U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO FORM SB-2
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Black Lake, Inc.,
-----------------
(Exact name of registrant as specified in its charter)
Nevada 8742 03-0427056
- ------ ---- ----------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
3187-G Airway Avenue, Costa Mesa, California 92626
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(Address of registrant's principal executive offices) (Zip Code)
(949)831-7874
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(Registrant's Telephone Number, Including Area Code)
MC Law Group
4100 Newport Place, Suite 830
Newport Beach, California 92660
949.250.8655
Facsimile 949.250.8656
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(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. [ ]
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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. [ ]
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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 2,000,000 $0.05 $100,000 $9.20
====================================== ======================== ==================== ======================= ===============
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
Black Lake, Inc.,
a Nevada corporation
2,000,000 Shares of Common Stock
We provide clients with advertising and marketing strategies. We strive
to assist our clients in building a strong corporate identity, from the
creation of company logos, through development of image ads, to other
advertising and marketing strategies. We are offering for sale
2,000,000 shares of our common stock in a self-underwritten offering
directly to the public. This is a best efforts offering. We are
offering the shares without any underwriting discounts or commissions.
The purchase price is $0.05 per share. If all of the shares offered by
us are purchased, the proceeds to us will be $100,000. We may receive
less than $100,000 if all of the offered shares are not purchased.
This is our initial public offering and no public market currently
exists for shares of our common stock. We have not applied for listing
or quotation on any public market. We do not expect a liquid market to
develop for several years, if at all.
Assuming that all the offered shares are purchased, our management will
own 66.67% of our issued and outstanding shares of common stock.
Investors may not revoke their subscription. There is no minimum number
of shares we must sell prior to utilizing the proceeds from this
offering. The funds that are raised in this offering will not be
deposited in an escrow account and will be available for immediate
utilization by us.
SEE "RISK FACTORS" ON PAGES 5 TO 9 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.
There will not be any graphics, maps, photographs or pictures appearing
in the prospectus. We will 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.
We will terminate this offering on February 28, 2004. We may extend the
offering if we believe it is in the best interests of the company and
our shareholders. On or before February 1, 2004, we will determine
whether we should extend this offering. If we decide to extend this
offering, we will extend it for an additional 12 months and terminate
this offering on February 28, 2005.
The date of this prospectus is May 8, 2003.
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary ..........................................................4
Risk Factors.................................................................5
Forward Looking Statements...................................................9
Use of Proceeds..............................................................9
Determination of Offering Price.............................................11
Dilution....................................................................11
Selling Security Holders....................................................12
Plan of Distribution........................................................12
Legal Proceedings...........................................................13
Directors, Executive Officers, Promoters and Control Persons................13
Security Ownership of Certain Beneficial Owners and Management..............14
Description of Securities...................................................15
Interest of Named Experts and Counsel.......................................16
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.............................................................16
Organization Within Last Five Years.........................................16
Description of Business.....................................................16
Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................21
Description of Property.....................................................24
Certain Relationships and Related Transactions..............................24
Market for Common Equity and Related Stockholder Matters....................24
Executive Compensation .....................................................25
Financial Statements........................................................26
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................26
Legal Matters...............................................................26
Experts.....................................................................26
Additional Information......................................................26
Indemnification of Directors and Officers...................................26
Other Expenses of Issuance and Distribution.................................27
Recent Sales of Unregistered Securities.....................................27
Exhibits....................................................................27
Undertakings................................................................28
Signatures..................................................................29
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
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OUR BUSINESS: Our principal business address is 3187-G
Airway Avenue, Costa Mesa, California
92626; our telephone number is
(949)831-7874.
We provide small businesses with effective
advertising and marketing strategies. We
provide our clients with customized
services, such as the design of brochures,
corporate mailers, magazine advertisements,
business cards, and logos, as well as
public relations services. We plan to
expand our operations by adding key staff,
including a marketing specialist, and by
expanding the number of our operating
locations.
We have limited operations and currently
operate only within a small area of
Southern California. We have suffered
losses since our inception on October 11,
2000. Our ability to earn additional
revenues will be affected by the industry
competition. Our industry is highly
competitive with low barriers to entry. As
such, our ability to earn revenues will be
affected by our ability to compete.
OUR STATE OF ORGANIZATION: We were incorporated in Nevada on October
11, 2000.
SUMMARY FINANCIAL INFORMATION: The summary financial information set forth
below is derived from the more detailed
financial statements appearing elsewhere in
this Form SB-2. We have prepared our
financial statements contained in this Form
SB-2 in accordance with generally accepted
accounting principles in the United States.
All information should be considered in
conjunction with our financial statements
and the notes contained elsewhere in this
Form SB-2.
INCOME STATEMENT PERIOD FROM PERIOD FROM
OCTOBER 11, 2000 TO JANUARY 1, 2002 TO
DECEMBER 31, 2001 DECEMBER 31, 2002
$ $
Revenue 0 56,502
Gross Profit (Loss) 0 11,524
Net Income (Loss) 0 (16,246)
Net Income (Loss) Per Share 0 (.01)
BALANCE SHEET DECEMBER 31, 2001 DECEMBER 31, 2002
$ $
Total Assets 0 10,471
Total Liabilities 0 5,967
Shareholders' Equity 0 4,504
NUMBER OF SHARES BEING OFFERED: We are offering for sale 2,000,000 shares
of our common stock. We will sell the
shares we are registering only to those
individuals who have received a copy of the
prospectus. Investors will experience
dilution of 60% or $0.03 per share if all
of the offered shares are sold.
4,000,000 shares of our common stock are
NUMBER OF SHARES OUTSTANDING currently issued and outstanding. If all
AFTER THE OFFERING: the offered shares are sold, 6,000,000
shares of our common stock will be issued
and outstanding.
4
We will receive $100,000 if all of the
offered shares are sold. We intend to use
any proceeds from such sale for marketing
expenses and for working capital. Our
management has complete discretion as to
the use of proceeds and our anticipated use
of proceeds is subject to change, in our
management's sole and absolute discretion.
This is a best efforts offering. There is
no minimum number of shares we must sell
prior to utilizing the proceeds from this
offering. We will not place the proceeds
from this offering in an escrow account,
therefore, the proceeds will be available
for immediate use. As a result, investors
may lose their entire investment.
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 in nature and involves a lot of risks. Any person who cannot afford
the loss of his or her entire purchase price for the offered shares should not
purchase the offered shares because such a purchase is highly speculative and
involves significant risks. Our business objectives must also be considered
speculative, and we cannot guaranty that we will satisfy those objectives.
Purchasers of the offered shares may not realize any return on their purchase of
the offered shares. Purchasers may lose their investment in us completely.
Risks related to our business:
THIS IS A BEST EFFORTS OFFERING AND THERE IS NO MINIMUM OF FUNDS WE MUST SELL IN
ORDER FOR US TO UTILIZE THE PROCEEDS OF THIS OFFERING; THEREFORE, WE MAY NOT
HAVE SUFFICIENT FINANCIAL RESOURCES TO FUND OUR EXPANSION PLANS IF WE RAISE LESS
THAN $30,000 IN THIS OFFERING.
There is no minimum-offering amount for this offering. We may not sell any or
all of the offered shares. We will need to raise approximately $30,000 in order
to fully implement our 12 month expansion plans. We have not set a minimum
amount required to be raised because we believe we can continue our business
even if we raise only nominal funds in this offering. We are currently earning
minimal revenues and operating as an ongoing business; however, we intend to
expand our operations if we can raise at least $30,000. If we raise less than
$30,000, we will use those funds to maintain our current business level. We
believe we can continue as a going concern even if we are not able to raise a
minimum of $30,000. If the offering is substantially undersold, investors may
lose their entire investment because we will have insufficient funds to fund our
expansion plans and we will likely not be able to increase our current revenue
level. If we do not sell all of the offered shares, we will likely be forced to
limit any proposed marketing activities, which will hinder our ability to expand
our activities and generate revenues.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH AN EVALUATION OF OUR PROSPECTS
CAN BE MADE AND THEREFORE OUR PROSPECTS SHOULD BE CONSIDERED SPECULATIVE.
We were incorporated in October 2000. 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
significant revenues. Specifically, new development stage companies such as ours
typically experience significant difficulties. Such difficulties include, but
are not necessarily limited to:
o lack of organization;
o undue stress on management due to the pressures associated with a
development stage company which is earning little to no revenues;
o finding a unique niche in the market within which we operate;
o finding an adequate price for our services which will allow us to cover our
costs and make a profit;
o finding sufficient funding to expand the geographical scope of our business
operations while avoiding cash flow problems;
o setting realistic goals and achieving those goals, step by step;
o developing effective strategies to take advantage of market conditions as
well as strategies to get through the tough times; and
o staying flexible in our business structure to account for unforeseen
problems and difficulties.
5
Any of these factors individually or in conjunction with other factors could
harm our ability to earn a profit and continue our business operations.
WE MAY HAVE PROBLEMS HIRING SUFFICIENT STAFF TO OPERATE OUR BUSINESS SHOULD WE
NEED SUCH STAFF TO CONTINUE OUR OPERATIONS. IF WE ARE NOT ABLE TO HIRE
SUFFICIENT STAFF, OUR ABILITY TO EXPAND OUR BUSINESS WILL BE HARMED.
If we are able to expand our operations, we may need to hire additional staff.
Finding quality and competent staff could be difficult. There are other
companies, both small and large, which offer similar marketing and advertising
services. We will compete with those companies for qualified staff. In order to
hire and retain staff, we will likely need to offer certain benefits, such as,
medical benefits, 401K Plans and other retirement benefits. As of the date of
this prospectus, we have not made specific arrangements to offer such benefits
and have not yet investigated the costs associated with providing such benefits.
There is no guarantee that we will have sufficient funds to establish such
plans. We have not determined the exact amount of funds we will need to
implement benefit plans but we do know that we will need to significantly
increase our revenue stream to justify such plans. Our inability to establish
incentive plans designed to attract qualified staff could harm our ability to
expand our operations. If we are not able to expand our operations, our ability
to earn additional revenue will be harmed.
WE HAVE INCURRED A NET LOSS SINCE INCEPTION AND EXPECT TO INCUR NET LOSSES FOR
THE FORESEEABLE FUTURE AND IF SUCH LOSSES CONTINUE, WE MAY NOT BE ABLE TO PAY
OUR EXPENSES WHICH MAY RESULT IN FORCED LIQUIDATION AND INVESTORS MAY LOSE THEIR
ENTIRE INVESTMENT.
