As filed with the Securities and Exchange Commission on February 25, 2005
Registration No. 333-118359
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CONTRARIAN PUBLIC INVESTMENT I, INC.
Exact name of registrant as specified in its charter)
Colorado 6770 20-1481636
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification I.D. No.)
incorporation or Code Number)
organization)
735 Broad Street, Suite 218
Chattanooga, Tennessee 37402
(423) 265-5062
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
Douglas A. Dyer
735 Broad Street, Suite 218
Chattanooga, Tennessee 37402
(423) 265-5062
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
WITH COPIES TO:
Craig G. Ongley
Vial, Hamilton, Koch & Knox, LLP
1700 Pacific Avenue, Suite 2800
Dallas, Texas 75201
(214) 712-4400
Facsimile: (214) 712-4402
Approximate date of commencement of proposed sale to
the public: As soon as practicable after this registration
statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box: |_|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering period. |_|
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 period. |_|
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 period. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
i
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
--------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) AGGREGATE OFFERING REGISTRATION FEE
--------------------------- ---------- ------------------- ------------------ ----------------
Common Stock, $0.001 par
value:
To be sold by selling 1,850,000 $0.20 $ 370,000 $ 44.55
stockholders (2)
To be issued by the
Registrant in acquisition
transactions(3) 15,000,000 $0.20 $3,000,000 $353.10
Total Registration Fee: $396.65
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) If the contract price of the Selling Stockholders' shares exceeds $0.20
per share, we will recalculate the registration fee in accordance with
Rule 457 and pay an additional fee at the time of our post effective
amendment.
(3) If the fair market value of property received in exchange for acquisition
shares exceeds $0.20 per share, we will recalculate the registration fee
in accordance with Rule 457 and pay an additional fee at the time of our
post-effective amendment.
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 the registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This registration statement relates to a continuous and integrated offering of
securities that will commence on the effective date of this registration
statement and terminate upon the closing of a business combination transaction.
This series of related transactions will require the use of at least two
different forms of prospectus:
o Our first prospectus is included in this registration statement and will
be used in connection with our company's discussions with potential
targets, the Selling Stockholders' discussions with advisors, owners of a
target entity and other participants in a potential business combination.
o Our second prospectus will be included in a post effective amendment to
this registration statement that will be filed after we execute a letter
of intent relating to a specific business combination. The second
prospectus will be used to finalize the terms of the business combination,
formally offer acquisition shares to the stockholders of the target
entity, and formally offer the Selling Stockholders' shares to
stockholders of the target entity and other participants in the proposed
business transaction.
o If possible, we will integrate the prospectus for our Rule 419
reconfirmation offering in the second prospectus. If the complexity of the
transaction makes such integration undesirable, we will prepare a third
prospectus for use in connection with our reconfirmation offering.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)
ii
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
CONTRARIAN PUBLIC INVESTMENT I, INC.
15,000,000 SHARES
TO BE ISSUED BY US IN CONNECTION WITH A
BUSINESS COMBINATION; AND 1,850,000
OUTSTANDING SHARES TO BE DISTRIBUTED BY SELLING STOCKHOLDERS
This registration statement covers an initial public distribution of our stock.
We are a "blank check company" as defined by the Securities and Exchange
Commission ("SEC") in Rule 419 of the Securities Act of 1933 (the "Securities
Act"). We have registered this distribution for the purpose of creating a
"public shell" and facilitating our plans to engage in a merger or acquisition
transaction with a company to be identified in the future. We refer to merger
and acquisition transactions as "business combinations."
We have registered 15,000,000 acquisition shares that our company will offer and
may issue in a business combination transaction. We will receive property in
exchange for the acquisition shares.
We have registered 1,850,000 issued and outstanding shares that 33 stockholders,
including three officers of our company, will offer and may transfer to third
parties in connection with a business combination (the "Selling Stockholders").
The prices to be paid by purchasers of the Selling Stockholders' shares will be
negotiable, at a fixed price, on a case-by-case basis until such time, if ever,
that our securities are quoted on the OTC Bulletin Board or securities exchange.
In the event our shares become quoted on the OTC Bulletin Board or listed on a
securities exchange, the prices paid to our Selling Stockholders would be at
prevailing market prices or privately negotiated prices. There can be no
assurance that our stock will ever be quoted on the OTC Bulletin Board or listed
on a securities exchange.
This is a "self-underwritten" distribution. That means we will not use an
underwriter in connection with the negotiation of a business combination or the
issuance of any acquisition shares. Likewise, our Selling Stockholders will not
use an underwriter in connection with their resale of their shares. The proceeds
from the resale of such shares may be substantial. However, we reserve the right
to enter into appropriate underwriting or brokerage contracts if warranted. Our
Selling Stockholders are subject to Rule 419. All stock certificates
representing the issued and outstanding common stock of the company, which are
held by the Selling Stockholders, and our stock transfer ledger have been
deposited in escrow with Regions Bank, N.A. We refer to this escrow as the "Rule
419 escrow." The stock certificates and stock ledger deposited in the Rule 419
escrow will be held in trust for the sole benefit of the Selling Stockholders
until we negotiate a business combination and comply with the disclosure,
reconfirmation and closing requirements of Rule 419. There has never been a
public market for our shares and the resale of the Selling Stockholders shares
will be prohibited until we have closed a business combination. If we ultimately
are unable to negotiate a suitable business combination, comply with Rule 419
and close the proposed transactions within 18 months from the date of this
prospectus, we intend to deregister the Selling Stockholders' and acquisition
shares. There is no assurance that a market will ever develop. Investing in our
shares is extremely speculative. The offering described in this prospectus
involves a very high degree of risk. Persons who cannot afford to lose their
entire investment should not consider an investment in our shares. SEE "RISK
FACTORS,." beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement we filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted The date of
this preliminary prospectus is _______________, 2005
iii
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................... 1
SUMMARY OF THE BUSINESS COMBINATION OFFERING................................ 2
SUMMARY FINANCIAL INFORMATION............................................... 3
RISK FACTORS................................................................ 4
GENERAL RISK FACTORS........................................................ 4
USE OF PROCEEDS............................................................. 10
ARBITRARY DETERMINATION OF OFFERING PRICE................................... 10
DILUTION.................................................................... 10
CAPITALIZATION.............................................................. 11
LEGAL PROCEEDINGS........................................................... 11
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................... 11
PROPOSED BUSINESS........................................................... 12
MANAGEMENT.................................................................. 19
EXECUTIVE COMPENSATION OF OFFICERS AND DIRECTORS............................ 24
PRINCIPAL STOCKHOLDERS...................................................... 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 26
DESCRIPTION OF SECURITIES................................................... 26
PLAN OF DISTRIBUTION........................................................ 30
SHARES ELIGIBLE FOR FUTURE SALE............................................. 34
EXPERTS..................................................................... 35
LEGAL MATTERS............................................................... 35
WHERE YOU CAN FIND ADDITIONAL INFORMATION................................... 35
INFORMATION NOT REQUIRED IN PROSPECTUS...................................... 38
INDEX TO FINANCIAL STATEMENTS: ..................................... F-1 - F-10
EXHIBITS
iv
UNTIL 90 DAYS AFTER THE DATE WHEN THE STOCK
CERTIFICATES ARE RELEASED FROM THE ESCROW ACCOUNT, ALL
DEALERS THAT EFFECT TRANSACTIONS
IN OUR SHARES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PART I
NARRATIVE INFORMATION REQUIRED IN PROSPECTUS
INSIDE FRONT AND OUTSIDE BACK COVER PAGES
SEE FRONT AND BACK COVER PAGES OF THIS PROSPECTUS.
PROSPECTUS SUMMARY
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY
IN ORDER TO UNDERSTAND THE RISKS OF OUR BUSINESS PLAN
AND THE TERMS OF THIS OFFERING. YOU SHOULD PAY PARTICULAR
ATTENTION TO THE DISCUSSION IN THE RISK FACTORS
SECTION OF THIS PROSPECTUS, BEGINNING ON PAGE 4.
We have registered this distribution under the Securities Act for the purpose of
creating a "public shell" and facilitating our efforts to effect a business
combination with an unidentified, privately held company.
Our company is classified as a "blank-check" company, sometimes referred to as a
"shell" company. It is a legally formed entity that is designed to facilitate
transactions with and for other corporations that have ongoing operations, but
may not have, in the past, structured their corporate formation to facilitate
the eventual trading of their stock. As a "blank-check" corporation, our company
may present an advantageous merger candidate, as it has already established an
identity with the Securities and Exchange Commission ("SEC") in the form of a
reporting history.
Blank check companies may offer an alternative route to "go public" for smaller
companies which may not have the opportunity or wish to initiate an initial
public offering ("IPO"). Companies that can complete an underwritten IPO may
find that route to be more advantageous, as it is a process that can raise a
significant amount of capital for the company in a relatively short amount of
time.
Certain disadvantages are inherent in becoming a public company, and these
should be carefully considered by any business considering a possible business
combination with our company. Immediately upon consummation of a merger with the
Company, the surviving entity would be subject to all of the reporting
requirements of the Securities Exchange Act of 1934 (the "1934 Act").
Additionally, management would assume certain fiduciary duties with respect to
shareholders and the public, including, but not limited to; the timely
disclosure of all material information regarding our company that might bear
upon the consideration of our company's stock as a suitable investment; the
duties of care and loyalty in the conducting of our company's business; and the
duty not to misappropriate corporate opportunities.
Prior to entering into a business combination, our company will fulfill the
reporting requirements of the 1934 Act through the services of its officers,
directors and general counsel.
We were incorporated in the State of Colorado on August 21, 2003. Our principal
executive office is located at 735 Broad Street, Suite 218, Chattanooga,
Tennessee 37402. Our telephone number is (423) 265-5062. We do not currently
have a website or Internet home page.
1
SUMMARY OF THE BUSINESS COMBINATION OFFERING
Securities to be issued upon completion 15,000,000 shares of our of a business
combination common stock, $0.001 par value
Securities Held by Selling Stockholders 1,850,000 shares of our common
stock, $0.001 par value
Offering Price $0.20 per share
Offering Proceeds Not Applicable.
Expiration Date the Offering will expire:
sixteen (16) months from the date
of this Prospectus*
Common stock outstanding prior
to the offering 1,850,000 shares
Common stock to be outstanding after
the business combination 16,850,000 shares
*We must file a post effective amendment to this registration statement,
successfully complete a reconfirmation offering and close a business combination
within eighteen (18) months of the date of this prospectus.
CURRENT CAPITALIZATION AND DISTRIBUTION
Our current stockholders, upon registration, hold 1,850,000 shares of common
stock which they will offer to sell to third parties in connection with a
business combination.
We have registered 15,000,000 acquisition shares that we will offer to issue in
connection with a business combination. We have also registered 1,850,000 shares
that are owned by the Selling Stockholders, three of whom are officers or
directors of the company. The Selling Stockholders are identified in the
prospectus. The Selling Stockholders' shares are subject to an escrow agreement
and will only be released upon the completion of a business combination or the
expiration of eighteen (18) months from the effective date of this prospectus.
Selling Stockholders may not transfer their shares before the business
combination is consummated. However, once the conditions of the escrow are
satisfied and the Selling Stockholders' shares are released, the Selling
Stockholders may sell their shares to any third party. Our distribution will
have two parts in connection with a business combination:
o We will offer to issue up to 15,000,000 acquisition common stock shares to
the owners of a target.
o The Selling Stockholders will offer to resell up to 1,850,000 common stock
shares to owners of a target and other participants in the business
combination.
We will receive property, consisting of all the issued and outstanding equity
stock of the target, in connection with the issuance of the acquisition shares.
Upon completion of a business combination, we will have 16,850,000 shares
outstanding.
INFORMATION APPLICABLE TO OFFERINGS:
If we are able to locate a single company and negotiate a business combination,
we will send each selling shareholder and each potential shareholder an updated
prospectus that describes the proposed business combination and all related
transactions. Each selling stockholder will then be required to either approve
the proposed transactions in writing and retain their shares, or reject the
proposed transaction. Although we have not commenced the search for a business
combination target we plan to do so upon the date this registration statement
becomes effective. There can be no assurance that we will be able to locate a
target or negotiate a business combination on acceptable terms.
If we are successful in locating a target company which executes an acquisition
agreement with us for which the fair value of the business or net assets to be
acquired represents at least eighty percent (80%) of the maximum offering
proceeds, we will file a post-effective amendment that:
(a) discloses the information required by the S-1 registration statement
form., including our financial statements and those of the company
acquired, as required by the form and applicable rules and
regulations of the SEC;
(b) discloses the results of the initial offering, including offering
proceeds, underwriting expenses and the specific amounts disbursed
to officers, directors, controlling stockholders and affiliates; and
(c) discloses the terms of the offering.
If we ultimately conclude that we will be unable to negotiate a suitable
business combination, comply with Rule 419 and close the proposed transactions
within 18 months from the date of this prospectus, we intend to distribute any
remaining assets to our Selling Stockholders and liquidate.
2
GENERAL BUSINESS COMBINATION STRATEGY
The following example provides summary forward-looking information on the future
ownership of our company assuming that up to 15,000,000 shares are issued in
connection with a business combination and 1,850,000 selling shareholder shares
are sold in the offering.
Original Stock issuances Potential future Percent of
Holdings and (sales) ownership total
-------- --------------- ---------------- ----------
Our Selling Stockholders 1,850,000 (1,850,000) 0 10.98%
Stock currently outstanding -- --
Selling Stockholders shares
sold in this offering -- 1,850,000 1,850,000
Owners of the Target
business combination acquisition
shares received -- 15,000,000 15,000,000 89.02%
----------- ------
Total Shares Outstanding
after business combination 16,850,000 100.00%
=========== ======
Our Selling Stockholders will not receive a physical stock certificate or be
permitted to sell their shares until we negotiate a business combination, comply
with the requirements of Rule 419 and close the transaction. All of our
outstanding and issued common stock and our shareholder ledger will be held in
escrow so that physical stock certificates may be issued to all of our
shareholders only upon consummation of the business combination transaction and
each shareholder's confirmation that they wish to retain their shares. Our
shares are not expected to qualify for immediate inclusion in a national
exchange after completion of a business combination and may never qualify for
such a listing. If a national exchange listing is unavailable, the likely
alternative would be a listing on the OTC Bulletin Board, an inter-dealer
automated quotation system for equity securities that do not qualify for
inclusion on any national exchange. If a public market for our shares develops,
it is likely to be illiquid and volatile. There can be no assurance that after a
business combination we will be successful in securing a listing on a national
exchange or the OTC Bulletin Board.
SUMMARY FINANCIAL INFORMATION
The following table sets forth our historical selected financial information for
the period from our inception, August 21, 2003, to June 30, 2004 (audited) and
for the period from our inception, August 21, 2003 to September 30, 2004
(unaudited). The data is derived from our financial statements which are
included elsewhere in this prospectus and is qualified in its entirety by our
financial statements.
FROM INCEPTION, AUGUST 21, 2003 FROM INCEPTION, AUGUST 21, 2003
STATEMENT OF OPERATIONS DATA TO PERIOD ENDED JUNE 30, 2004 TO PERIOD ENDED SEPTEMBER 30, 2004
- ---------------------------- ------------------------------- ----------------------------------
Revenue $ .00 $ .00
Net (Loss) Income (1,850) (31,850)
(Loss) Earnings Per Share:
Basic and Diluted (.00) (.02)
BALANCE SHEET DATA PERIOD ENDED JUNE 30, 2004 PERIOD ENDED SEPTEMBER 30, 2004
- ---------------------------- ------------------------------- ----------------------------------
Current Assets $ .00 $ .00
Total Assets .00 .00
Current Liabilities .00 30,000
Stockholders' (Deficiency) .00 (30,000)
3
RISK FACTORS
Our shares offered hereby are extremely speculative and our business plan
involves a high degree of risk. We believe that an investment in the common
stock of a blank check company is one of the most speculative investments
available and should not be purchased by investors who cannot afford the loss of
their entire investment.
GENERAL RISK FACTORS
IF WE NEED ADDITIONAL FINANCING TO CONTINUE OPERATIONS, OUR ABILITY TO LOCATE
THE BEST AVAILABLE BUSINESS OPPORTUNITY MAY BE IMPAIRED.
We have access to very limited funds, and such funds may not be adequate to take
advantage of any available business opportunities. Even if our funds prove to be
sufficient to acquire an interest in, or complete a transaction with, a business
opportunity, we may not have enough capital to exploit the opportunity. Our
ultimate success may depend upon our ability to raise additional capital. We
have not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until we determine a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to us. If not available, our operations will be
limited to those that can be financed with our modest capital.
OUR LACK OF OPERATING HISTORY MAY SEVERELY IMPACT OUR ABILITY TO OPERATE AND
LOCATE THE BEST AVAILABLE BUSINESS OPPORTUNITY.
Our company was formed in August of 2003 for the purpose of registering its
common stock under the 1933 Act and acquiring a business opportunity. We have no
operating history, revenues from operations, or assets. We face all of the risks
of a new business plus the special risks inherent in the investigation,
acquisition, or involvement in a potential business combination.
A DESIRABLE BUSINESS COMBINATION TARGET WILL BE UNAVAILABLE TO OUR COMPANY IF
THE TARGET CANNOT PROVIDE AUDITED FINANCIAL STATEMENTS.
Section 13 of the Securities Exchange Act of 1934 (the "1934 Act"), requires
companies subject to that section to provide certain information about
significant acquisitions, including certified financial statements for the
company acquired, covering one or two years, depending on the relative size of
the acquisition. The time and additional costs that may be incurred by some
target entities to prepare such statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by us.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the 1934 Act are applicable.
