As filed with the Securities and Exchange Commission on December 22, 2005
Registration No. 333-______
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under the Securities Act of 1934
Gemwood Productions, Inc.
(Name of Small Business Issuer in Its Charter)
NEVADA 7231 20-3240178
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
C Alta Mar 157 Fracc Baja Del Mar
Playas de Rosarito BC 22710 Mexico (775) 352-4178
(Address of principal Executive Offices) (Issuer's Telephone Number)
Law Office of Michael M. Kessler
3436 American River Drive, Suite 11
Sacramento, CA 95864 (916)239-4000 (919)239-4008
(Name and Address of Agent for Service) (Telephone Number) (Fax Number)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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
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Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Offering Aggregate Amount of
to be Amount to be Price Offering Registration
Registered Registered Per Unit (1) Price (2) Fee
- --------------------------------------------------------------------------------
Common 900,000 $0.03 $27,000 $2.89
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(1) Fixed offering price was set by the selling shareholders until securities
are quoted on the OTC Bulletin Board or other national exchange, and
thereafter at prevailing market prices or privately negotiated prices.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
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.
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PROSPECTUS
Gemwood Productions, Inc.
C Alta Mar 157 Fracc Baja Del Mar,
Playas De Rosarito, B.C. 22710, Mexico
900,000 SHARES OF COMMON STOCK
This is the initial offering of common stock of Gemwood Productions, Inc. and no
public market exists for the securities being offered. Gemwood Productions is
offering for sale a total of 900,000 shares of its common stock on a
self-underwritten, best effort, all-or-none basis. The shares will be offered at
a fixed price of $.03 per share for a period of 180 days from the date of this
prospectus, unless extended by our Board of Directors for an additional 90 days.
There is no minimum number of shares required to be purchased per investor. We
intend to open a standard bank checking account to be used only for the deposit
of funds received from the sale of shares in this offering. This offering is on
best efforts, all-or-none basis, meaning if all shares are not sold and the
total offering amount is not deposited by the expiration date of the offering,
all monies will be returned to investors, without interest or deduction. See
"Use of Proceeds" and "Plan of Distribution".
Gemwood Productions is a development stage, start-up Company and currently has
limited operations. Any investment in the shares offered herein involves a high
degree of risk. You should only purchase shares if you can afford a complete
loss of your investment.
BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY,
THE RISK FACTORS SECTION, BEGINNING ON PAGE 4.
Neither the U.S. Securities and Exchange Commission nor any state securities
division has approved or disapproved these securities, or determined if this
prospectus is current, complete, truthful or accurate. Any representation to the
contrary is a criminal offense.
Offering Total
Price Amount of Underwriting Proceeds
Per Share Offering Commissions to Us
--------- -------- ----------- -----
Common Stock $.03 $27,000 $0 $27,000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE WILL
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE U.S.
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.
Subject to Completion, Dated , 2005
TABLE OF CONTENTS
SUMMARY...................................................................... 3
OFFERING..................................................................... 3
RISK FACTORS................................................................. 4
FORWARD LOOKING STATEMENTS .................................................. 9
USE OF PROCEEDS.............................................................. 9
DETERMINATION OF OFFERING PRICE ............................................. 10
DIVIDEND POLICY.............................................................. 10
PLAN OF DISTRIBUTION......................................................... 10
LEGAL PROCEEDINGS............................................................ 12
DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS .......................... 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .............. 13
DESCRIPTION OF SECURITIES ................................................... 13
INTEREST OF NAMED EXPERTS AND COUNSEL ....................................... 14
SECURITIES ACT INDEMNIFICATION DISCLOSURE ................................... 14
ORGANIZATION IN THE LAST FIVE YEARS ......................................... 15
DESCRIPTION OF BUSINESS ..................................................... 15
PLAN OF OPERATION............................................................ 20
DESCRIPTION OF PROPERTY ..................................................... 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............................. 24
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS .................................................. 24
EXECUTIVE COMPENSATION ...................................................... 27
FINANCIAL STATEMENTS ........................................................ 27
CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING CONTROL
AND FINANCIAL DISCLOSURE ................................................... 27
2
SUMMARY
You should read the following summary together with the more detailed business
information, financial statements and related notes that appear elsewhere in
this prospectus. In this prospectus, unless the context otherwise denotes,
references to "we," "us," and "our" are to Gemwood Productions, Inc.
