As filed with the Securities and Exchange Commission on December 11 , 2001
Registration No. 333-69784
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NUMBER 2 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DEMAND FINANCIAL INTERNATIONAL, LTD.
(Name of Small Business Issuer in its Charter)
NEVADA 5812 91-1997728
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(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
141 ADELAIDE STREET WEST, STE 1004, TORONTO, ONTARIO M5H 3L5
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(416) 628-5264
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(Address and telephone number of principal executive offices)
Mitchell Geisler, President
Demand Financial International, Ltd.
141 Adelaide Street West, Suite 1004
Toronto, Ontario, Canada M5H 3L5
(416) 777-0477 Ext. 227
(Name, Address and Telephone Number of Agent for Service)
Copy to:
Andrew D. Hudders, Esq.
Graubard Miller
600 Third Avenue - 32nd Floor
New York, NY 10016
Telephone: (212) 818-8800
Facsimile (212) 818-8881
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 under Rule 415 under the Securities Act of 1933, as
amended, check the following box: [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Title of Each Proposed Proposed
Class of Maximum Maximum Amount of
Securities to Amount to be Offering Price Aggregate Registration
be Registered Registered Per Share Offering Price Fee
- --------------------------------------------------------------------------------
Common Stock, 21,000,000 $0.05 $1,050,000 $262.50
$.001 shares
par value
- --------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
Information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities, and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted or would be unlawful prior to
registration or qualification under the securities laws of any state.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 11 , 2001
21,000,000
Shares of Common Stock
DEMAND FINANCIAL INTERNATIONAL, LTD.
Up to 20,000,000 shares of our common stock are being sold by an officer
of Demand Financial on a self-underwritten, best efforts basis, with no minimum.
The offering by us will commence on the date of this prospectus and will
continue for nine months or until all the shares offered are sold, if earlier.
We will not escrow the funds received in the purchase of our common stock. We
will issue certificates for common stock purchased from us within ten business
days after receipt of a fully executed subscription agreement that is accepted
by us and good funds for the purchase are in our account.
Up to 1,000,000 shares of common stock are being sold by selling
stockholders. These shares will be sold through any stock quotation medium or
exchange or in privately negotiated transactions, when and in amounts as they
decide and at the price set forth below. We will not receive any of the proceeds
from the sale of these shares.
No public market exists for our common stock. A public market may not
develop after the sale of the shares.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Per Share Total
Public offering price........... $.05 $1,050,000 (1)
(1) Assumes all 21,000,000 shares offered are sold. The expenses of this
offering, estimated at $50,000, will be paid by and deducted from the total
proceeds to Demand Financial International, Ltd. We will not receive any of
the proceeds from the 1,000,000 shares being offered by selling
stockholders.
The date of this Prospectus is __________ , 2001
3
TABLE OF CONTENTS
PAGE
----
Prospectus Summary 5
Risk Factors 6
Use of Proceeds 8
Dividend Policy 9
Determination of Offering Price 9
Dilution of the Price Paid for the Shares 10
Capitalization 11
Management's Discussion and Analysis of Results of Operations 11
Business 12
Management 15
Executive Compensation 15
Principal Stockholders 16
Shares Eligible for Future Resale 18
Selling Stockholders 18
Plan of Distribution 21
Legal Matters 23
Experts 23
Additional Information 23
Index to Financial Statements F-1
Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 39
4
PROSPECTUS SUMMARY
This summary highlights information set forth elsewhere in this
prospectus. You should read the entire prospectus carefully, paying particular
attention to the section entitled Risk Factors.
The Company
Demand Financial International, Ltd., intends to develop a caviar lounge,
restaurant and piano bar business situated high a-top famous skylines in North
America. As of December 5, 2001 our only asset was $2,340 in cash and we may not
be successful in obtaining adequate capital to continue operations.
Our strategy is to create and operate a high-end food and entertainment
chain, which combines a caviar lounge, restaurant and piano bar with a
sophisticated atmosphere. Our venues will be located in well-known high-rise
towers in the financial districts of major cities. Our target market will be
professionals from businesses and sophisticated social communities. We are
currently searching for a location in the Toronto, Canada area for our initial
flagship restaurant. If we are successful with this initial operation, we will
seek to expand into other major cities.
Our product focus will be on a selection of quality caviar, fresh seafood,
vintage wines, fine liquors and liqueurs, a skyline view and piano bar.
Demand Financial is a development stage company. We have had no revenues
to date and expect to incur substantial expenses in implementing our plan. We
cannot indicate now if we will ever be profitable. Additionally, we had a net
working capital deficit of $15,100 as of September 30, 2001 and no other form of
financial commitment for the funding of our business plan. Our independent
auditors have issued a qualified opinion that raises substantial doubt as to our
ability to continue as a going concern. We cannot give any assurance that this
offering will be successful or that we will be able to locate any funding or
enter into any agreements that will provide the required operating capital.
The Offering by Demand Financial
Securities offered by us......................Up to 20,000,000 shares of common
stock.
Securities offered by
selling shareholders..........................Up to 1,000,000 shares of common
stock
Common stock outstanding
prior to the offering.........................10,000,000 shares
Common stock to be outstanding
after the offering............................30,000,000 shares (assuming all
20,000,000 shares are sold)
Use of proceeds...............................We intend to use the proceeds of
this offering as follows:
o Repayment of offering expenses
o Contracting with outside
consultants and architect
o Securing a location and lease
o Construction expenses
o Working capital
Subscription method...........................Investors will be asked to
complete an investor subscription
agreement and return it to us with
the purchase price.
Certificate issuance..........................Within ten business days after
receipt and acceptance of investor
subscription agreement and good
funds, a certificate for the
shares will be sent to the
address supplied.
Demand Financial was incorporated in Nevada on December 31, 1996. The
mailing address of our principal executive office is 141 Adelaide Street West,
Suite 1004 Toronto, Ontario, Canada M5H 3L5 and the telephone number is (416)
777-0477 Ext. 227.
5
RISK FACTORS
You should consider carefully the following risks before you decide to
invest in our common stock. Our business, financial condition or results of
operations could be materially adversely affected by any of these risks. Any of
these risks could cause the trading price of our common stock to decline, and
you could lose all or part of your investment.
Risks Relating to Our Business
We have no long-term history of operations upon which investors may
evaluate our business plan and performance.
We are in the early stages of implementing our business plan. We have not
engaged in any substantive operations to date and have no revenues from
operations. Since inception we have accumulated a deficit of $29,083 through
September 30, 2001. Therefore, investors will not have a track record with which
to judge our ability to achieve our business objectives. Investors must evaluate
an investment in Demand Financial based on management's expectations and their
own evaluation of our prospects.
Our independent auditors have issued their opinion with a going concern
qualification.
Because of our accumulated deficits, our lack of revenues sufficient to
support our operations and our limited capital resources, our independent
auditors have issued an audit opinion that raises substantial doubt about our
ability to continue as a going concern.
Our ability to operate will depend on our ability to face all the challenges of
a new business.
We expect to face many challenges in the development of our business. An
investment in Demand Financial must be considered in light of the risks,
expenses and difficulties of companies in the early development stage.
Our success will depend on creating goodwill and branding to attract customers
and differentiate our venues from other restaurants and bars.
Our ultimate success is dependent on the goodwill we generate and the
brand name recognition we achieve over time as a high-end food and entertainment
chain. If we are unable to create goodwill and branding associated with our
facilities, we believe we will not be adequately differentiated in the market
place to attract the kinds of customers we plan to focus on and to generate
sufficient revenues that will cover our operations.
Our industry is highly competitive and subject to rapid changes in customer
taste.
Unless we create the kind of environment that attracts customers from
their restaurant, bar and entertainment alternatives, we will not be successful
in achieving adequate revenues. Our competitors include well established and
well known restaurants as well as new venues that may open from time to time.
Our business is also affected by rapid changes in customer taste. So if we do
not sustain recognition in our market niche or differentiation, we may not
continue to attract customers. A substantial loss in customers or a rejection of
our restaurant style will adversely affect Demand Financial.
The current business downturn and other recent events could greatly hamper our
ability to start a successful upscale restaurant.
Our business plan is to locate our restaurant business a-top well-known
high-rise buildings. Due to the recent events of September 11, 2001, attracting
customers will be difficult as long as there is uncertainty about the security
of such locations. In addition, the current economic downturn will also hinder
our ability to start an upscale restaurant, as consumers will likely have less
discretionary funds to spend on higher priced hospitality services.
6
National and local economic conditions may adversely affect our business plan
and/or operations.
The restaurant and entertainment industry often is greatly effected by
changes in the economy because it competes for the discretionary dollars of
customers. If there is an adverse change in the local or national economic
climate, our business will be affected because it will be harder to attract
customers.
Risks Relating to this Offering
Without a successful offering, we will not be able to implement our business
plan.
We are dependent on raising the proceeds in this offering to fund our
operations during implementation of our business plan. If we do not raise
sufficient capital, we will have to curtail aspects of our operations or abandon
them altogether. Revising the business plan may result in our not being able to
continue in business as planned.
This offering is being made without an underwriter; therefore, it is possible
that Demand Financial will not sell all the shares offered.
The offering is self-underwritten. This means Demand Financial will not
engage the services of an underwriter to sell the shares. We intend to sell the
shares through the efforts of one of our officers, and we will not pay him any
commissions. Without the services of a professional finance firm, it is possible
that we will not sell all the shares offered. If Demand Financial does not raise
the full amount being sought, it will have to modify its business plan to reduce
its proposed expenditures. A substantial reduction in the business plan may
impair the business and financial ability of Demand Financial, and it may be
required to cease operations.
This offering is being made without any escrow of investor funds or provisions
to return funds.