We will be putting significant reliance upon Financial Statements in selecting a
potential business combination which could result in a poor choice of
candidates. The Company will require audited financial statements from companies
that it proposes to acquire. Given cases where audited financials are available,
the Company will have to rely upon interim period unaudited information received
from target companies' management that has not been verified by outside
auditors. The lack of the type of independent verification which audited
financial statements would provide, increases the risk that the Company, in
evaluating an acquisition with such a target company, will not have the benefit
of full and accurate information about the financial condition and recent
interim operating history of the target company. This risk increases the
prospect that the acquisition of such a company might prove to be an unfavorable
one for the Company or the holders of the Company's securities.
4
NO POTENTIAL BUSINESS OPPORTUNITY HAS BEEN IDENTIFIED AND THERE IS A SUBSTANTIAL
LIKELIHOOD THAT ANY BUSINESS WE LOCATE WILL REPRESENT A SIGNIFICANT RISK TO OUR
STOCKHOLDERS AND THEIR INVESTMENT.
We have not identified and have no commitments to enter into or acquire a
specific business opportunity and, therefore, we can only disclose the risks and
hazards of a business or opportunity that it may enter into in only a general
manner, and we cannot currently disclose the risks and hazards of any specific
business or opportunity that we may enter into. A stockholder can expect any
potential business opportunity we might consider to be quite risky. Our
acquisition of or participation in a business combination will likely be highly
illiquid and could result in a total loss to us and our stockholders of their
investment if the business or opportunity proves to be unsuccessful. In
addition, should our officers need cash or the return of funds advanced to the
company, they may not be objective in reviewing a potential business combination
as they may be more concerned about the return of funds then locating a business
combination which would be of benefit to all the stockholders of the Company.
OUR COMPANY MAY NOT BE ABLE TO CONDUCT AN EFFECTIVE AND EXHAUSTIVE INVESTIGATION
AND ANALYSIS OF POTENTIAL BUSINESS OPPORTUNITIES, AS OUR OPERATING FUNDS AND
MANAGEMENT TIME AVAILABILITY ARE LIMITED AND SUCH LIMITATIONS MAY RESULT IN A
POOR SELECTION OF A BUSINESS OPPORTUNITY.
We have no cash and are dependant on our president for advances to operate the
company. Our financial situation and the lack of full-time management will
likely make it impracticable to conduct a complete and exhaustive investigation
and analysis of a business opportunity before we commit our capital or other
resources thereto. Management decisions, therefore, will likely be made without
detailed feasibility studies, independent analysis, market surveys and the like
which, if we had more funds available to us, would be desirable. Because our
officers and directors have a limited experience in business analysis, there can
be no assurance that they will consummate a business combination transaction
with the most optimal target available. We will be dependent upon our president,
Mr. Doug Dyer, who has orally agreed to advance up to the sum of $50,000 to fund
our search for a business combination. There can be no assurance that Mr. Dyer
will be capable of supplying the aforementioned funds.
We will be particularly dependent in making decisions upon information provided
by the promoter, owner, sponsor, or others associated with the business
opportunity seeking our participation. A significant portion of our available
funds may be expended for investigative expenses and other expenses related to
preliminary aspects of completing an acquisition transaction, whether or not any
business opportunity investigated is eventually acquired.
We currently have three individuals who are serving as our only officers and
directors. We will be heavily dependent upon their skills, talents, and
abilities to implement our business plan, and may, from time to time, find that
the inability of our officers and directors to devote their full time attention
to our business results in a delay in progress toward implementing our business
plan. Furthermore, since only three individuals are serving as our officers and
directors, we will be entirely dependent upon their experience in seeking,
investigating, and acquiring a business and in making decisions regarding our
operations. We anticipate that our officers and directors will only be capable
of spending an aggregate of 10 hours per week on the operation of our business.
THERE CAN BE NO ASSURANCE THAT WE WILL BE SUCCESSFUL IN SELECTING A PROFITABLE
BUSINESS COMBINATION. WHICH WOULD RESULT IN OUR STOCKHOLDERS NOT BEING ABLE TO
RECEIVE A RETURN OF THEIR INVESTMENT.
There can be no assurance that we will acquire a favorable business opportunity.
If we become involved in a business opportunity, there is no assurance that it
will generate revenue or profits, or that the market price of our common stock
will increase as a result of the operations of the business combination.
EVEN IF WE NEGOTIATE AND CLOSE A BUSINESS COMBINATION, AN ACTIVE, SUSTAINED AND
STABLE PUBLIC MARKET FOR OUR SHARES MAY NEVER DEVELOP, NEGATIVELY EFFECTING
STOCKHOLDER LIQUIDITY AND VALUE.
Even if we are successful and negotiate and close a business combination, an
active, sustained, and stable public market for our shares may never develop, as
the target we acquire may not have the attributes necessary to qualify for
listing on a stock exchange or have an adequate number of outstanding free
trading shares or stockholders to create an active market in our stock.
5
OUR RECONFIRMATION OFFERING WILL BE A "TAKE IT OR LEAVE IT" PROPOSITION, AND
FAILURE TO OBTAIN RECONFIRMATION WILL RESULT IN UNWINDING OF THE BUSINESS
COMBINATION.
We must conduct our reconfirmation offering as soon as we negotiate a
transaction where the fair value of the target exceeds $2,696,000. If we select
a target and make a reconfirmation offering that is not accepted by the
requisite percentage of current stockholders, Rule 419 will require that we
unwind the potential business combination and deregister the selling stockholder
shares and the acquisition shares.
RISKS FOR CERTAIN NON-AFFILIATE SHAREHOLDERS
DEPENDING ON THE NATURE OF THE BUSINESS COMBINATION ENTERED INTO, IT IS POSSIBLE
THAT MANAGEMENT WILL RECEIVE FAVORABLE TERMS OF EXCHANGE WITH THE TARGET COMPANY
THAT WILL NOT BE AVAILABLE TO OTHER SHAREHOLDERS.
Management may actively negotiate or otherwise consent to the purchase of any
portion of their common shares as a condition to or in connection with a
proposed merger or acquisition transaction. It is emphasized that due to our
management owning a substantial majority of our outstanding common stock that
they may effect transactions having a potentially adverse impact upon our
shareholders pursuant to the authority and discretion of our management to
complete acquisitions subject only to the reconfirmation. In some instances,
however, the proposed participation in a business opportunity may be submitted
to the stockholders for their consideration, either voluntarily by such
directors to seek the stockholders' advice and consent or because state law so
requires.
EXISTING SHAREHOLDERS OF THE COMPANY MAY SUFFER SIGNIFICANT DILUTION TO THEIR
OWNERSHIP PERCENTAGE OF THE COMPANY, INSOFAR AS THE BUSINESS COMBINATION ENTERED
INTO MAY INVOLVE THE ISSUANCE OF A LARGE NUMBER OF AUTHORIZED BUT UNISSUED
SHARES TO THE TARGET COMPANY.
It is likely that we will acquire our participation in a business opportunity
through the issuance of our common stock or other securities. Although the terms
of any such transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisition is a
so-called "tax free" reorganization under the Internal Revenue Code of 1986,
depends upon the issuance to the stockholders of the acquired company of a
controlling interest (i.e. 80% or more) of the common stock of the combined
entities immediately following the reorganization. If a transaction were
structured to take advantage of these provisions rather than other "tax free"
provisions provided under the Internal Revenue Code, our current stockholders
would retain in the aggregate 20% or less of the total issued and outstanding
shares. By the terms of this registration statement, we are anticipating issuing
up to 15,000,000 shares of our common stock in a business combination
transaction. This could result in substantial dilution in the equity of those
who were our stockholders prior to such reorganization whereby our current
stockholders' ownership would be reduced from 100% to 10.98%. Any such issuance
of additional shares might also be done simultaneously with a sale or transfer
of shares representing a controlling interest in our company by the current
officers, directors and principal shareholders.
YOU WILL NOT BE ABLE TO SELL YOUR SHARES UNTIL WE COMPLETE A BUSINESS
COMBINATION AND WILL HAVE NO POTENTIAL LIQUIDITY FOR YOUR SHARES UNTIL SUCH
BUSINESS COMBINATION IS CONSUMMATED AND AN ACTIVE TRADING MARKET DEVELOPS.
Our shareholder ledger and stock certificates, if any, for all existing
shareholders will be promptly deposited in an escrow account and held in trust
until we close a business combination. Current stockholders will not be able to
sell or transfer their shares until we have completed a business combination and
the escrow agent has mailed their stock certificates to them.
WE EXPECT A BUSINESS COMBINATION WILL RESULT IN A CHANGE OF CONTROL AND OUR
CURRENT OFFICERS WILL NOT HAVE ANY POWER TO ENSURE THAT AN ACTIVE TRADING MARKET
DEVELOPS.
We plan to issue up to 15,000,000 acquisition shares in connection with a
business combination. Therefore we expect a business combination to result in a
change in control. After a change in control, the owners of the target will have
the right to appoint their own officers and directors and our current officers
will have no power to influence future decisions, seek a listing for our stock
or take any other action to promote an active public market. There can be no
assurance that we will be able to negotiate appropriate after-market support
agreements or that any terms we negotiate will be effective. If the combined
companies do not devote sufficient time and resources to developing and
promoting an active trading market, you may be unable to sell your shares at any
price.
6
THE PERSONAL PECUNIARY INTERESTS OF OUR OFFICERS MAY CONFLICT WITH THEIR
FIDUCIARY DUTIES TO OUR SHAREHOLDERS.
It is likely that a business combination and the potential resale of certain
shares issued to our officers and directors will result in the transfer of
property to us and the payment of cash to our officers and directors. Therefore,
the personal pecuniary interests of our officers and directors may conflict with
their fiduciary duties to our shareholders since they may separately negotiate
the sale of their shares prior to an active trading market developing.
Consequently, it is possible that our officers and directors may select a target
for a business combination that has the ability to purchase affiliate shares but
does not necessarily represent the best business combination for our
shareholders. We will not receive any proceeds from the sale of our affiliate
shares.
OUR INABILITY TO COMPENSATE OUR OFFICERS AND PRINCIPAL ADVISORS WITH CASH WILL
INCREASE THE POTENTIAL FOR CONFLICTS OF INTEREST.
Certain conflicts of interest exist between us and our officers and directors as
follows:
(a) They have other business interests to which they devote their
attention, and they may be expected to continue to do so. As a result, conflicts
of interest may arise that can be resolved only through their exercise of such
judgment as to whether certain needs of our company may not be adequately and
necessarily addressed, provided our officers and directors elect to devote
attention to outside interest when they could be attending to the needs of our
company;
(b) Certain of our officers and directors will own all of the issued and
outstanding stock of several additional corporations to be formed in the future
which are likely to be used as additional shell companies. Thus, we may be in
competition with other shell companies owned by our officers and directors. in
seeking merger candidates.
(c) It is anticipated that our officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of their common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, our officers and/or directors may consider their
own personal pecuniary benefit rather than the best interests of our
shareholders, and our shareholders are not expected to be afforded the
opportunity to approve or consent to any particular stock buy-out transaction.
See "Conflicts of Interest."
CERTAIN RISKS FOR OWNERS OF POTENTIAL TARGET COMPANIES
YOU SHOULD EXPECT INCREASED SCRUTINY FROM THE REGULATORY COMMUNITY AND
SKEPTICISM FROM THE FINANCIAL COMMUNITY IF YOU ENTER INTO A BUSINESS COMBINATION
WITH OUR COMPANY.
Congress has found that blank check companies have been common vehicles for
fraud and manipulation in the penny stock market. Moreover, the financial
community views shell transactions with a high degree of skepticism until the
combined companies have been active for a sufficient period of time to
demonstrate credible operating performance. Increased regulatory scrutiny and
heightened market skepticism may increase your future costs of regulatory
compliance and make it more difficult for the combined companies to establish an
active trading market.
YOU SHOULD NOT CONSIDER A BUSINESS COMBINATION WITH OUR COMPANY IF YOU CURRENTLY
NEED ADDITIONAL CAPITAL, OR WILL REQUIRE ADDITIONAL CAPITAL WITHIN 12 TO 18
MONTHS.
A business combination with our company will not provide an effective means of
accessing capital markets. Therefore, you should not consider a business
combination with us if you currently need additional capital, or will require
additional capital within 12 to 18 months. Until the combined companies have
been active for a sufficient period of time to demonstrate credible operating
performance, it will be very difficult, if not impossible, for you to raise
additional capital to finance the combined companies' operations. You cannot
assume that the combined companies will ever be able to raise additional
capital.
OUR REGULATORY STATUS MAY MAKE A BUSINESS COMBINATION MORE COMPLEX AND EXPENSIVE
AND THEREBY REDUCE OUR ABILITY TO LOCATE A TARGET.
This distribution has been registered on Form S-1. Our decision to use this form
may make compliance with the disclosure and reconfirmation requirements of Rule
419 more difficult. Our future SEC filings must comply with the requirements of
Regulations S-K and S-X, which can be more complete than their counterparts
under Regulation S-B. Therefore, the owners of a potential target may decide
that the added cost of regulatory compliance will make our company less
desirable.
7
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements within the meaning
of the federal securities laws. When used in our documents or in any oral
presentation, statements which are not historical in nature, including the words
"anticipate," "estimate," "should," "expect," "believe," "intend," and similar
expressions are intended to identify forward-looking statements. They also
include statements containing a projection of revenues, earnings (loss), capital
expenditures, dividends, capital structure or other financial terms. Certain
statements regarding the following particularly are forward-looking in nature:
o Our business plan and the availability of suitable targets;
o Our ability to locate an acceptable target, conduct an adequate due
diligence investigation and negotiate a successful business
combination;
o Our ability to execute our business plan in compliance with the
requirements of Rule 419;
o The potential development of a public trading market for the
combined companies' shares.
These statements are forward-looking and reflect our current beliefs, opinions
and expectations. They are subject to a number of risks and uncertainties,
including the risk factors and other uncertainties described in this prospectus.
We do not intend to update our forward-looking statements. In light of the many
risks and uncertainties surrounding our business plan, potential purchasers of
our shares should be aware that we can provide no assurance that any of the
forward-looking statements in this prospectus will occur or prove to be
accurate.
OUR DISTRIBUTION IS SUBJECT TO
SECURITIES AND EXCHANGE COMMISSION RULE 419
We are a "blank check company" as defined in Rule 419. This section explains the
requirements of Rule 419 and describes the procedures we will implement to
insure compliance with that Rule.
PURPOSES AND BACKGROUND OF RULE 419
Blank check companies have been used as vehicles for fraud and manipulation in
the penny stock market. In response to a Congressional mandate, the SEC adopted
Rule 419, which requires blank check companies to implement certain safekeeping,
disclosure and reconfirmation procedures in their public offerings, including:
o Depositing at least 90% of any net offering proceeds in escrow until
the requirements of Rule 419 have been satisfied and an acquisition
has been completed;
o Depositing all stock certificates for shares distributed to the
public in escrow until the requirements of Rule 419 have been
satisfied and an acquisition has been completed;
o Conducting a reconfirmation offering for the purpose of giving
public stockholders an opportunity to review and consider detailed
prospectus disclosure concerning a proposed acquisition;
o Giving each public stockholder an opportunity to either approve the
proposed acquisition and retain his shares, or reject the proposed
acquisition and unwind his share acquisition transaction;
o Unwinding individual transactions with any public stockholders that
fail to approve the reconfirmation offering in writing; and
o Returning all offering proceeds if a sufficient percentage of the
public stockholders do not approve the reconfirmation offering in
writing, or if an acquisition is not closed within eighteen months.
8
APPLICATION OF RULE 419
Rule 419 applies to every registration statement filed by a blank check company.
The staff of the SEC's Division of Corporation finance has taken the position
that Rule 419 applies to both issuer transactions and the resale of outstanding
securities. We will comply with the applicable requirements of Rule 419.
All stock certificates representing all issued and outstanding shares have been
deposited in the Rule 419 escrow. Those certificates will be held in trust for
the sole benefit of the stockholder until we negotiate an acquisition and comply
with the disclosure, reconfirmation and closing requirements of Rule 419.
All shares deposited in the Rule 419 escrow will be represented by individual
stock certificates that are registered in the names of the individual
stockholders. While certificates for the shares are held in the Rule 419 escrow,
the stockholders will be entitled to all of the voting and other rights of
stockholders of our company. However, shares deposited in the Rule 419 escrow
may not be sold or transferred by the stockholders, except upon death or
pursuant to a qualified domestic relations order.
SELLING STOCKHOLDERS
Our Selling Stockholders represent all the existing purchasers of our shares at
the date of this offering and will have the right to terminate their agreements
without penalty until they approve the terms of our reconfirmation offering in
writing. Notwithstanding such approval, all contracts for the resale of Selling
Stockholders' shares will be contingent on the successful completion of our
reconfirmation offering to the stockholders. Purchasers of Selling Stockholders'
shares will not be required or permitted to pay for such shares until the
related business combination has closed. Therefore, the resale of our Selling
Stockholders' shares will not result in any proceeds that can be deposited in
escrow.
When our Selling Stockholders agree to resell their shares, their shares will be
held in escrow until we complete our reconfirmation offering and close a
business combination. Resale transactions for Selling Stockholders' shares will
close concurrently with or promptly after the related business combination
closing.
Shares deposited in the Rule 419 escrow will be registered in the name of the
Selling Stockholder and accompanied by duly executed instruments of transfer.
Purchasers of the Selling Stockholders' shares will not obtain title to their
shares or have any voting or other stockholders' rights until the resale
transactions are closed. Pending closing of the resale transactions, all voting
and other stockholders rights will remain vested in our Selling Stockholders.