Gemwood Productions, Inc. was incorporated in Nevada on January 17, 2005 for the
purpose of marketing and selling day spa services to tourists at resort
destinations throughout Mexico. We have signed a commercial lease agreement to
commence on April 1st, 2006 and continue month-to-month thereafter until
canceled upon 30 days prior notice by either party. We have paid a deposit of
$500.00 for the location, and the rental cost will be $300.00 per month. We have
received a letter-of-intent from Gran Baja Resorts offering their intent to
authorize Gemwood Productions, Inc. to provide day spa and salon services to
their resort guests beginning spring of 2006. The principal executive offices
are located at C Alta Mar 157 Fracc Baja Del Mar, Playas De Rosarito, B.C.
22710. The telephone number is (775) 352-4178.
From inception until the date of this filing we have had limited operating
activities. Our audited financial statements for the year ended September 30,
2005 report no revenues and no losses. Our independent auditors have issued an
audit opinion for Gemwood Productions which includes a statement expressing
substantial doubt as to our ability to continue as a going concern. Our only
asset as of the date of this prospectus is our cash in the bank, consisting of
$20,000 in cash generated from the issuance of shares to our founder.
OFFERING
The following is a brief summary of this offering. Please see the Plan of
Distribution and Terms of the Offering sections for a more detailed description
of the terms of the offering.
Securities Being Offered 900,000 Shares of common stock, par value $.001.
Offering Price per Share $.03
Offering Period The shares are being offered for a period not to
exceed 180 days, unless extended by our Board of
Directors for an additional 90 days. In the event
we do not sell all of the shares before the
expiration date of the offering, all funds raised
will be promptly returned to the investors, without
interest or deduction.
Net Proceeds $27,000
Use of Proceeds We intend to use the proceeds to expand our
business operations.
No. of Shares Outstanding
Before the Offering: 2,000,000
No. of Shares Outstanding
After the Offering: 2,900,000
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Our officer, director, control person and/or affiliates do not intend to
purchase any shares in this offering. If all the shares in this offering are
sold, our executive officer and director will own 69% of our common stock. Due
to the controlling amount of his share ownership, he will have a significant
influence in determining the outcome of all corporate transactions.
RISK FACTORS
RISKS ASSOCIATED WITH OUR COMPANY:
OUR OFFICER AND DIRECTOR CURRENTLY DEVOTES ONLY PART TIME SERVICES TO THE
COMPANY AND IS ALSO INVOLVED IN OTHER BUSINESS ACTIVITIES. THE COMPANY'S NEEDS
COULD EXCEED THE AMOUNT OF TIME OR LEVEL OF EXPERIENCE HE MAY HAVE. THIS COULD
RESULT IN HIS INABILITY TO PROPERLY MANAGE COMPANY AFFAIRS, RESULTING IN OUR
REMAINING A START-UP COMPANY WITH NO REVENUES OR PROFITS.
Victor Manuel Savceda, the President and Director of the company, currently
devotes approximately 5 - 10 hours per week to company matters. The
responsibility of developing the company's business, the offering and selling of
the shares through this prospectus and fulfilling the reporting requirements of
a public company all fall upon Mr. Savceda. He has no prior experience serving
as a principal accounting officer or principal financial officer in a public
company. We have not formulated a plan to resolve any possible conflict of
interest with his other business activities. Mr. Savceda intends to limit his
role in his other business activities and devote full time services to Gemwood
Productions after we attain a sufficient level of revenue and are able to
provide sufficient officers' salaries. In the event he is unable to fulfill any
aspect of his duties to the company we may experience a shortfall or complete
lack of sales resulting in little or no profits and eventual closure of the
business.
SINCE WE ARE A DEVELOPMENT STAGE COMPANY, HAVE GENERATED NO REVENUES AND LACK AN
OPERATING HISTORY, AN INVESTMENT IN THE SHARES OFFERED HEREIN IS HIGHLY RISKY
AND COULD RESULT IN A COMPLETE LOSS OF YOUR INVESTMENT IF WE ARE UNSUCCESSFUL IN
OUR BUSINESS PLANS.