Since our inception on October 11, 2000, to December 31, 2002, we sustained a
net loss of $16,246. As we strive to expand our operations, we expect to incur
significant operating and capital expenditures and, as a result, we expect
significant net losses in the future. Although we do not know the exact amount,
we estimate that we will need approximately $30,000 in order to realize our 12
month expansion plans. We do believe that our general operating expenses will
increase approximately fifty to seventy percent over the next year depending on
available cash and depending on the speed at which we expand our operations. If
we are not able to raise such funds, we will not be able to expand our
operations. We will need to generate significant revenues to achieve and
maintain profitability.
IF WE DO NOT RAISE AT LEAST $30,000 IN THIS OFFERING, WHICH WE ESTIMATE WILL BE
THE AMOUNT NEEDED TO REALIZE OUR 12 MONTH EXPANSION PLANS, WE MAY NOT HAVE
ADEQUATE RESOURCES TO SUCCESSFULLY COMPETE WITH OUR COMPETITION AS MANY OF OUR
COMPETITORS HAVE GREATER EXPERIENCE, FINANCIAL AND TECHNICAL RESOURCES AND
MARKETING CAPABILITIES. IF WE ARE NOT ABLE TO SUCCESSFULLY COMPETE, OUR ABILITY
TO EARN REVENUES WILL BE HARMED AND WE MAY NEVER BE ABLE TO INCREASE OUR CURRENT
REVENUE LEVEL.
The advertising and marketing industry is inundated with companies providing
similar services. We do not have the established reputation of some of the
larger firms and, as such, we will be forced to compete based on price and
service. We believe that as we grow our business, if we are able to grow our
business, we will experience increased expenses for: legal, accounting, employee
salaries and benefits, insurance, supplies and marketing. We will compete with
other companies for qualified personnel and clients. If we are unable to
effectively compete, our ability to earn revenues will be harmed. If we are
unable to increase our revenue stream, we will be unable to expand our
operations and attract additional investors or business partners. As a result,
the value of our company will be harmed and, as a result, the value of an
investment in us will suffer. If we are unable to compete, investors in us may
lose their entire investment or such an investment could be worth less.
We believe that we fill a unique niche in that we provide our services to small
and medium development stage companies where most of our competitors provide
similar services to large companies. Our competition includes both large and
small public relations firms. Those firms include: Amies Communications;
Integrity PR; Paine PR; Roxburgh Integrated Communications; Kanatsiz
Communications, Inc.; Fleishman Hillard, International Communications; and
Porter Novelli. The small, localized public relations and marketing firms
primarily operate within their own geographic confines and not all of them
directly compete with us in the area within which we currently operate. Many of
our competitors have greater financial resources and can afford to spend more
resources than we can to market their services. We may not be able to succeed in
marketing and selling our various services if we do not raise at least $30,000
in this offering as we estimate that is the amount needed to realize our 12
month expansion plans. We cannot guaranty that our competitors will not succeed
in marketing and selling our various services. If we are unable to compete due
to lack of sufficient operating funds, investors will likely lose part or all of
their investment.
6
IF OUR PRIMARY CLIENTS TERMINATE THEIR RELATIONSHIPS WITH US, OUR REVENUES WILL
BE REDUCED UNLESS WE CAN OBTAIN NEW CLIENTS. IF WE ARE UNABLE TO ATTRACT
ADDITIONAL CLIENTS, WE WILL NOT BE ABLE TO EARN REVENUES WHich will likely cause
our investors to lose their entire investment in us.
Relationships we have with existing clients are currently our primary source of
revenue. Specifically, we have three clients, Krinner USA, Inc., Pacific School
of Music and the Arts, and Airport Graphics, Inc. Krinner USA, Inc. hired us to
perform the following services: negotiate advertising contracts, design ads,
review and revise ads and place the ads. We also designed their trade show
booth, including the artwork and collateral material. As Krinner USA, Inc.'s
product is somewhat seasonal, we believe the bulk of our services will occur in
Spring and Fall of each year.
Although our services to Pacific School of Music & the Arts are somewhat limited
at this time, we hope to take over their complete advertising needs, including
their press release needs. Currently, we handle their PR needs only.
We provide website design services, as well as digital photography, print
brokering and graphic design and event services to Airport Graphics.
We are currently attempting to develop relationships with two additional clients
but have not secured any commitments from these entities.
There are no affiliations between Krinner USA, Inc., Pacific School of Music &
the Arts, or Airport Graphics, Inc., and us. In the event that these
relationships are disrupted, we will need to develop relationships with other
clients in order to continue to generate revenue. Our existing clients have no
obligation to utilize our services for their advertising and marketing needs.
We believe that our relationships with our existing clients are excellent.
However, in the event that these clients terminate their relationships with us,
we will not be able to generate revenues as projected unless and until we
establish similar relationships with comparable clients. It is unlikely that we
will be able to attract additional clients unless we can raise approximately
$30,000 in this offering. We anticipate that we will require approximately
$30,000 in order to realize our 12 month expansion plans. If we lose our
existing clients and we are unable to replace those clients, our business may
fail and investors in us may lose a portion or all of their investment as we
will be unable to raise revenue.
WE DEPEND ON THE EFFORTS AND ABILITIES OF CERTAIN OF OUR SENIOR MANAGEMENT AND A
LOSS OF SUCH MANAGEMENT COULD HINDER OUR ABILITY TO CONDUCT OPERATIONS AND
GENERATE REVENUES.
The interruption of the services of key management could harm our operations,
profits and future development, if suitable replacements are not promptly
obtained. Specifically, Peg Warren, our president, chief executive officer and a
director has valuable experience in marketing and public relations. Ms. Warren
has been employed in marketing and public relations positions throughout her
career, serving as a client liaison, a president, a sales director, and an
account executive. We cannot guaranty that each of our executives will remain
with us during or after the term of any proposed employment agreement, if we
enter into such agreements. If Ms. Warren decides to pursue other business
ventures and leaves the company, it will be difficult and expensive to find a
replacement. 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.
7
AS OUR OFFICERS AND DIRECTORS DO NOT DEVOTE THEIR FULL BUSINESS TIME TO OUR
BUSINESS, WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS PLAN AND OUR BUSINESS MAY
FAIL IF OUR OFFICERS AND DIRECTORS FAIL TO DEVOTE SUFFICIENT TIME TO OUR
BUSINESS.
The persons serving as our officers and directors have existing responsibilities
and may have additional responsibilities to provide management and services to
other entities. Specifically, Peg Warren, our president, chief executive officer
and a member of our board of directors, devotes approximately 20-30 hours a week
to our business. Robin Welles, our treasurer, chief financial officer, secretary
and a member of our board of directors, works for the Walt Disney Company where
she serves as a production coordinator. Ms. Welles currently devotes
approximately 10-20 hours a week to our business. We cannot guaranty that any of
our officers or directors will be able to devote sufficient amounts of their
business time to enable us to implement our business plan. However, Ms. Warren
and Ms. Welles have indicated that they will devote their full time efforts,
specifically, 40 hours a week, to our business should we be successful in
raising sufficient funds in this offering to expand our business operations
which we estimate will be approximately $30,000. If any or all of our officers
or directors do not devote a sufficient amount of their business time to the
management of our business, then our business may fail and investors will lose
part or all of their investment.
RISKS RELATED TO THIS OFFERING:
WE ARBITRARILY DETERMINED THE OFFERING PRICE OF THE SHARES OF COMMON STOCK.
THEREFORE, INVESTORS MAY LOSE ALL OR PART OF THEIR INVESTMENT IF THE OFFERING
PRICE IS HIGHER THAN THE CURRENT MARKET VALUE OF THE OFFERED SHARES.
The offering price of the shares of common stock being offered by us has been
determined primarily by our capital requirements and has no relationship to any
established criteria of value, such as book value or earnings per share.
Additionally, because we have no significant operating history and have not
generated any significant revenues to date, the price of the shares of common
stock is not based on past earnings, nor is the price of the shares indicative
of current market value for the assets we own. Investors could lose all or a
part of their investment if the offering price has been arbitrarily set too
high. Even if a public trading market develops for our common stock, the shares
may not attain market values commensurate with the offering price.
WE LACK A PUBLIC MARKET FOR SHARES OF OUR COMMON STOCK, WHICH MAY MAKE IT
DIFFICULT FOR INVESTORS TO SELL THEIR SHARES WHICH, IN TURN, MAY FORCE INVESTORS
TO RETAIN THEIR SHARES DURING PERIODS WHEN SELLING WOULD BE MORE PRUDENT.
There is no public market for shares of our common stock. We cannot guaranty
that an active public market will 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 services 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. Further,
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.
Moreover, because there is no public market for our stock, investors may be
forced to retain their stock during periods when it would be more prudent to
sell. As a result, investors could miss an opportunity to profit from their
share ownership in us unless a public market develops.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION OF
THEIR INVESTMENT; HOWEVER, THE EXACT DILUTION DEPENDS ON THE NUMBER OF SHARES
SOLD IN THIS OFFERING.
The initial public offering price is substantially higher than the pro forma net
tangible book value per share of our outstanding common stock. Our existing
shareholders have paid an average of $0.005 per share for their common stock,
which is considerably less than the amount to be paid for the common stock in
this offering. As a result, assuming an initial public offering price of $0.05
per share and assuming all of the offered shares are sold, investors purchasing
common stock in this offering will incur immediate dilution of $0.03 in pro
forma net tangible book value per share of common stock as of December 31, 2002.
If only 10%, or 200,000 shares, of the offered shares are sold, then investors
purchasing common stock in this offering will incur immediate dilution of $0.043
in pro forma net tangible book value per share. If only 50%, or 1,000,000
shares, of the offered shares are sold, then investors purchasing common stock
in this offering will incur immediate dilution of $0.036 in pro forma net
tangible book value per share.
8
OUR EXISTING SHAREHOLDERS CONTROL OUR OPERATIONS AND MAY BE ABLE TO
SIGNIFICANTLY INFLUENCE MATTERS REQUIRING SHAREHOLDER APPROVAL; THEREFORE,
MINORITY SHAREHOLDERS MAY HAVE LITTLE TO NO SAY IN OUR BUSINESS DIRECTION.