RECONFIRMATION OFFERING
Rule 419 requires us to conduct a reconfirmation offering before we close a
business combination. We will take the following steps to insure compliance with
the requirements of Rule 419:
o When we negotiate a business combination, we will sign a preliminary
agreement that is contingent on the approval of the target's
stockholders and subject to the completion of our reconfirmation
offering.
o When our officers negotiate agreements for the resale of Selling
Stockholders' shares, they will sign agreements that are contingent
on the purchaser's approval of our reconfirmation offering and
subject to the completion of our reconfirmation offering.
o When conditional agreements have been signed by all parties, we will
file a post-effective amendment to our registration statement that
contains the information required by the Rule 419(e) (1) (i) -
(iii), together with other appropriate disclosure.
o Before we conduct our reconfirmation offering, we will deliver an
updated prospectus to each stockholder of the target and each
purchaser of the Selling Stockholders' shares.
o When all necessary parties approve our reconfirmation offering, we
will sign definitive agreements that are only subject to the
successful completion of our reconfirmation offering.
o After signing the definitive agreements, we will deliver a final
prospectus to each Selling Stockholder and conduct our
reconfirmation offering.
In connection with our reconfirmation offering, each current stockholder will be
given at least twenty days and not more than forty-five days to consider the
prospectus information and make reconfirmation decision. Each such stockholder
will then be required to approve the terms of our reconfirmation offering in
writing.
9
Rule 419 requires us to treat a stockholder's failure to respond to our
reconfirmation offering as a rejection of the reconfirmation offering terms. If
a specified percentage of the stockholders do not approve the terms of our
reconfirmation offering in writing, all proposed transactions will be abandoned.
Our stockholders should understand that if our reconfirmation offering provides
for a relatively low reconfirmation threshold, they might not be able to rely on
the collective business judgment of a large number of other stockholders in
making a reconfirmation decision. Conversely, if our reconfirmation offering
provides for a relatively high reconfirmation threshold, the stockholders as a
group might have the power to overrule individual decisions.
After we complete our reconfirmation offering and close a business combination,
we will send a notice of completion to the escrow agent. This notice will
include a copy of our final prospectus and identify the stockholders that
approved the terms of our reconfirmation offering in writing. Upon the receipt
of this notice, the escrow agent will release all of the remaining stock
certificates from the Rule 419 escrow and we will file a prospectus supplement
that indicates the number of shares released from the Rule 419 escrow and the
date of such release.
Subject to the limitations described in this prospectus, certain Selling
Stockholders may resell or transfer all or any portion of their shares to
existing shareholders, participants in a business combination and others. The
proceeds from the resale of the Selling Stockholder shares may be substantial.
We will not have any interest in the proceeds from the resale of any affiliate
shares.
REPORTS TO STOCKHOLDERS
We plan to furnish our stockholders with an annual report for each fiscal year
containing financial statements audited by our independent certified public
accountants. Additionally, we may, in our sole discretion, issue unaudited
quarterly or other interim reports to our stockholders when we deem appropriate.
We intend to comply with the periodic reporting requirements of the 1934 Act for
so long as we are subject to those requirements.
USE OF PROCEEDS
If we close a business combination, we will retain equity consideration in
connection with the issuance of our shares. It is impossible to predict the
value of such shares.
There can no assurances that any business combination will be completed. In that
event, there is a substantial risk to us that failure to complete a business
combination will significantly restrict our business operation and force
management to cease operations and liquidate our company.
Subject to the limitations described in this prospectus, certain affiliates may
resell or transfer all or any portion of their shares to existing shareholders,
participants in a business combination and others. The proceeds from the resale
of affiliate shares may be substantial. We will not have any interest in the
proceeds from the resale of any affiliate shares.
REPORTS TO STOCKHOLDERS
We plan to furnish our stockholders with an annual report for each fiscal year
containing financial statements audited by our independent certified public
accountants. Additionally, we may, in our sole discretion, issue unaudited
quarterly or other interim reports to our stockholders when we deem appropriate.
We intend to comply with the periodic reporting requirements of the 1934 Act for
so long as we are subject to those requirements.
ARBITRARY DETERMINATION OF OFFERING PRICE
We have not commenced negotiating a price for our shares since we are not in a
position to negotiate a price until a business combination candidate is
available and a post-effective amendment is prepared, filed and distributed to
all of our shareholders.
DILUTION
On the date of this prospectus, our net tangible book value is $0.00, or
approximately $0.00 per share. Since the potential transfer and/or sale of our
original shareholder shares involves currently issued and outstanding shares, it
will not change the net tangible book value of our stock. We cannot predict
whether a business combination will ultimately result in dilution to the
investors. If the target has a weak balance sheet, a business combination may
result in significant dilution. If a target has a relatively strong balance
sheet, there may be no material dilution. If appropriate, the prospectus for our
reconfirmation offering will include a detailed dilution discussion.
10
CAPITALIZATION
The following table sets forth our capitalization at September 30, 2004. The
table also presents as adjusted information that gives retroactive effect to the
completion of the original shareholder distribution. This data is qualified in
its entirety by our financial statements.
As of September 30, 2004
------------------------
Common stock, $0.001 par value, 50,000,000 shares
authorized, 1,850,000 shares issued and outstanding, $ 1,850
Preferred, $0.001 par value, 50,000,000 shares authorized,
no shares issued and outstanding 0
Additional paid-in capital 0
Deficit accumulated during development stage (31,850)
--------
Total stockholders' deficiency (30,000)
--------
LEGAL PROCEEDINGS
Neither our company nor any of our affiliates are a party, nor is any of their
property subject, to material pending legal proceedings or material proceedings
known to be contemplated by governmental authorities.
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We intend to seek to acquire assets or shares of an entity actively engaged in
business which generates revenues, in exchange for its securities. We have no
particular acquisitions in mind and have not entered into any negotiations
regarding such an acquisition. None of our officers, directors, promoters or
affiliates have engaged in any preliminary contact or discussions with any
representative of any other company regarding the possibility of an acquisition
or merger between our company and such other company as of the date of this
registration statement.
As stated hereinabove, we will not acquire or merge with any entity which cannot
provide independent audited financial statements prior to our filing a
post-effective amendment and subsequently closing of the proposed transaction.
We will be subject to all of the reporting requirements included in the 1934 Act
upon filing a Form 8-K subsequent to the effectiveness of this registration
statement. Included in these requirements is the affirmative duty to file
independent audited financial statements as part of its Form 8-K to be filed
with the SEC upon consummation of a merger or acquisition, as well as the
Company's audited financial statements included in its annual report on Form
10-K. If such audited financial statements are not available prior to closing,
or within time parameters necessary to insure our compliance with the
requirements of Rule 419, or if the audited financial statements provided do not
conform to the representations made by the candidate to be acquired in the
closing documents, the closing will not be possible.
PRESENT FINANCIAL CONDITION
We were incorporated in the State of Colorado on August 21, 2003. Our founders
acquired 1,850,000 shares of our common stock at our company's par value of
$0.001, for a total of $1,850.
The shares were issued pursuant to Section 4(2) of the Securities Act of 1933
(the "Act") and are restricted securities within the meaning of Rule 144 of the
Act.
We have incurred organization, operating and offering costs of $31,850 through
September 30, 2004. All costs have been or will be paid by our president, Doug
Dyer, who will continue to do so until a business combination is completed on
behalf of the company. Upon our request, Mr. Dyer has orally agreed to advance
our company the sum of up to $50,000 for future costs and expenses in completing
this offering and locating a business combination. Mr. Dyer's advances are
considered as no interest loans to the company and must be repaid from the
proceeds of any successful business combination. Should Mr. Dyer fail to make
his promised advances, or in the event such advances are inadequate, our ability
to locate and/or close a business combination would be severely limited, if not
impossible.
11
LIQUIDITY AND CAPITAL RESOURCES
Our company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholder's equity. Our company's balance sheet as of September 30, 2004,
reflects a current asset value of $0.00, and a total asset value of $0.00.
PLAN OF OPERATIONS
We will use our available cash resources created from advances obtained from Mr.
Dyer to pay the cost of operating our company, investigating business
opportunities, negotiating a business combination and preparing the required
post-effective amendment to our registration statement. We will not pay any
compensation to our officers, but we will reimburse out-of-pocket expenses, if
any, which they might incur on our behalf from the advances obtained from Mr.
Dyer. If advances from Mr. Dyer are not available to reimburse out-of-pocket
expenses, then such expenses will only be reimbursed if we are successful in
completing a business combination.
During the next twelve (12) months, our sole activity will be to market
our company and look for companies which might make suitable targets and, if
successful, complete a business combination that would have the potential of (1)
purchasing our Selling Stockholders' shares at a profit to the stockholders, and
(ii) paying our outstanding liabilities consisting of the advances owed to Mr.
Dyer.
Our marketing efforts will primarily utilize the personal contacts of our
officers who are involved in the investment banking industry or are NASD
licensed broker/dealers. We believe that "word of mouth" will be sufficient to
locate potential targets, however, there can be no assurance that we will be
successful. In the event our "word of mouth" marketing is not successful, we
would have to utilize our limited advances to engage consultants and other
securities professionals such as lawyers and accounting firms to help market our
company. We have budgeted approximately $15,000 of the funds available to us to
facilitate our marketing efforts.
In the event we are successful in locating a potential target, we will
negotiate the terms of the target's acquisition and will engage in a due
diligence review of the target. We intend to request a reasonable due diligence
fee from the target in order to carry out our due diligence review. The amount
of due diligence fee we will request from any potential target will vary
according to our perception of the anticipated complexity of such a review. The
complexity of any review will be dependent upon a number of factors including
the financial size of the target, type of business conducted by the target,
whether the target already has audited financial statements and the number of
years the target has been engaged in business. We anticipate that our due
diligence fee request would be between $2,500 to $10,000, however, it is
possible that the due diligence fee could be more, depending on the factors
described above.
There can be no assurance that a target will be willing to pay such a due
diligence fee or the fee we charge will be adequate to cover our costs. However,
we believe that there are sufficient targets available which will pay such a fee
and that the fee will be adequate to cover our costs. Targets which do not have
sufficient capital to pay such a fee will not be considered as business
combination candidates.
Nevertheless, we may run out of money if a particular investigation requires
significant technical expertise or if we spend substantial amounts of money
investigating a potential target and then determine that the potential target is
not acceptable.
Rule 419 will require that we deregister the Selling Stockholder's shares and
acquisition shares if we are unable to negotiate a business combination,
complete our reconfirmation offering and close the transaction within eighteen
(18) months from the date of this prospectus. If we ultimately conclude that we
will be unable to meet this deadline, we will promptly distribute our remaining
assets, if any, to our stockholders and liquidate our company. We believe that
our available cash resources will be adequate for our anticipated needs although
there can be no assurance that Mr. Dyer will have or make available to us all
the funds he has agreed to advance to us upon our request.
The SEC's integration and general solicitation rules will preclude private
placement transactions until we complete our reconfirmation offering and close
the associated business combination. Therefore, we will be unable to obtain
funds by seeking additional securities. We have the corporate power to borrow
money but credit, in excess of the advances agreed by Mr. Dyer, is not likely to
be available. Our officers have no duty to loan money to our company. If we
spend all of the cash advances available to us and are unable to obtain
additional financing, we will be forced to abandon our business and liquidate.
PROPOSED BUSINESS
GENERAL
We are a blank check company. Our goal is to engage in a business combination on
terms that will give our stockholders a reasonable share of the increased market
value that ordinarily arises when a private company makes the transition to
public ownership. We have not engaged in any substantive business to date and we
have no plans to engage in any particular business in the future. We will not
limit our search to a particular industry.
The IPO market has been weak since the spring of 2000 and many proposed IPO's
have been delayed or abandoned. Despite uncertain market conditions, we believe
that a substantial number of adequately financed private companies want to
become publicly held in order to satisfy the requirements of their early-stage
investors and implement their growth strategies. We believe our blank check
company structure may present a viable alternative for certain private companies
that want to be publicly held, but have been unable to conduct an IPO.
OVERVIEW OF SHELL TRANSACTIONS.
The two most common ways for a private company to "go public" are a traditional
IPO, or a business combination with a public shell. Most private companies that
decide to go public do so because they need to raise capital, but financing is
not the only reason private companies decide to go public. Other reasons
include:
o Increasing total stockholder value by transforming a private company
into a public company;
o Creating an "alternative currency" (i.e., publicly traded shares)
that can be used for acquisitions;
o Facilitating equity-based compensation for employees and management;
o Providing investment liquidity for investors and minority
stockholders; and
o Preparing a foundation for future financing activities.
12
We believe an IPO is usually preferable to a shell transaction, but in cases
where an adequately financed private company wants to go public for reasons
other than a current need for additional capital, we believe it is important for
the management and owners to carefully consider the pros and cons of each
alternative. The following table highlights some of the differences we believe
the management and owners of a private company should consider before deciding
between an IPO and a shell transaction.
CHARACTERISTICS OF BUSINESS
CHARACTERISTICS OF IPO MARKET COMBINATION MARKET
- -------------------------------------- --------------------------------------
An IPO usually generates substantial Business combinations do not usually
cash proceeds and dilutes the generate substantial cash proceeds or
ownership interest of insiders. dilute ownership.
The IPO market can be "trendy," and if The business combination market is
a company is not in a "hot" industry frequently less concerned with current
it can be difficult or impossible to market trends.
conduct an IPO.
Secondary markets develop rapidly, the Secondary markets develop slowly,
markets are generally liquid and there liquidity is often a problem and there
is usually a good balance between are frequently more sellers than
sellers and buyers. buyers.
The IPO market is very sensitive to The business combination market has
current market conditions and deals less sensitivity to current market
are frequently aborted or delayed at a conditions and deals are less likely
relatively late stage in the process. to be aborted or delayed in their
final stages.
The IPO market has a high degree of The business combination market has
visibility and companies that complete relatively low visibility and
an IPO find it relatively easy to companies frequently find it difficult
develop "institutional" interest in to develop "institutional" interest in
their stock. their stock.
Because of the competition and due Companies that engage in shell
diligence associated with the IPO transactions are generally viewed with
process, companies that complete an skepticism for an extended period of
IPO are often perceived as more time.
substantial and credible.
The generic term "public shell" can be used to describe any existing company
that has no substantial business activities, a relatively large stockholder base
and outstanding stock that may be lawfully resold by the holders. Within this
broad definition, there are substantial variations in the structure, value and
overall utility of public shells. The factors that are typically considered when
evaluating a public shell include:
o Control status Public shells that can offer a controlling interest
to the owners of a target are generally more desirable than shells
that cannot implement a change in control.
o Regulatory status Public shells that are registered with the SEC are
generally more desirable than shells that will be required to
register with the SEC at some future date.
o 1933 Act registration Public shells that can issue registered stock
in connection with a business combination are generally more
desirable than shells that can only issue restricted stock.
o Trading status Public shells that are listed for trading or eligible
for immediate listing are generally more desirable than shells that
will be required to pursue a listing at a future date.
o Available resources Public shells that have available resources,
particularly cash resources, are generally more desirable than
shells that have no available resources or material liabilities.
o Prior operations Public shells that have no prior operations are
generally more desirable than shells that have prior operations and
the potential for contingent liabilities.
o Stock distribution Public shells that have a substantial number of
existing stockholders and a relatively even distribution of stock
ownership are generally more desirable than shells that have a small
number of stockholders, or a few stockholders who control large
blocks of stock.
13
In developing a structure for our blank check company, we have endeavored to
maximize our competitive advantages and minimize our competitive disadvantages.
Therefore, we believe our company will have a strong competitive position when
compared with other available public shells. We can provide no assurances to
you, however, that potential targets will find our structure more desirable than
competitive shells.
INFORMATION REQUIREMENTS FOR TARGETS
We must file a post effective amendment to our registration statement and
conduct a reconfirmation offering before we close a business combination. Rule
419(e)(1) requires that the amendment contain:
o The information specified by Form S-1 and the applicable Industry
Guides;
o Audited balance sheets as of the end of the two most recently
completed fiscal years and unaudited interim balance sheets for the
dates specified in Regulation S-X;
o Audited statements of income and cash flow for the three most
recently completed fiscal years and unaudited interim statements of
income and cash flow for the periods specified in Regulation S-X;
and
o Unaudited pro forma financial information on the combined companies.
We cannot enter a business combination with a target that cannot provide the
foregoing information. Our future SEC filings must comply with the requirements
of Regulations S-K and S-X, which can more complex than their counterparts under
Regulation S-B. Therefore, the owners of a potential target may decide that
added cost of regulatory compliance will make our company less desirable than a
competing public shell.
SELECTING A TARGET
Immediately upon approval of this Prospectus we anticipate that our officers and
a variety of unaffiliated sources will bring potential targets to our attention.
Potential lead sources include broker/dealers, investment bankers, venture
capitalists, attorneys and other members of the financial community, who may
present solicited or unsolicited proposals. We will not enter into exclusive
relationships with professional firms that specialize in business acquisitions.
We may, however, agree to work with such firms on a non-exclusive basis. In
evaluating potential targets, our officers will ordinarily consider the
following factors, among others:
o The target's liquidity, financial condition and results of
operation;
o The target's growth potential and future capital requirements;
o The nature, competitive position and market potential of the
target's products, processes or services;
o The relative strengths and weaknesses of the target's intellectual
property protection;
o The education, experience and abilities of the target's management
and key personnel;
o The regulatory environment within the target's industry; and
o The market performance of the equity securities of similar public
companies in the target's industry.
The foregoing is not an exhaustive list of factors we may consider in our
evaluation of potential targets. We will also consider other factors that our
officers deem relevant under the circumstances. In evaluating a potential
target, we intend to conduct a due diligence review that will include, among
other things, meetings with management and key staff, inspection of properties
and facilities, reviews of material contracts, financial statements and
projections, and any other matters that we believe are relevant under the
circumstances.