Our company was incorporated on January 17, 2005; we have not yet commenced our
business operations; and we have not yet realized any revenues. We have no
operating history upon which an evaluation of our future prospects can be made.
Based upon current plans, we expect to incur operating losses in future periods
as we incur significant expenses associated with the initial startup of our
business. Further, we cannot guarantee that we will be successful in realizing
revenues or in achieving or sustaining positive cash flow at any time in the
future. Any such failure could result in the possible closure of our business or
force us to seek additional capital through loans or additional sales of our
equity securities to continue business operations, which would dilute the value
of any shares you purchase in this offering.
OUR ONLY ASSET IS $20,000 CASH IN THE BANK AND WE ARE DEPENDENT UPON THE
PROCEEDS OF THIS OFFERING TO COMPLETE THE FUNDING FOR OUR BUSINESS PLAN. IF WE
DO NOT RECEIVE FUNDING OUR BUSINESS WILL FAIL.
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The only cash currently available is the cash paid by our founder for the
acquisition of his shares. In the event we do not sell all of the shares and
raise the total offering proceeds, there can be no assurance that we would be
able to raise the additional funding needed to fully implement our business
plans or that unanticipated costs will not increase our projected expenses for
the year following completion of this offering. Our auditors have expressed
substantial doubt as to our ability to continue as a going concern.
WE DO NOT HAVE ANY ADDITIONAL SOURCE OF FUNDING FOR OUR BUSINESS PLANS AND MAY
BE UNABLE TO FIND ANY SUCH FUNDING IF AND WHEN NEEDED, RESULTING IN THE FAILURE
OF OUR BUSINESS.
Other than the shares offered by this prospectus, no other source of additional
capital has been has been identified or sought. As a result we do not have an
alternate source of funds should we fail to complete this offering. If we do
find an alternative source of capital, the terms and conditions of acquiring
such capital may result in dilution and the resultant lessening of value of the
shares of stockholders.
If we are not successful in raising sufficient capital through this offering, we
will be faced with several options:
1. abandon our business plans, cease operations and go out of business;
2. continue to seek alternative and acceptable sources of capital; or
3. bring in additional capital that may result in a change of control.
In the event of any of the above circumstances you could lose a substantial part
or all of your investment. In addition, there can no be guarantee that the total
proceeds raised in this offering will be sufficient, as we have projected, to
fund our business plans or that we will be profitable. As a result, you could
lose any investment you make in our shares.
WE CANNOT PREDICT WHEN OR IF WE WILL PRODUCE REVENUES, WHICH COULD RESULT IN A
TOTAL LOSS OF YOUR INVESTMENT IF WE ARE UNSUCCESSFUL IN OUR BUSINESS PLANS.
We have not yet opened our day spa and have not yet generated any revenues from
operations. In order for us to continue with our plans and open our business, we
must raise capital through this offering. The timing of the completion of the
milestones needed to commence operations and generate revenues is contingent on
the success of this offering. There can be no assurance that we will generate
revenues or that revenues will be sufficient to maintain our business. As a
result, you could lose all of your investment if you decide to purchase shares
in this offering and we are not successful in our proposed business plans.
THE DAY SPA INDUSTRY IS HIGHLY COMPETITIVE. IF WE CAN NOT DEVELOP AND MARKET A
DESIRABLE OFFERING OF SERVICES THAT THE PUBLIC IS WILLING PURCHASE, WE WILL NOT
BE ABLE TO COMPETE SUCCESSFULLY, OUR BUSINESS MAY BE ADVERSELY AFFECTED AND WE
MAY NEVER BE ABLE TO GENERATE ANY REVENUES.
The day spa industry is intensely competitive and fragmented. We will compete
against a number of large well-established companies with greater name
recognition, a more comprehensive offering of services, and with substantially
larger resources than ours. In addition to these large competitors there are
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numerous smaller operations that have developed and are marketing services
similar to ours. Our competitors include, by way of example, Cielo, Spa Vital,
and Spa at the Riviera Alta. There can be no assurance that we can compete
successfully in this complex and changing market. If we cannot successfully
compete in this highly competitive industry, we may never be able to generate
revenues or become profitable. As a result, you may never be able to liquidate
or sell any shares you purchase in this offering.