When investors make a subscription for our common stock, the purchase
price will not be placed in any escrow account and will become a general asset
of Demand Financial. There is no minimum offering amount. Subscriptions will be
accepted on a rolling basis. There are no investor protections for the return of
invested monies.
Because there is no minimum offering requirement, early investors in this
offering bear a disproportionate risk of Demand Financial being able to operate
on the funds raised.
This offering is made on a rolling basis with no minimum amount having to
be raised. Therefore, early investors will participate in the offering with no
assurance that a sufficient amount of funds will be raised for the intended
uses. If insufficient funds are the result of this offering, Demand Financial
may have to limit the extent to which it will be able to implement its business
plan, but investors will not be able to get their investment funds back.
The offering price has been arbitrarily established.
The offering price has been arbitrarily established by the board of
directors. It is not based on market factors, business appraisal or other
established criteria of business valuation. We have not consulted with any
finance professionals to determine the offering price. Consequently, investors
in this offering may be overpaying for their aggregate portion of Demand
Financial at this time. Moreover, after the offering, the common stock may not
trade at or above the offering price.
The officers will have broad discretion in the use of proceeds from this
offering.
Although we have allocated the proceeds from this offering among several
categories of uses, they may be changed by management at any time. The amount
allocated to a use also may be changed depending on management's determination
about the best use of the funds at a particular time. Therefore, investors must
rely entirely on the business judgment of management in the use of the offering
proceeds and to determine how and what portions of the business plan will be
implemented.
7
There has been no prior market for our common stock and the market price of the
shares may fluctuate.
There has been no market for our common stock prior to this offering. The
price of our common stock after the offering may fluctuate widely and may trade
at prices significantly below its initial public offering price. We cannot
guarantee that a trading market for our common stock will develop or, if a
market does develop, that the depth of the trading market for the common stock
or the prices at which the common stock will trade.
There can be no assurance that a public market will develop for the common
stock.
We plan to take action so that our common stock will trade on the
Over-the-Counter Bulletin Board, operated by NASDAQ. Because the OTC BB is a
broker driven market, before our stock may be listed and quoted, brokers must
apply for it to be listed and then establish market levels for it to trade. We
must wait until brokers take the appropriate action before our common stock will
trade in that market. There can be no assurance that a market will develop for
the common stock.
Because the common stock of Demand Financial will be deemed "penny stock" under
the Securities and Securities Exchange, investors may not be readily able to
resell the shares acquired in the offering in the public markets.
The shares are defined as penny stock under the Securities and Exchange
Act of 1934 and rules of the SEC. These rules impose additional sales practice
and disclosure requirements on broker-dealers who sell our shares to persons
other than certain accredited investors. For covered transactions, a
broker-dealer must make a suitability determination for each purchaser and
receive a purchaser's written agreement prior to sale. In addition, the
broker-dealer must make certain mandated disclosures in transactions of penny
stocks. Consequently, these rules may affect the ability of broker-dealers to
make a market in our common stock and may affect the investor's ability to
resell shares purchased in this offering.
Our directors and officers will have substantial ability to control our business
direction.
After the offering, assuming the sale of all the common stock, one of our
directors and officers will own about 30% of the common stock outstanding. If
less shares are sold in the offering, the percentage will be higher. Therefore,
this person will be in a position to substantially influence the election of our
directors, if not actually control it. Consequently, he will be able to
influence the business operations of Demand Financial.
USE OF PROCEEDS
The offering is on a best efforts, no minimum basis. The principal use of
proceeds will be to locate and build out our initial restaurant and piano bar.
Below are four alternatives of the application of proceeds that may be received
at various levels of stock sold in the offering.
Based on Based on Based on Base on
25% of 50% of 75% of 100% of
Activity Proceeds Proceeds Proceeds Proceeds
- -------- -------- -------- -------- ----------
Cost of the
Offering $50,000 $50,000 $50,000 $50,000
Initial Inventory $35,000 $35,000 $50,000 $75,000
Advertising $10,000 $30,000 $50,000 $75,000
Securing location
And lease $40,000 $60,000 $80,000 $100,000
Hiring of outside
Consultants and architects $15,000 $25,000 $30,000 $50,000
Construction $60,000 $250,000 $390,000 $500,000
Ongoing Legal & Accounting
fees for being a public
company $30,000 $30,000 $30,000 $30,000
Working Capital $10,000 $20,000 $70,000 $120,000
-------- -------- -------- ----------
Total $250,000 $500,000 $750,000 $1,000,000
-------- -------- -------- ----------
8
We believe the average start-up costs for a restaurant in today's
marketplace ranges from $80 to $125 per square foot. As we are targeting the
high-end market, we have budgeted start-up costs based on the high end of this
range. Our budget includes costs associated with the design, architecture,
engineering, contracting, legal fees, restaurant equipment, assets, fixtures,
initial staff training and salaries, and initial inventory. Our budget also
anticipates that property lease payments will be at a premium of $75, gross, per
square foot. If the full amount of the offering is not received, we will have to
scale back in such areas as a prime location and other amenities included in our
plan. We cannot give any assurance that even if we raise the full amount of the
offering that we will be able to find a suitable location or build out the
restaurant as planned.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.
Although we have made allocations for the use of the net proceeds of the
offering, management may change the allocations in its sole discretion based on
the amount of funds actually received. If less than all the shares are sold, it
correspondingly will limit our ability to build out our initial restaurant in
accordance with our business plan. We also would reduce the working capital
allocation and try to reduce the other anticipated expenses. Significant
reductions in our business plan or delays in taking action may impair our
ability to implement our business plan causing us to curtail all or substantial
parts of our potential business operations.
In addition to changing allocations because of the amount of proceeds
received, we may change the uses of proceeds because of required changes in our
business plan or management decisions based on arbitrary decision making.
Investors should understand that we have wide discretion over the use of
proceeds. Therefore, our decisions may not be in line with the initial
objectives of investors who will have little ability to influence these
decisions other than through the process of changing the directors of Demand
Financial International, Ltd. by stockholder action.
DIVIDEND POLICY
We have never paid any dividends. We can make no assurances that our
proposed operations will result in sufficient revenues to enable profitable
operations or to generate positive cash flow. For the foreseeable future, we
anticipate that we will use any funds available to us to finance the growth of
our operations and that we will not pay cash dividends to holders of common
stock. The payment of dividends, if any, in the future is within the discretion
of our board of directors and will depend on our earnings, capital requirements,
restrictions imposed by lenders and on our financial condition, having funds
legally available to pay dividends and other relevant factors.
DETERMINATION OF OFFERING PRICE
The price of the shares was arbitrarily determined in order for Demand
Financial to raise up to a total of $1,000,000 in this offering. The offering
price bears no relationship whatsoever to our assets, earnings, book value, or
other established criteria of value. We also did not consult finance
professionals to help establish the offering price. There is no assurance that
the price paid for a share in the offering will be recoverable by a sale of the
shares in the public market, or that a public market will value Demand Financial
as we have determined its value.
9
DILUTION
At September 30, 2001, we had a negative net tangible book value of
$(15,083) or $(0.002) per share of common stock. Net tangible book value is
equal to total tangible assets minus total liabilities. Our net tangible book
value per share is calculated by dividing our net tangible book value by
10,000,000, the total number of shares of common stock outstanding.
At September 30, 2001, after giving effect to the sale of 20,000,000
shares of common stock (excluding the shares sold by current stockholders) in
this offering at an assumed initial public offering price of $.05 per share and
the receipt by us of the net proceeds (net of $50,000 in expenses) from this
offering, our pro forma net tangible book value at September 30, 2001 would have
been approximately $935,000, or approximately $.031 per share of common stock.
The dilution is $.019 per share, or approximately 38%, less than the price that
an investor in this offering would be paying for the stock. The dilution could
be substantially more if we sell less than the full amount of the offering
(20,000,000 shares). The following table illustrates the dilution based on
various levels of the number of shares sold:
25% or 50% or 75% or 100% or
5,000,000 10,000,000 15,000,000 20,000,000
shares shares shares shares
----------- ---------- ---------- ----------
Assumed public offering price per share $.05 $.05 $.05 $.05
Net tangible book value per share of
common stock as of September 30, 2001 (actual) ($0.002) ($0.002) ($0.002) ($0.002)
Increase per share attributable
to sale of common stock in this offering $0.014 $0.023 $0.029 $0.033
Pro forma net tangible book value per
share of commonstock after this offering $0.012 $0.022 $0.027 $0.031
Dilution per share of common stock to
investors in this offering $0.038 $0.028 $0.023 $0.019
------ ------ ------ ------
The public offering price is substantially higher than the pro forma net
tangible book value per share. Investors will incur immediate and substantial
dilution.
The following table summarizes the number and percentage of shares
purchased, the amount and percentage of consideration paid and the average price
per share of common stock paid by our existing stockholders and by new investors
in this offering:
Price Per Number of Total Percentage Consideration Percentage of
Share Shares Held of Ownership Paid Consideration
--------- ----------- ---------------- ------------- -------------
Existing stockholders $.001 10,000,000 33.3% $14,000 1.4%
Investors in this offering $.05 20,000,000 66.7% $1,000,000 98.6%
---------- ------ ---------- ------
Total 30,000,000 100.0% $1,014,000 100.0%
10
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2001, on an actual and a pro forma basis, as adjusted for the sale of all
20,000,000 shares being offered by us and excluding the shares being sold by
current stockholders.
Pro forma
Actual As Adjusted
September 30, for the
2001 Offering
--------- --------
Stockholders' equity:
Common stock, $.001 par value
Authorized 100,000,000 shares
10,000,000 shares issued and outstanding $10,000 $30,000
before the offering and 30,000,000 shares
after the offering
Additional paid-in capital 4,000 984,000
Retained Earnings (deficit) (29,083) (79,083)
--------- --------
Total capitalization $(15,083) $934,917
========= ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The financial information set forth in the following discussion should be
read with the financial statements of Demand Financial included elsewhere
herein.