Our registration statement includes 15,000,000 acquisition shares that we may
issue in connection with a business combination. It also includes 1,850,000
shares that our Selling Stockholders may resell to our advisors, owners of a
target and other participants in the business combination. Within these limits,
our officers will have unlimited flexibility to structure a business combination
and establish for the resale of the Selling Stockholders' shares.
The time, effort and expense required to evaluate a target and negotiate a
business combination cannot be predicted with any degree of accuracy. We do not
have any full-time employees. Our officers act as part-time employees but are
not required to devote any specific amount of time to our business. If our
officers do not devote adequate time to investigation, due diligence and
negotiations, we may be unable to identify a suitable target, negotiate a
business combination and comply with the requirements of Rule 419 in a timely
manner.
14
LIMITED ABILITY TO EVALUATE MANAGEMENT
We intend to evaluate the management of a potential target when considering the
desirability of a business combination. We cannot assure you that our assessment
will prove to be correct or that a target's management will possess the
particular skills, qualifications and abilities required to effectively manage a
public company.
We may require the target to recruit additional personnel to supplement its
current management team. We cannot assure you that a target will have the
ability to recruit additional managers, or that any new management team members
that are recruited will have the requisite skills, knowledge or experience.
While one or more of our officers may remain involved in the affairs of the
combined companies, they are not likely to have execute or board level
authority. While our officers have significant experience in a variety of
industries, we cannot assure you that they will have significant experience or
knowledge relating to the operations of a particular target. The prospectus for
our reconfirmation offering will include summary information on the identity,
education and experience of the officers, directors and key personnel of the
target.
VALUATION OF TARGETS
Our board of directors intends to rely on established criteria that are
generally used in the financial community to determine the value of a target and
negotiate the terms of a business combination. Our board of directors will
ordinarily begin its evaluation of a target using the following objective
factors, among others:
o The target's audited balance sheet;
o The target's historical and projected sales; and
o The target's historical and projected results of operations and cash
flow.
In most cases, our board of directors will also consider a variety of subjective
factors that can have a positive or negative impact on valuation decisions,
including:
o Overall conditions in the target's industry and the target's
competitive position within its industry;
o The relative strengths and weaknesses of the target's business
development plans;
o The market capitalization of similarly situated public companies;
and
o The relative strengths and weaknesses of the target, compared with
similarly situated public companies.
Based on their analysis, our board of directors will reach a conclusion
concerning the fair market value of a target. It will then attempt to negotiate
a business combination that maximizes stockholder value. The Board of Directors
may retain independent experts to assist in the evaluation of a target but it is
not required to do so.
The valuation of a potential target is an inherently subjective process that is
subject to a substantial degree of risk and uncertainty. Our directors are not
experts in the evaluation of businesses. We can offer no assurance that our
directors will be able to accurately assess the value of particular target.
Further, we can offer no assurance that our directors will be able to negotiate
a business combination on terms that are advantageous to our stockholders. If a
business combination is concluded, we can give you no assurance that the
combined companies' shares will ever achieve a market price that is in line with
the value determined by our board of directors.
AMEX LISTING STANDARDS
The following table summarizes the quantitative listing standards for companies
that want to list their securities on the American Stock Exchange:
15
STANDARD 1 STANDARD 2 STANDARD 3 STANDARD 4
---------- ---------- ---------- ----------
Operating History N/A 2 years N/A N/A
Stockholders' Equity $4,000,000 $4,000,000 $4,000,000 N/A
Net income in last year or two $750,000 N/A N/A N/A
of three most recent years
Total Market Capitalization N/A N/A $50,000,000 $75,000,000 or
Total Assets $75,000,000 $75,000,000 and
Total Revenue $75,000,000
Minimum Share Price $3 $3 N/A N/A
Market value of public float $3,000,000 $15,000,000 $15,000,000 $20,000,000
DISTRIBUTION ALTERNATIVES
800 public stockholders and 500,000 shares publicly held or 400 public
stockholders and 1,000,000 shares publicly held or 400 public stockholders,
500,000 shares publicly held and average daily trading volume of 2,000 shares
for last six months.
NASDAQ LISTING STANDARDS
The following table summarizes the quantitative listing standards for companies
that want to list their securities on the Nasdaq Stock Market:
Operating History 1 year and N/A
Stockholders' equity $5,000,000 or $15,000,000
Net income in last year or two of $ 750,000 or $1,000,000
three most recent years
Market capitalization $50,000,000 N/A
Total Assets N/A N/A
Total Revenue N/A
Minimum price $4.00 $5.00
Market value of float $5,000,000 $8,000,000
Number of stockholders 300 400
Number of publicly held shares 1,000,000 1,100,000
We have 33 stockholders which is insufficient to meet the listing requirements
for any exchange. This initial number is likely to decline in connection with
our reconfirmation offering. We will endeavor to negotiate a business
combination with a target that has sufficient operating history, stockholders'
equity, number of stockholders and net income to satisfy the applicable Amex or
Nasdaq listing standards. If we are successful in negotiating a proposed
transaction with a target that believes the combined companies can satisfy the
quantitative listing standards for an Amex or Nasdaq listing, the target may ask
us to modify our capital structure by implementing a forward or reverse stock
split to facilitate their planned listing application. As long as the aggregate
percentage interests of the various classes of stockholders remain unchanged, we
are likely to comply with such a request. We will not, however, negotiate a
business combination on terms that would result in the combined companies having
a public float of less than 1,850,000 shares.
There is no assurance that we will be able to negotiate a business combination
with a target that has sufficient operating history, stockholders' equity and
net income to satisfy the applicable Amex or Nasdaq listing standards. Even if
the quantitative standards are met, the Amex or Nasdaq listing may require the
combined companies to establish a trading history before considering a listing
application. Therefore, the combined companies' shares will likely have to begin
trading on the OTC Bulletin Board, the Pink Sheets or the proposed BBX, and wait
to apply for an Amex or Nasdaq listing until all applicable listing standards
are met. Under the circumstances, there is no assurance our shares will ever
qualify for an Amex or Nasdaq listing.
16
STRUCTURING A BUSINESS COMBINATION
We believe the most likely business combination structure will involve a
"reverse takeover" where we issue acquisition shares in exchange for the assets
or outstanding stock of the target. Upon the completion of a reverse takeover,
we expect that the former stockholders of the target will likely own a
substantial majority interest in the combined companies. Since the ongoing costs
and expenses associated with reporting under the Exchange Act can be a
significant burden for a small company, we believe that larger established
companies are better suited to shell transactions than small entrepreneurial
companies. Moreover, a substantial transaction will be required to meet the
minimum listing standards for the Amex or Nasdaq.
NO RIGHT TO APPROVE SPECIFIC TERMS
We do not intend to provide information to our stockholders regarding our
evaluation of potential targets or the progress of negotiations. Our officers
will have the necessary executive and equity voting power to unilaterally
approve all corporate actions until we close a business combination. As a
result, non officer Selling Stockholders will have no effective voice in
decisions made by management and will be entirely dependent on management's
judgment in the selection of a target and the negotiation of the specific terms
of a business combination.
Under Colorado law, the Selling Stockholders of a corporation are not entitled
to vote with respect to the terms of a stock issuance transaction that does not
involve a statutory merger, even if the transaction will result in a change in
control. We presently intend to structure a business combination as an exchange
of stock in our company for the assets or outstanding stock of a target. Since
we do not intend to conduct a statutory merger with a target, we do not intend
to seek prior stockholder approval of the terms of a proposed business
combination. Rule 419 will not give stockholders voting rights that they do not
otherwise possess under Colorado law. If we successfully negotiate a business
combination, the proposed transaction will be presented to our Selling
Stockholders as an integrated whole and be detailed in the reconfirmation
offering. Each Selling Stockholder will then be required to make an independent
decision about whether he wants to remain a stockholder. If a stockholder does
not approve our reconfirmation offering in writing, Rule 419 requires us to
treat the failure to act as a rejection of our reconfirmation offering. If a
sufficient percentage of Selling Stockholders does not reconfirm their
subscriptions in writing, we will not close a proposed business combination.
Rule 419 does not require that a specific percentage of stockholders accept our
reconfirmation offering. Instead, Rule 419 leaves that issue to negotiations
between our company and the target. If the terms of our reconfirmation offering
establish a relatively low reconfirmation threshold, non officer Selling
Stockholders will not necessarily be able to rely on the collective business
judgment of others in making their decisions.
We will endeavor to structure a business combination so as to achieve the most
favorable tax treatment to us, the target and the stockholders of both
companies. We cannot assure you, however, that the Internal Revenue Service or
any state tax authority will agree with our tax treatment of the business
combination.
BUSINESS DIVERSIFICATION IS UNLIKELY
Rule 419 will require that we conduct our reconfirmation offering as soon as we
negotiate a transaction where the fair value of the business or assets to be
acquired exceeds $2,696,000, calculated as 80% of the estimated value of the
maximum number of shares in exchange for the stock or assets of a target, any
material acquisition is almost certain to result in a change in control.
We will probably not be able to diversify our operations or benefit from the
spreading of risks or offsetting of losses. We will probably be dependent upon
the development or market acceptance of a single or limited number of products,
processes or services. Our probable lack of diversification may subject us to a
variety of economic, competitive and regulatory risks, any or all of which may
have a substantial adverse impact on our future business. Accordingly, there is
no assurance that our future operations will be commercially viable.
FINDERS' FEES
If our company or the target agrees to pay cash finders' fees, the payments will
reduce the cash resources of the combined companies. If our company or the
target agrees to pay stock-based finders' fees, the share issuances will reduce
the number of shares that would otherwise be available to the owners of a
target. Therefore, we believe the target should participate in all decisions
respecting the payment of finders' fees. Accordingly, we will not agree to pay
any finders' fees or similar compensation without the express consent of the
target.
We will not pay finders' fees, commissions or similar compensation to our
officers or their respective affiliates. Our company and our officers will not
pay any finders' fees, commissions or similar compensation to persons who are
not duly licensed broker/dealers without first obtaining an opinion of legal
counsel that registration is not required under the circumstances.
17
Our reconfirmation offering prospectus will disclose the material terms of any
agreements for the direct or indirect payment of finders' fees, commissions or
similar compensation by our company and/or our officers.
COMPETITION
We expect to encounter substantial competition in our efforts to locate
attractive opportunities, primarily from business development companies, venture
capital partnerships and corporations, venture capital affiliates of large
industrial and financial companies, small investment companies, and wealthy
individuals. Many of these entities will have significantly greater experience,
resources and managerial capabilities than our company and will therefore be in
a better position than us to obtain access to attractive business opportunities.
We also will experience competition from other public "blind pool" companies,
many of which may have more capital available than us.
We will remain an insignificant player among the firms that engage in business
combinations. There are many established venture capital and financial concerns
which have significantly greater financial and personnel resources and technical
expertise than us. In view of our combined limited financial resources and
limited management availability, we will continue to be at a significant
competitive disadvantage compared to our competitors.
Also, we will be competing with a large number of other small public, blank
check companies located throughout the United States.
EMPLOYEES
We presently have no full or part time employees. Our officers and directors are
engaged in outside business activities, and the aggregate amount of time they
will collectively devote to our business will be approximately ten (10) hours
per week; however, they will receive no compensation from us for their activity
other than the common stock shares issued and disclosed in this offering. Upon
completion of the public offering, it is anticipated that management will devote
the time necessary each month to our affairs or until a successful acquisition
of a business has been completed.
FACILITIES
We are presently using the offices of two of our beneficial shareholders, Mr.
Dyer and Mr. Brennan, as our office, an arrangement which we expect to continue
until the completion of the business combination transaction. We presently do
not own any equipment, and do not intend to purchase or lease any equipment
prior to or upon completion of this offering.
PERIODIC REPORTING AND AUDITED FINANCIAL STATEMENTS
We have filed a Form S-1 registration statement for this offering. Therefore,
the combined companies will be subject to the reporting requirements of the 1934
Act, including the requirement that we file annual and quarterly reports with
the SEC. In accordance with the requirements of Rule 419(f)(1) the combined
companies will furnish all stockholders audited financial statements for the
first full fiscal year of operations following consummation of a business
combination. We currently do not have a website; we will make available copies
of our periodic filings to anyone upon written request.
NO ESTABLISHED MARKET
There has never been a public market for our stock. Even if we complete a
business combination, our stock will not qualify for an immediate Amex or Nasdaq
listing. At present, the securities of public companies that do not qualify for
an Amex or Nasdaq listing are either quoted on the OTC Bulletin Board or
published in the Pink Sheets. The markets for OTC Bulletin Board and Pink Sheet
securities are notoriously illiquid and volatile. There is no assurance that an
active, stable or sustained market for our shares will ever develop.
We have not engaged in discussions or negotiations with potential market makers.
We will not approach any market makers until a business combination is
completed. We will not take any steps to seek a listing for our shares until the
stock certificates are released from the Rule 419 escrow. We do not intend to
use consultants or advisors to negotiate with potential market makers or promote
an active trading market. Our officers and their respective affiliates will not
recommend, encourage or advise stockholders to open brokerage accounts with any
broker/dealer. Stockholders will have the exclusive authority to make their own
decisions regarding whether to hold or sell their shares. We will not attempt to
influence those decisions.
18
MANAGEMENT
OFFICERS
The following table identifies our directors and executive officers.
NAME AGE POSITION
Douglas A. Dyer 42 President and Director
Jack W. Eversull, Jr. 62 Secretary and Director
John D. Lane 57 Director
The directors named above will serve until the first annual meeting of our
stockholders. Thereafter, directors will be elected for three-year terms at the
annual stockholders' meeting. Officers will hold their positions at the pleasure
of the board of directors, absent any employment agreement, of which none
currently exists or is contemplated. There is no arrangement or understanding
between our directors and/or officers and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
Our directors and officers will devote their time to our affairs on an "as
needed" basis. As a result, the actual amount of time which they will devote to
our affairs is unknown and is likely to vary substantially from month to month.
However, we believe that our officers and directors will be capable of
delivering an aggregate of at least ten (10) hours per week to our operations.
The following is a brief account of the business experience of each of our
directors and executive officers.
Douglas A. Dyer, Director and President. Mr. Dyer has been the president of
Contrarian since its inception in August 2003. Concurrently and since 1998, Mr.
Dyer has been a founder and owner of Broad Street Ventures, LLC, an investment
banking and venture capital firm. Prior to joining Broad Street, Mr. Dyer was a
licensed representative, holding a Series 7 license, with several securities
firms, including First Allied Securities, Inc. (1994-1996); Keogler Mergan, Inc.
(1992-1994); Mid Atlantic Securities, Inc. (1991-1992); and Raymond James and
Associates, Inc. (1986-1991).
Mr. Dyer has a Bachelor of Science degree in Finance from the University of
Tennessee.
Jack W. Eversull, Jr., Director and Secretary. Mr. Eversull became an officer
and director of Contrarian in March 2004. He is also currently engaged as the
president of The Eversull Group, Inc., an investor relations firm which he
founded in 1997. From 1964 to 1997, Mr. Eversull held various positions with
Atmos Energy Corporation and its predecessors, including Vice President of
Investor Relations (1989-1997); Senior Vice President, Governmental Affairs and
Investor Relations (1988-1989); and Division President, Trans Louisiana Gas
Company (1987-1988).
Mr. Eversull received an MBA in Finance and Marketing from Louisiana State
University and a Bachelor of Science in Business Administration and Accounting
from Northwestern State University.
John D. Lane, Director. Mr. Lane has been a director of Contrarian since August
2003. Concurrently and since 2001, Mr. Lane has been the principal executive
officer of Lane Capital Markets, Inc., an investment banking concern. Prior to
founding Lane Capital Markets, Inc., Mr. Lane held positions in several
investment banking firms from 1984 to 2000, including Boettcher & Co., Inc.;
Advest & Co., Inc.; Dain Bosworth, Inc.; and Moseley Hallgarten, Inc.
Since 2002, Mr. Lane has served as chairman of the National Association of
Security Dealers ("NASD") District Business Conduct Committee (Boston,
Massachusetts); he currently serves on the NASD Small Firm Advisory Board and on
the NASD Corporate Finance Committee.
ADMINISTRATION OF OUR AFFAIRS
Our officers and directors have orally agreed to provide certain administrative
services for us until we complete a business combination. Under this
arrangement, they are authorized to:
(a) provide all necessary office facilities and equipment,
(b) provide all necessary clerical, support and accounting staff,
(c) manage our day-to-day operations,
(d) manage our administrative, accounting and reporting functions,
(e) assist in the investigation of potential targets, and
(f) provide administrative support services to our officers and directors in
connection with their efforts to identify a suitable target and negotiate
a business combination.
19
We believe that our officers and director's facilities and staff will be
adequate for our needs until we complete a business combination or liquidate our
company. The services provided by our officers and directors are done gratis and
no written agreement to provide the services exists. In the event our officers
and directors should discontinue to provide the administrative services we
require, we would have to use our cash advances from Mr. Dyer.
MANAGEMENT'S PRIOR INVOLVEMENT IN SHELL TRANSACTIONS
Current management and affiliates have been involved in the formation of a
number of shell companies. The following summary reflects activity by our
officers and affiliates with shell transactions.
Name of combined companies Leapfrog Smart Products Americas Power Partners, Inc. Cytation Corporation
SEC Central Index Key CIK 0000831669 CIK 0001072568 CIK 0000095047
Original name of the shell company Albara Corporation Oak Brook Capital II, Inc. Stylex Homes, Inc.