OUR CONTINUED OPERATIONS DEPEND ON THE PUBLIC'S ACCEPTANCE OF OUR DAY SPA
SERVICES. IF THE PUBLIC DOESN'T FIND OUR SERVICES DESIRABLE AND WE CANNOT
ESTABLISH A RETURNING CUSTOMER BASE, WE MAY NOT BE ABLE TO GENERATE ANY FUTURE
REVENUES, WHICH WOULD RESULT IN A FAILURE OF OUR BUSINESS AND A LOSS OF ANY
INVESTMENT YOU MAKE IN OUR SHARES.
The ability to offer a line of day spa services that the public finds desirable
and willing to purchase on a recurring basis is critically important to our
success. We cannot be certain that the services that we will be offering will be
appealing to the public and as a result there may not be any demand for our
services and our sales could be limited and we may never realize any revenues.
In addition, there are no assurances that if we alter or change our services in
the future that the public's demand for these new offerings will develop and
this could adversely affect our business and any possible revenues.
WE WILL BE SUBJECT TO THE MANY RISKS OF DOING BUSINESS INTERNATIONALLY,
INCLUDING BUT NOT LIMITED TO THE DIFFICULTY OF ENFORCING LIABILITIES IN FOREIGN
JURISDICTIONS, MAKING IT DIFFICULT FOR AN INVESTOR TO EFFECT SERVICE UPON THE
COMPANY.
We are a Nevada corporation and, as such, are subject to the jurisdiction of the
State of Nevada and the United States courts for purposes of any lawsuit, action
or proceeding by investors herein. An investor would have the ability to effect
service of process in any action on the company within the United States. In
addition, we will be operating as a foreign corporation doing business in Mexico
and are subject to the local laws of Mexico governing the investor's ability to
bring actions in foreign courts and enforce liabilities against a foreign
private issuer, or any person, based on U.S. federal securities laws. Generally,
a final and conclusive judgment obtained by investors in U.S. courts would be
recognized and enforceable against us in the Mexican courts having jurisdiction
without reexamination of the merits of the case.
Since our officer and director resides outside the United States, substantially
all or a portion of his assets are located outside the United States. As a
result, it may not be possible for investors to affect service of process within
the United States upon such persons or to enforce against them judgments
obtained in United States courts predicated upon the civil liability provisions
of the federal securities laws of the United States.
BECAUSE WE OPERATE IN A FOREIGN COUNTRY, OUR BUSINESS WILL BE SUBJECT TO FOREIGN
CURRENCY FLUCTUATIONS AND RISKS WHICH COULD SEVERELY IMPACT OUR REVENUES AND
RESULTS OF OPERATIONS.
While our bank account is in U.S. Dollars and is held in a U.S. bank, we will be
conducting the majority of our business, at least initially, in the Mexican
Peso. The Mexican Peso has traded in a fairly narrow range over the past several
years so we currently only have limited exposure to exchange rate fluctuations.
6
At some point in the future the exchange rate could fluctuate substantially more
which would cause us exposure to exchange rate risk as our profits would then be
subject to exchange rate fluctuations.
RISKS ASSOCIATED WITH THIS OFFERING:
THE SHARES BEING OFFERED ARE DEFINED AS "PENNY STOCK", THE RULES IMPOSED ON THE
SALE OF THE SHARES MAY AFFECT YOUR ABILITY TO RESELL ANY SHARES YOU MAY
PURCHASE, IF AT ALL.
The shares being offered are defined as a penny stock under the Securities and
Exchange Act of 1934, and rules of the Commission. The Exchange Act and such
penny stock rules generally impose additional sales practice and disclosure
requirements on broker-dealers who sell our securities to persons other than
certain accredited investors who are, generally, institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000 ($300,000 jointly with spouse), or in
transactions not recommended by the broker-dealer. For transactions covered by
the penny stock rules, a broker-dealer must make a suitability determination for
each purchaser and receive the purchaser's written agreement prior to the sale.