Financial Condition and Changes in Financial Condition
Overall Operating Results:
We had no revenues since our inception (December 31, 1996) through
September 30, 2001.
Operating expenses since inception totaled $29,100 of which $11,800 were
incurred primarily for legal and accounting services rendered in connection with
the filing of Form 10-SB with the Securities and Exchange Commission and our
subsequent financial reporting obligations. Other operating expenses amounted to
$3,500 and were incurred for supplies and filing fees. We also incurred $4,750
in expenses on December 31, 1996 which included $3,000 for consulting services
rendered and $1,750 for incorporating and formulating a business plan for Demand
Financial by Mr. Antonio Garcia, our first president and chairman of the board.
Mr. Garcia received 950,000 shares or 9.5% of our current issued and outstanding
common stock for these services. On January 17, 2001, we incurred $9,000 for
consulting services rendered by our current president and chairman of the board,
Mr. Mitchell Geisler. Mr. M. Geisler received 9,000,000 shares of our common
stock (90% of our current issued and outstanding shares) for these services.
We have incurred a cumulative net loss since inception through September
30, 2001 of $29,100.
Liquidity and Capital Resources:
We currently have no working capital with which we can fund our future
operations. We have been reliant on loans from a shareholder to fund operations
to date. These promissory notes bear 8% simple interest and are due one year
from the date that the loans were made. The shareholder has agreed to be repaid
when and if the Company begins operations and has sufficient funds for
repayment. Our independent auditors have issued an audit opinion that raises
substantial doubt about our ability to continue as a going concern as of
December 31, 2000. We cannot assure you that we will be able to continue our
operations without adequate funding. As of September 30, 2001, our only asset
was $2,200 in cash. Our total liabilities were $17,300, which includes $5,200 in
accounts payable and $12,100 in short-term notes payable to a shareholder. Total
stockholders' deficit at September 30, 2001 was $15,100.
Plan of Operations
We intend to seek capital to fund our operations through the sale of the
common stock being offered by us. We may also seek acquisition/merger
opportunities with operating companies. We have not identified or pursued any
potential acquisition or merger prospects at this time. We estimate that we will
need approximately $1,000,000 to fund our operations and fully implement our
business plan during the first year, however, if we raise less than the full
amount of the offering we believe we will still be able to pursue our business
objectives by adjusting our business plan to lower levels. This would include
reducing our expenditures in such areas as amenities, location, etc.We have no
financing commitments or acquisition arrangements or prospects at this time. In
the interim, our stockholders/officers and/or directors have committed to
advance the operating expenses of the Company. These advances will not be paid
from any of the proceeds from this offering. These advances will be repaid once
operations of the business begins.
11
We believe that we will require additional financing in the future to fund
expansions into other cities. We cannot assure you that we will be successful in
raising any of the capital needed to fund expansion.
Once we open one or more locations, we expect to generate revenues with
which we will be able to cover operating costs. If our revenues exceed total
operating costs, these funds will be used in our business expansion. Many
restaurants are not profitable for a considerable time after their opening and
many fail within the first and second year after opening. We cannot give any
assurance that our lounge and food format will attract customers who spend an
amount that will cover our expenses or provide a profit on operations. The
owning and operating of restaurants is considered a risky enterprise and
investment returns are often significantly less than in other investments.
New Accounting Pronouncements
We have adopted FASB Statement 128. It is not expected that we will be
impacted by other recently issued standards. FASB Statement 128 presents new
standards for computing and presenting earnings per share (EPS). The statement
is effective for financial statements for both interim and annual periods ending
after December 15, 1997.
FASB Statement 131 presents news standards for disclosures about segment
reporting. We do not believe that this accounting standard applies to us as all
of our operations are integrated for financial reporting and decision-making
purposes.
Inflation
Our results of operations have not been affected by inflation and we do
not expect inflation to have a significant effect on its operations in the
future.
BUSINESS
General
Demand Financial plans to create and operate a caviar lounge, restaurant
and piano bar business located on the top floor levels of high-rise buildings in
the United States and Canada. We are a company in the development stage. From
incorporation through the date of this Prospectus, we have had no business
operations of any kind.
We currently do not have capital to implement our business plan and must
obtain funding. If we do not receive funding, we will have to discontinue our
business plan. Our independent auditors have issued a qualified audit opinion
that raises substantial doubt as to our ability to continue as a going concern.
Until such time as we have adequate funding, some of our stockholders, officers
and directors have committed to advance the operating expenses of Demand
Financial. We have no commitments for funding from unrelated parties or any
other agreements that will provide working capital. We cannot give any assurance
that we will locate any funding or enter into any agreements that will provide
the required operating capital.
Business Strategy
The following business strategy, products and marketing plans outline the
intended goals of our operations. None of them have been implemented and
investors should be aware that the hospitality business is very competitive and
we may not be successful in achieving these goals even with adequate capital.
Our business plan calls for the design and operation of a high-end food
and entertainment chain, which combines a caviar lounge, restaurant and piano
bar. We intend to focus on the creation of a sophisticated and relaxed
atmosphere within well-known high-rise towers in major cosmopolitan areas,
catering to the dining and entertainment enjoyment of professionals from
businesses and high-end social communities. We are presently searching for a
suitable location for our Toronto-based flagship operation. We intend to find a
location in close proximity to the financial community. If our initial operation
is successful, we anticipate expanding into other cities such as New York City,
Los Angeles, Chicago and Houston. The goal of our establishments will be the
creation of a mood and atmosphere that lends itself to an exclusive environment
in which our guests may conduct business meetings or simply relax. Our overall
design calls for the setting to be upscale, the products of the highest quality,
and the service exemplary.
12
Our product focus will be on a selection of high quality caviar, fresh
seafood, vintage wines, quality liquors and liqueurs, a skyline view and piano
bar. We believe there is an increasing demand for high quality and attention to
detail in today's hospitality industry and we will attempt to earn a reputation
as a premier cosmopolitan restaurant and lounge.
Our sources of revenues principally will be from food and beverage sales.
We anticipate that of our revenues in the first year 65% will be generated from
food sales and 35% from beverage sales. We anticipate food cost to be
approximately 37% and beverage 29% of their respective sales. In addition, we
will incur other expenses in operating our business such as salaries for staff,
rent, and other general operating expenses.
Products
We intend to focus on caviar as our featured menu item. In addition, our
menu will also offer a high-quality selection of fresh shellfish and seafood,
gourmet sandwiches, salads, hors de oeuvres, and an array of meals with a light,
healthy appeal. Our beverages will include an extensive wine list and a
collection of fine cognac, scotch and exclusive liqueurs.
We believe that featuring caviar is ideal for many reasons. First, caviar
appeals to many up-scale consumers who appreciate its quality and enjoy the
social status it has acquired. Second, caviar has gained significant exposure in
recent years and is rapidly becoming a popular and much sought-after consumer
product. Third, caviar can be enjoyed alone as light fare and can also be
incorporated into a fine meal. Finally, a large percentage of today's consumers
have moved well away from large-portioned heavy dining to a preference for
lighter, healthy foods. We believe that for today's consumer, it is quality, as
opposed to quantity, that drives a great restaurant to success.
Our management and staff will be committed to providing our clientele with
an exceptional level of service and professionalism.
Marketing
Our overall marketing program will be designed to generate consumer
awareness of our establishments. We will focus on a clientele with a preference
for an upscale social environment, and quality products and services. We intend
to devote a great deal of attention to the atmosphere and the decor of the
lounge facilities. Paying particular attention to detail, including the style of
furniture, the artwork, the interior design and the indoor waterfall, our goal
is to create an overall relaxing environment for our customers.
We intend for the main attraction of our restaurant/lounge to be the
experience and prestige it offers: extraordinary views of the city, ambience,
and unique trendy cuisine. We believe that the location will naturally attract
the clientele we are seeking to serve.
Our marketing program will initially be based on a significant amount of
advertising. Initially, the advertising will be oriented to the greater
metropolitan area in which the lounge is located. Thereafter, we plan to expand
the awareness marketing to defined segments such as business travelers and
high-end vacationers. We plan to use radio, television, print, bulk mailings and
any other form of advertising that we believe will create consumer awareness. We
also will initiate a program of contacting magazines, newspapers, television
programs and travel guides to obtain exposure through food and restaurant
reviews and write-ups and new location/business articles.
Although many of our marketing plans have been successfully used in the
past by different restaurant/lounge establishments, there is no assurance that
we will be able to use them successfully to create the consumer base we seek.
Moreover, because the consumer is increasingly sophisticated and exposed to a
multitude of marketing programs, we will have to constantly appraise our
strategies and seek out ways to change and improve them so as to remain fresh
and competitive. No assurance can be given that we will successfully change and
update our marketing in a way that continues to generate positive consumer
reaction to our establishments.
Competition
The hospitality industry is very competitive. There are over 6,000
restaurants from fast food to fine dining in the Toronto area alone. All over
North America new restaurants open up on a daily basis. Our goal is to offer
something new and exciting for up-scale consumers. There are several factors
that will allow us to obtain our goal. The first factor will be the
extraordinary view each restaurant will offer. Situated on top of high-rise
office towers should be an attraction to many potential consumers. This offers
an advantage, as most restaurants are located on ground level. The second factor
is the food we are offering on our menu. Our food is meant to be exhilarating,
unique and refreshing. The third factor is our service. As a high-end
restaurant, service must be of the utmost importance. From the maitre'd to the
wait-staff and wine steward, knowledgeable friendly staff must treat the guest
with hospitality. The fourth key factor is the atmosphere. Our piano bar will be
the focal point of attention. Offering entertainment that is both inspiring and
calming to the clientele. From classical to jazz greats, we believe live music
will lift the atmosphere of the restaurant. Other atmosphere enhancements will
include an indoor waterfall, comfortable seating, specialized lighting, and
intriguing art. The fifth factor that will allow us to reach our goal is our
desire to be a market leader. Setting a new trend for the high-end niche market
will allow us to differentiate ourselves from other high-end restaurants.