Inactive since September 2002 Still active Still active
Name of target company Leapfrog Smart Products, Inc. Americas Power Partners, Inc. Cytation Corporation
Business of combined companies Software Engineering Energy Consulting and Web-Based Education
Project Mgmt.
----------------------------- ----------------------------- --------------------
Closing date February 2000 September 1999 February 1999
----------------------------- ----------------------------- --------------------
Cash Fees paid by target None $100,000 None
Shares issued to certain of our 242,000 330,000 286,000
Affiliates
Percentage of ownership of Target
held by certain of our affiliates (1)
Douglas A. Dyer 1.43% 1.71% 1.55%
James H. Brennan 1.43% 1.71% 1.55%
Number of shares issued by Target to certain of our affiliates:
Douglas A. Dyer 121,000 165,000 143,000
James H. Brennan 121,000 165,000 143,000
Shares held by original public
stockholders (2) 792,000 378,000 1,200,000
Shares issued to target/advisors 7,650,000 9,300,000 8,050,000
OTC Symbol FROG APPN CYON
Trading since February 2000 January 2000 February 1999
Highest sale price (*) $9.50 $6.75 $13.75
Lowest sale price (*) ** $0.01 $0.10
Recent Bid (*) ** $0.01 $3.00
(*) Obtained from Bloomberg and PC Quote, January 1, 1999 through July 31,
2004
(**) No longer quoted or active
(a) The table does not include information on any profits received by Mr. Dyer
or Mr. Brennan from the resale of shares held by them. Mr. Dyer and Mr.
Brennan state that although they did not maintain records they believe
they did not make any profits from the above transactions given the
expenses they experienced and the amount of services rendered to each
issuer was in excess of any income they derived from the sale of such
shares. Neither Mr. Dyer or Mr. Brennan received any consulting fees or
"finders fees" in the above transactions. The above described fees were
paid to third party broker dealers unaffiliated with Mr. Dyer and Mr.
Brennan.
(b) "Shares held by original public stockholders" is defined as those total
number of shares that were issued and outstanding, prior to the issuance
of shares in connection with the business combination.
In the above prior transactions, the stock of the combined companies has only
qualified for listing on the OTC Bulletin Board or American Stock Exchange. In
each of these transactions, the market prices have been highly volatile, and the
markets have not been active, liquid or sustained. Leapfrog Smart Products, Inc.
has subsequently been de-listed from the OTC Bulletin Board for failure to file
their required 1934 Act reports in a timely manner and appears to have ceased
any gainful activity.
20
Our officers and directors have also been involved in several prior "blank
check" transactions. Utilizing a series of Form 10 Registration Statements, a
total of ten (10) companies were created: Providence Capital I, Inc. through
Providence Capital VII, Inc. and Providence Capital IX, Inc. and Providence
Capital X, Inc. Of the ten blank check companies created, only four consummated
mergers with target companies:
Providence Capital I, Inc. (SEC Central Index Key 0001109483). In August
2000, Providence Capital I, Inc. entered into a business combination with United
American Companies, Inc. that was structured as a reverse takeover. The
stockholders of United American were issued 13,500,000 shares of Providence I
common stock in exchange for all the issued and outstanding common stock of
United American. The original stockholders of Providence I retained 1,500,000
shares, representing ten percent (10%) of the issued and outstanding shares of
the merged company. United American's common stock was never publicly traded,
and the company filed a Form 15-12G in May 2001, terminating their registration.
They are no longer a reporting company.
Providence Capital II, Inc. (SEC Central Index Key 0001110049). In August
2000, Providence Capital II, Inc. entered into a business combination with
Lifelong.com, Inc. Structured as a reverse merger, Providence II issued
20,000,000 common stock shares to the Lifelong stockholders in return for all
the outstanding and issued shares of Lifelong. The original Providence II
stockholders retained 734,000 or 3.5% of the issued and outstanding common stock
shares of the merged company. Lifelong has never been publicly traded and ceased
operations in 2001.
Providence Capital III, Inc. (SEC Central Index Key 0001110048) and
Providence Capital IV, Inc. (SEC Central Index Key 0001110047) were not
successful in locating a business combination and are non-operating companies.
Providence Capital V, Inc. (SEC Central Index Key 0001110044). A reverse
merger transaction was entered into between Providence V and Gourmet Station,
Inc. in March 2001. Providence V issued 3,250,000 shares of its common stock to
the stockholders of Gourmet and the original Providence stockholders retained
750,000 common stock shares (18.75%) Gourmet is still in operation but has never
been publicly traded.
Providence Capital VI, Inc. (SEC Central Index Key 0001110043) and
Providence Capital VII, Inc. (SEC Central Index Key 0001110726) were
unsuccessful in locating a business combination and are non-operating companies.
Providence Capital IX, Inc. (SEC Central Index Key 0001110038). In June
2001, Providence IX, in a reverse merger, completed a business combination with
Cachestream Corporation. In return for all the issued and outstanding common
stock of Cachestream, its stockholders received 7,232,053 shares of common stock
of Providence IX. The original stockholders of Providence IX retained 750,000
shares or 9.4% of the issued and outstanding common stock of Providence IX.
Cachestream did not trade publicly and it is no longer an operating company.
Providence Capital X, Inc. (SEC Central Index Key 0001110018) was not
successful in locating a business combination and is a non-operating company.
Even if we are successful in completing a business combination, our ultimate
business goal of achieving an active, liquid, stable and sustained public market
for our common stock may not be achieved, as there can be no assurance that our
business plan will be successful. Our shareholders are encouraged to
independently review the available public information, including SEC reports,
press releases and historical trading data, on the prior transactions effected
by our officers and directors.
Detailed information on our officer's and director's activities with respect to
these companies is included in the proxy statements and other SEC reports filed
both before and after the business combinations. Additional information,
including press releases and the trading history of these companies, is
available from other public sources. Our shareholders are encouraged to
independently review the available public information, including SEC reports,
press releases and historical trading data, for the companies that were
previously managed by certain of our officers and directors.
CONFLICTS OF INTEREST
Our officers and directors will devote only a small portion of their time to the
affairs of the Company, estimated to be no more than an aggregate of ten (10)
hours per week. There will be occasions when the time requirements of our
business conflict with the demands of their other business and investment
activities. Such conflicts may require that we attempt to employ additional
personnel. There is no assurance that the services of such persons will be
available or that they can be obtained upon terms favorable to us.
Douglas Dyer, our President, and certain of the Company's officers and directors
intend to promote other "blank check" entities in the future. To the extent that
other "blank check" entities exist and Contrarian has not been utilized, then a
conflict would exist, as our officers and directors may be promoting more than
one blank check company at any time.
21
There is no procedure in place which would allow our officers and directors to
resolve potential conflicts in an arms-length fashion. Accordingly, they will be
required to use their discretion to resolve them in a manner which they consider
appropriate.
Our officers and directors may actively negotiate or otherwise consent to the
purchase of a portion of their common stock as a condition to, or in connection
with, a proposed merger or acquisition transaction. It is anticipated that a
substantial premium over the initial cost of such shares may be paid by the
purchaser in conjunction with any sale of shares by our officers and directors
which is made as a condition to, or in connection with, a proposed merger or
acquisition transaction. The fact that a substantial premium may be paid to our
officers and directors to acquire their shares creates a potential conflict of
interest for them in satisfying their fiduciary duties to us and our other
shareholders.
Even though such a sale could result in a substantial profit to them, they would
be legally required to make the decision based upon the best interests of our
company and our other shareholders, rather than their own personal pecuniary
benefit.
Shareholders have certain rights with regards to our management, in the event of
breaches of certain obligations including loyalty and the misappropriation of a
corporate opportunity. Shareholders may seek remedies under several provisions
of the 1933 and 1934 acts. Sections 11 and 12 of the '33 Act help safeguard
investors against materially false statements in Registration Statements
(section 11); and against materially false statements in prospectuses and other
communications (section 12). Remedies available under these sections include the
reimbursement to the investor, by the company, of the consideration paid for the
security, minus any gain received thereupon. Investors are also protected by
section 10(b) of the '34 Act, which proscribes manipulative or deceptive
practices in connection with the purchase or sale of a security; and by section
14(e) of the '34 Act, which proscribes material misstatements in connection with
proxies. As many states, including Colorado, have securities laws modeled after
the '33 and '34 Acts, remedies may be available under state law as well. In any
case, lawsuits under section 11 of the '33 Act may be brought "at law or in
equity, in any court of competent jurisdiction."
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado law, our Articles of Incorporation provide that we will
indemnify our directors and officers against expenses and liabilities they incur
to defend, settle, or satisfy any civil or criminal action brought against them
on account of their being or having been our directors or officers unless, in
any such action, they are adjudged to have acted with gross negligence or
willful misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the company pursuant to the foregoing provisions, we have been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
EXCLUSION OF LIABILITY
Pursuant to the Colorado Business Corporation Act, our Articles of Incorporation
exclude personal liability for our directors for monetary damages based upon any
violation of their fiduciary duties as directors, except as to liability for any
breach of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, acts in violation
of Section 7-106-401 of the Colorado Business Corporation Act, or any
transaction from which a director receives an improper personal benefit. This
exclusion of liability does not limit any right which a director may have to be
indemnified and does not affect any director's liability under federal or
applicable state securities laws.
BOARD OF DIRECTORS
Colorado provides that a corporation's board of directors may be divided into
various classes with staggered terms of office. Our directors are elected for a
term of three years and until their successors are elected and qualified. We do
not have an audit committee or a compensation committee. We do not intend to
create an audit committee or a compensation committee until after the completion
of a business combination.
NUMBER OF DIRECTORS
Our board of directors currently consists of three directors. The number of
directors on our board may only be changed by a vote of a majority of our
directors, subject to the rights of the holders of any outstanding series of our
company's preferred stock to elect additional directors.
REMOVAL OF DIRECTORS
Our directors, or the entire board, may be removed for cause by the affirmative
vote of the holders of at least 50% of the outstanding shares of common stock
entitled to vote in the election of directors, voting as a single class and
subject to the rights of the holders of any outstanding series of our company's
preferred stock.
22
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Any newly created directorships in our board of directors, resulting from any
increase in the number of authorized directors or any vacancies, may be filled
by a majority of the remaining members of such board of directors, even though
less than a quorum, or in the case of our company, by a sole remaining director,
subject to the rights of holders of any outstanding series of preferred stock.
Newly created directorships or decreases in directorships in our board of
directors are to be apportioned among the classes of directors so as to make all
classes as nearly equal in number as practicable, provided that no decreases in
the number of directors in our board of directors may shorten the term of any
director then in office.
To the extent reasonably possible, any newly created directorship will be added
to the class of directors whose term of office is to expire at the latest date
following the creation of that directorship, unless otherwise provided for by
resolution of the majority of the directors then in office.
Any newly eliminated directorship will be subtracted from the class whose office
is to expire at the earliest date following the elimination of the directorship,
unless otherwise provided for by resolution of the majority of the directors
then in office.
ABILITY TO CALL SPECIAL MEETINGS
Special meetings of our stockholders may be called by our board of directors, by
affirmative vote of a majority of the total number of authorized directors at
that time, regardless of any vacancies, or by the Chief Executive Officer.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
Our bylaws allow stockholders to nominate candidates for election to the board
of directors at any annual or any special stockholder meeting at which the board
of directors has determined that directors will be elected. In addition, the
bylaws allow stockholders to propose business to be brought before any annual
stockholder meeting. However, nominations and proposals may only be made by a
stockholder who has given timely written notice to our Secretary before the
annual or special stockholder meeting.
Under our bylaws, to be timely, notice of stockholder nominations or proposals
to be made at our annual stockholder meeting must be received by our Secretary
no less than 60 days nor more than 90 days before the first anniversary of the
preceding year's annual stockholder meeting. If the date of the annual meeting
is more than 30 days before or more than 60 days after the anniversary of the
preceding year's annual stockholder meeting, notice will also be timely if
delivered within 10 days of the date on which public announcement of the meeting
was first made by us.
In addition, if the number of directors to be elected is increased and no public
announcement is made by us naming all of the nominees or specifying the size of
the increased board of directors at least 70 days before the first anniversary
of the preceding year's annual meeting, or, if the date of the annual meeting is
more than 30 days before or 60 days after the anniversary of the preceding
year's annual meeting, at least 70 days before the annual meeting, a
stockholder's notice will be considered timely, with respect to the nominees for
any new positions created by the increase, if it is delivered to our Secretary
within 10 days of the date on which public announcement of the meeting was first
made by us.
Under our bylaws, to be timely, notice of a stockholder nomination to be made at
a special stockholder meeting must be received no less than 60 days, nor more
than 90 days, before a special meeting at which directors are to be elected or
within 10 days of the date on which public announcement of the special meeting
was first made by our company.
A stockholder's notice to us must set forth all of the following:
o all information required to be disclosed in solicitations of proxies
for election of directors, or information otherwise required by
applicable law, relating to any person that the stockholder proposes
to nominate for election or re-election as a director, including
that person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected
o a brief description of the business the stockholder proposes to
bring before the meeting, the reasons for conducting that business
at that meeting and any material interest of the stockholder in the
business proposed
o the stockholder's name and address as they appear on our books and
the class and number of shares which are beneficially owned by the
stockholder
o The chairman of our stockholder meeting will have the power to
determine whether the nomination or proposal was made by the
stockholder in accordance with the advance notice procedures set
forth in our bylaws.
o If the chairman determines that the nomination or proposal is not in
compliance with advance notice procedures, the chairman may declare
that the defective proposal or nomination will be disregarded.
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EXECUTIVE COMPENSATION OF OFFICERS AND DIRECTORS
At our inception, our officers and directors received 1,850,000 shares of Common
Stock valued at $0.001 (par value) per share in consideration for $1,514 in cash
and pre-incorporation services rendered to our company related to investigating
and developing our proposed business plan and capital structure, and completion
of the incorporation and organization of our company valued at $336. None of our
officers or directors has received any other compensation.
SUMMARY COMPENSATION TABLE
The following summary compensation table presents information about the
compensation paid by us during our three most recent fiscal years to those
individuals who were (i) our Chief Executive Officer (the "CEO") at the end of
the last completed fiscal year, regardless of compensation level and (ii) our
most highly compensated executive officer other than the CEO who was serving as
an executive officer at the end of the last completed fiscal year and whose
total annual salary and bonus for the last completed fiscal year exceeded
$100,000 and (iii) three additional individuals who served as executive officers
during 2003 (collectively, the "Named Executive Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND PRINCIPAL POSITION YEAR 2004 BASE SALARY BONUS OPTIONS COMPENSATION GRANTED
- --------------------------- ---- ---------------- ----- ------- --------------------
Douglas A. Dyer 2004 0 0 0 0
Jack Eversull 2004 0 0 0 0
John D. Lane 2004 0 0 0 0
It is possible that, after we successfully consummate a merger or acquisition
with an unaffiliated entity, that entity may desire to employ or retain one or
more members of our management for the purposes of providing services to the
surviving entity, or otherwise provide other compensation to such persons.
However, we have adopted a policy whereby the offer of any post-transaction
remuneration to members of management will not be a consideration in our
decision to undertake any proposed transaction. Each member of management has
agreed to disclose to our Board of Directors any discussions concerning possible
compensation to be paid to them by any entity which proposes to undertake a
transaction with us and further, to abstain from voting on such transaction.
Therefore, as a practical matter, if each member of our Board of Directors is
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction will not be approved by our Board of
Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
We do not have an audit committee or a compensation committee. We do not intend
to create an audit committee or a compensation committee until after the
completion of a business combination.
No member of our management will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan outlined herein. Also, there are no plans, proposals, arrangements or
understandings with respect to the sale or issuance of additional securities by
our company prior to the location of an acquisition or merger candidate.
Although we have a very large amount of authorized but unissued common and
preferred stock that may be issued without further shareholder approval or
notice, it is our intention to avoid inhibiting certain transactions with
prospective acquisition or merger candidates, based upon the perception by such
candidate that they may be engaged in a rapidly expanding industry and cannot
afford to proxy shareholders each time their management needs to authorize
additional shares.
COMPENSATORY STOCK PLANS
We have adopted certain plans that will allow our company to pay or accrue
additional compensation to our officers and directors for services related to
seeking business opportunities and completing a merger or acquisition
transaction. We have also adopted a compensatory stock-option plan for the
benefit of directors and/or officers or other employees, and the Board of
Directors may recommend implementation of such program in the foreseeable
future.
Under the terms of our present consulting and advisory services plan, our
Company is authorized to issue a maximum of 1,000,000 common shares from time to
time, for the benefit of directors, officers, full time employees, consultants
and advisors of our company or its subsidiaries and companies wholly owned by
these individuals.
There have been no common shares or options issued under our compensatory stock
option plan or under our consulting and advisory services plan
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DIRECTOR COMPENSATION
Our directors, no matter whether they are officers or not, are not compensated
for serving.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Articles of Incorporation provide that a director of our company shall not
be personally liable to us or any of our shareholders for monetary damages for
breach of fiduciary duty as a director, except for liability:
(a) for any breach of the director's duty of loyalty to our company or our
shareholders,
(b) for acts or omissions not in good faith or which involve gross negligence,
intentional misconduct or a knowing violation of law,
(c) for any unlawful distribution as set forth in the Colorado Model Business
Corporation Act of Colorado; or
(d) for any transaction from which the director derived an improper personal
benefit. These provisions may have the effect in certain circumstances of
reducing the likelihood of derivative litigation against directors. While
these provisions may eliminate the right to recover monetary damages from
directors in various circumstances, rights to seek injunctive or other
non-monetary relief is not eliminated.