In addition, the broker-dealer must make certain mandated disclosures in penny
stock transactions, including the actual sale or purchase price and actual bid
and offer quotations, the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may affect the ability of
broker-dealers to make a market in or trade our common stock and may also affect
your ability to resell any shares you may purchase in this offering in the
public markets. See the Plan of Distribution section on page 10.
WE ARE SELLING THIS OFFERING WITHOUT AN UNDERWRITER AND MAY BE UNABLE TO SELL
ANY SHARES.
This offering is self-underwritten, that is, we are not going to engage the
services of an underwriter to sell the shares; we intend to sell them through
our officer and director, who will receive no commission. He will offer the
shares to his friends, relatives, acquaintances and business associates.
However; there is no guarantee that he will be able to sell any of the shares.
In the event all of the shares are not sold before the expiration date of the
offering, all funds will be promptly returned to the investors, without interest
or deduction.
DUE TO THE LACK OF A TRADING MARKET FOR OUR SECURITIES, YOU MAY HAVE DIFFICULTY
SELLING ANY SHARES YOU PURCHASE IN THIS OFFERING.
There is presently no demand for our common stock and no public market exists
for the shares being offered in this prospectus. We plan to contact a market
maker to file an application on our behalf to have our common stock listed for
quotation on the Over-the-Counter Bulletin Board (OTCBB) immediately following
the effectiveness of this Registration Statement. The OTCBB is a regulated
quotation service that displays real-time quotes, last sale prices and volume
information in over-the-counter (OTC) securities. The OTCBB is not an issuer
listing service, market or exchange. Although the OTCBB does not have any
listing requirements per se, to be eligible for quotation on the OTCBB, issuers
must remain current in their filings with the SEC or applicable regulatory
authority. Market Makers are not permitted to begin quotation of a security
7
whose issuer does not meet this filing requirement. Securities already quoted on
the OTCBB that become delinquent in their required filings will be removed
following a 30 or 60 day grace period if they do not make their required filing
during that time. We cannot guarantee that our application will be accepted or
approved and our stock listed and quoted for sale. As of the date of this
filing, there have been no discussions or understandings between Gemwood
Productions or anyone acting on our behalf with any market maker regarding
participation in a future trading market for our securities. If no market is
ever developed for our common stock, it will be difficult for you to sell any
shares you purchase in this offering. In such a case, you may find that you are
unable to achieve any benefit from your investment or liquidate your shares
without considerable delay, if at all. In addition, if we fail to have our
common stock quoted on a public trading market, your common stock will not have
a quantifiable value and it may be difficult, if not impossible, to ever resell
your shares, resulting in an inability to realize any value from your
investment.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF THE PRICE YOU PAY FOR YOUR
SHARES.
Our existing stockholder acquired his shares at a cost substantially less than
that which you will pay for the shares you purchase in this offering.
Accordingly, any investment you make in these shares will result in the
immediate and substantial dilution of the net tangible book value of those
shares from the $.03 you pay for them. Upon completion of the offering, the net
tangible book value of your shares will be $.014 per share, $.016 less than what
you paid for them.
WE WILL BE HOLDING ALL PROCEEDS FROM THE OFFERING IN A STANDARD BANK CHECKING
ACCOUNT UNTIL ALL SHARES ARE SOLD HOWEVER THERE IS NO GUARANTEE ALL OF THE FUNDS
WILL BE USED AS OUTLINED IN THIS PROSPECTUS.
All funds received from the sale of shares in this offering will be deposited
into a standard bank checking account until all shares are sold and the offering
is closed, at which time, the proceeds will be transferred to our business
operating account. We have committed to use the proceeds raised in this offering
for the uses set forth in the proceeds table. However, certain factors beyond
our control, such as increases in certain costs, could result in the company
being forced to reduce the proceeds allocated for other uses in order to
accommodate these unforeseen changes. The failure of our management to use these
funds effectively could result in unfavorable returns. This could have a
significant adverse effect on our financial condition and could cause the price
of our common stock to decline.