Our ability to compete will be dependant on the level of quality and
service we provide for our consumers. There can be no assurance that we will be
able to accomplish our goals or compete on a profitable basis within our target
market.
13
Regulation
The Liquor License Process in Ontario
Obtaining a liquor license in the province of Ontario is relatively easy.
The entire process takes between 75 and 100 days at a cost of approximately
$2,500 CDN. The provincial liquor board is administered by a branch of the
provincial government known as the Alcohol and Gaming Commission of Ontario, or
AGCO. The approval process requires a sign to be posted in a conspicuous place
within the proposed establishment for 30 days stating the intention to have the
premises licensed. As well, an advertisement must run in the local newspaper
with the address of the establishment. Within this 30-day period any one in the
community who objects to the licensing of alcohol on the specified premises may
do so to the AGCO in writing. All objections must be received within 15 days
after the 30th day of posting. Any objectors would then have to defend their
position in front of the liquor licensing board with the proposed vendor
present. The AGCO would then decide whether or not to license the premises. In
most cases there are no objections and approval is given within 30 days after
all mail must be received. Objections usually occur in residential areas where
local homeowners have concerns and not within the downtown Toronto business
core. There are no restrictions as to the number of licensed premises in an
area, nor are their any further costs involved.
Health and Safety Regulations
Operating our facilities will require us to comply with local and state or
provincial laws and regulations relating to food preparation, food service,
cleanliness and garbage disposal. In addition, we will be subject to various
workplace safety regulations. Our activities will also be subject to the Federal
Americans With Disabilities Act and related regulations, which prohibit
discrimination on the basis of disability in public accommodations and
employment. We will be subject to state "dram-shop" laws and regulations, which
generally provide that a person injured by an intoxicated person may seek to
recover damages from an establishment that wrongfully served alcoholic beverages
to such person.
Worker Regulations
As with any employer, we will be subject to employment laws, including
workman's compensation, hourly scheduling and employment discrimination
statutes. We may also be subject to union employee rules in one or more
employment categories.
All of these legal impositions are anticipated to vary from location to
location. Therefore, we expect to expend a considerable amount of our management
time on regulatory and union compliance activities so as to assure the proper
operations of each lounge facility. Even if our operation of these restaurants
is in strict compliance with the requirements of the Immigration and
Naturalization Service, our employees may not all meet federal citizenship or
residency requirements, which could lead to disruptions in our work force.
Changes in any or all of these laws or regulations, such as government-imposed
paid leaves of absence or mandated health benefits, or increased tax reporting
and tax payment requirements for employees who receive gratuities, could have a
material adverse effect on our business. Delays or failures in obtaining or
maintaining required construction and operating licenses, permits or approvals
could delay or prevent the opening of our initial and prospective new
restaurants or could materially and adversely affect our operations. In
addition, there can be no assurance that we will be able to obtain necessary
variances or amendments to required licenses, permits or other approvals on a
cost-effective and timely basis in order to construct and develop restaurants in
the future.
A number of our anticipated employees will be subject to various minimum
wage requirements on both a state and federal level. These wage requirements are
legislated and we have no control over the timing or amount of newly enacted
laws. There can be no assurance that we will be able to pass additional
increases in labor costs through to our customers in the form of menu price
adjustments and, accordingly, such minimum wage increases could have a material
adverse effect on our business, financial condition, results of operations or
cash flows.
Legal Proceedings
We are not a party to any material legal proceedings, and no material
legal proceedings have been threatened by or, to the best of our knowledge,
against us.
Description of Property
The offices of Demand Financial are located at 141 Adelaide Street West,
Suite 1004, Toronto, Ontario, M5H 3L5. The telephone number is 416-628-5264.
We are entitled to use office space otherwise provided to our executive
officer pursuant to an oral agreement. In addition, we are provided office
services as may be required. We currently do not pay any amount for the office
space or services. Any costs of this office are considered immaterial to the
financial statements and accordingly are not reflected therein. We believe that
this facility is adequate to meet our corporate needs in the foreseeable future.
14
Employees
Mr. Mitchell Geisler, our chief executive officer and Mr. Howard Geisler,
our vice president, are working part-time on a gratis basis while we are in the
development stage. At the onset of building our first restaurant (once adequate
funding is secured), it is anticipated that we will require two full-time
employees. One will help oversee the construction and building phase and
initiate pre-employment needs, while the second, a head chef, will begin
preparation of our menu and recipes. When the restaurant is ready for opening,
we anticipate employing several full and part-time hospitality staff and
management associates. Accounting and general administrative personnel will also
be required.
MANAGEMENT
Executive Officers and Directors
Mr. Mitchell Geisler, 30, has been the president, treasurer and secretary
and a director of Demand Financial since January 2001. Mr. M. Geisler has more
than 15 years of experience in the hospitality industry, and will lead and
manage the planning, start-up and operation of the business. He has been an
active member of the Toronto business and tourist district in a variety of
capacities, and has worked with many international corporations including, Prime
Restaurants, The Keg Restaurants, Cara Foods, and Sire Corp Restaurants. Most
recently, during the period 1998 to 2001, Mr. M. Geisler was president and
operator of the Toronto-based 52 Restaurants Inc. He was a supervisor for Imago
Restaurants from 1997 to 1998. From 1996 to 1997 he was a manager of Ruby Beets
Restaurant. Mr. M. Geisler is a graduate of Toronto's York University in
Toronto, and also studied at the University of Tel Aviv. Mr. M. Geisler is a
director and president of LRS Capital, Inc., a public company engaged in mineral
exploration activities.
Mr. Howard Geisler, 34, our vice-president and director, has served in
these positions since August 20, 2001. He currently holds the position of
Director of e-client solutions for Wunderman, a global marketing services
company since 1999. His initiatives span across the America's (Canada, United
States and Mexico) and his expertise includes e-strategy, e-communication,
technology design and implementation. Prior to his current employer, Mr. H.
Geisler was employed from 1996 to 1999 as a Technology Project Manager
responsible for developing technology solutions for The Bank of Montreal, one of
Canada's largest financial institutions.
Mitchell Geisler and Howard Geisler are brothers.
Executive Compensation
We have not paid any cash compensation or other benefits to our executive
officers since our inception. Cash compensation amounts will be determined in
the future based on the services to be rendered and time devoted to our business
and the availability of funds. Other elements of compensation, if any, will be
determined at that time or at other times in the future.
Ms. Maedche resigned her position as president, secretary, treasurer and
sole director on January 5, 2001 and Mr. M. Geisler was appointed to fill these
positions. Ms. Maedche did not receive any compensation for her services.
On January 17, 2001, Mr. M. Geisler received 9,000,000 shares of our
common stock valued at $.001 per share for consulting services rendered. These
services were valued at $9,000. He does not currently receive any salary.
Until we have sufficient capital or revenues, Mr. M. Geisler and Mr. H.
Geisler will not be provided cash remuneration. At such time as we are able to
provide a regular salary, it is our intention that Mr. M. Geisler will become
employed pursuant to an executive employment agreement, at an annual salary to
be determined based on his then level of time devoted to Demand Financial and
the scope of his responsibilities. Until we enter into an employment agreement,
we may use shares of common stock to compensate Mr. M. Geisler. In addition, we
may use common stock to compensate others for services to Demand Financial.
15
Director Compensation
Persons who are directors and employees will not be additionally
compensated for their services as a director. There is no plan in place for
compensation of persons who are directors who are not employees, but it is
expected that in the future we will create a remuneration and reimbursement
plan.
Other Compensation Arrangements
Although we do not have any formal equity-based compensation plan, we do
have the ability to enter into options and similar equity-based agreements with
employees, consultants and others. In the future, we may enter into these types
of agreements as the sole means or as part of the overall compensation of
someone working for Demand Financial.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 6, 2001, the name and
shareholdings of each person who owns of record, or was known by us to own
beneficially,* 5% or more of the shares of the common stock currently issued and
outstanding; the name and shareholdings, including options to acquire the common
stock, of each director; and the shareholdings of all executive officers and
directors as a group.
NUMBER OF PERCENTAGE
SHARES OF
NAME OF PERSON OR GROUP OWNED OWNERSHIP
-------------------------- ---------- ----------
Mitchell Geisler (1)............ 9,000,000 90.0%
Howard Geisler (1).............. 0 0.0%
All executive officers and
directors as a group (two persons) 9,000,000 90.0%
- --------------
* Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
issuable upon the exercise of options or warrants currently exercisable
or convertible within 60 days, are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants but
are not deemed outstanding for computing the percentage ownership of
any other person.
(1) The persons business address is 141 Adelaide Street West, Suite 1004,
Toronto, Ontario, M5H 3L5.
There are currently no outstanding options or warrants to purchase shares
of our stock.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of capital
stock, all of which is designated common stock, $.001 par value. As of December
6, 2001, there were 10,000,000 shares of common stock issued and outstanding.
Common Stock Description
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders. In addition, the holders are
entitled to receive dividends ratably, if any, as may be declared from time to
time by the board of directors out of legally available funds. In the event of
our dissolution, liquidation or winding-up, the holders of common stock are
entitled to share ratably in all the assets remaining after payment of all our
liabilities and subject to the prior distribution to any senior securities that
may be outstanding at that time. The holders of common stock do not have
cumulative voting rights or preemptive or other rights to acquire or subscribe
for additional, unissued or treasury shares. The holders of more than 50% of
such outstanding shares, voting at an election of directors can elect all the
directors on the board of directors. All outstanding shares of common stock are,
when issued, the shares of common stock offered hereby, are full paid and
non-assessable.