Our officers and directors will beneficially own approximately 66.67% of our
common stock following the completion of this offering if all of the shares are
sold. Our officers and directors will own a larger percentage of our issued and
outstanding stock if we sell less than all of the offered shares. Their
percentage ownership will depend on how many shares we sell. No matter how many
shares we ultimately sell, our officers and directors will be able to
significantly influence all matters requiring shareholder approval, including
the election and removal of directors, approval of significant corporate
transactions and decisions of whether a change in control will occur. Therefore,
investors must be prepared to trust the judgment of our officers and directors
regarding such matters.
WE WILL NEED TO RAISE APPROXIMATELY $30,000 FROM THIS OFFERING TO EXPAND OUR
BUSINESS PLAN. WE CANNOT GUARANTEE THAT WE WILL RAISE A MINIMUM OF $30,000
BECAUSE WE ARE OFFERING SHARES IN A DIRECT PUBLIC OFFERING, RATHER THEN USING
THE EXPERIENCE OF A BROKER-DEALER. IF WE ARE NOT ABLE TO RAISE AT LEAST $30,000,
WE WILL LIKELY NOT BE ABLE TO SUFFICIENTLY EXPAND OUR BUSINESS OPERATIONS AND,
AS A RESULT, WE MAY NOT BE ABLE TO ESTABLISH OR MAINTAIN A REVENUE STREAM WHICH
COULD CAUSE INVESTORS TO LOSE THEIR ENTIRE INVESTMENT IN US.
We are offering shares in a self-underwritten offering directly to the public.
No individual, firm, or corporation has agreed to purchase any of the offered
shares. We cannot guaranty that any or all of the shares will be sold. We
anticipate that we will need to raise approximately $30,000 in order to realize
our 12 month expansion plans. We do not plan to use a broker-dealer, even though
a broker-dealer may have more experience, resources or contacts to more
effectively sell shares. A delay in the sale of the shares in this offering
could cause us a similar delay in expanding our business operations. If do not
raise at least $30,000 from this offering, our plans to expand our business
could be harmed. The result may be that investors in us lose their entire
investment as we will be unable to generate additional revenue.
FORWARD LOOKING STATEMENTS
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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 receive up to $100,000 if all of the shares of common stock we are
offering at $0.05 per share are purchased. Assuming all of the shares are
purchased, we intend to use approximately 4% of the proceeds for rent and office
expenses, approximately 9% of the proceeds for website development expenses,
approximately 11% of the proceeds for an inventory of products that are ready to
ship, and 6% of the proceeds for production equipment. We intend to use 24% of
the proceeds for general expenses, including, marketing expenses, printing
costs, and advertising. We intend to use the remaining 47 % of the proceeds for
working capital, which includes general administrative, legal and accounting
expenses. We cannot guaranty that we will sell any or all of the shares being
offered by us. If we only sell a portion of the shares of our common stock that
we are offering, we anticipate we will need to adjust our allocation of
resources as estimated on the table below. However, this estimate may differ
from actual results, depending on circumstances at the time.
9
======================= ============== ================= ============== ====================================
OFFERED SHARES SOLD OFFERING APPROXIMATE TOTAL NET PRINCIPAL USES
PROCEEDS OFFERING OFFERING OF NET PROCEEDS
EXPENSES PROCEEDS
- ----------------------- -------------- ----------------- -------------- ------------------------------------
200,000 shares $10,000 $16,160 ($6,160) If we are only able to raise
(10%) $10,000 in this offering, we will
first attempt to pay offering
expenses out of current cash
resources and/or revenues.
However, we may need to borrow
funds in order to cover the
offering expenses. We believe that
our officers and directors will
loan us the funds to cover such
expenses. However, there is no
guarantee that they will loan us
the funds nor are they legally
obligated to do so.
- ----------------------- -------------- ----------------- -------------- ------------------------------------
500,000 shares $25,000 $16,160 $8,840 Rent/Office Expenses: $750
(25%) Website Development: $1,500
Inventory of Products: $500
Production Equipment: $1,000
Working Capital: $5,090
- ----------------------- -------------- ----------------- -------------- ------------------------------------
1,000,000 shares $50,000 $16,160 $33,840 Rent/Office Expenses: $1,500
(50%) Website Development: $3,000
Inventory of Products: $2,000
Production Equipment: $1,000
Marketing/Printing: $8,000
Working Capital: $18,340
- ----------------------- -------------- ----------------- -------------- -------------------------------------
1,500,000 shares $75,000 $16,160 $58,840 Rent/Office Expenses: $3,000
(75%) Website Development: $7,350
Inventory of Products: $7,350
Production Equipment: $3,650
Marketing/Printing: $10,000
Working Capital: $27,490
- ----------------------- -------------- ----------------- -------------- ------------------------------------
2,000,000 shares $100,000 $16,160 $83,840 Rent/Office Expenses: $3,000
(100%) Website Development: $7,500
Inventory of Products: $9,000
Production Equipment: $5,000
Marketing/Printing: $20,000
Working Capital: $39,340
======================= ============== ================= ============== ====================================
Website development includes hiring a website designer who would update and
refine the website as the company grows. The website designer would be retained
to develop and update the website as the company builds its line of services and
ancillary products.
It is possible that we will receive only nominal proceeds from this offering. If
we fail to raise approximately $30,000 which is the amount we estimate we will
need to realize our 12 month expansion plans, our ability to expand our business
will be harmed. The result would be our ability to earn revenues would also be
harmed. Moreover, our ability to attract clients will be adversely affected if
we are not able to raise at least $30,000. If we raise less than $30,000, we may
need to attempt to make other funding arrangements, such as loans in order to
expand our business operations. There is no guarantee that we will be able to
raise more than nominal proceeds. There is also no guaranty that we will be able
to arrange for alternative sources of financing, should we only raise nominal
proceeds. We do believe that we can continue to operate our business even if we
raise less than $30,000.
10
If the offering proceeds are insufficient to pay the offering expenses in full,
then we intend to pay those expenses from our current cash reserves and any
revenues we may earn. As of May 8, 2003, our cash reserves were approximately
$2,931.18. We believe that if we do not receive sufficient funds to pay the
offering expenses and if our cash reserves coupled with revenues are not
sufficient to pay the offering expenses, our officers and directors will loan us
the money to pay the balance of the expenses. Such a belief is based on the fact
that our officers and directors own an aggregate of 4,000,000 of our issued and
outstanding shares and we believe as long as they maintain such a significant
ownership, they will be willing to loan us funds to pay operating expenses until
we are able to generate sufficient funds. However, our officers and directors
are not legally obligated to pay any of our expenses, including the offering
expenses. If we are unable to pay our offering expenses from available cash and
revenues and are unable to raise sufficient funds in this offering to pay such
expenses and our officers and directors do not loan us the funds to pay the
offering expenses, we may be forced to negotiate with our service providers to
either take stock in us in lieu of cash or to give us additional time to pay the
offering expenses. In the event we cannot negotiate such agreements, there is a
possibility that we could be sued by our service providers.
DETERMINATION OF OFFERING PRICE
- -------------------------------
FACTORS USED TO DETERMINE SHARE PRICE. The offering price of the 2,000,000
shares of common stock being offered by us has been determined primarily by our
capital requirements and has no relationship to any established criteria of
value, such as book value or earnings per share. Additionally, because we have
no significant operating history and have not generated any revenues to date,
the price of the shares of common stock is not based on past earnings, nor is
the price of the shares indicative of current market value for the assets we
own. No valuation or appraisal has been prepared for our business and potential
business expansion.
DILUTION
- --------
We intend to sell 2,000,000 shares of our common stock being registered by this
registration statement. We were initially capitalized by the sale of our common
stock. The following table sets forth the number of shares of common stock
purchased from us, the total consideration paid and the price per share. The
following table assumes all 2,000,000 shares of common stock will be sold.
================================ ========================================= ====================================== ==================
SHARES ISSUED TOTAL CONSIDERATION PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Founding Shareholders 4,000,000 Shares 66.67% $20,000 16.67% $0.005
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Purchasers of Shares 2,000,000 Shares 33.33% $100,000 83.33% $0.05
================================ ====================== ================== =================== ================== ==================
TOTAL 6,000,000 Shares 100% $120,000 100%
================================ ====================== ================== =================== ================== ==================
The following table assumes10% (200,000) of the offered shares will be sold.
================================ ========================================= ====================================== ==================
SHARES ISSUED TOTAL CONSIDERATION PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Founding Shareholders 4,000,000 Shares 95.24% $20,000 66.67% $0.005
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Purchasers of Shares 200,000 Shares 4.76% $10,000 33.33% $0.05
================================ ====================== ================== =================== ================== ==================
TOTAL 4,200,000 Shares 100% $30,000 100%
================================ ====================== ================== =================== ================== ==================
The following table assumes 50% (1,000,000) shares of common stock will be sold.
================================ ========================================= ====================================== ==================
SHARES ISSUED TOTAL CONSIDERATION PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Founding Shareholders 4,000,000 Shares 80% $20,000 28.57% $0.005
- -------------------------------- ---------------------- ------------------ ------------------- ------------------ ------------------
Purchasers of Shares 1,000,000 Shares 20% $50,000 71.43% $0.05
================================ ====================== ================== =================== ================== ==================
TOTAL 5,000,000 Shares 100% $70,000 100%
================================ ====================== ================== =================== ================== ==================
11
The following table sets forth the difference between the offering price of the
shares of our common stock being offered by us, the net tangible book value per
share, and the net tangible book value per share after giving effect to the
offering by us, assuming that:
o all of the shares of the common stock offered by us are sold;
o 50% of the shares of common stock offered by us are sold; and
o 10% of the shares of common stock offered by us are sold.
Net tangible book value per share represents the amount of total tangible assets
less total liabilities divided by the number of shares outstanding as of
December 31, 2002.
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
All Offered Shares 50% of Offered Shares 10% of Offered Shares
are Sold are sold are sold
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
Offering Price $0.05 per share $0.05 per share $0.05 per share
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
Net tangible book value at December 31, 2002 $0.00 per share $0.00 per share $0.00 per share
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
Net tangible book value after giving effect to the offering $0.015 per share $0.008 per share ($0.0004) per share
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
Per Share Dilution to New Investors $0.035 per share $0.042 per share $0.050 per share
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
Percent Dilution to New Investors 70.6% 84.7% 100.8%
- ----------------------------------------------------------- ----------------------- ----------------------- -----------------------
SELLING SECURITY HOLDERS
- ------------------------
The shares we are registering for sale are not yet issued and outstanding.