OUR DIRECTOR WILL CONTINUE TO EXERCISE SIGNIFICANT CONTROL OVER OUR OPERATIONS,
WHICH MEANS AS A MINORITY SHAREHOLDER, YOU WOULD HAVE NO CONTROL OVER CERTAIN
MATTERS REQUIRING STOCKHOLDER APPROVAL THAT COULD AFFECT YOUR ABILITY TO EVER
RESELL ANY SHARES YOU PURCHASE IN THIS OFFERING.
After the completion of this offering, our executive officer and director will
own 69% of our common stock. Due to the controlling amount of his share
ownership, he will have a significant influence in determining the outcome of
all corporate transactions, including the election of directors, approval of
significant corporate transactions, changes in control of the company or other
matters that could affect your ability to ever resell your shares. His interests
may differ from the interests of the other stockholders and thus result in
corporate decisions that are disadvantageous to other shareholders.
8
WE WILL INCUR ONGOING COSTS AND EXPENSES FOR SEC REPORTING AND COMPLIANCE,
WITHOUT REVENUE WE MAY NOT BE ABLE TO REMAIN IN COMPLIANCE, MAKING IT DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES, IF AT ALL.
Our business plan allows for the estimated $5,000 cost of this Registration
Statement to be paid from existing cash on hand. We plan to contact a market
maker immediately following the effectiveness of this Registration Statement and
have them file an application on our behalf to have the shares quoted on the OTC
Electronic Bulletin Board. To be eligible for quotation on the OTCBB, issuers
must remain current in their filings with the SEC. Market Makers are not
permitted to begin quotation of a security whose issuer does not meet this
filing requirement. Securities already quoted on the OTCBB that become
delinquent in their required filings will be removed following a 30 or 60 day
grace period if they do not make their required filing during that time. In
order for us to remain in compliance we will require future revenues to cover
the cost of these filings, which could comprise a substantial portion of our
available cash resources. If we are unable to generate sufficient revenues to
remain in compliance it may be difficult for you to resell any shares you may
purchase, if at all.
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risk and
uncertainties. We use words such as "anticipate", "believe", "plan", "expect",
"future", "intend", and similar expressions to identify such forward-looking
statements. Investors should be aware that all forward-looking statements
contained within this filing are good faith estimates of management as of the
date of this filing. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us as described in the "Risk Factors" section and elsewhere in
this prospectus.
USE OF PROCEEDS
Assuming we are able to sell all of the shares and complete the offering, which
we can't guarantee, the proceeds to us will be $27,000. We expect to disburse
those proceeds in the priority set forth below, during the first 12 months
following successful completion of this offering:
Total Proceeds $27,000
-------
Salaries 12,000
Advertising and Marketing 12,000
Renovations 3,000
-------
Total Net Proceeds $27,000
=======
DETERMINATION OF OFFERING PRICE
The offering price of the shares has been determined arbitrarily by us. The
price does not bear any relationship to our assets, book value, earnings, or
other established criteria for valuing a privately held company. In determining
9
the number of shares to be offered and the offering price we took into
consideration our cash assets and the amount of money we would need to fully
implement our business plans. Accordingly, the offering price should not be
considered an indication of the actual value of our securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
the business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
PLAN OF DISTRIBUTION
There is currently no market for any of our shares and we can provide no
assurance that the shares offered will have a market value or that they can be
resold at the offering price. We can also provide no assurance when an active
secondary market might develop, or that a public market for our securities may
be sustained even if it is developed.
We plan to contact a market maker to file an application on our behalf to have
our common stock listed for quotation on the Over-the-Counter Bulletin Board
(OTCBB) immediately following the effectiveness of this Registration Statement.
The OTCBB is a regulated quotation service that displays real-time quotes, last
sale prices and volume information in over-the-counter (OTC) securities. We do
not know how long this process will take and we cannot guarantee that our
application will be accepted or approved and our stock listed and quoted for
sale. As of the date of this filing, there have been no discussions or
understandings between Gemwood Productions or anyone acting on our behalf with
any market maker regarding participation in a future trading market for our
securities. If no market is ever developed for our common stock, it will be
difficult for you to sell any shares you purchase in this offering. In such a
case, you may find that you are unable to achieve any benefit from your
investment or liquidate your shares without considerable delay, if at all. In
addition, if we fail to have our common stock quoted on a public trading market,
your common stock will not have a quantifiable value and it may be difficult, if
not impossible, to ever resell your shares, resulting in an inability to realize
any value from your investment.