16
Prior to this offering, there has been no public market for our common
stock. The common stock is not approved for listing on any trading medium or
exchange. After the offering, we plan to take such action as may permit a
broker-dealer to apply for quotation of the common stock on the Over-the-Counter
Bulletin Board. The OTCBB is a broker driven market. We independently are not
able to make an application for listing Demand Financial on that market.
Therefore, we are dependant on an application being made and market quotes being
supplied by a broker-dealer. If no broker-dealer takes action in respect of the
common stock, there will be no trading on that market. Prior to any listing on
the OTCBB, it is possible there may be trading of the common stock on the "pink
sheets".
Even if there is a quote for the common stock, there can be no assurance
that an active market will develop. If an active e trading market is not
developed or maintained, the liquidity and trading price of our common stock
could be adversely affected. The per-share price in this offering was determined
by the management of Demand Financial. It may bear no relationship to the price
at which the shares will trade upon completion of this offering. It also is not
indicative of the future market performance of the common stock.
It is anticipated that trading our capital stock will be subject to the
"penny stock" rules as defined in Rule 3a51-1 of the Securities and Exchange Act
of 1934. The penny stock disclosure requirements may have the effect of reducing
the level of trading activity of our common stock in the secondary market.
Pursuant to the Penny Stock Reform Act of 1990, prior to effecting any
transaction in any penny stock, a broker or dealer is required to give the
customer a risk disclosure statement the content of which is to include the
following:
a. A description of the nature and level of risk for the
market.
b. A description of the nature and level of the risk in the
market for penny stocks.
c. A brief, clear, narrative description of a dealer market,
including bid and ask prices for penny stocks and the
significance of a spread between bid and ask prices.
d. A toll free telephone number for inquiries on disciplinary
actions relating to security violators.
e. A definition of significant terms used in the Risk
Disclosure Document or in the Conduct of Trading in Penny
Stock.
f. Such other information as the SEC shall require by rule or
regulation.
The Penny Stock Reform Act also directed the SEC to adopt rules requiring
broker/dealers, prior to effecting any transaction in a penny stock, to disclose
in connection with the transaction the following:
a. The bid and ask prices for the penny stock.
b. The number of shares to which such bid and ask prices
apply, or other comparable information relating to the
depth and liquidity of the market for such stocks.
c. The amount and a description of any compensation the
broker/dealer and associated persons will receive in
connection with the transaction.
d. Such other information as the SEC by rule determines to be
useful and reliable information relating to the price of
such stock.
17
The disclosure scheme under the Penny Stock Reform Act has three related
layers designed to inform investors of the extraordinary risk associated with
investments in the penny stock market. The first layer requires a broker-dealer
prior to the initial transaction in a penny stock with the customer to furnish
the customer with a Risk Disclosure Document including, among other things, a
description of the penny stock market and how it functions, its inadequacies and
shortcomings, and the risk associated with investments in the penny stock
market. The second layer consists of transaction related documents that the
broker-dealer must make available prior to effecting a transaction in penny
stocks, including quotation information, the dealer's and salesperson's
compensation in connection with the transaction. Finally, the customer must be
furnished with a monthly statement including prescribed information relating to
market and price information concerning the penny stocks held in the customer's
account.
The Risk Disclosure Document is a generic disclosure document that must be
given to the customer by a broker-dealer before the initial transaction with the
customer of a penny stock whether the transaction is in connection with the
distribution of a security or a trading transaction. The broker-dealer must
receive, and preserve as part of his records a written acknowledgment of receipt
of the document from the customer prior to effecting a transaction in a penny
stock.
Stock Transfer Agent
The stock transfer agent for the common stock is Executive Registrar, 3118
West Thomas Road, Suite 707, Phoenix, Arizona 85017.
Holders
As of November 1, 2001, there were 28 holders of record of the common
stock.
SHARES HELD FOR FUTURE RESALE
After the completion of the full offering, we will have 30,000,000 shares
of common stock outstanding. All 20,000,000 shares sold in the offering will be
freely tradeable without restriction under the Securities Act of 1933. Of the
10,000,000 shares outstanding prior to the offering, 1,000,000 shares are being
registered under this Prospectus and may be sold from time to time in the public
market subject to the Securities Act requirements by the selling stockholders
and 9,000,000 shares will be eligible for public sale without registration in
January 2002 pursuant to Rule 144.
Under Rule 144, a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least one year, including the
holding period of any prior owner except an affiliate, would be generally
entitled to sell within any three month period a number of shares that does not
exceed the greater of (i) 1% of the number of then outstanding shares of the
common stock or (ii) the average weekly trading volume of the common stock in
the public market during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to manner of sale provisions, notice requirements and
the availability of current public information about Demand Financial. Any
person (or persons whose shares are aggregated) who is not deemed to have been
an affiliate of Demand Financial at any time during the three months preceding a
sale, and who has beneficially owned shares for at least two years (including
any period of ownership of preceding nonaffiliated holders), would be entitled
to sell shares under Rule 144(k) without regard to the volume limitations,
manner-of-sale provisions, public information requirements or notice
requirements.
SELLING STOCKHOLDERS
The following tables list certain information, as of December 6, 2001,
regarding the beneficial ownership of our outstanding common stock by each of
our selling stockholders, which are being registered pursuant to this
prospectus. Beneficial ownership is determined in accordance with the rules of
the SEC. Except as otherwise noted, the persons or entities named have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
The 1,000,000 shares of common stock that we are registering pursuant to
this prospectus that are owned by current stockholders (excluding the 20,000,000
of new shares being offered by Demand Financial are listed under the column
"Number of Shares Being Offered".
The information provided in the following table with respect to each
selling stockholder is based on information obtained from that selling
stockholder.
18
Number of Shares Percent of Ownership Percent of Ownership
Name and Address Being Offered Before the Offering After the Offering
---------------- ------------- ------------------- ------------------
Glen Akselrod 475,000 4.75% 0%
5785 Yonge St., Ste 701
Toronto, Ontario M2M RJ2
Boav Ben-Mosahe 2,000 .02% 0%
155 Anenida Granada #115
Palm Springs, CA 92362
Michael Keith Booth 2,000 .02% 0%
1912 S. Pacific Street
Oceanside, CA 92054
Emilio Cabellero 2,000 .02% 0%
221107 Fair Oaks Ave., Ste. 32
S. Pasadena, CA 91030
Cindy Carrie 2,000 .02% 0%
P. O. Box 822
Solana Beach, CA 92075
Kenneth Charity, Jr. 2,000 .02% 0%
20322 Lighthouse Lane
Huntington Beach, CA 92646
Jennifer Ferrante .02% 0%
9535 Vilven 2,000
Houston, TX 77057
Gus Galante 2,000 .02% 0%
3266 Lochlomond Road #201
Carlsbad, CA 92008
Allison Garcia 2,000 .02% 0%
5875 Los Santos Way
Buena Park, CA 90620
David H. Hack 2,000 .02% 0%
232 West Snoot Drive
Tucson, AZ 85705
Stephanie Hill 2,000 .02% 0%
1555 West Renee Drive
Anaheim, CA 91802
Tawny Hill 2,000 .02% 0%
5855 Naples Plaza #204
Long Beach, CA 90803
Keith Johnson 2,000 .02% 0%
2101 S. Hearthstone Ave.
Tucson, AZ 85710
19
Tony Martinez 2,000 .02% 0%
2800 Saturn St., Ste. #200
Brea, CA 92821
Annette Obrien 2,000 .02% 0%
16761 Viewpoint Lane #187
Huntington Beach, CA 92054
Phil Perez 2,000 .02% 0%
7093 El Viento Way
Buena Park, CA 90620
Richard Perez 2,000 .02% 0%
12449 Gradwell Street
Lakewood, CA 90715
Joel Rattray 2,000 .02% 0%
5181 Del Sol Circle
La Palma, CA 90623
Bryan E. Rhodes 2,000 .02% 0%
2011 S. Cloverland
Tucson, AZ 85711
Lynde Russell 2,000 .02% 0%
1114 North Calle Marcus
Palm Springs, CA 92262
Eric Sherman 2,000 .02% 0%
1623 3rd Avenue 4K
New York, NY 10128
Kirsten Shermerhorn 2,000 .02% 0%
2653 Alicante Road
La Miranda, CA 90520
Dave Shutts 2,000 .02% 0%
21686 Calle Alcazar Street
Yorba Linda, CA 92887
Victoria Smith 2,000 .02% 0%
14 Sand Dollar Court
Newport Beach, CA 92663
Tanya Wattenberg 2,000 .02% 0%
9160 East Deer Trail
Tucson, AZ 85710
Jennifer Worden 2,000 .02% 0%
9055 E. Catalina Hwy. Ste. 5206
Tucson, AZ 85749
ZDG Investments Limited 475,000 4.75% 0%
141 Adelaide Street West, #1004
Toronto, Ontario M5H 3L5
------------- ------------------- ------------------
Total 1,000,000 10.00% 0%
20
PLAN OF DISTRIBUTION
Shares Offered by the Company
The 20,000,000 shares being offered by Demand Financial will be sold by
the efforts of Howard Geisler, our vice-president and a director of the Company.
He will not receive any commission from the sale of any shares. He will also not
register as a broker-dealer pursuant to Section 15 of the Securities and
Exchange Act of 1934 in reliance upon Rule 3a4-1, which sets forth those
conditions under which a person associated with an issuer may participate in the
offering of the issuer's securities and not be deemed to be a broker-dealer.
