------------------------------
Jack Muellerleile
principal executive officer
president, secretary and a director
/s/ K. John Shukur September 10, 2001
- --------------------------------------------
K. John Shukur
principal accounting officer
treasurer and a director
38