PRINCIPAL STOCKHOLDERS
The following table contains information on the beneficial ownership of our
common stock at September 30, 2004, as adjusted to reflect the issuance of
15,000,000 shares and the potential resale of 1,850,000 shares in connection
with a business combination. Unless otherwise indicated, all persons named in
the table have sole voting and investment power with respect to the shares
beneficially owned by them. The table identifies:
o Each person known by us to be the owner of more than 5% of the
outstanding shares of common stock.
o Each of our officers and directors and their affiliates.
o All our officers and directors as a group.
Before this Offering(1) After this Offering(2) After Combination(1)
Name and Address of ----------------------- ---------------------- --------------------
Beneficial Owner(2) Shares Percent Shares Percent Shares Percent
Douglas A. Dyer 403,394 21.8% 403,394 21.8% 0 0
James H. Brennan, III 403,394 21.8% 403,394 21.8% 0 0
Lane Capital Markets(3) 200,000 10.8% 200,000 10.8% 0 0
Chester Berry 92,592 5.0% 92,592 5.0% 0 0
Tommy Lee Graham 92,610 5.0% 92,610 5.0% 0 0
James F. Sattler 92,610 5.0% 92,610 5.0% 0 0
Jack Eversull 50,000 2.7% 50,000 2.7% 0 0
All Officers and Directors
as a Group (three persons) 653,394 35.3% 653,394 35.3% 0 0
(1) Based upon a total of 1,850,000 common shares being issued and
outstanding, none of the 1,850,000 original shareholder shares will be
sold in this offering but assumes that all shares will be sold at the time
of completion of the business combination
(2) Unless otherwise specifically stated the address for all those listed is
735 Broad Street, Suite 218, Chattanooga, TN 37402.
(3) This entity is owned solely by one of our directors, John D. Lane and its
address is; 263 Queens Grant Rd. Fairfield, CT. 06824.
Management has no plans to issue any additional securities to management,
promoters or their affiliates or associates and will do so only if such issuance
is in the best interests of shareholders of our company and complies with all
applicable federal and state securities rules and regulations.
25
Each of our officers may be deemed to be a "promoter" of our company as that
term is defined in Rule 12b-2 of the General Rules of the SEC promulgated under
the 1934 Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the organization of our company, our founders, Mssrs. Dyer,
Lane and Eversull, received 1,850,000 shares of common stock at a price of
$0.001 (par value) per share for the sum of $1,514 cash, representing legal fees
paid on behalf of the company and $336 in services as described below. The
services included pre-incorporation planning, strategic planning and basic
organizational planning, including, but not necessarily limited to, drafting of
the business plan, attending organizational meetings, general corporate
governance planning and providing information to prepare this statement
registration. The shares were also issued in connection with future services
expected to be rendered in connection with the implementation of the business
plan including searching for a business combination.
In February 2004, Mr. Dyer, in private transactions, sold and/or gifted shares
to thirty (30) persons. The receiving stockholders are either accredited
investors as defined in Rule 501, Regulation D, or are parties related to Mr.
Dyer and Mr. Brennan. We believe that the described transactions are exempt
under Sections 4(1) and 4(6) of the Securities Act of 1933. All of the resulting
stockholders constitute the Selling Stockholders listed individually in this
Prospectus.
Doug Dyer has also paid organizational costs, filing fees and auditing costs in
connection with the incorporation of our company and filing of this registration
statement. The aggregate amount of these costs is calculated at approximately
$31,850, of which $30,000 has been advanced to us by Doug Dyer. Mr. Dyer has
orally agreed to advance up to a total of $50,000.
Our company maintains a business address at the office of two of our affiliate
shareholders, Mr. Dyer and Mr. Brennan. Mr. Brennan is a business associate and
partner with Mr. Dyer in a business called Broad Street Ventures, LLC. As a
result, we pay no rent and incur no expense for maintenance of an office and do
not anticipate paying rent or incurring office expense in the future. All
transactions between us and any of our officers or their respective affiliates
will be on terms that we believe are no less favorable than the terms that could
have been negotiated with unaffiliated third parties. All related party
transactions will require prior approval from a majority of our disinterested
directors.
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue 50,000,000 shares of common stock, par value $0.001,
and 50,000,000 shares of preferred stock, par value $0.001. As of the date of
this prospectus, 1,850,000 shares of common stock are outstanding, held of
record by 33 persons. No shares of preferred stock are currently outstanding.
Our common shareholders do have preemptive rights and are not entitled to
cumulative voting.
After the completion of a business combination, we will have approximately
33,150,000 shares of authorized and unissued common stock and 50,000,000 shares
of authorized and unissued preferred stock. These authorized and unissued shares
may be issued without stockholder approval at any time, in the sole discretion
of our board of directors. The authorized and unissued shares may be issued for
cash, to acquire property or for any other purpose that is deemed in the best
interests of our company. Any decision to issue additional shares will reduce
the percentage of our stockholders' equity held by the purchasers of the shares
and could result in dilution of our net tangible book value. The following is a
summary of the principal attributes of the share capital of our company.
COMMON SHARES
The rights, privileges, restrictions and conditions attached to the common
shares are as follows:
VOTING
Holders of our common shares shall be entitled to receive notice of and to
attend and vote at all meetings of shareholders of our company, except meetings
of holders of another class of shares. Each common share shall entitle the
holder thereof to one vote.
DIVIDENDS
Subject to the preferences accorded to holders of our preferred shares and any
other shares ranking senior to the common shares from time to time with respect
to the payment of dividends, holders of common shares shall be entitled to
receive, if, as and when declared by the board of directors, such dividends as
may be declared thereon by the board of directors from time to time.
LIQUIDATION, DISSOLUTION OR WINDING-UP
In the event of the voluntary or involuntary liquidation, dissolution or
winding-up of our company, or any other distribution of its assets among its
shareholders for the purpose of winding-up its affairs, such event referred to
herein as a distribution, holders of common shares shall be entitled, subject to
the preferences accorded to our holders of the preferred shares and any other
shares ranking senior to the common shares from time to time with respect to
payment on a distribution, to share equally, share for share, in the remaining
property of our company.
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PREFERRED SHARES
Our articles of incorporation provide that the board of directors is authorized
to provide for the issuance of shares of undesignated preferred stock in one or
more series, and to fix the designations, powers, preferences and rights of the
shares of each series and any qualifications, limitations or restrictions
thereof.
The number of our authorized shares of undesignated preferred stock may be
increased by the affirmative vote of the holders of a majority of our common
stock, without a vote of the holders of preferred stock, unless their vote is
required pursuant to the terms of any preferred stock then outstanding. The
number of our authorized shares of undesignated preferred stock may be reduced
or eliminated by the affirmative vote of the holders of 80% of our outstanding
capital stock entitled to vote in the election of directors, voting together as
a single class.
ATTRIBUTES
Subject to the filing of Articles of Amendment in accordance with the Act, our
board of directors may from time to time fix, before issuance, the designation,
rights, privileges, restrictions and conditions attached to each series of
preferred shares including, without limiting the generality of the foregoing,
the amount, if any, specified as being payable preferentially to such series on
a distribution; the extent, if any, of further participation on a distribution;
voting rights, if any; and dividend rights (including whether such dividends be
preferential, cumulative or non-cumulative), if any.
LIQUIDATION
In the event of a distribution, holders of each series of preferred shares shall
be entitled, in priority to holders of our common shares and any other shares
ranking junior to the preferred shares from time to time with respect to payment
on a distribution, to be paid ratably with holders of each other series of
preferred shares the amount, if any, specified as being payable preferentially
to the holders of such series on a distribution.
DIVIDENDS
The holders of each series of our preferred shares shall be entitled to
dividends. We have never paid any dividends on our common shares and intend to
retain our earnings to finance the growth and development of our business and do
not expect to pay dividends in the near future. Our board of directors will
review this policy from time to time having regard to our financing
requirements, financial condition and other factors considered relevant.
CERTAIN PROTECTIVE PROVISIONS
GENERAL
Our articles and bylaws and the Colorado revised statutes contain certain
provisions designed to enhance the ability of the board of directors to deal
with attempts to acquire control of our company. These provisions may be deemed
to have an anti-takeover effect and may discourage takeover attempts that have
not been approved by the board of directors (including potential takeovers which
certain shareholders may deem to be in their best interest) and may adversely
effect the price that a potential purchaser would be willing to pay for our
stock. These provisions also could discourage or make more difficult a merger,
tender offer or proxy contest, even though such transaction may be favorable to
the interests of shareholders, and could potentially adversely effect the price
of our common stock.
The following briefly summarizes protective provisions contained in the
articles, the bylaws and the Colorado revised statutes. This summary is
necessarily general and is not intended to be a complete description of all the
features and consequences of these provisions, and is qualified in its entirety
by reference to our articles, bylaws and the provisions of the Colorado revised
statutes.
AMENDMENT OF ARTICLES OF INCORPORATION
Under Colorado law, articles of incorporation of a Colorado corporation may be
amended by approval of the board of directors of the corporation and the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote for the amendment, unless a higher vote is required by the corporation's
articles of incorporation.
27
Our articles of incorporation provides that the affirmative vote of the holders
of at least 50% of the outstanding shares of capital stock of our company
entitled to vote in the election of directors, voting together as a single
class, will be required to reduce or eliminate the number of authorized shares
of common stock or preferred stock, or to amend, repeal or adopt any provision
inconsistent with the provisions of the articles of incorporation which deal
with the following:
o undesignated preferred stock
o matters relating to the board of directors, including number of
members, board classification, vacancies and removal
o the powers and authority expressly conferred upon the board of
directors
o the manner in which stockholder action may be effected
o amendments to bylaws
o business combinations with interested stockholders of our company
o indemnification of officers and directors of our company
o the personal liability of directors to our company or our
stockholders for breaches of fiduciary duty
o the amendment of our company's articles of incorporation
AMENDMENT OF BYLAWS
Under Colorado law, stockholders entitled to vote have the power to adopt, amend
or repeal bylaws. In addition, a corporation may, in its articles of
incorporation, confer such power upon the board of directors. The stockholders
always have the power to adopt, amend or repeal bylaws, even though the board
may also be delegated such power. Our board of directors is expressly authorized
to adopt, amend and repeal the bylaws by an affirmative vote of a majority of
the total number of authorized directors at that time, regardless of any
vacancies.
Our bylaws may also be adopted, amended and repealed by the affirmative vote of
the holders of at least 50% of the outstanding shares of capital stock entitled
to vote in the election of directors, voting together as a single class.
LIMITATION OF LIABILITY OF DIRECTORS
The Colorado revised statutes permits a corporation to include a provision in
its articles of incorporation eliminating or limiting the personal liability of
a director or officer to the corporation or its stockholders for damages for a
breach of the director's fiduciary duty, subject to certain limitations. Our
articles of incorporation include such a provision to the maximum extent
permitted by law.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate that
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado revised statutes permit a corporation to indemnify officers and
directors for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. Our articles of incorporation and bylaws provide that any
person who was or is a party or is threatened to be a party to or is involved in
any action, suit, or proceeding, whether civil, criminal, administrative or
investigative, because that person is or was a director or officer, or is or was
serving at the request of either of us as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, will be indemnified against expenses, including attorney's fees, and
held harmless by each of us to the fullest extent permitted by the Colorado
revised statutes. The indemnification rights conferred by each of us are not
exclusive of any other right to which persons seeking indemnification may be
entitled under any statute, our articles of incorporation or bylaws, any
agreement, vote of stockholders or disinterested directors or otherwise.
In addition, each of us is authorized to purchase and maintain insurance on
behalf of its directors and officers. Additionally, each of us may pay expenses
incurred by our directors or officers in defending a civil or criminal action,
suit or proceeding because that person is a director or officer, in advance of
the final disposition of that action, suit or proceeding. However, such payment
will be made only if we receive an undertaking by or on behalf of that director
or officer to repay all amounts advanced if it is ultimately determined that he
or she is not entitled to be indemnified by us, as authorized by our articles of
incorporation and bylaws.
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TRANSFER AGENT
We are currently serving as our own transfer agent, and plan to continue to
serve in that capacity until such time as management believes it is necessary or
appropriate to employ an independent transfer agent in order to facilitate the
creation of a public trading market for our securities. Since we do not
currently expect any public market to develop for our securities until after we
have completed a business combination, we do not currently anticipate that we
will seek to employ an independent transfer agent until we have completed such a
transaction.
INTEREST OF NAMED EXPERTS AND COUNSEL
IN REGISTRATION STATEMENT
No expert named in this prospectus was paid on a contingent basis or had a
material interest in our company or any of its subsidiaries or was connected
with our company or any of its subsidiaries as a promoter, underwriter, voting
trustee, director, officer or employee.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that a director shall not be personally
liable to any of its shareholders for monetary damages for breach of fiduciary
duty as a director, except liability for the following:
(a) any breach of the director's duty of loyalty to our Company or its
shareholders;
(b) acts or omissions not in good faith or which involve gross negligence
intentional misconduct or a knowing violation of law;
(c) any unlawful distribution as set forth in the General Corporation Law
of the State of Colorado; or
(d) any transaction from which the director derived an improper personal
benefit.
These provisions may have the effect in certain circumstances of reducing the
likelihood of derivative litigation against directors. While these provisions
may eliminate the right to recover monetary damages from directors in various
circumstances, rights to seek injunctive or other non-monetary relief are not
eliminated.
Our By-laws provide for indemnification of our directors to the fullest extent
permitted by law. The bylaws also permit us, through action of the board of
directors, to indemnify our officers or employees to the fullest extent
permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of our company
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 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by our company of expenses incurred or paid
by a 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, our company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
RECENT TRANSACTIONS IN UNREGISTERED SECURITIES
Unregistered Securities Issued or Sold Within One Year--Recent Sales of
Unregistered Securities.
The following transactions reflect the issuance during the previous two years of
securities not registered under the Securities Act.
On August 21, 2003, we issued 1,850,000 restricted shares to our founding
shareholders in connection with services rendered for pre-incorporation
services. All such securities were issued to the shareholders of our company
with no broker-dealer or underwriter involved and no commissions paid to any
person in respect thereto. The shares were issued pursuant to Section 4(2) of
the Securities Act of 1933 (the "Act") and are restricted securities within the
meaning of Rule 144 of the Act.
In February 2004, one of our founding members, Mr. Dyer, in private
transactions, sold and/or gifted shares to 30 persons including certain gift
shares issued to Mr. Brennan Mr. Dyers business partner. The receiving
stockholders are either accredited investors as defined in Rule 501, Regulation
D or parties related to Mr. Dyer or Mr. Brennan. The company believes that the
transactions were exempted under Sections 4(1) and 4(6) of the Act.
29
MARKET FOR OUR COMMON STOCK
No public trading market exists for our securities and all of our outstanding
securities are restricted securities as defined in Rule 144. There were
thirty-three (33) holders of record of our common stock on September 30, 2004.
No dividends have been paid to date and our Board of Directors does not
anticipate paying dividends in the foreseeable future.
We have not issued any options or warrants to purchase, or securities
convertible into, our common equity. The 1,850,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act. Generally, Rule 144 provides that director, executive officer,
and persons or entities that they control or who control them may sell shares of
common stock in any three-month period in a limited amount. However, the SEC has
taken the position that resales cannot be made pursuant to Rule 144 for blank
check companies. Therefore, the 1,850,000 outstanding shares held by our
stockholders cannot be sold pursuant to Rule 144, but must be registered.
MARKET PRICE
Our common stock is not quoted at the present time, as there is currently no
market for our common stock.
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a "penny stock," for purposes
relevant to us, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. Should a market develop for our common stock, it is
likely that our share price would be under $5.00 per share. For any transaction
involving a penny stock, unless exempt, the rules require:
(a) that a broker or dealer approve a person's account for transactions in
penny stocks; and
(b) the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny stock to
be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
(a) obtain financial information and investment experience and objectives
of the person; and
(b) make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form:
(a) sets forth the basis on which the broker or dealer made the
suitability determination; and
(b) that the broker or dealer received a signed, written agreement from
the investor prior to the transaction. Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary
trading, and about commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and the rights
and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
PLAN OF DISTRIBUTION
The shares being offered by our Selling Stockholders or their respective
pledgees, Selling Stockholders, transferees or other successors in interest, may
only be sold in connection with the business combination transaction. The sale
price to the public may be:
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o at negotiated prices; or
o such other price as the Selling Stockholders determine from time to
time.
30
No selling stockholder has entered into any agreement with a prospective
underwriter and there is no assurance that any such agreement will be entered
into. If a selling stockholder enters into such an agreement or agreements, the
relevant details will be set forth in a supplement or revisions to this
prospectus.
We have agreed to pay all fees and expenses incident to the registration of the
shares, including certain fees and disbursements of counsel to the selling
shareholders. We have agreed to indemnify the selling shareholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
CONDUCT OF THE OFFERING
This Offering shall commence promptly upon effectiveness of the registration
statement. We do not intend to use an underwriter or securities dealer but
intend on a "self underwritten" distribution.
Our officers Dyer, Lane and Eversull will be solely responsible to distribute
prospectuses related to the offering. We estimate that they will distribute a
limited number of prospectuses to acquaintances, colleagues and business
contacts who may know of potential target companies.
Our officers shall conduct the offering of the acquisition shares. Although they
are collectively an "associated person" as that term is defined in Rule 3a4-1
under the 1934 Act, they will rely on the safe harbor exemption of SEC Rule
3a4-1(a)(4)(iii) because:
o they will not be subject to a statutory disqualification as that
term is defined in Section 3(a)(39) of the Securities Exchange Act
at the time of the sale of our securities;
o they will not be compensated in connection with the sale of the
acquisition shares;
o they will not be an associated person of a broker or dealer at the
time of their participation in the sale of our securities; and
o they shall restrict their participation to the following activities
in order to fit within the scope of Rule 3a4-1:
(i) preparing written communications or delivering them through
the mails or other means that does not involve their oral
solicitation of a potential purchaser;
(ii) responding to inquiries of potential purchasers in
communications initiated by potential purchasers, provided
however, that the content of each response is limited to
information contained in the registration statement; or
(iii) performing ministerial and clerical work involved in effecting
any transaction.