These conditions included the following:
1. None of the selling persons are subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of
the Exchange Act, at the time of participation,
2. None of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities,
3. None of the selling persons are, at the time of participation, an
associated person of a broker-dealer, and
4. All of the selling persons meet the conditions of paragraph (a)
(4) (ii) of Rule 3a4-1 of the Exchange Act, in that they (A)
primarily perform or are intending primarily to perform at the end
of the offering, substantial duties for or on behalf of the issuer
otherwise than in connection with transactions in securities, and
(B) are not a broker or dealer, or an associated person of a
broker or dealer, within the preceding twelve months, and (C) do
not participate in selling and offering of securities for any
issuer more than once every twelve months other than in reliance
on this rule.
Since the offering is self-underwritten, we intend to advertise and hold
investment meetings in various states where the offering will be registered and
will distribute this prospectus to potential investors at the meetings and to
persons with whom management is acquainted who are interested in Demand
Financial International, Ltd. and a possible investment in the offering.
We are offering the shares subject to prior sale and subject to approval
of certain matters by our legal counsel.
This offering will commence on the date of this prospectus and continue
for a period of nine months, unless we sell all the shares prior to that final
date. We may terminate this offering at any time, for any reason; thus not
selling any or all of the shares offered. There is no minimum number of shares
that we are required to sell.
Procedure of Subscription
If you decide to subscribe for shares in this offering, you will be
required to execute a subscription agreement and tender it, together with a
check or wired funds to us, for acceptance or rejection. All checks should be
made payable to Demand Financial International, Ltd. A copy of this agreement
will accompany a prospectus or may be obtained from us by persons who have
received a prospectus and requested the agreement.
We have the right to accept or reject subscriptions in whole or in part,
for any reason or for no reason. All monies from rejected subscriptions will be
returned immediately by us to the subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected promptly. Once
accepted, the funds will be deposited in an account maintained by us and
considered assets of Demand Financial International, Ltd. once cleared by our
bank. Subscription funds will not be deposited in an escrow account.
Certificates for the shares purchased will be issued and distributed by our
transfer agent, within ten business days after a subscription is accepted and
"good funds" are received in our account. Certificates will be sent to the
address supplied in the investor subscription agreement by regular mail.
21
Shares Offered by Selling Stockholders
We have agreed to register for public resale, shares of our common stock
which have been issued to the selling stockholders. The aggregate proceeds to
the selling stockholders from the sale of shares offered pursuant to this
prospectus will be the prices at which such securities are sold, less any
commissions.
The selling stockholders may, from time to time, sell all or a portion of
the shares of our common stock at the offering price set forth on the cover page
of this prospectus . The selling stockholders may offer their shares of our
common stock at various times in one or more of the following transactions:
o in an over-the counter market if the shares are traded thereon;
o through block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may purchase and resell a
portion of the block as principal to facilitate the transaction;
o through purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus;
o in ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o through options, swaps or derivatives;
o in privately negotiated transactions; o in transactions to cover
short sales; and
o through a combination of any such methods of sale.
The selling stockholders may also sell their shares of our common stock in
accordance with Rule 144 under the Securities Act, rather than pursuant to this
prospectus.
The selling stockholders may sell their shares of our common stock
directly to purchasers or may use brokers, dealers, underwriters or agents to
sell such shares. In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions, discounts or concessions from a selling
stockholder or, if any such broker-dealer acts as agent for the purchaser of
such shares, from a purchaser in amounts to be negotiated. Such compensation
may, but is not expected to, exceed that which is customary for the types of
transactions involved. Broker-dealers may agree with a selling stockholder to
sell a specified number of such shares at a stipulated price per share, and, to
the extent such broker-dealer is unable to do so acting as agent for a selling
stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling stockholders. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature described
above, in the over-the-counter market or otherwise, at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions. In connection with such resales,
broker-dealers may pay to or receive from the purchasers of such shares
commissions as described above.
The selling stockholders and any broker-dealers or agents that participate
with the selling stockholders in sales of their shares of our common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933
in connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of such shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933.
From time to time the selling stockholders may engage in short sales,
short sales against the box, puts, calls and other hedging transactions in our
securities, and may sell and deliver their shares of our common stock in
connection with such transactions or in settlement of securities loans. These
transactions may be entered into with broker-dealers or other financial
institutions. In addition, from time to time a selling stockholder may pledge
its shares pursuant to the margin provisions of its customer agreements with its
broker-dealer. Upon default by a selling stockholder, the broker-dealer or
financial institution may offer and sell such pledged shares from time to time.
We are required to pay all fees and expenses incident to the registration
of the shares of our common stock offered hereby other than broker-dealer
discounts and commissions. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933.
22
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for Demand Financial by Graubard Miller.
EXPERTS
The financial statements of Demand Financial International. Ltd. for the
years ended December 31, 2000, and 1999, appearing in this Prospectus and
Registration Statement have been audited by Simon Krowitz Bolin & Associates,
P.A., independent auditors, as set forth in their report thereon appearing
elsewhere herein.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We intend to furnish our stockholders with annual reports, which will
include financial statements audited by our independent accountants, and all
other periodic reports as we may determine to furnish or as may be required by
law, including Sections 13(a) and 15(d) of the Exchange Act.
As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and in the exhibits and schedules thereto. For further information
with respect to Demand Financial International, Ltd. and the Common Stock
offered hereby, reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus concerning the provisions of
documents filed with the Registration Statement as exhibits and schedules are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission. The Registration Statement, including the exhibits and schedules
thereto, may be obtained at the address noted below.
We file annual and other periodic reports pursuant to the requirements of
the Securities Exchange Act of 1934, as amended, and such reports and other
information filed by us may be inspected and copied at the public reference
facilities of the Commission in Washington, D.C., and can be read or obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The Commission maintains a website that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission at http://www.sec.gov.
23
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
----
Report of Simon Krowitz Bolin & Associates,P.A.
independent accountants F-2
Balance Sheet for the years ended
December 31, 2000 and December 31, 1999 F-3
Statements of Loss and Retained Earnings for
the years ended December 31, 2000 and December
31, 1999 and inception to December 31, 2000 F-4
Statement of Changes in Shareholders' Equity
for the period December 31, 1996 (inception)
through December 31, 2000 F-5
Statements of Cash Flows for the years
ended December 31, 2000 and December 31,
1999 and inception to December 31, 2000 F-6
Notes to Financial Statements F-7
Review Report of Simon Krowitz Bolin & Associates,
P.A. Independent Accountants F-10
Balance Sheets as of September 30, 2001
and December 31, 2000 F-11
Statements of Loss and Retained Earnings
for the three months ended September
30, 2001 and September 30, 2000 F-12
Statements of Loss and Retained Earnings
for the nine months ended September 30,
2001 and September 30, 2000 and inception
to September 30, 2001 F-13
Statements of Cash Flows for the nine
months ended September 30, 2001 and September
30, 2000 and inception to September 30, 2001 F-14
Notes to Interim Financial Statements F-15
F-1
24
SIMON KROWITZ BOLIN & ASSOCIATES, P.A.
11300 ROCKVILLE PIKE, SUITE 800
ROCKVILLE, MARYLAND 20852
Independent Auditors' Report
To the Board of Directors of
Demand Financial International, Ltd.
Toronto, Ontario
CANADA
We have audited the accompanying balance sheet of Demand Financial
International, Ltd. (a development stage company) as of December 31, 2000 and
1999 and the related statements of income and retained earnings and cash flows
for the years ended December 31, 2000 and 1999 and for the period from December
31, 1996 (inception) to December 31, 2000. These financial statements are the
responsibility of Demand Financial International's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those 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, as well as 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 Demand Financial International,
Ltd. as of December 31, 2000 and 1999, and the results of its operations and
cash flows for the years ended December 31, 2000 and 1999 and for the period
from December 31, 1996 (inception) to December 31, 2000 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been presented assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has no established source of income and this
raises substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Simon Krowitz Bolin & Associates, P.A.
April 3, 2001
F-2
25
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
BALANCE SHEET
December 31,
2000 1999
---------- ----------
ASSETS
Current Assets $ 0 $ 0
---------- ----------
TOTAL ASSETS $ 0 $ 0
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 0 $ 0
Long-Term Liabilities 0 0
---------- ----------
Total Liabilities 0 0
---------- ----------
Stockholders' Equity
Common Stock - $0.001 par value; 5,000,000 shares
authorized, 1,000,000 shares issued and outstanding 1,000 1,000
Additional Paid in Capital 4,000 4,000
Deficit accumulated during the development stage (5,000) (5,000)
---------- ----------
Total Stockholders' Equity (Deficit) 0 0
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 0 $ 0
---------- ----------
See Auditors' Report and Notes to Financial Statements.
F-3
26
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
STATEMENTS OF LOSS AND RETAINED EARNINGS
For the Periods
December 31,
January 1, January 1, 1996
2000 to 1999 to (inception)
December 31, December 31, to December
2000 1999 31, 2000
------------ ------------ ------------
REVENUES $ 0 $ 0 $ 0
------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating Expenses 0 0 5,000
------------ ------------ ------------
NET (LOSS) 0 0 (5,000)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT
STAGE - BEGINNING (5,000) (5,000) 0
------------ ------------ ------------
DEFICIT ACCUMULATED DURING THE DEVELOPMENT
STAGE - ENDING $ (5,000) $ (5,000) $ (5,000)
------------ ------------ ------------
NET (LOSS) PER SHARE - BASIC $ 0 $ 0 $ 0
WEIGHTED AVERAGE SHARES USED IN PER
SHARE CALCULATION - BASIC 1,000,000 1,000,000 1,000,000
------------ ------------ ------------
See Auditors' Report and Notes to Financial Statements.