Therefore, there are no selling security holders in this offering.
PLAN OF DISTRIBUTION
- --------------------
We are offering for sale 2,000,000 shares of our common stock in a
self-underwritten offering directly to the public. We have not conducted any
discussions or negotiations for the sale of all or any portion of those
2,000,000 shares of our common stock. This is a best efforts offering. There is
no minimum number of shares that must be purchased by each prospective
purchaser. The maximum number of shares we will sell is 2,000,000. We will not
pay any commissions or other fees, directly or indirectly to any person or firm
in connection with solicitation of sales of the common stock. There are no
minimum proceeds set for this offering. We will terminate this offering on
February 28, 2004. We may extend the offering if we believe it is in the best
interests of the company and our shareholders. On or before February 1, 2004, we
will determine whether we should extend this offering. If we decide to extend
this offering, we will extend it for an additional 12 months and terminate this
offering on February 28, 2005.
12
We anticipate that Peg Warren, our president, chief executive officer and one of
our directors, will participate in the offer and sale of our shares of common
stock, and rely on the safe harbor from broker-dealer registration set out in
Rule 3a4-1 under the Securities Exchange Act of 1934. Although Ms. Warren is an
associated person of the company as that term is defined in Rule 3a4-l under the
Exchange Act, she is deemed not to be a broker for the following reasons:
o Ms. Warren is not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Exchange Act at the time of her
participation in the sale of our securities.
o Ms. Warren will not be compensated for her participation in the sale of
company securities by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities.
o Ms. Warren is not an associated person of a broker or dealer at the time of
participation in the sale of company securities.
o Ms. Warren is not associated with a broker or dealer and does not have an
arrangement with a broker or dealer to effect transactions in securities.
o Ms. Warren does not participate in selling an offering of securities for
any issuer more than once every 12 months other than in reliance on
paragraph (a)4(i) or (a)4(iii) of Section 3a4-1 of the Securities Exchange
Act of 1934, except that for securities issued pursuant to rule 415 under
the Securities Act of 1933, the 12 months shall begin with the last sale of
any security included within one rule 415 registration.
Ms. Warren will restrict her participation to the following activities:
o Preparing any written communication or delivering any communication through
the mails or other means that does not involve oral solicitation by the
President of a potential purchaser;
o Responding to inquiries of potential purchasers in communications initiated
by the potential purchasers, provided, however, that the content of
responses are limited to information contained in this registration
statement and any amendments filed hereto filed under the Securities Act or
other offering document;
o Performing ministerial and clerical work involved in effecting any
transaction.
We do not believe that our officers or directors will purchase any of the
offered shares. We plan to offer and sell our securities in: New York, the
District of Columbia, Colorado and North Carolina. As of May 8, 2003, we had
prepared and delivered the necessary documents to each state within which we
intend to register the offering.
We have not retained a broker for the sale of securities being offered. In the
event we retain a broker who may be deemed an underwriter, we will file an
amendment to the registration statement.
The shares of common stock we are offering have not been registered for sale
under the securities laws of any state as of the date of this prospectus.
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 beginning of such distribution.
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
- ------------------------------------------------------------
Our directors and principal executive officers are as specified on the following
table:
13
============ ===== ============================================================
Name Age Position
- ------------ ----- ------------------------------------------------------------
Peg Warren 48 president, chief executive officer and a director
- ------------ ----- ------------------------------------------------------------
Robin Welles 29 treasurer, chief financial officer, secretary and a director
============ ===== ============================================================
Peg Warren. Ms. Warren is responsible for our day to day operations and has been
our president, chief executive officer and one of our directors since April 13,
2002. From September 1992 to May 1993, Ms. Warren served as an Account Executive
at Larry Huffman Enterprises, Inc., an advertising agency which provides
services primarily to the automotive industry. While at Larry Huffman
Enterprises, Inc., Ms. Warren coordinated all advertising efforts for major
accounts, and negotiated electronic media buys with local radio and TV stations.
From 1993 to November 1995, Ms. Warren was the Marketing Director at Traveland
USA, a recreational vehicle mall, service complex and retail supply center which
consists of approximately 20 recreational dealers representing most of the large
recreational vehicle manufacturers in the United States. While with Traveland
USA, she conceived and executed several successful target marketing programs,
directed four national industry trade shows, and headed a marketing program.
From November 1995 to 2000, Ms. Warren served as the President of Warren
Business Ventures, a business development and marketing firm which services
developmental stage and mid-sized companies. At Warren Business Ventures, Ms.
Warren developed marketing strategies, assessed, evaluated and advised
re-structuring of organizational procedures in preparation for mergers,
acquisitions and strategic sales. From April 1999 to May 2002, Ms. Warren worked
for 1st Team Cable Marketing, a cable agency offering complete marketing and
advertising services to major cable television, high-speed internet, and
telephone providers both regionally and nationally. As director of
production/client services, Ms Warren provided all print, direct mail and
electronic coordination of cable advertising campaigns, both nationally and
regionally. While working there, Ms. Warren managed all print, TV and radio
production issues; she re-structured the customer service program, and
developed, implemented and managed operational systems to enhance the efficiency
and productivity of the entire company. In May 2002, Ms. Warren left 1st Team
Cable Marketing to join our company and advance our business. She still does
provide limited consulting services to 1st Team Cable Marketing. Ms. Warren has
not been an officer or director of any reporting company.
Robin Welles. Ms. Welles has been our treasurer, chief financial officer,
secretary and a member of our board of directors since April 13, 2002. Since
1997, Ms. Welles has been employed by Walt Disney Entertainment. She has been
promoted from a Department Assistant, to a Senior Secretary, to a Production
Coordinator. Her duties have included the redesign and implementation of a
tracking process for direct and indirect budgets, aiding in the creation of cast
member incentive programs, and managing and assisting development of all grand
opening events for Tokyo DisneySea. Ms. Welles earned her Bachelor of Science
degree in Business Administration at California State University, Sacramento.
Ms. Welles is not an officer or director of any reporting company.
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 May 8, 2003, 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.
14
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS PERCENT OF PERCENT OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNER IF NO SHARES ARE CLASS IF 10% CLASS IF 50% OF CLASS IF 100%
SOLD OF SHARES ARE SHARES ARE SOLD OF SHARES ARE
SOLD SOLD
- --------------- ------------------------- --------------------- ------------------ --------------- ----------------- -------------
Common Stock Peg Warren 2,000,000 shares
24242 Tahoe Court president, chief 50% 47.62% 40% 33.34%
Laguna Niguel, CA executive officer
92677 director
Common Stock Robin Welles 2,000,000 shares
622 E. California Blvd. treasurer, chief 50% 47.62% 40% 33.34%
Pasadena, CA 91106 financial officer
secretary, director
Common Stock All directors and named
executive officers as a 4,000,000 shares 100% 95.24% 80% 66.68%
group
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 SECURITIES
- -------------------------
Common Stock. We are authorized to issue 25,000,000 shares of $.001 par value
common stock. As of May 8, 2003, 4,000,000 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. 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 for that purpose. 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.
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.
Penny Stock Rules. 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. 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 provide
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 reduce 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.
15
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, 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.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
- -----------------------------------------------------------------------
Article Sixth of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
o Acts or omissions which involve intentional misconduct, fraud or knowing
violation of the law; or
o The payment of dividends in violation of Section 78.300 of the Nevada
Revised Statutes.
Accordingly, our directors may not be liable to our shareholders for any
mistakes or errors of judgment or for any act or omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
ORGANIZATION WITHIN LAST FIVE YEARS
- -----------------------------------
TRANSACTIONS WITH PROMOTERS. There have been no transactions with promoters
which would necessitate the disclosure of information required by Item 404(d) of
Regulation S-B.
DESCRIPTION OF BUSINESS
OUR BACKGROUND. We were incorporated on October 11, 2000 as Black Lake, Inc.,
pursuant to the laws of the state of Nevada. On December 6, 2000, our articles
of incorporation were amended to change our name to Black Lake, Inc. Our former
principals were Eddie Wenrick and Wayne Thompson. We have been informed by the
former principals that Black Lake, Inc., did not conduct any business activities
prior to Peg Warren and Robin Welles being appointed to our Board of Directors.
On April 13, 2002, our Board of Directors appointed Peg Warren to the office of
president and Robin Wells to the office of secretary and treasurer. On April 14,
2002, the resignation of Edward Wenrick, our former president, secretary,
treasurer and director, was accepted. On April 14, 2002, we accepted the
resignation of Wayne Thompson, our director.
Our Business. We currently offer public relations and marketing programs and
ancillary products that are designed to meet our clients' expectations and
assist our clients in achieving profitability. Our primary business is to
provide public relations and marketing services. Public relations services help
an organization and its clients adapt to each other through an evaluation of the
markets within which the organization will be operating. After such an
evaluation, we can then assist our clients in improving and updating their image
in the eyes of their customers through media, press releases and events.
Marketing is slightly different in that it focuses on competitively positioning
actual products and services into the marketplace through advertising, branding
and public relations. Our marketing and public relations services operate
together. However, as part of those services, we provide ancillary products such
as marketing brochures, product cards, sample product press releases, business
card and letterhead design. We plan to strive to continuously respond to change
while embracing new technology to thrive in a competitive environment. It is our
opinion that in order to succeed, we will need to keep abreast of the changes in
our industry and constantly update our public relations and marketing services.
Specifically, we will need to keep informed about latest innovations and
techniques in the public relations and marketing arenas. We hope to be able to
continue to take advantage of computer programs and related technologies to keep
our overhead low.
16
Our public relations and marketing services are designed to provide small
businesses with the tools to compete with large corporations in the global
market. We believe that our management has the expertise to build a strong
corporate identity for our clients, from the creation of company logos through
development of image ads and collateral materials such as signs, brochures and
business cards. Because we cater to smaller businesses, we are able to provide
in-depth, customized services. Because we are a new, development stage business,
we understand the commitment small businesses have to their own success and
consequently we try to target key areas that are common problem areas for most
small businesses related to business development.