We will also defer the detailed responsibilities and services of negotiating and
consummating a business combination transaction to our legal counsel so that we
may avoid having any of our officers and directors take part in any processes
that may outside the limits of the provisions set forth above. Once we have
identified a target and initiated a business combination transaction, we
anticipate that the reconfirmation offering will be accomplished by the target's
management.
Our officers will perform substantially all of the functions that would
ordinarily be performed by brokers in a more conventional securities offering,
but they will not seek registration as brokers because they will be acting as
principals, rather than intermediaries, in connection with the various
transactions set forth above.
If we subsequently conclude that an exemption from the broker registration
requirements of the 1934 Act is not available for a proposed transaction and
retain a broker or underwriter, we will halt the distribution and amend our
registration statement accordingly.
OFFERING OF BUSINESS COMBINATION SHARES
We have registered 15,000,000 shares that we may offer to issue in connection
with a business combination. These shares will only be used for acquiring assets
or exchanging stocks. Subject to the limits described in this prospectus, our
officers will have broad discretion to structure a business combination and
establish terms for the issuance of such shares. All material terms of a
proposed business combination will be determined by arms-length negotiations
between our officers and the representatives of a potential target. All material
terms of a proposed business combination will be disclosed in our reconfirmation
offering prospectus. Any shares that are not issued in connection with a
business combination will be removed from registration in connection with our
reconfirmation offering.
31
SELLING STOCKHOLDERS
We have issued 1,850,000 shares that our Selling Stockholders may resell or
transfer to personal assigns, non-affiliates, advisors, participants in a
business combination and others, subject to the provisions of Rule 419. Any
proceeds from the resale of such shares may be substantial. Our company will not
have any interest in the proceeds from the resale of these shares.
Our Selling Stockholders have broad discretion to establish terms for the resale
or other transfer of their shares. They may also make bona fide gifts or
charitable contributions of their shares. There are no fixed numerical
limitations on such gifts or charitable contributions. All agreements for the
resale or other transfer of affiliate shares will be subject to the completion
of our reconfirmation offering. In connection with the resale of affiliate
shares, each of our officers and/or directors have agreed that they will not:
o Transfer affiliate shares to any of our current officers or their
respective affiliates;
o Transfer affiliate shares to family members of any current officer
who share that officer's residence;
o Transfer affiliate shares for value unless the purchaser is an
advisor to us or the sale is an integral element of the business
combination;
o Transfer affiliate shares at a price that represents a premium to
the per share value received by us in connection with the issuance
of business combination shares;
o Transfer affiliate shares to any person unless all material
transaction terms are described in our reconfirmation offering
prospectus;
o Permit any purchaser to pay for affiliate shares until the closing
of the business combination; or
o Complete any transfer of affiliate shares until the closing date of
the business combination.
All the stockholder shares have been deposited in the Escrow Account where they
will be held in trust for the benefit of the recipients until we complete our
reconfirmation offering and close a business combination.
Each Selling Stockholder is an "underwriter" and shares registered on their
behalf may only be transferred in the manner and for the purposes described in
this prospectus. Shares registered on behalf of the Selling Stockholders may not
be resold in open market transactions. While they are not required to do so, the
Selling Stockholders may retain broker/dealers to represent them in connection
with the resale of their shares.
If all the acquisition shares are issued and all of the original issued
founders' shares are sold, none of the Selling Stockholders will own more than
seventeen percent (17%) of the outstanding stock of the combined merged
companies.
The following table identifies each of the Selling Stockholders, the number of
shares owned and the maximum number of shares to be owned by each Selling
Stockholder after a business combination.
The following listed holders own or have the rights to 1,850,000 shares of
Contrarian Public Investment I, Inc. common stock. Upon the effective date of
this Registration Statement and pursuant to this prospectus, the listed
stockholders will have the ability to sell their stock at any time. Should all
the Selling Stockholders sell their stock at or near the same time, there is a
significant likelihood that our stock price will fall.
32
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT OF TOTAL
COMMON SHARES SHARES PERCENTAGE OF
TO BE OFFERED TOTAL OWNED COMMON SHARES
FOR EACH SHARES OWNED AFTER OWNED
STOCKHOLDER'S PRIOR TO THIS THIS AFTER THIS
SELLING SHAREHOLDERS ACCOUNT OFFERING OFFERING OFFERING
(1) ADDRESS (2) (3) (4) (5)
- -------------------------------------------------------------------------------------------------------------------------
James H. Brennan, III 735 Broad Street, Suite 218 403,394 403,394 0 0
Chattanooga, Tennessee 37402
Douglas A. Dyer 735 Broad Street, Suite 218 403,394 403,394 0 0
Chattanooga, Tennessee 37402
Lane Capital Markets 735 Broad Street, Suite 218 200,000 200,000 0 0
(John Lane) Chattanooga, Tennessee 37402
Tommy Lee Graham P.O. Box 789 92,610 92,610 0 0
Linden, TN 37096
James F. Sattler 117 Forest Ave. 92,610 92,610 0 0
Chattanooga, TN 37405
Chester Berry 17075 Perdido Key Dr. 92,592 92,592 0 0
Unit 6E
Pensacola, FL 32507
Jack Eversull 735 Broad Street, Suite 218 50,000 50,000 0 0
Chattanooga, Tennessee 37402
Ian T. K. Kuah 2 Kingsford Close 46,300 46,300 0 0
Billingshurst, West Sussex
RH14 9HG
John L. Harper P.O. Box 48 46,296 46,296 0 0
Ariton, AL 36311
John Robert Jones, Jr. 100 Tom Reeve Drive 46,296 46,296 0 0
Carrollton, GA 30117
James P. Richmond, Jr. 1213 Ft. Stephenson Oval 46,296 46,296 0 0
Lookout Mt., TN 37350
William J. Ritger 623 Ocean Avenue 46,296 46,296 0 0
Sea Girt, NJ 08750
Daniel W. Hollis 3500 Lenox Rd., Ste. 1500 40,000 40,000 0 0
Atlanta, GA 30326
Elizabeth A. Davis 3614 Wimberly Lane 25,004 25,004 0 0
East Ridge, TN 37412
Clifton A. Baile 425 River Road 23,148 23,148 0 0
444 Animal Science Complex
Athens, GA 30602-2771
David E. Blake 9108 Brompton Court 23,148 23,148 0 0
Raleigh, NC 27615
Chester McKinney, Jr. 1034 Wildwood Park Dr. 23,148 23,148 0 0
Florence, AL 35630
Edward L. McMillan and McMillan LLC 23,148 23,148 0 0
Judith A. McMillan JTWROS 105 North Third St., Ste. 204
Greenville, IL 62246
R P Capital, LLC c/o Eric Richardson 23,148 23,148 0 0
(Eric Richardson) 10900 Wilshire Blvd., Ste.
500
Los Angeles, CA 90024-6525
Shai Stern and Michelle 43 Maple Avenue 23,148 23,148 0 0
Stern Cedarhurst, NY 11516
Christy Renee Barnette 4917 Eastern Valley Road 23,125 23,125 0 0
McCalla, AL 35111
CNA Trust FBO: Attn.: Juan Betancourt
Jackie L. Reed 3080 South Bristol St. 2nd 13,888 13,888 0 0
Flr.
Costa Mesa, CA 92526
J. Patterson Corey 215 Richardson Street 10,000 10,000 0 0
Lookout Mt., TN 37350
William T. Whorton and 118 Foggy Bottom Drive 9,259 9,259 0 0
Linda A. Whorton JTWROS Carrollton, GA 30116
Tango Sierra Ltd. c/o Tony Smith 6,500 6,500 0 0
6135 Airways Blvd., Ste. 1000
Chattanooga, TN 37421
Isra B. Thames, III P.O. Box 461 4,625 4,625 0 0
Reserve, LA 70084
- -------------------------------------------------------------------------------------------------------------------------
33
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT OF TOTAL
COMMON SHARES SHARES PERCENTAGE OF
TO BE OFFERED TOTAL OWNED COMMON SHARES
FOR EACH SHARES OWNED AFTER OWNED
STOCKHOLDER'S PRIOR TO THIS THIS AFTER THIS
SELLING SHAREHOLDERS ACCOUNT OFFERING OFFERING OFFERING
(1) ADDRESS (2) (3) (4) (5)
- -------------------------------------------------------------------------------------------------------------------------
Shawn F. Lyons 185-A Mahiai Place 4,302 4,302 0 0
Makawao, HI 96768
Andrew David Pittmann 3715 Rock Ivy Trail 1,850 1,850 0 0
Roswell, GA 30075
John G. Roark 2906 Kell Road 1,850 1,850 0 0
Signal Mtn., TN 37377
Jay Griffin Roark 2906 Kell Road 1,850 1,850 0 0
Signal Mtn., TN 37377
Clay Robinson Dorsey 334 Della Rose Circle 925 925 0 0
Birmingham, AL 35214
William C. Godbold 143 Cedarcrest Circle 925 925 0 0
Auburn, AL 36830
Joy Daine Laughlin 3348 Dunbrooke Drive 925 925 0 0
Birmingham, AL 35243
- -------------------------------------------------------------------------------------------------------------------------
1. The name of the person who has the right to vote the shares. In the case
of an entity the names in parenthesis are the names of all the individuals
that exercise voting and / or dispositive powers with respect to shares
offered for resale. None of the persons or entities listed is a
broker/dealer or an affiliate of a broker dealer.
2. The number of current shares being registered.
3. Represents the number of shares currently held by the individual or entity
including any warrants or options that are exercisable within sixty days
of the registration date.
4. Represents the total number of shares that could be held assuming all
shares registered by this registration statement are sold. 5. The
ownership percentage reflects the percentage of the total common shares
outstanding after the offering if 1% or greater.
SHARES ELIGIBLE FOR FUTURE SALE
We will have up to 16,850,000 shares of common stock issued and outstanding upon
the completion of a business combination.
SHARES ELIGIBLE FOR IMMEDIATE RESALE.
The Selling Stockholders shares in the amount of 1,850,000 shares and any
acquisition shares that are issued to stockholders of the combined companies who
are not classified as affiliates of the combined companies are eligible for
resale.
All direct and indirect offering costs incurred by us prior to the date of this
prospectus have been paid by Mr. Dyer and advanced to the company. Mr. Dyer has
agreed to pay and advance to the company all direct and indirect costs
associated with negotiating a business combination. We anticipate negotiating
from any target an "up front" contribution towards the cost of conducting our
reconfirmation offering and distributing the acquisition shares.
RESALE OF SHARES HELD BY AFFILIATES OF THE TARGET.
Rule 145 establishes a safe harbor exemption for the resale of securities
acquired in connection with certain business combinations. While it is possible
to structure a business combination that is not subject to Rule 145, we intend
to incorporate resale restrictions that follow the framework established by Rule
145 in the underlying contracts for any business combination. In general, we
intend to impose contractual resale restrictions with respect to all acquisition
and Selling Stockholders' shares that are issued to or purchased by the
following classes of persons:
o Officers and directors of the target; and
o Other persons who directly or indirectly own ten percent (10%) or
more of the combined companies' shares.
34
Acquisition and Selling Stockholders' shares held by such persons will be
treated as restricted securities that were first acquired on the closing date of
the business combination. Such shares will not be eligible for resale for a
period of one year after the closing date unless the transaction is registered
under the Securities Act. During the second year after the closing date,
acquisition and Selling Stockholders' shares held by the foregoing classes of
persons may be resold in transactions effected in compliance with all applicable
regulations and the provisions of paragraph (c), (e), (f) and (g) of Rule 144.
Any contractual or other arrangements that provide piggy-back or demand
registration rights for any holders of acquisition and founders' shares will be
described in our reconfirmation offering prospectus.
RESALE OF SHARES RETAINED BY OUR SELLING STOCKHOLDERS
Our Selling Stockholders own 1,850,000 shares of common stock which have been
registered for resale. All Selling Stockholders' shares that are not transferred
to unaffiliated third parties will be removed from registration in connection
with our reconfirmation offering. Each of our Selling Stockholders has agreed
that they will not sell or otherwise transfer any shares that are retained by
them after the completion of a business combination unless the transaction is
effected pursuant to an effective registration statement under the Act or an
available exemption from registration.
Any contractual or other arrangements that provide registration rights for any
of our officers will be described in our post-effective amendment and the final
prospectus for our reconfirmation offering.
RULE 144
Rule 144 provides a safe harbor exemption for the open market resale of
"restricted securities." The term "restricted securities generally includes
securities that were sold in an exempt transaction, or that are held by a person
who is an affiliate of the issuer of the securities. The term "affiliate" is
generally defined as any person who directly or indirectly controls, is
controlled by or under common control with the issuer of the securities.
Under Rule 144 as currently in effect, a holder of restricted securities that
are eligible for resale, will be entitled to sell in any rolling three-month
period a number of shares that does not exceed the greater of one percent (1%)
of the number of shares of common stock then outstanding, or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
To the extent that shares of a company are only quoted on the OTC Bulletin Board
or in the "Pink Sheets" the one percent (1%) limit will be applied without
regard to trading volume. Sales under Rule 144 are also limited by manner of
sale provisions, notice requirements and the availability of current public
information about our company.
The staff of the SEC's Division of Corporation finance has taken the position
that Rule 144 is not available to the officers, directors, promoters and
affiliates of blank check companies. Accordingly, our officers have agreed that
they will seek a "no-action" letter or other interpretive guidance from the SEC
before entering into a contract for the unregistered resale or other transfer of
any shares that are retained by them after the closing of a business
combination.
EXPERTS
The financial statements included in this prospectus have been audited by
Prescott Chatellier Fontaine & Wilkinson, LLP, independent public accountants,
as indicated in their report on such financial statements, and are included in
this prospectus in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
LEGAL MATTERS
We are not a party to any legal proceedings.
Certain legal matters, including the validity of the shares being issued, will
be passed upon for Contrarian by the law firm of Vial, Hamilton, Koch & Knox,
LLP.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a Form S-1 registration statement under the Securities Act with
the SEC. Our registration statement includes certain exhibits, schedules and
other materials that are not included in this prospectus. Although this
prospectus, which forms a part of the registration statement, contains all
material information included in the registration statement, other parts of the
registration statement have been omitted as permitted by rules and regulations
of the SEC. We refer you to the registration statement and its exhibits for
further information about our securities, this offering and us. The registration
statement and its exhibits can be inspected and copied at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004. You may obtain information about the public
reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site at that contains our Form S-1 and other reports, proxy and
information statements and information that we file electronically with the SEC.
(THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)
35
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditor F-2
Balance Sheet F-3
Statement of Operations and Loss F-4
Statement of Changes in Stockholders' Equity (Deficiency) F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 - F-10
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the
Board of Directors and Stockholders of
CONTRARIAN PUBLIC INVESTMENT I, INC.
(A Development Stage Company)
We have audited the accompanying balance sheet of CONTRARIAN PUBLIC
INVESTMENT I, INC. (a development stage company) as of June 30, 2004, and the
related statements of operations and loss accumulated in the development stage,
stockholders' equity (deficiency) and cash flows for the period August 21 2003
(date of inception) to June 30, 2004. 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 audit.
We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). These standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides 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 CONTRARIAN PUBLIC INVESTMENT
I, INC. as of June 30, 2004, and the results of its operations and its cash
flows for the period August 21, 2003 (date of inception) to June 30, 2004 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a development stage enterprise and has
focused its efforts on the raising of capital and acquiring existing businesses
through merger or acquisition. The Company has not yet commenced its principal
operations. Accordingly, the Company has no operating history, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans with regard to these matters are discussed in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Prescott Chatellier Fontaine & Wilkinson LLP
Providence, Rhode Island
August 12, 2004
F-2
CONTRARIAN PUBLIC INVESTMENT I, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
Unaudited
June 30, 2004 December 31, 2004
------------- -----------------
TOTAL ASSETS .............................................................. $ $
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Total liabilities (accounts payable) ...................................... $
Stockholders' equity (deficiency):
Preferred stock, $0.001 par value; 50,000,000 shares authorized common stock,
$0.001 par value, 50,000,000 shares authorized 1,850,000 issued and
outstanding ................................................................ 1,850 1,850
Additional paid-in-capital .................................................. 30,000
Deficit accumulated during the development stage ............................ (1,850) (30,000)
---------------------------
Total stockholders' equity (deficiency)
---------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) ................... $ $
===========================
SEE NOTES TO FINANCIAL STATEMENTS
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-3
CONTRARIAN PUBLIC INVESTMENT I, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND LOSS
(Unaudited)
August 21, 2003 August 21, 2003
Date of (Unaudited) Date of
Inception) to July 1, 2004 to Inception to
June 30, 2004 December 31, 2004 December 31, 2004
------------- ----------------- -----------------
Revenue................................................ $ $ $
-----------------------------------------------------------
Expenses:
Professional fees.................................... 1,850 30,000 31,850
-----------------------------------------------------------
Total............................................ 1,850 30,000 31,850
-----------------------------------------------------------
Net loss............................................... $(1,850) $(30,000) $(31,850)
===========================================================
Basic and fully diluted loss per common share.......... (0.00) (0.02) (0.02)
Accumulated loss, beginning of period.................. (1,850)
Net loss............................................... $(1,850) $(30,000) $(31,850)
-----------------------------------------------------------
Accumulated loss, end of the period.................... $(1,850) $(31,850) $(31,850)
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-4
CONTRARIAN PUBLIC INVESTMENT I, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Deficit
Accumulated
Common Stock Additional During the
Paid-In Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance at August 21, 2003 (date of
inception................................