F-4
27
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
STATEMENT OF CHANGES OF SHAREHOLDERS' EQUITY
For the Period December 31, 1996 (inception) to December 31, 2000
Additional
Paid in Accumulated
Shares Amount Capital Deficit
---------- --------- ---------- ---------
Balance at December 31, 1996
(inception) 0 $ 0 $ 0 $ 0
Issuance of Common Stock for
services rendered @ 1.00 per share 5,000 5,000 0 0
Net Loss 0 0 0 (5,000)
---------- --------- ---------- ---------
Balance - December 31, 1996 5,000 5,000 0 (5,000)
Net Loss - Year Ended December
31, 1997 0 0 0 0
---------- --------- ---------- ---------
Balance - December 31, 1997 5,000 5,000 0 (5,000)
Net Loss - Year Ended December 31,
1998 0 0 0 0
---------- --------- ---------- ---------
Balance - December 31, 1998 5,000 5,000 0 (5,000)
On March 10, 1999:
- - Changed value of stock from no
par value to 0.001 per share 0 (4,000) 4,000 0
- - Forward split 200:1 resulted in
additional issuance 995,000 0 0 0
Net Loss - Year Ended December
31, 1999 0 0 0 0
---------- --------- ---------- ---------
Balance - December 31, 1999 1,000,000 1,000 4,000 (5,000)
Net Loss - Year Ended December
31, 2000 0 0 0 0
---------- --------- ---------- ---------
Balance - December 31, 2000 1,000,000 $ 1,000 $ 4,000 $ (5,000)
---------- --------- ---------- ---------
See Auditors' Report and Notes to Financial Statements.
F-5
28
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
December 31,
January 1, January 1, 1996
2000 to 1999 to (inception) to
December December December 31,
31, 2000 31, 1999 2000
---------- ---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ 0 $ 0 $ (5,000)
Adjustments to reconcile net income to net
cash (used) by operating activities:
Common stock issued for services 0 0 5,000
---------- ---------- -------------
NET CASH (USED) BY OPERATING ACTIVITIES 0 0 0
---------- ---------- -------------
NET INCREASE IN CASH 0 0 0
CASH - Beginning 0 0 0
---------- ---------- -------------
CASH - Ending $ 0 $ 0 $ 0
---------- ---------- -------------
See Auditors' Report and Notes to Financial Statements.
F-6
29
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
On December 31, 1996 Demand Financial International, Ltd. (the
"Company") was incorporated under the laws of the State of Nevada. The
Company currently has no operations and in accordance with SFAS #7, is
considered a development stage company.
NOTE 2 - SUMMARY OF SIGIFICANT ACCOUNTING POLICIES
Accounting Method - The Company records income and expenses using the
accrual method of accounting.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reported period. Actual results could differ
from those estimates.
Cash Equivalents - For the purposes of the statement of cash flows, all
highly liquid investments with a maturity of three months or less are
considered to be cash equivalents. There are no cash equivalents as of
December 31, 2000 and 1999.
Income Taxes - Income taxes are provided for using the liability method
of accounting in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS #109) "Accounting for Income Taxes." A deferred
tax asset or liability is recorded for all temporary difference between
financial and tax reporting. Deferred tax expense (benefit) results
from the net change during the year of deferred tax assets and
liabilities.
Organization Costs - Costs will be expensed as incurred.
Loss Per Share - Net loss per share is provided in accordance with
Statement of Financial Accounting Standards No. 128 (SFAS #128),
"Earnings Per Share." Basis loss per share is computed by dividing
losses available to common stockholders' by the weighted average number
of common shares outstanding during the period. Diluted loss per share
reflects per share amounts that would have resulted if dilutive common
stock equivalents had been converted to common stock. As of December
31, 2000 and the Company had no dilutive common stock equivalents such
as stock options.
Year End - The Company has selected December 31 as its year end.
F-7
30
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
December 31, 2000
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the years December 31, 2000
and 1999 to the net loss and the fact that there is no state income tax
in the state of the Company's domicile and operations; Nevada. The
Company's total deferred tax asset as of December 31, 2000 and 1999 is
as follows:
Net operating loss carryforward $5,000
Valuation Allowance (5,000)
------
Net Deferred Tax Asset $ 0
======
The federal net operating loss carryforward will expire in various
amounts from 2016 to 2017. This carryforward may be limited upon the
consummation of a business combination under IRS Section 381.
NOTE 4 - SHAREHOLDERS EQUITY
Common Stock - The initial authorized common stock of Demand Financial
International, Ltd. consists of 25,000 shares with no par value.
On March 10, 1999 the State of Nevada approved the Company's restated
articles of incorporation which increased the authorized shares of
common stock from 25,000 common shares to 5,000,000 common shares. The
par value was changed from no par to $.001.
On March 10, 1999 the Board of Directors authorized the forward split
on a 200:1 ratio, of the outstanding common shares of the company, thus
increasing its number of outstanding shares from 5,000 to 1,000,000.
On March 10, 1999 the Board of Directors authorized a stock issuance
totaling 995,000 common shares of the company to reflect the change
above.
Preferred Stock - Demand Financial International, Ltd. has no preferred
stock.
F-8
31
DEMAND FINANCIAL INTERNATIONAL, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
December 31, 2000
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer has provided office services without charge. Such costs are
immaterial to the financial statements and accordingly are not
reflected herein. The officers and directors are involved in other
business activities and most likely will become involved in other
business activities in the future. If a specific business opportunity
becomes available, such persons may face a conflict of interest. A
Company policy for handling such a conflict has not yet been
formulated.
NOTE 6 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire additional
shares of common stock.
NOTE 7 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. The Company has not
established revenues sufficient to cover its operating costs which
raises substantial doubt that it can continue as a going concern. The
stockholders/officers and/or directors have committed to advancing the
operating costs of the Company. These advances are in the form of
short-term promissory notes that bear 8% simple interest and are due
one year from the date that the advances were made. The Company expects
to begin operations within nine months of the funds raised from the
offering.
F-9
32
SIMON KROWITZ BOLIN & ASSOCIATES, P.A.
11300 ROCKVILLE PIKE, SUITE 800
ROCKVILLE, MARYLAND 20852
Independent Accountants Review Report
To the Board of Directors
Demand Financial International, Ltd.
Toronto, Ontario, CANADA
We have reviewed the balance sheet of Demand Financial International, Ltd. (a
development stage company) as of September 30, 2001 and the related statements
of operations and cash flows for the nine months ended September 30, 2001 and
2000 and the cumulative amounts from December 31, 1996 (inception) to September
30, 2001. These statements are the responsibility of management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the aforementioned financial statements for them to be in conformity
with generally accepted accounting principles.
The accompanying financial statements have been presented assuming that the
Company will continue as a going concern. The Company has not established source
of revenue and this raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from outcome of this uncertainty.
/s/ Simon Krowitz Bolin & Associates, P.A.
Rockville, Maryland
November 6, 2001
F-10
33
Demand Financial International, Ltd.
(A Development Stage Company)
BALANCE SHEET
Unaudited
September 30, December 31,
2001 2000
------------- ------------
ASSETS:
Cash $ 2,240 $ -
------------- ------------
Total Current Assets 2,240 -
TOTAL ASSETS $ 2,240 $ -
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Accounts Payable $ 5,179 $ -
Notes Payable 12,144 -
------------- ------------
Total Current Liabilities 17,323 -
Total Liabilities 17,323 -
Stockholders' Equity
Common Stock, $.001 par value
Authorized 100,000,000 shares
Issued and Outstanding 10,000,000 shares 10,000 1,000
Additional Paid in Capital 4,000 4,000
Deficit Accumulated During the Development Stage (29,083) (5,000)
------------- ------------
Total Stockholders' Equity (15,083) -
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,240 $ -
============= ============
See accompanying notes to financial statements.
F-11
34
Demand Financial International, Ltd.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Unaudited Unaudited
Three Months ended Three Months ended
September 30, 2001 September 30, 2000
------------------ ------------------
Revenues $ - $ -
Operating expenses 1,415 -
Legal and Accounting 6,075 -
-------------- --------------
Net income (loss) from operations (7,490) -
Other income
Interest income 30 -
Provision for income taxes - -
-------------- --------------
Net loss $ (7,460) $ -
============== ==============
Deficit accumulated during the development
stage - beginning (21,623) (5,000)
-------------- --------------
Deficit accumulated during the development
stage - ending $ (29,083) $ (5,000)
============== ==============
Net loss per common share $ (0.00) $ (0.00)
-------------- --------------
Weighted average number
of shares outstanding 10,000,000 1,000,000
============== ==============
See accompanying notes to financial statements.
F-12
35
Demand Financial International, Ltd.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Unaudited
Cumulative amounts
Unaudited Unaudited since inception
Nine Months ended Nine Months ended December 31, 1996 to
September 30, 2001 September 30, 2000 September 30, 2001
------------------ ------------------ --------------------
Revenues $ - $ - $ -
Operating expenses 12,359 - 17,359
Legal and Accounting 11,754 - 11,754
------------------ ------------------ ------------------
Net income (loss) from operations (24,113) - (29,113)
Other income
Interest income 30 - 30
Provision for income taxes - - -
------------------ ------------------ ------------------
Net loss $ (24,083) $ - $ (29,083)
================== ================== ==================
Deficit accumulated during the development
stage - beginning (5,000) (5,000) -
------------------ ------------------ ------------------
Deficit accumulated during the development
stage - ending $ (29,083) $ (5,000) $ (29,083)
================== ================== ==================
Net loss per common share $ (0.00) $ (0.00)
------------------ ------------------ ------------------
Weighted average number
of shares outstanding 10,000,000 1,000,000
================== ================== ==================
See accompanying notes to financial statements.