The following is a list of our services:
o Brochure Design--We design informative and interesting brochures for
our clients which highlight the products and services provided by our
clients. We design marketing brochures tailored to each individual
clients.
o Logo Design--We assist our clients in designing attractive and eye-
catching logo's for their products and/or services.
o Corporate Mailers--Our corporate mailers are printed materials that are
designed to be distributed at events such as trade shows or
conventions. They typically focus on the corporate structure and
history of the featured corporation. We believe they help in sales
efforts.
o Trade Show Services--We assist our clients in designing and
constructing trade show displays and print materials, brochures, trade
show booth design, booth graphics and press kits (described below). A
trade show booth is a unit which is designed for a trade show or
convention. Representatives of our client stand or sit in the booth and
market their product at sales events.
o Magazine Advertisements--We assist our clients in designing
advertisements which can be used for magazines, newspapers and other
print media. We provide advice on advertisement layout, subject matter
and content.
o Business Cards--We assist our clients in designing attractive,
innovative business cards which are tailored to our client's needs.
o Press Releases--We assist our clients in designing and writing written
releases announcing new products or improved products or services. We
believe that well written press releases can increase market interest
and acceptance of our client's products and/or services.
o Printing--We provide printing services. Specifically, we have the
ability to print the written brochures, press releases and other print
materials.
Our current clients are Krinner USA, Inc., Pacific School of Music and the Arts
and Airport Graphics, Inc. We have provided all the above-referenced services to
Krinner USA, Inc., in one form or another. Krinner USA, Inc. contracted us to
help refine their corporate image and design and print their marketing
materials. Krinner USA, Inc., markets and sells a Christmas tree stand. Pacific
School of Music and the Arts provides music, art and drama training to all ages.
We have provided Pacific School of Music and the Arts with printed
advertisements and consulting on public relations. Finally, Airport Graphics,
Inc., contracted with us to provide
marketing services, including consulting on expanding their services.
OUR CORPORATE BRANDING SERVICES. We provide small companies with customized,
professional, corporate identity and branding. From logo design to press
releases, we strive to keep our clients' corporate presence consistent and
competitive, prompting consumers to identify with and respond to our clients'
products or services, thereby increasing market awareness of the particular
product or service. Through the process of developing a strong corporate
identity, we work closely with our clients, familiarizing ourselves with each
company and incorporating our clients' particular goals into each company's
corporate identity. We believe a strong corporate identity is essential for the
following reasons:
17
o Assists consumers to identify, select, and become familiar with our
clients' products and/or services.
o Shows consumers and competitors that our client has a strong, consistent
image.
o Offers a benchmark against which competitors can be measured and evaluated.
We believe that each business is unique, and therefore, each individual client
requires an identity tailored to its particular needs to achieve the desired
results. We believe that a structured, carefully planned corporate identity
package can provide a business with a valuable asset. The corporate identity
package can also be used to market the company to clients and potential business
partners. We begin most corporate identity packages with a conservative,
time-tested structure, and then customize the final product to suit the
individual client's business and goals. We strive to make each corporate
identity package a realistic reflection of the expectations and individuality of
the particular client.
We also provide general public relations services. We strive to evaluate our
clients' strengths in order to accentuate those strengths and create heightened
consumer interest. We believe that small businesses have the ability to create
special relationships with their customers as long as they identify and
strengthen their corporate identity. We believe that our corporate identity
packages allow our clients to meet their business goals while creating those
special relationships. We believe that we have a comprehensive understanding of
consumer-to-business relationships and the ability to explore and expand that
relationship through our services. As small businesses are challenged to remain
competitive in a marketplace characterized by large, well-capitalized
competitors, we believe services such as ours will become increasingly
important. We believe that through our focused guidance, a smaller company can
compete successfully with its larger competitors.
OUR TARGET MARKETS AND MARKETING STRATEGY. We primarily market our services to
small businesses which we believe can benefit from our knowledge of the
day-to-day requirements of operating a business. Typically, our clients will
have one to 10 employees and have modest revenues. However, we target businesses
that wish to increase the size and breadth of their business. With a
well-constructed identity, we believe that our clients will be more effective in
maximizing their efforts and staying ahead of their competitors. We believe that
many small companies lack the necessary identity to distinguish themselves from
their competitors. We also believe that in today's market, a strong identity
builds a loyal consumer base. It is our belief that many times, the only way for
a small company to compete with its larger competitors is to build a unique and
recognizable corporate identity and only through building a strong corporate
identity can small companies build a loyal customer base. We hope that through a
loyal consumer base, our clients can generate interest in their products and/or
services through "word of mouth" advertising. That is, we believe that if our
clients are happy, they will spread the word and recommend our services to other
similar small businesses. We believe that no matter what final form advertising
takes, a company's strategic foundation supports its corporate and marketing
goals.
We also plan to promote our services and attract clients through our proposed
website. Our website is currently in the beginning stage of development. In
addition to the advertising we do on our proposed website, our other marketing
initiatives will include:
o utilizing direct response print advertisements placed primarily in small
business, entrepreneurial, and special interest magazines;
o links to industry focused websites;
o advertising by television, radio, banners, affiliated marketing and direct
mail; and
o presence at industry tradeshows
We do not plan to institute our marketing initiatives (other than the continuing
development of our proposed website) until and unless funds permit. We hope to
raise sufficient funds to finance all of our marketing plans. However, we will
institute such plans only as our funds permit.
GROWTH STRATEGY. Our objective is to expand our operations by adding staff while
increasing our market presence in the Orange County area of Southern California,
and into nearby regions. We anticipate achieving growth by hiring additional
staff, installing computers and launching a professionally designed website to
attract new clients. Our website will not be an inactive website but will
feature examples of the types of services and ancillary advertising products
which we provide. For example, the website will feature: example press releases,
creative marketing brochures, event/trade show planning techniques. The website
will primarily be used to showcase our materials and contact information and
advertise our services. We hope that through providing online examples of our
services and ancillary products, we can attract clients.
We plan to hire individuals with the following strengths:
18
o Marketing Representative: This position requires an individual
experienced in marketing to small businesses, writing proposals, and
developing and implementing ongoing marketing ideas. This position will
be a liaison between us and those institutions which traditionally
assist small businesses, such as: banks, legal offices and government
agencies.
o Clerical Assistant: This individual will perform all daily office
tasks including, but not limited to, computer input and bookkeeping.
o Computer Assistant: This individual will have web design experience, a
working knowledge of computer networks, as well as work with an outside
web design firm to establish our proposed website. We believe that our
proposed website will be an important tool to expand our area of
operations and client base.
We plan to expand our services to other cities in Southern California. We
believe it is critical to have a physical presence in the major Southern
California cities so that we can provide quality service to clients in those
locations while developing a local following. We hope that if we can develop a
reputation for superior services locally, that will lead to word-of-mouth
advertising which will hopefully increase our revenue stream. We believe that
word-of-mouth advertising is an effective advertising strategy. We have not yet
decided the exact areas into which we plan to expand. However, we anticipate
that we will attempt to expand into Los Angeles County and other areas of Orange
County.
We anticipate that in order to implement our business expansion plans over the
next 12 months, we will need to raise funds in the following amounts for the
following items:
o Purchase additional computers: $3,000
o Acquire additional office space for one year: $12,000
o Website development for one year: $5,000
o Working capital for one year: $10,000
We will need to raise such funds in order to fully implement our 12 month
expansion plans. We have not set a minimum amount required to be raised because
we believe we can continue our business even if we raise only nominal funds in
this offering. We are currently earning minimal revenues and operating as an
ongoing business; however, we intend to expand our operations if we can raise at
least $30,000. The estimated amounts specified directly above represent what we
believe we will require to meet our 12 month expansion plans. We believe we can
continue as a going concern even if we are not able to raise a minimum of
$30,000.
We anticipate that the funds from this offering, even if we do not sell all of
the offered shares, will provide us sufficient capital for the next twelve
months. Our rate of expansion will depend on the number of offered shares we
sell. If we are not able to raise at least $30,000 in this offering, we may
raise additional funds either through additional offerings of our shares or
through other financing arrangements, such as borrowings in order to speed our
expansion plans. There is no guarantee that we will be able to raise funds in
addition to the funds we raise in this offering, if any. We do believe we can
continue as a going concern even if we are not able to raise $30,000 in this
offering as we are currently earning revenues and are building our client base.
Specifically, we have been operating in our current business for approximately
one year and have grown our client base allowing us to pay our expenses. We feel
we can continue to build our client base even without raising the $30,000 and
continue to pay our expenses. If we are unable to raise $30,000 in this
offering, we will not be able to expand our business as quickly as we would
like, but we do believe we can stay in business. We are earning a small amount
of revenue and believe we can continue to earn that level of revenue, if not
more. We also have confidence that our management will work to ensure that we
continue as a going concern through cost cutting measures or otherwise. We also
do not believe that our losses since inception will continue at their current
rate as certain start-up costs are not recurring.
None of our officers or directors or, as far as we know, any of their affiliates
or associates have had any preliminary contact or discussions with any other
business or company regarding the possibility of an acquisition or merger
transaction. We do not have any present plans, proposals, arrangements or
understandings with any representatives of the owners of any business or company
regarding the possibility of an acquisition or merger transaction.
19
OUR PROPOSED WEBSITE. We anticipate that our website will be developed by a
local web design firm. We intend to design a user-friendly website which
provides prospective clients with a complete listing of our available services
and pages dedicated to relevant topics of interest to small businesses. We
anticipate that we will use a portion of the proceeds from this offering to
develop our website. However, as of the date of this prospectus, our website has
not moved beyond the mere discussion phase as we currently lack the necessary
funds to begin development of our website. Assuming our proposed website becomes
operational, we expect to next focus on expanding the scope of our Internet
presence. We hope to achieve such expansion by registering with major search
engines with the goal of placing our website at the top of search results. This
typically requires pre-funding with certain search engines. We do not currently
have adequate financial resources to conduct such registration.
OUR INTELLECTUAL PROPERTY. We do not presently own any domain names, copyrights,
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:
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.
COMPETITION. The market for comprehensive advertising, marketing and public
relations services is highly fragmented and intensely competitive. In order to
compete effectively in the advertising and marketing services industry, a
company must provide a wide range of quality services and products at a
reasonable cost. The changing business environment has also produced an evolving
range of strategic and operating options for small businesses entrepreneurs,
many of whom are unfamiliar with the requirements of day-to-day business
operations. In response, business-consulting firms are formulating and
implementing new strategies and tactics, including developing ancillary products
and services as well as engaging in target marketing programs. In providing our
services, we compete with national and international advertising and marketing
firms such as Fleishman Hillard International Communications and Porter Novelli,
as well as local agencies in the Orange County market, such as Amies
Communications, Paine PR, and Roxburgh Integrated Communications.