This is a self-underwritten offering. This prospectus is part of a prospectus
that permits our officer and director to sell the shares directly to the public,
with no commission or other remuneration payable to him for any shares they
sell. There are no plans or arrangements to enter into any contracts or
agreements to sell the shares with a broker or dealer. Our officer and director
will sell the shares and intends to offer them to friends, family members and
business acquaintances. In offering the securities on our behalf, our officer
and director will rely on the safe harbor from broker dealer registration set
out in Rule 3a4-1 under the Securities Exchange Act of 1934, 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.
a. Our officer and director is not subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of the
Act, at the time of his participation; and,
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b. Our officer and director will not be compensated in connection with
his participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities; and
c. Our officer and director is not, nor will be at the time of his
participation in the offering, an associated person of a
broker-dealer; and
d. Our officer and director meets the conditions of paragraph (a)(4)(ii)
of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs,
or is intending primarily to perform at the end of the offering,
substantial duties for or on behalf of our company, other than in
connection with transactions in securities; and (B) is not a broker or
dealer, or been associated person of a broker or dealer, within the
preceding twelve months; and (C) has not participated in selling and
offering securities for any Issuer more than once every twelve months
other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Our officer, director, control person and affiliates of same do not intend to
purchase any shares in this offering.
TERMS OF THE OFFERING
The Shares will be sold at the fixed price of $.03 per Share until the
completion of this offering. There is no minimum amount of subscription required
per investor.
This offering will commence on the date of this prospectus and continue for a
period of 180 days, unless we extend the offering period for an additional 90
days, or unless the offering is completed.
This is a "best efforts", "all or none" offering and, as such, we will not be
able to spend any of the proceeds unless and until all shares are sold and all
proceeds are received. We intend to hold all funds collected for subscriptions
in a separate bank account until the total amount of $27,000 has been received.
At that time, the funds will be transferred to our business account for use in
our business plans. In the event the offering is not sold out prior to the
Expiration Date, all funds will be returned to investors, without interest or
deduction.
PROCEDURES FOR SUBSCRIBING
If you decide to subscribe for any shares in this offering, you will be required
to execute a Subscription Agreement and tender it, together with a check or
certified funds to us. All checks for subscriptions should be made payable to
Gemwood Productions, Inc.
LEGAL PROCEEDINGS
Gemwood is not currently involved in any legal proceedings and we are not aware
of any pending or potential legal actions.
11
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The director and officer of Gemwood, whose one year term will expire 11/15/06,
or at such a time as his successor(s) shall be elected and qualified is as
follows:
Date
Name & Address Age Position First Elected Term Expires
- -------------- --- -------- ------------- ------------
Victor Manuel Savceda 20 President, 08/13/05 11/15/06
C Alta Mar 157 Fracc Baja Del Mar Secretary,
Playas De Rosarito B.C 22710 Director
The foregoing person is a promoter of Gemwood, as that term is defined in the
rules and regulations promulgated under the Securities and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the board of directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
The director and officer currently devotes an immaterial amount of time,
approximately five to ten hours per week, to manage the business affairs of our
company. After receiving funding per our business plan Mr. Savceda intends to
devote full time services to the company.
No executive officer or director of the corporation has been the subject of any
order, judgment, or decree of any court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring, suspending or
otherwise limiting him or her from acting as an investment advisor, underwriter,
broker or dealer in the securities industry, or as an affiliated person,
director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities.
No executive officer or director of the corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No executive officer or director of the corporation is the subject of any
pending legal proceedings.
Resume
Arco Iris Salon
Owner - Rosarito, B.C.
2004 - Present
Owner of the Arco Iris Salon in Rosarito Beach, Baja California, Mexico. Arco
Iris Salon provides manicure, pedicure, hair salon, hair removal and waxing
services to customers in Rosarito Beach, Baja California, Mexico. Mr. Savceda
manages the daily operations of the business, including management of its four
employees, inventory, sales, marketing, budgeting, and customer relations.