F-13
36
Demand Financial International, Ltd.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Unaudited
Cumulative amounts
Unaudited Unaudited since inception
Nine Months ended Nine Months ended December 31, 1996 to
September 30, 2001 September 30, 2000 September 30, 2001
------------------ ------------------ ------------------
Cash flows from operating activities:
Net losses $ (24,083) $ - $ (29,083)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common Stock issued for services 9,000 - 14,000
Changes in assets and liabilities:
Increase in accounts payable 5,179 - 5,179
--------------- -------------- --------------
Net cash (used) by operating activities (9,904) - (9,904)
Cash flows from financing activities:
Proceeds from notes payable 12,144 - 12,144
-------------- -------------- --------------
Net cash provided (used) by financing activities 12,144 - 12,144
Net increase (decrease) in cash 2,240 - 2,240
Cash, beginning of period - - -
-------------- -------------- --------------
Cash, end of period $ 2,240 $ - $ 2,240
============== ============== ==============
Supplemental disclosure of cash flow
information:
Significant non-cash financing activities:
Common stock issued for services rendered $ 9,000 $ - $ 14,000
============== ============== ==============
See accompanying notes to financial statements.
F-14
37
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements have been prepared
in conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 2000 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of September 30, 2001 and the results of operations for
the periods presented. These statements have not been audited but have been
reviewed by the Company's independent certified public accountants. The
operating results for the interim periods are not necessarily indicative of
results for the full fiscal year.
The notes to consolidated financial statements appearing in the Company's Annual
Report as filed on SEC Form 10-SB for the years ended December 31, 2000 and 1999
should be read in conjunction with this Quarterly Report on Form 10-QSB.
2. NOTES PAYABLE
During the quarter ended September 30, 2001, the Company received various loans
totaling $5,500 from a shareholder in order to pay operating expenses. These
promissory notes bear 8% simple interest and are due one year from the date that
the loans were made.
F-15
38
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On December 11, 2001 we filed a Form 8-K with the Securities and Exchange
Commission reporting that we changed our Independent Accountants as of December
6, 2001. The following information was filed in that current report:
(a) Previous independent accountants
(i) On December 6, 2001, Simon Krowitz Bolin &
Associates, P.A., the independent accountants of Demand Financial International,
Ltd. ("Registrant"), resigned.
(ii) The report of Simon Krowitz Bolin & Associates, P.A.
on the 2000 financial statements contained no adverse opinion, disclaimer of
opinion or modification of the opinion other than the statement that the
Registrant has no established source of income and this raises substantial doubt
about the Registrant's ability to continue as a going concern.
(iii) The Registrant's Board of Directors participated in
and approved the decision to change independent accountants on December 6, 2001.
(iv) In connection with its audits for the two most recent
fiscal years and review of unaudited financial statements through December 6,
2001, there have been no disagreements with Simon Krowitz Bolin & Associates,
P.A. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Simon Krowitz Bolin & Associates, P.A. would have caused
them to make reference thereto in their report on the financial statements.
(v) During the two most recent fiscal years and through
December 6, 2001, there have been no reportable events (as defined in Regulation
S-K Item 304(a)(1)(v)).
(vi) The Registrant requested that Simon Krowitz Bolin &
Associates, P.A. furnish it with a letter addressed to the SEC stating whether
or not it agrees with the above statements.
(b) New independent accountants
The Registrant engaged Eric Bolin CPA, P.C. as its new
independent accountants as of December 6, 2001. During the two most recent
fiscal years and through December 6, 2001, the Registrant has not consulted with
Eric Bolin CPA, P.C. regarding (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Registrant's consolidated financial
statements, and no written report or oral advice was provided to the Registrant
by concluding there was an important factor to be considered by the Registrant
in reaching a decision as to an accounting, auditing or financial reporting
issue; or (ii) any matter that was either the subject of a disagreement, as that
term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304(a)(1)(iv) of Regulation S-K.
39
Part II
Information Not Required in Prospectus
ITEM 24. Indemnification of Directors and Officers
The Nevada Business Corporation Act permits Nevada corporations such as
ours to include in the articles of incorporation a provision eliminating or
limiting directors' exposure to liability for monetary damages for breaches of
their duty of care as directors, if the director acted in good faith and with
ordinary care. The act does not eliminate the directors' liability for monetary
damages for acts or omissions not in good faith or involving the intentional
violations of law, the improper purchase or redemption of stock, payment of
improper dividends or any transaction from which the director received an
improper personal benefit.
The act also permits Nevada corporations to include in the articles of
incorporation a provision to indemnify any and all persons it has the power to
indemnity. The act provides that a Nevada corporation may indemnify a person who
was, is or is threatened to be made, a named party in a proceeding because the
person is or was acting on behalf of the corporation. The indemnification by the
corporation may be made if it is determined that the person conducted himself in
good faith, reasonably believed that the conduct was in the corporation's best
interests if the indemnitee is a director, or was at least not opposed to the
corporations' best interests if the person was someone other than a director.
Directors may not be indemnified if the person improperly benefited personally
or the person is found liable to the corporation. The indemnification may be in
respect of judgments, penalties, fines, settlements and reasonable expenses
actually incurred.
We have implemented the above-described provisions in our articles of
incorporation. In addition, our by-laws provide for similar provisions. We do
not have separate agreements of indemnification or advancement of expenses. We
do not have directors and officers insurance.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling our company
pursuant to the foregoing provisions, we have been informed that in the opinion
of the SEC, indemnification is against public policy and is therefore
unenforceable. In the event that a claim for indemnification against
liabilities, other than the payment by us of expenses incurred by a director,
officer or controlling person in successful defense of any action, suit or
proceedings, is asserted by such director, officer or controlling person in
connection with the securities being offered or sold by us, we will, unless in
the opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the federal
securities law, and will be governed by the final adjudication of such case.
ITEM 25. Other Expenses of Issuance and Distribution
The estimated expenses payable by us in connection with the distribution
of the securities being registered are as follows:
SEC Registration and Filing Fee $ 264
Legal Fees and Expenses 20,000
Accounting Fees and Expenses 15,000
Financial Printing and Engraving 1,000
Blue Sky Fees and Expenses 2,500
Miscellaneous 11,236
------
TOTAL $ 50,000
ITEM 26. Recent Sales of Unregistered Securities
On January 17, 2001, we issued 9,000,000 shares of common stock to Mr.
Mitchell Geisler, the President of Demand Financial, in payment of his services
as a consultant in the preparation of our business plan. We have expensed $9,000
for these services in January 2001. The issuance was made under Section 4(2) of
the Securities Act of 1933 on the basis that Mr. M. Geisler is a sophisticated
investor. Mr. M. Geisler is a director or has been an employee/consultant of
several companies, most of which operate in the area of hospitality services.
40
ITEM 27. Exhibits
Exhibit
Number Name of Exhibit
- ------ ---------------
3.01 Articles of Incorporation of Demand Financial International, Ltd.
(2)
3.02 Amendment to Articles of Incorporation of Demand Financial
International, Ltd. (2)
3.03 By-laws of Demand Financial International, Ltd. (2)
4.01 Demand Financial International, Ltd. Subscription Agreement (1)
5.1 Opinion of Graubard Miller with respect to the legality of the
securities being offered hereby (1)
15.01 Simon Krowitz Bolin & Associates, P.A, letter on unaudited
interim financial information (1)
16.01 Letter on Change in Certifying Accountant (1) (also filed with
Form 8-K on December 11, 2001)
23.01 Consent of Graubard Miller ( included as part of its opinion) (1)
23.02 Consent of Simon Krowitz Bolin & Associates, P.A. (1)
- -------------------------------
(1) Filed herewith.
(2) Incorporated by reference from Form 10-SB filed on April 30, 2001. SEC
file number 000-032629.
ITEM 28. Undertakings
The Company will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" Table in the effective registration
statement.
(iii) Include any additional or changed material information on
the Plan of Distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company under Rule 424(b)(1) or (4), or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
41
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that the offering of the securities at that time as the initial bona fide
offering of those securities.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
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.
Insofar as indemnification for liabilities arising under Securities Act
may be permitted to directors, officers and controlling persons of Registrant
pursuant to the provisions of its Articles of Incorporation, its By-Laws, 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 liabilities (other than the payment by
Registrant for expenses incurred or paid by an officer, director 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 public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, hereunto
duly authorized, in Toronto, Ontario on December 11, 2001
DEMAND FINANCIAL INTERNATIONAL, LTD.
By /s/ Mitchell Geisler
--------------------
Mitchell Geisler, President, Secretary, Treasurer
& Chief Financial Officer
(Principal Executive Officer)
In accordance with 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 stated.
Signature Title Date
--------- ----- ----
/s/ Mitchell Geisler President, Secretary, Treasurer December 11, 2001
- --------------------- & Chief Financial Officer
Mitchell Geisler
/s/ Howard Geisler Vice-President & Director December 11, 2001
- -------------------
Howard Geisler
43
Table of Exhibits
Exhibit
Number Name of Exhibit
- ------- ---------------
3.01 Articles of Incorporation of Demand Financial International, Ltd.
(2)
3.02 Amendment to Articles of Incorporation of Demand Financial
International, Ltd. (2)
3.04 By-laws of Demand Financial International, Ltd. (2)
4.01 Demand Financial International, Ltd. Subscription Agreement (1)
5.1 Opinion of Graubard Miller with respect to the legality of the
securities being offered hereby (1)
15.01 Simon Krowitz Bolin & Associates, P.A, letter on unaudited
interim financial information (1)
16.01 Letter on Change in Certifying Accountant (1) (also filed with
Form 8-K on December 11, 2001)
23.01 Consent of Graubard Miller ( included as part of its opinion) (1)
23.02 Consent of Simon Krowitz Bolin & Associates, P.A. (1)
- -------------------------------
(1) Filed herewith.
(2) Incorporated by reference from Form 10-SB filed on April 30, 2001. SEC file
number 000-032629.
44