We believe that many of our competitors operate traditional "brick and mortar"
operations. A traditional "brick and mortar" business is a business which uses
traditional avenues of marketing and public relations such as newspaper and
magazine advertising, a large sales force, mailings, etc. We believe that many
of our competitors have a high overhead. This leads to a higher cost of doing
business and higher prices paid by clients. We strive to meet and beat our
competition by keeping our overhead low and, as a result, passing on the savings
to our clients. We endeavor to provide quality comprehensive services while
keeping costs down. We feel we can keep costs down by using the Internet to
advertise and showcase our services and by employing state-of-the-art computer
systems and software. At least initially, we plan to complete development of our
proposed website which will be our initial advertising tool. However, if we are
able to raise more than $30,000 in this offering, we plan on using at least a
portion of the funds for additional marketing initiatives discussed more
particularly in the section entitled "Growth Strategy" above. We will not
implement additional marketing plans until and unless funds permit. We believe
that we can keep our costs low by using state-of-the-art computer systems
because the more we can accomplish with computers and marketing related software
and hardware, the less we will have to rely on expensive third party providers
and staff. Tasks that would, in the past, require paying a third party to
accomplish can now be accomplished relatively inexpensively on the computer. For
example, we can reduce printing costs and design costs by using computer
programs designed for such tasks. We are a small development stage enterprise.
Our competitive position in our industry is low. We hope to improve that
position by offering affordable, quality advertising, marketing and public
relations services. There is no guarantee that we will be able to improve our
competitive position.
20
Many of our competitors have greater financial resources than we have, enabling
them to finance acquisition and development opportunities, pay higher prices for
the same opportunities or develop and support their own operations. In addition,
many of these companies can offer bundled, value-added or additional services
not provided by us. Many also have greater name recognition. Our competitors may
have the luxury of sacrificing profitability in order to capture a greater
portion of the market for advertising and public relations services. They may
also be in a position to pay higher prices than we would for the same expansion
and development opportunities. Consequently, we will encounter significant
competition in our efforts to achieve our internal and external growth
objectives.
While we compete with traditional "brick and mortar" providers of advertising
and marketing services, once we design and establish our website, we will also
compete with other Internet-based companies and businesses that have developed
and are in the process of developing websites which will be competitive with the
services developed and offered by us. We cannot guaranty that other websites or
services which are functionally equivalent or similar to our proposed website
and our current services have not been developed or are not in development. Many
of these competitors have greater financial and other resources and more
marketing and sales experience than we have.
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 marketing and public relations services are not
subject to licensing or other regulatory requirements.
Internet access and online services are not subject to direct regulation in the
United States. Changes in the laws and regulations relating to the
telecommunications and media industry, however, could impact our business. For
example, the Federal Communications Commission could begin to regulate the
Internet and online services industry, which could result in increased costs for
us. The laws and regulations applicable to the Internet and to our services are
evolving and unclear and could damage our business. There are currently few laws
or regulations directly applicable to access to, or commerce on, the Internet.
Due to the increasing popularity and use of the Internet, it is possible that
laws and regulations may be adopted, covering issues such as user privacy,
defamation, pricing, taxation, content regulation, quality of products and
services, and intellectual property ownership and infringement. Such legislation
could expose us to substantial liability as well as dampen the growth in use of
the Internet, decrease the acceptance of the Internet as a communications and
commercial medium, or require us to incur significant expenses in complying with
any new regulations. The European Union has recently adopted privacy and
copyright directives that may impose additional burdens and costs on
international operations.
OUR RESEARCH AND DEVELOPMENT. We are not currently conducting any research and
development activities, other than the development of our proposed website. We
do not anticipate conducting any research or development activities in the near
future.
EMPLOYEES. As of May 8, 2003, we had no employees other than our officers. We
are not a party to any collective bargaining agreements. We have not entered
into any employment agreements with any of our executives. We anticipate that we
will enter into employment agreements with our key personnel when, and if, our
revenue production justifies such agreements. We have not negotiated the
specific terms or conditions of such agreements. We do not currently anticipate
that we will hire any employees in the next six months, unless we generate
significant revenues. From time-to-time, we anticipate that we will also use the
services of independent contractors and consultants to support our business
development. We believe our future success depends in large part upon the
continued service of our senior management personnel and our ability to attract
and retain highly qualified technical and managerial personnel.
FACILITIES. Our executive, administrative and operating offices are located at
3187-G Airway Avenue, Costa Mesa, California 92626. We believe that our current
facilities are adequate for our current needs and that additional suitable space
will be available on acceptable terms as required. We currently pay $250 per
month. We have agreed to lease the space for at least one year at that rate. We
share a conference room with other tenants. We do not own any real estate.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
- --------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2002 (UNAUDITED).
- ------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES. At December 31, 2002, we had cash and cash
equivalents of $4,275 compared to no cash resources as at December 31, 2001. The
cash influx from December 31, 2001 to December 31, 2002 was primarily due to the
purchase of stock by our officers and directors as well as revenues earned
during year ended December 31, 2002. Our officers and directors provided us with
our initial capitalization of $20,000 through the purchase of our common stock.
Those proceeds were used for initial working capital such as office supply and
setup expenses. We believe that through this offering, we can increase our cash
reserves.
21
We did not have any accounts receivable as at December 31, 2001, compared to
accounts receivable of $6,196 at December 31, 2002. At December 31, 2002, we had
total assets of $10,471 compared to no assets at December 31, 2001. We expect
that our assets will increase as we increase our business capacity. However, we
will not be able to increase our business capacity unless we raise at least
$30,000 in this offering. If we raise less than $30,000, we will use the funds
to pay our general operating expenses. At December 31, 2002 we had total
liabilities of $5,967 compared to no liabilities at December 31, 2001. Our only
liability at December 31, 2002, was for accounts payable.
RESULTS OF OPERATIONS.
REVENUES. From our inception on October 11, 2000 to December 31, 2001, we had
not earned any revenues. During the year ended December 31, 2003, we earned
$56,502 in revenues from marketing and advertising services we provided. As
discussed in more detail below, we intend to increase our business activities
over the next 12 months. We will need to raise approximately $30,000 in order to
realize our expansion plans over the next 12 months. If we are not able to raise
at least $30,000 to expand our operations, our ability to increase our revenues
will be harmed. Our cost of revenues during that period was $44,978. We believe
that as we expand our operations, our profit margin will increase. Currently,
our cost of revenues is high and profit margin is low because of our initial
start up costs added to the cost of revenues. We believe that as we do a higher
volume of business, our costs compared to revenue will come down.
OPERATING EXPENSES. For the period from October 11, 2000, our date of formation,
to December 31, 2001, we had no expenses. For the year ended December 31, 2003,
we had cost of revenues of $44,978 and general and administrative expenses,
accounting expenses and legal fees totaling $27,770. Our general and
administrative expenses for the year ended December 31, 2003, consisted
primarily of legal fees and accounting fees. If we are able to raise at least
$30,000 to expand our operations, our expenses will increase because we will use
funds for marketing our services and for the purchase of additional office and
production equipment. We realize that in order to increase our revenues, we will
need to increase our expenditures. For example, in order to increase our
revenues we may engage in a comprehensive advertising campaign, or purchase
additional equipment which will enable us to broaden our service offering. For
the year ended December 31, 2003, we suffered a net loss of $16,246. We expect
to suffer losses for the foreseeable future as we will be using our available
cash to pay our operating expenses and, if available, to expand our operations.
We are not aware of any known trends, events or uncertainties that will have or
reasonably may have a material impact on our short-term or long-term liquidity
except for the following:
o A general economic slowdown could adversely affect our business as
consumption of both services and products generally slows down during
economic downturns.
o If we are not able to raise at least $30,000 to realize our 12 month
expansion plans, our ability to increase our revenues will be harmed.
We do not have any material commitments for capital expenditures. We also do not
believe that our revenues will be affected by seasonal influences.
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. To further implement our
business plan and expand our operations during the next twelve months, we will
need to raise funds in this offering, so that we can expand our services to
other areas of Southern California. We anticipate that we will use the funds
raised in this offering and revenues generated to fund the development of our
website, for marketing activities and for working capital. Our failure to market
and promote our services will harm our business and future financial
performance. If we are unable to expand our operations within the next twelve
months, we will likely fail to increase our revenues.
22
We had cash of approximately $2,931.18 at May 8, 2003. We have operated at a
loss. In the opinion of management, available funds, even if no additional
revenue is earned, will satisfy our working capital requirements through
December 2002. Our level of business activity primarily involves meeting with
prospective clients and educating them about our service offerings. Our business
activities are conducted at minimal cost to us. We believe that these activities
and our cash on hand will sufficiently cover our operating expenses for the next
twelve months. Specifically, our revenues for the year ended December 31, 2002
were $56,502 and our cost of revenues was $44,978 for a gross margin of $11,524.
Therefore our average monthly revenue for 2002 was approximately $4,700. Our
operating expenses for the year ended December 31, 2002 were $27,770 which
primarily consisted of legal and accounting expenses. Therefore, our average
monthly expenses for the year ended December 31, 2002 were approximately $2,300
a month. We believe that we can reduce our legal expenses especially given that
the bulk of legal expenses paid in 2002 were for the preparation of our Form
SB-2. We also believe we can reduce our cost of revenues as our expenses in 2002
included what we believe are nonrecurring start-up costs. Given our historical
average monthly revenues of $4,700, our average monthly expenses of $2,300, our
cash reserves and our belief that we can reduce our expenses and increase our
customer base, we believe we can pay our operating expenses over the next 12
months even if we raise only minimal funds. However, there is no guarantee that
we will be able to pay our expenses. There is also no guarantee that we have not
underestimated our expenses and/or overestimated our anticipated revenues. If
either of these proves to be true, we may not be able to pay our operating
expenses, in which case we may be forced to curtail or cease operations. As a
result, an investor in us could lose all of his or her investment.
Our day-to-day business activities consist largely of following-up with existing
clients and activities designed to generate additional revenues, including
designing ways to attract new clients and increasing our service and product
offerings.
However, we plan on earning additional revenue during that period of time which
will allow us additional working capital. 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. Depending on the amount of funds we raise in this offering, we may need
to raise additional capital to expand our operations, although we have not
identified any sources of such additional capital. 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 we need additional funds and such additional
funds are not available, then we may not be able to fully expand our operations.