Net loss for period ended June 30, 2004.. $(1,850) ($1,850)
Issuance of common stock at
inception for services................... 1,514,194 $1,514 1,514
Issuance of common stock for services.... 335,806 336 336
-------------------------------------------------------------------------------
Balance at June 30, 2004................. 1,850,000 $1,850 ($1,850) 0
Payments by principal shareholder
for professional services................ $30,000 30,000
Net loss for six months ended
December 31,2004 (Unaudited)............. (30,000) (30,000)
-------------------------------------------------------------------------------
Balance (deficiency) at
December 31, 2004 (Unaudited)............ 1,850,00 $1,850 $(31,850) $ 0
-------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
CONTRARIAN PUBLIC INVESTMENT I, INC.
(A Development Stage Company)
JUNE 30, 2004
(Information as of and for the period ended December 31, 2004 is Unaudited)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Development Stage Operations
Contrarian Public Investment I, INC. (a Development Stage Company)
(the Company) was incorporated on August 21, 2003, in the State of
Colorado, for the purpose of conducting a public distribution of
securities (the Proposed Distribution) and then effecting a merger,
acquisition or other business combination transaction (Business
Combination) with an unidentified privately-held company (a Target). The
Company's business strategy is also referred to as a "blind pool" because
neither the management of the Company nor the persons who acquire
securities in the Proposed Distribution know what the business of the
Company will ultimately be. The Company is in the development stage and
has had no significant business activity to date. The Company has adopted
a fiscal year end of June 30, however upon merger the Company intends to
adopt the fiscal period of the target.
Stock-Based Compensation
The Company will account for the future issuance of stock options to
employees and directors in accordance with Accounting Principles Board
Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and
related interpretations. Pursuant to APB 25, compensation expense is
recorded over the vesting period only if the estimated fair value of the
underlying stock exceeds the exercise price. Stock options granted to
consultants will be accounted for under the fair value method, in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation. The
Company records stock issued to non-employees for products or services
(including to pay outstanding debt and the related interest) at the
estimated fair value of the stock or the estimated fair value of the goods
or services received, whichever is more readily determinable. Because
there is not a market for the Company's common stock, the Company
typically records transactions of this type based upon the estimated fair
value of the goods or services received.
Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
Income Taxes
The Company accounts for income taxes based upon the liability
method as required by FASB Statement No. 109, "Accounting from Income
Taxes." Under FASB Statement No. 109, deferred tax assets and liabilities
are determined based on differences between financial reporting and the
tax basis of assets and liabilities, and are measured using the enacted
tax rates and laws that will be in effect when the differences are
expected to reverse.
Recently Issued Accounting Pronouncements
In June 2003 the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. In November 2002, the FASB
issued Interpretation No. 45 (FIN 45), Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. The Company has evaluated the
impact of the adoption of these standards and does not believe that their
adoption will have an impact on its financial position and results of
operations.
F-6
SFAS No. 149, Amendment of Statement 133 on "Derivative Instruments
and Hedging Activities," was issued in April 2003 and amends and clarifies
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated
after June 30, 2003. We do not believe that the adoption of SFAS No. 149
will have a material impact on our financial position or results of
operations.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
Statement No. 123"("SFAS 148"). SFAS 148 amends FASB Statement No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods
of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation. It also
amends the disclosure provisions of that Statement to require prominent
disclosure about the effects on reported net income of an entity's
accounting policy decisions with respect to stock-based employee
compensation. Finally, this Statement amends Accounting Principles Board
("APB") Opinion No. 28, "Interim Financial Reporting", to require
disclosure about those effects in interim financial information. SFAS 148
is effective for financial statements for fiscal years ending after
December 15, 2002. The Company will continue to account for stock-based
employee compensation using the intrinsic value method of APB Opinion No.
25, "Accounting for Stock Issued to Employees," but has adopted the
enhanced disclosure requirements of SFAS 148.
The FASB issued Interpretation (FIN) No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others, in November 2002 and FIN No. 46, Consolidation
of Variable Interest Entities, in January 2003. FIN No. 45 is applicable
on a prospective basis for initial recognition and measurement provisions
to guarantees issued after December 2002; however, disclosure requirements
are effective immediately. FIN No. 45 requires a guarantor to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligations undertaken in issuing the guarantee and expands the required
disclosures to be made by the guarantor about its obligation under certain
guarantees that it has issued. The adoption of FIN No. 45 did not have a
material impact on our financial position or results of operations. FIN
No. 46 requires that a company that controls another entity through
interest other than voting interest should consolidate such controlled
entity in all cases for interim periods beginning after June 15, 2003. We
do not believe the adoption of FIN No. 46 will have a material impact on
our financial position or results of operations.
2. STOCKHOLDERS' EQUITY
On August 21, 2003, the Company issued one million, five hundred
fourteen thousand, one hundred ninety four (1,514,194) shares of its $.001
par value common stock at inception in exchange for legal services paid by
related parties, valued at the fair market value of the legal services
provided to the Company in the amount of $1,514. The shares were issued
pursuant to Section 4(2) of the Securities Act of 1933 (the "Act") and are
restricted securities within the meaning of Rule 144 of the Act.
Also at inception, on August 21, 2003, the Company issued three
hundred thirty five thousand, eight hundred six (335,806) shares of its
$.001 par value common stock for professional services, valued at the fair
market value of the legal services provided to the Company in the amount
of $336. The shares were issued pursuant to Section 4(2) of the Securities
Act of 1933 (the "Act") and are restricted securities within the meaning
of Rule 144 of the Act.
F-7
The Company's Board of Director's has the power to issue any or all
of the authorized but unissued Common Stock without stockholder approval.
The Company currently has no commitments to issue any shares of Common
Stock other than the gift shares. However, the Company will, in all
likelihood, issue a substantial number of additional shares in connection
with a Business Combination. Since the company expects to issue additional
shares of Common Stock in connection with a Business Combination, the
ultimate ownership of the gift share donees is likely to be less than 5%
of the issued and outstanding common stock of the Company. It is
impossible to predict whether a business combination will ultimately
result in dilution to donees. If the target has a relatively weak balance
sheet, a Business Combination may result in significant dilution. If a
target has a relatively strong balance sheet, there may be no dilution.
The Company authorized 50,000,000 shares of Series A convertible
preferred stock with a par value of $.001 per share. Currently, there are
no shares outstanding. Each share of preferred stock can be converted into
one share of common stock and each share is entitled to one vote, voting
together with the holders of shares of common stock. There are no shares
of preferred stock issued or outstanding.
The Board of Directors of the Company is empowered, without
stockholder approval, to issue up to 50,000,000 shares of "blank check"
preferred stock
3. EARNINGS PER SHARE
The Company accounts for earnings per share under Statement of
Financial Accounting Standards No. 128 "Earnings Per Share", which
requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS"). The computation of Basic EPS
is computed by dividing net income by the weighted average number of
outstanding common shares during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period.
The shares used in the computation are as follows:
June 30, and December 31, 2004
------------------------------
Basic and Diluted EPS......... 1,850,000
4. RELATED PARTY TRANSACTIONS
At inception a total of 1,514,194 shares of common stock were issued
to related parties in exchange for payment of legal and professional
services provided to Contrarian Public Investment I, Inc. in the amount of
$1,850.
Professional fees have been paid for by a principal shareholder in
the amount of $30,000. In accordance with SAB Topic 5-T (Accounting for
expenses or liabilities paid by principal shareholders) the amount paid
for professional fees have been credited to paid-in-capital.
5. INCOME TAXES
Due to the current period's operating loss, the Company has no
provision for income taxes for 2004.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
The Company's net deferred tax asset balances are attributable to net
operating loss carryforwards. The deferred tax asset was calculated using
a blended rate of 40% for federal and state in com taxes. The Company's
deferred tax asset consisted of the following:
F-8
June December
---- --------
Deferred tax asset ............................................. $ 800 $ 13,000
Valuation allowance ............................................ (800) (13,000)
-------- --------
Net deferred tax assets recognized on the accompanying balance
sheets ..................................................... $ 0 $ 0
======== ========
The components of the income tax provision (benefit) consisted of
the following for the periods ended June 30, 2004 and December 31, 2004.
June December
---- --------
Tentative tax provision (benefit) .............................. $ 800 $ 12,200
Change in valuation allowance .................................. 800 12,200
-------- --------
Net income tax provision (benefit) ..................... $ 0 $ 0
======== ========
The Company has a net operating and economic loss carryforward of
approximately $1,850 available to offset future federal and state taxable
income through 2024 as follows:
Year of Expiration Amount
2024 $1,850
======
6. INCENTIVE STOCK PLAN
The Company's 2003-2004 Incentive Stock Plan was adopted and
approved in connection with the organization of the Company. The common
stock reserved for issuance under the plan will be the lesser of 1,000,000
shares, or 10% of the total number of shares outstanding after the closing
of a Business Combination.
There were no stock options or other incentive awards outstanding at
June 30, 2004 or December 31, 2004.
The class of persons eligible to participate in the plan includes
all full-time and part-time employees of the Company, provided that the
eligible participants do not include employees who are eligible to receive
awards under the terms of any employment contract or specialty plan
adopted by us in the future. The plan permits the grant of a variety of
incentive awards including (i) non-qualified stock options, (ii) incentive
stock options, (iii) shares of restricted stock, (iv) shares of phantom
stock, and (v) stock bonuses. In addition, the plan allows us to grant
cash bonuses that will be payable when an employee is required to
recognize income for federal income tax purposes because of the vesting of
shares of restricted stock or the grant of a stock bonus.
7. GOING CONCERN
The Company has been in the development stage since its inception in
2003 to present and has incurred losses from its inception through June
30, 2004 amounting to $1,850 and through December 31, 2004 amounting to
$31,850. The Company's ability to meet its future obligations is dependent
upon its ability to complete its SEC registration, raise capital and close
on a potential business combination as discussed in Note 1. These factors
raise doubt about the Company's ability to continue as a going concern.
Management is actively pursuing merger and business combinations and
believes that the necessary capital and the future acquisition of business
will take place and will provide for the Company to continue as a going
concern.
F-9
The Company's financial statements are prepared using generally
accepted accounting principles in the United States of America applicable
to a going concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. In order to
continue as a going concern, the Company will need additional capital
resources. Management's plans to obtain such resources for the Company
include (1) obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses, and (2) seeking out and
completing a merger with an existing operating company. However,
management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is
dependent upon management's ability to successfully accomplish the plans
described in the preceding paragraphs and eventually secure other sources
of financing and attain profitable operations. The accompanying financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
F-10
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses which will be paid by us in
connection with the issuance and distribution of the securities being
registered. With the exception of the registration fees, all amounts shown are
estimates.
Registration fee $ 2
Blue sky fees and expenses (including legal and filing fees 0
Printing expenses (other than stock certificates) 0
Legal fees and expenses (other than blue sky) 25,000
Accounting fees and expenses 10,000
Transfer Agent and Registrar fees and expenses 0
Miscellaneous expenses 1,850
-------
Total: $36,850
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Model Business Corporation Act of the State of Colorado ("CMBCA") provides,
in general, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation),
because the person is or was a director or officer of the corporation. Such
indemnity may be against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and if, with respect to any criminal
action or proceeding, the person did not have reasonable cause to believe the
person's conduct was unlawful.
The CMBCA provides, in general, that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor because the person is or was a
director or officer of the corporation, against any expenses (including
attorneys' fees) actually and reasonably incurred by the person in connection
with the defense or settlement of such action or suit if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation.
The CMBCA provides, in general, that a corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the corporation against any liability asserted against the person
in any such capacity, or arising out of the person's status as such, whether or
not the corporation would have the power to indemnify the person against such
liability under the provisions of the law.
The Company's Articles of Incorporation (incorporated by reference herein)
provides for indemnification of directors, officers and other persons as
follows:
To the fullest extent permitted by the CMBCA as the same now exists or may
hereafter be amended, the Corporation shall indemnify, and advance expenses to,
its directors and officers and any person who is or was serving at the request
of the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation, by action of its board of directors, may provide indemnification or
advance expenses to employees and agents of the Corporation or other persons
only on such terms and conditions and to the extent determined by the board of
directors in its sole and absolute discretion.
The indemnification and advancement of expenses shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corp oration as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability.
38
The indemnification and advancement of expenses, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such officer or director. The indemnification and advancement
of expenses that may have been provided to an employee or agent of the
Corporation by action of the board of directors, shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be an employee or agent of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person, after the time such person
has ceased to be an employee or agent of the Corporation, only on such terms and
conditions and to the extent determined by the board of directors in its sole
discretion.
THE COMPANY'S BY-LAWS PROVIDES THAT:
Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, because he
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the CMBCA, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide before such amendment), against all
expense, liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith; provided, however, that,
except as provided in the section "Right of Indemnitees to Bring Suit" with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such Indemnitee in connection with a proceeding (or part
thereof) initiated by such Indemnitee only if such proceeding (or part thereof)
was authorized by the board of directors of the Corporation.
RIGHT TO ADVANCEMENT OF EXPENSES.
The right to indemnification conferred in the section "Right to Indemnification"
of this Article shall include the right to be paid by the Corporation the
expenses (including attorney's fees) incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the CMBCA
requires, an advancement of expenses incurred by an Indemnitee in his capacity
as a director or officer (and not in any other capacity in which service was or
is rendered by such Indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such Indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal that such Indemnitee is not entitled
to be indemnified for such expenses under this section or otherwise. The rights
to indemnification and to the advancement of expenses conferred in this section
and the section "Right to Indemnification" of this Article shall be contract
rights and such rights shall continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators. Any repeal or modification of
any of the provisions of this Article shall not adversely affect any right or
protection of an Indemnitee existing at the time of such repeal or modification.
RIGHT OF INDEMNITEES TO BRING SUIT.
If a claim under the section "Right to Indemnification" or "Right to Advancement
of Expenses" of this Article is not paid in full by the Corporation within sixty
(60) days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the Indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Indemnitee shall also be entitled to be paid the expenses of
prosecuting or defending such suit. In (1) any suit brought by the Indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met any applicable standard for indemnification set forth in
the CMBCA.
Neither the failure of the Corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the Indemnitee is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct set forth in the CMBCA, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
39
NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification and to the advancement of expenses conferred in
this Article shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, the Corporation's Articles of
Incorporation as amended from time to time, these By-Laws, any agreement, any
vote of stockholders or disinterested directors or otherwise.
INSURANCE.
The Corporation may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
CMBCA.
INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation. The directors and officers of our
company are covered by a policy of liability insurance.
ITEM 15. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
The following information sets forth all securities of the Company sold by it
since inception, which securities were not registered under the Securities Act
of 1933, as amended. There were no underwriting discounts and commissions paid
in connection with the issuance of any shares of common stock prior to the date
of this Registration Statement. A total of 1,850,000 shares were issued to the
founding stockholders upon our incorporation. Two of our stockholders who are
affiliates of the company resold or gifted 793,212 shares in reliance upon
Sections 4(1) and 4(6) of the Securities Act, which provides exemption for
transactions not involving the issuer or sold securities to accredited
investors. All stock sold was sold solely to accredited investors. All shares
were issued at the time of organization of the Company and a total of 1,850,000
common stock shares have been issued. Each certificate evidencing such shares of
Common Stock bears an appropriate restrictive legend and "stop transfer" orders
are maintained on our stock transfer records there against. None of these sales
involved (i) participation by an underwriter or a broker-dealer, or (ii) general
solicitation or advertising of the offering.
40
EXHIBITS
ITEM 16. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
**Exhibit 3.1 Articles of Incorporation
**Exhibit 3.2 Bylaws
**Exhibit 4.1 Specimen Stock Certificate **Exhibit 4.2 Form Escrow Account
Agreement between the Registrant and escrow agent (amended)
*Exhibit 5.1 Opinion of the Law Offices of Vial, Hamilton, Koch & Knox, LLP,
regarding the legality of the securities being offered hereby.
**Exhibit 10.1 2004 Stock Plan of Contrarian Public Investment I, Inc.
*Exhibit 23.1 Consent of Counsel (contained in Exhibit 5.1)
*Exhibit 23.2 Consent of Prescott Chatellier Fontaine & Wilkinson, LLP
* Filed herewith
** Previously filed
ITEM 17. UNDERTAKINGS
Registrant hereby undertakes:
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;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the 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;
(iii) To include any 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, each post-effective amendment that contains a form of prospectus
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.
4. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to Item 14 of this Part II to the registration
statement, or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant 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, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against the public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
5. That for purposes of determining any liability under the Securities Act,
the information omitted form the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
6. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chattanooga, State of
Tennessee, on the 25th day of February, 2005.
CONTRARIAN PUBLIC INVESTMENT I, INC.
/s/ Douglas A. Dyer
-------------------------------------
President and Chief Financial Officer
Each of the officers and directors of Contrarian Public Investment I, Inc. whose
signature appears below hereby constitutes and appoints Douglas A. Dyer, as his
true and lawful attorney-in-fact and agent, with full power of substitution,
with the power to act alone, to sign and execute on behalf of the undersigned
any amendment or amendments to this registration statement on Form S-1, and to
perform any acts necessary to be done in order to file such amendment, and each
of the undersigned does hereby ratify and confirm all that such attorney-in-fact
and agent, or his substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Douglas A. Dyer President and Director February 25, 2005
Chief Operating and Financial Officer
/s/ John D. Lane Director February 25, 2005
/s/ Jack Eversull Secretary and Director February 25, 2005
42