If we raise only minimal funds in this offering, we plan to maintain our low
overhead and expand our operations only if funds are available in the future. We
will continue to design our website but may not be able to fully implement our
website plans. Our office space will not be expanded. We are currently earning
revenues, albeit at a slow rate. We believe that even if minimal funds are
raised in this offering, we can maintain our current revenue level. We will
continue to service our current clients with the hope that they will recommend
our services to their business acquaintances.
If we are able to raise the maximum sought by this offering, we will expand our
services more rapidly. We will also seek to expand our service and product
offerings. We will aggressively implement our website and provide interactive
capabilities, with client-password access and database management capability. We
also plan to expand our marketing efforts beyond the current "word-of-mouth"
advertising on which we rely. We will hire support staff and we will increase
our office facilities as we increase our client base and support staff.
Even if we raise only minimal funds in this offering, we believe that we can
meet our operating expenses as we are generating more revenues and have
increased our client base. If we are only able to raise minimal funds, we will
not expand our operations but will continue to market our services and operate
at current levels.
We are not currently conducting any research and development activities, other
than the development of our proposed website. We do not anticipate conducting
such activities in the near future. We do not anticipate purchases of plant or
equipment other than general office supplies and general office equipment. In
the event that we expand our customer base, then we may need to hire additional
employees or independent contractors. Specifically, if we are able to raise
sufficient capital to expand our services and service area, which we anticipate
we will require approximately $30,000, and our revenue levels justify such
action, we plan on hiring additional office staff.
23
DESCRIPTION OF PROPERTY
- -----------------------
PROPERTY HELD BY US. As of the date specified in the following table, we held
the following property:
================================== =========================
Property December 31, 2002
---------------------------------- -------------------------
Cash $4,275
================================== =========================
OUR FACILITIES. Our executive, administrative and operating offices are located
at 3187-G Airway Avenue, Costa Mesa, California 92626. We currently pay $250 per
month. We have agreed to lease the space for at least one year at that rate. We
share a conference room with other tenants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
During the nine months ended December 31, 2002, one of our officers was paid
$6,300 for executive services and reimbursement of expenses.
During the twelve-months ended December 31, 2002 and the period from October 11,
2000 (our inception date) through December 31, 2002, we recorded rent fees of
$750. The fees were paid by our president. Our president has waived
reimbursement of the rent fees and we have considered such fees to be additional
paid in capital.
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 disclose such transactions in prospectuses where required;
o disclose in any and all filings with the Securities and Exchange
Commission, where required;
o obtain disinterested directors consent; and
o obtain shareholder consent where required.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------------
REPORTS TO SECURITY HOLDERS. Our securities are not listed for trading on any
exchange or quotation service; therefore, 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 and if we become a reporting company with the Securities and Exchange
Commission, the public may read and copy any materials filed with the Securities
and Exchange Commission at the Securities 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.
As of May 8, 2003, there were two record holders of our common stock.
There are no outstanding shares of our common stock which 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 of 1933 for sale by security holders.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
24
PENNY STOCK REGULATION. Shares of our common stock will probably be 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, except
for 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
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability 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
president and our other executive officers during the years ending December 31,
2002. 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 Compensation
Salary ($) Compensation ($)
- -------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Peg Warren - president, chief executive 2002 $5,000 None None None
officer
- -------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Robin Welles - treasurer, chief financial 2002 None None None None
officer, secretary
============================================ ======= ============= ============= ===================== =========================
25
COMPENSATION OF DIRECTORS. Our directors who are also our employees receive no
extra compensation for their service on our Board of Directors.
COMPENSATION OF OFFICERS. During the year ended December 31, 2002, and the
period October 11, 2000 (inception) through December 31, 2002, one of our
officers was paid $3,850 for executive services.
EMPLOYMENT CONTRACTS. We anticipate that we will enter into employment
agreements with our key personnel when revenues justify such contracts. However,
we have not negotiated the specific terms and conditions of such agreements.
Moreover, we do not anticipate entering into such agreements until and unless we
realize sufficient revenues to justify such action. Specifically, we will need
to increase our revenue level by at least 200% in order to justify entering into
long term employment contracts. There is no guarantee that we will ever realize
sufficient revenues to justify entering into employment agreements with any of
our current or future key personnel.
FINANCIAL STATEMENTS
- --------------------
BLACK LAKE, INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
26
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
INDEX
-----
PAGE
----
Independent Auditors' Report .................................................1
Financial Statements
Balance Sheets as of December 31, 2002 and December 31, 2001..................2
Statements of Operations for the for the years ended December 31, 2002
and 2001, the periods October 11, 2000 (inception) through December
31, 2000, and October 11, 2000 (inception) through December 31, 2002..........3
Statements of Changes in Stockholders' Equity for the period October
11, 2000 (inception) through December 31, 2002................................4
Statements of Cash Flows for the years ended December 31, 2002 and
2001, the periods October 11, 2000 (inception) through December
31, 2000, and October 11, 2000 (inception) through December 31, 2002..........5
Notes to Financial Statements............................................6 - 10
27
Independent Auditors' Report
----------------------------
March 28, 2003
To the Board of Directors and Stockholders of
Black Lake, Inc.
We have audited the accompanying balance sheets of Black Lake, Inc. (a
development stage company) as of December 31, 2002 and 2001, and the related
statements of operations, changes in stockholders' equity and cash flows for the
years ended December 31, 2002 and 2001, and the periods October 11, 2000
(inception) through December 31, 2000 and October 11, 2000 (inception) through
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Black Lake, Inc. as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years ended December 31, 2002 and 2001, and the periods October
11, 2000 (inception) through December 31, 2000 and October 11, 2000 (inception)
through December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the financial
statements, the Company has incurred net losses since its inception and has had
an accumulated deficit of $16,246 as of December 31, 2002. This condition raises
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
A Professional Accountancy Corporation
Newport Beach, California
28
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
BALANCE SHEETS
--------------
ASSETS
------
December 31,
--------------------------------------
2002 2001
---------------- ----------------
ASSETS
Cash and cash equivalents $ 4,275 $ ---
Accounts receivable 6,196 ---
---------------- ----------------
Total assets $ 10,471 $ ---
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 5,967 $ ---
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
25,000,000 shares authorized,
4,000,000 and 0 shares issued and outstanding
at December 31, 2002
and 2001, respectively 4,000 ---
Additional paid-in capital 16,750 ---
Deficit accumulated during development stage (16,246) ---
---------------- ----------------
Total stockholders' equity 4,504 ---
---------------- ----------------
Total liabilities and stockholders' equity $ 10,471 $ ---
================ ================
See the accompanying notes to these financial statements
29
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
Years Ended December 31, October 11, 2000 October 11, 2000
-------------------------------------- (inception) (inception)
Through Through
2002 2001 December 31, 2000 December 31, 2002
----------------- ---------------- ----------------- -----------------
NET REVENUES $ 56,502 $ --- $ --- $ 56,502
COST OF REVENUES 44,978 --- --- 44,978
----------------- ----------------- ----------------- -----------------
GROSS MARGIN 11,524 --- --- 11,524
----------------- ----------------- ----------------- ------------------
OPERATING EXPENSES
Accounting 8,950 --- --- 8,950
Legal 14,914 --- --- 14,914
General and administrative expenses 3,906 --- --- 3,906
----------------- ----------------- ----------------- -----------------
Total operating expenses 27,770 --- --- 27,770
----------------- ----------------- ----------------- -----------------
LOSS FROM OPERATIONS BEFORE PROVISION
FOR INCOME TAXES (16,246) --- --- (16,246)
PROVISION FOR INCOME TAXES --- --- --- ---
----------------- ----------------- ----------------- -----------------
NET LOSS $ (16,246) $ --- $ --- $ (16,246)
================= ================= ================= =================
BASIC LOSS PER SHARE $ (.01)$ N/A $ N/A $ (.02)
====================================== ================= ====================
DILUTIVE LOSS PER SHARE $ (.01)$ N/A $ N/A $ (.02)
====================================== ================= ====================
BASIC AND DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,049,451 --- --- 919,852
================= ================= ================ ================
30
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
PERIOD OCTOBER 11, 2000 (INCEPTION) THROUGH DECEMBER 31, 2002
-------------------------------------------------------------
Deficit
Development
Common Stock Additional Accumulated
---------------------------- Paid-In During
Shares Amount Capital Stage Total
-------------- ----------- ----------- ----------- -----------
BALANCE, October 11, 2000 (inception) --- $ --- $ --- $ --- $ ---
-------------- ----------- ----------- ----------- -----------
BALANCE, December 31, 2000 --- --- --- --- ---
-------------- ----------- ----------- ----------- -----------
BALANCE, December 31, 2001 --- --- --- --- ---
-------------- ----------- ----------- ----------- -----------
ISSUANCE OF COMMON STOCK, July 2002 4,000,000 4,000 16,000 --- 20,000
ADDITIONAL PAID-IN CAPITAL, (in
exchange for rent expense) --- --- 750 --- 750
NET LOSS --- --- --- (16,246) (16,246)
-------------- ----------- ----------- ----------- -----------
BALANCE, December 31, 2002 4,000,000 $ 4,000 $ 16,750 $ (16,246) $ 4,504
============== =========== =========== =========== ===========
See accompanying notes to these financial statements.
31
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF CASH FLOWS
-------------------------
October 11, 2000 October 11, 2000
Years Ended December 31, (inception) (inception)
-------------------------------------- Through Through
2002 2001 December 31, 2000 December 31, 2002
---------------- ---------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (16,246) $ --- $ --- $ (16,246)
Adjustments to reconcile net loss to net
cash used in operating activities
Goods and services provided in
exchange for additional paid-in capital 750 --- --- 750
Changes in operating assets and
liabilities
Increase in accounts receivable (6,196) --- (6,196)
Increase in accounts payable 5,967 --- 5,967
---------------- ---------------- ----------------- ----------------
Net cash used in operating activities (15,725) --- (15,725)
---------------- ---------------- ----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 20,000 --- --- 20,000
---------------- ---------------- ----------------- ----------------
Net cash provided by financing activities 20,000 --- --- 20,000
---------------- ---------------- ----------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,275 --- --- 4,275
CASH AND CASH EQUIVALENTS, beginning of period --- --- --- ---
----------------- ----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 4,275 $ --- $ --- $ 4,275
================ ================ ================= ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ --- $ --- $ --- $ ---
Cash paid during the period for income taxes $ --- $ --- $ --- $ ---
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
During the year ended December 31, 2002 and the period October
11, 2000 (inception) through December 31, 2002, the Company
recorded additional paid-in capital of $750 for rent provided by
a stockholder.
See the accompanying notes to these financial statements
32
BLACK LAKE, INC.
----------------
(A Development Stage Company)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 1 - COMPANY OPERATIONS
Black Lake, Inc. (the "Company") is currently a development stage
company under the provisions of the Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 7.
The Company was incorporated under the laws of the state of Nevada on October
11, 2000. However, no business was transacted until April 2002.
On April 13, 2002, the directors of the Company appointed officers of
the Company. On April 14, 2002, the initial directors resigned. With the newly
appointed officers, the Company's mission is to provide public relations
programs and products to assist small companies in their corporate and marketing
goals.
GOING CONCERN - The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
has experienced net losses since its inception and had an accumulated deficit of
$16,246 as of December 31, 2002. The Company expects operating losses to
continue for the foreseeable future as it continues to develop and promote its
services. The Company's continued existence is dependent upon several factors
including the Company's ability to fund operations and raise additional capital.
In the absence of significant revenues, profits, and increased working
capital, the Company intends to fund operations through possibly new debt and
additional equity financing arrangements which management believes may be
insufficient to fund its capital expenditures, working capital, and other cash
requirements for the fiscal year ending December 31, 2003. Therefore, the
Company may be required to seek additional funds to finance its long-term
operations. The successful outcome of future activities cannot be determined at
this time and there are no assurances that, if achieved, the Company will have
sufficient funds to execute its intended business plan or generate positive
operating results. These matters raise substantial doubt about the Company's
ability to continue as a going concern.
The accompanying financial statements do not include any adjustments
related to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are summarized as follows:
DEVELOPMENT STAGE - Black Lake, Inc. is currently a development-stage
company under the provisions of the Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 7. The Company
is in the process of providing public relations programs and products to assist
small companies in their corporate and marketing goals.
33
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS - For purposes of the balance sheets and
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three (3) months or less to be cash
equivalents.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
ACCOUNTS RECEIVABLE - The Company extends credit to its customers as
part of its normal business operations.
The Company monitors all receivables, especially those balances over
sixty (60) days past due. Balances are written off only when all reasonable
collection efforts have been exhausted. Management must approve all write-offs
of customer balances. There were no bad debt write-offs for the periods ended
December 31, 2002, 2001 and 2000.
REVENUE RECOGNITION - The Company is retained to provide public
relations programs and marketing services to companies. In addition, the Company
may sell certain marketing related products to the companies. Revenue is
recognized upon completion of services and delivery of products.
INCOME TAXES - The Company accounts for income taxes in accordance with
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted rates in effect for the periods in which the
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, "Disclosure about
Fair Value of Financial Instruments" ("SFAS 107") requires entities to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to estimate
fair value. SFAS 107 defines fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. As of December 31, 2002, the carrying value of cash and cash
equivalents, accounts receivable and accounts payable approximate fair value due
to the short term nature of such instruments.
START-UP ACTIVITIES - The Company has adopted the provisions of
Statement of Position 98-5, "Reporting Costs of Start-up Activities" ("SOP
98-5"). SOP 98-5 requires that the costs of start-up activities including
organization costs be expensed as incurred.
34
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE OF COMMON STOCK - Basic and diluted loss per share is
computed using shares of common stock issued to date. Consideration is also
given in the dilutive loss per share calculation for the dilutive effect of
common stock equivalents which might result from the exercise of stock options.
However, for the periods presented, there were no common stock equivalents.
CONCENTRATIONS - The Company currently conducts business with primarily
one customer. The loss of this customer could have a significant impact on the
financial position of the Company. Management believes that its customer base
will increase in the near future.
ACCOUNTING PRONOUNCEMENTS - In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations,"
which is effective for business combinations initiated after June 30, 2001. SFAS
141 eliminates the pooling of interest method of accounting for business
combinations and requires that all business combinations occurring after July 1,
2001 are accounted for under the purchase method. The Company has not been
affected by SFAS 141.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is
effective for fiscal years beginning after December 15, 2001. Early adoption is
permitted for entities with fiscal years beginning after March 15, 2001,
provided that the first interim financial statements have not been previously
issued. SFAS 142 addresses how intangible assets that are acquired individually
or with a group of other assets should be accounted for in the financial
statements upon their acquisition and after they have been initially recognized
in the financial statements. SFAS 142 requires that goodwill and intangible
assets that have indefinite useful lives not be amortized but rather be tested
at least annually for impairment, and intangible assets that have finite useful
lives be amortized over their useful lives. SFAS 142 provides specific guidance
for testing goodwill and intangible assets that will not be amortized for
impairment. The Company has not been affected by SFAS 142.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations."
SFAS 143 established standards associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. This statement is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company does not expect SFAS 143 to have a material impact on its
financial statements.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS 144 addresses financial accounting and reporting for
the impairment of long-lived assets of which to be disposed. The provisions of
SFAS 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within these fiscal
years, with early adoption encouraged. The Company does not expect SFAS 144 to
have a material impact on its financial statements.
35
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145 ("SFAS 145"), Rescission of FASB Statements No. 4, 44 and
64,Amendment of FASB Statement No. 13, and Technical Corrections. The Statement
updates, clarifies and simplifies existing accounting pronouncements. Any gain
or loss on extinguishment of debt that was classified as an extraordinary item
in prior periods presented that does not meet the criteria in Accounting
Principles Board Opinion No. 30 for classification as an extraordinary item
shall be reclassified. The provisions of SFAS 145 are effective for transactions
occurring after May 15, 2002 with early adoption encouraged. The Company does
not expect SFAS 145 to have material impact on its financial statements.
NOTE 3 - INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of realizability.
The components of the Company's income tax provision consist of:
Years Ended December 31, October 11, 2000 October 11, 2000
-------------------------------------- (inception) (inception)
Through Through
2002 2001 December 31, 2000 December 31, 2002
---------------- ---------------- ----------------- -----------------
Federal taxes (deferred) capitalized
start-up costs for tax purposes $ (2,400) $ --- $ --- $ (2,400)
Change in valuation account 2,400 --- --- 2,400
---------------- ----------------- ----------------- ----------------
$ --- $ --- $ --- $ ---
================ ================= ================= ================
Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities are as follows:
December 31,
2002 2001
---------------- -----------
Deferred income taxes
Capitalized start-up costs for
tax purposes $ 2,400 $ ---
Valuation allowance (2,400) ---
---------------- -----------------
$ --- $ ---
================ =================
36
NOTE 4 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2002 and the period October 11, 2000
(inception) through December 31, 2002, the Company has recorded rent fees of
$750. These services were paid for by the Company's president. The president has
waived reimbursement of the rent fees and has considered them as additional
paid-in capital.
During the year ended December 31, 2002 and the period October 11, 2000
(inception) through December 31, 2002, an officer of the Company was paid $3,850
for executive services.
NOTE 5 - COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of $.001 par
value common stock and no other class of stock shall be authorized. Each share
of common stock shall entitle the holder to one vote, in person or by proxy, on
any matter on which action of the stockholders of this corporation is sought.
The Company issued 4,000,000 shares of common stock in July, 2002 for
$20,000 in cash.
37
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
- -------------------------------------------------------------------------
In April 2002, our Board of Directors appointed Lesley, Thomas, Schwarz &
Postma, a professional accountancy corporation, to audit our financials
statements from October 11, 2000, our date of formation, through June 30, 2002.
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 us has
been passed upon by the law firm of MC Law Group, located in Newport Beach,
California.
EXPERTS
- -------
Our financial statements for the period from October 11, 2000, our date of
formation, through June 30, 2002, appearing in this prospectus which is part of
a registration statement have been audited by Lesley, Thomas, Schwarz & Postma,
a professional accountancy corporation, and are included in reliance upon such
reports given upon the authority of Lesley, Thomas, Schwarz & Postma, a
professional 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. 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.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
- -----------------------------------------
Article Sixth of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
38
o for any breach of such director's duty of loyalty to us or our security
holders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o for unlawful payments of dividends or unlawful stock purchase or redemption
by us; or
o for any transaction from which such director derived any improper personal
benefit.
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.
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 our
common stock. The estimated expenses of issuance and distribution are set forth
below.
======================================== ==================== ===============
Registration Fees Approximately $9.20
- ---------------------------------------- -------------------- ---------------
Transfer Agent Fees Approximately $650.00
- ---------------------------------------- -------------------- ---------------
Costs of Printing and Engraving Approximately $500.00
- ---------------------------------------- -------------------- ---------------
Legal Fees Approximately $10,000.00
- ---------------------------------------- -------------------- ---------------
Accounting Fees Approximately $5,000.00
======================================== ==================== ===============
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:
During August 2002, Peg Warren, our president and a member of our board of
directors, purchased 2,000,000 shares for $10,000.00 and during that same
period, Robin Welles, our treasurer, secretary and a member of our board of
directors, purchased 2,000,000 shares for $10,000.00. All of the shares were
issued in transactions which we believe satisfy 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 promulgated by the Securities and
Exchange Commission. Specifically, the shares were issued to Ms. Warren and Ms.
Welles as our officers and directors and, therefore, at the time of issuance Ms.
Warren and Ms. Welles were "accredited investors", as that term is defined under
applicable federal and state securities laws.
EXHIBITS
- --------
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
39
Exhibit No.
- -----------
3.1 Articles of Incorporation*
3.2 Amendment to Articles of Incorporation*
3.3 Bylaws*
5. Opinion Re: Legality
11. Statement Re: Computation of Per Share Earnings**
23.1 Consent of Auditors
23.2 Consent of Counsel
* Attached as an exhibit to the company's original registration
statement on form SB-2 filed on September 13, 2002
** Included in Financial Statements
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 aggregateoffering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(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.
40
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 Costa Mesa, California, on May
8, 2003.
Black Lake, Inc.,
a Nevada corporation
/s/ Peg Warren
--------------------------------------
Peg Warren
President, Principal Executive Officer,
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/ Peg Warren May 8, 2003
- ------------------------------------ -----------
Peg Warren
President, Principal Executive Officer, Director
/s/ Robin Welles May 8, 2003
- ------------------------------------ -----------
Robin Welles
Treasurer, Principal Financial Officer,
Principal Accounting Officer, Secretary, Director
41