Graduate of the Instituto Europeo - 2004
Prior to 2004, Mr. Savceda was a student.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information on the ownership of Gemwood's voting
securities by officers, directors and major shareholders as well as those who
own beneficially more than five percent of Gemwood's common stock through the
most current date - December 16, 2005:
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
----- ------- --------------- -----
Common Victor Manuel Savceda 2,000,000 (a) 100%
C Alta Mar 157 Fracc Baja Del Mar
Playas De Rosarito B.C 22710
Total Shares Owned by Officers & Directors
as a Group 2,000,000 100%
- ----------
(a) Mr. Savceda received 1,000,000 shares of the company's common stock on
August 25, 2005 for $10,000 cash. He received an additional 1,000,000
shares of common stock on October 25, 2005 for $10,000 cash.
FUTURE SALES BY EXISTING STOCKHOLDER
A total of 2,000,000 shares have been issued to the existing stockholder, all of
which are held by our officer and director and are restricted securities, as
that term is defined in Rule 144 of the Rules and Regulations of the SEC
promulgated under the Act. Under Rule 144, such shares can be publicly sold,
subject to volume restrictions and certain restrictions on the manner of sale,
commencing one year after their acquisition. Any sale of shares held by the
existing stockholder (after applicable restrictions expire) may have a
depressive effect on the price of our common stock in any market that may
develop, of which there can be no assurance.
Our principal shareholder does not have any existing plans to sell his shares at
any time after this offering is complete.
DESCRIPTION OF SECURITIES
Gemwood's Certificate of Incorporation authorizes the issuance of 50,000,000
shares of common stock, par value $0.001 per share. There is no preferred stock
authorized. Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders, and do not have
cumulative voting rights. Holders of shares of common stock are entitled to
share ratably in dividends, if any, as may be declared from time to time by the
board of directors in its discretion, from funds legally available therefore. In
the event of a liquidation, dissolution, or winding up of Gemwood, the holders
of shares of common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. Holders of common stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption with respect to such shares.
13
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the below described experts or counsel have been hired on a contingent
basis and none of them will receive a direct or indirect interest in the
Company.
Our financial statements for the period from inception to the year ended
September 30, 2005 included in this prospectus have been audited by De Joya
Griffith & Company, LLC, 2425 W. Horizon Ridge Parkway, Henderson, NV 89052. We
include the financial statements in reliance on their reports, given upon their
authority as experts in accounting and auditing.
The Law Office of Michael M. Kessler, 3436 American River Drive, Suite 11,
Sacramento, CA 95864, has passed upon the validity of the shares being offered
and certain other legal matters and is representing us in connection with this
offering.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Pursuant to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a lawsuit, because of his position, if he acted in good faith and in a
manner he reasonably believed to be in our best interest. In certain cases, we
may advance expenses incurred in defending any such proceeding. To the extent
that the officer or director is successful on the merits in any such proceeding
as to which such person is to be indemnified, we must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The indemnification is intended to be to the fullest
extent permitted by the laws of the State of Nevada.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
14
ORGANIZATION IN THE LAST FIVE YEARS
Gemwood Productions, Inc. was incorporated in Nevada on January 17, 2005. In
August of 2005 the board of directors voted to seek capital and began
development of our business plan. We received our initial funding of $20,000
through the sale of common stock to our officer and director. Gemwood does not
have any, nor has it had any, associations with any promoters aside from Mr.
Savceda, our director, who is considered a promoter.
DESCRIPTION OF BUSINESS
FORM AND YEAR OF ORGANIZATION
Gemwood Productions, Inc. was incorporated in Nevada on January 17, 2005. We
have taken the following steps: developed our business plan, signed a commercial
lease for our first day spa, and received a letter of intent to provide services
for a beach resort hotel. We are a development stage company with essentially no
revenues and a limited operating history.
Gemwood Productions, Inc. has a very specific business plan that it is executing
as aggressively as it can with the current funding. Our director has the
experience and knowledge in the day spa and salon services industry to
successfully execute the business plan. We are a new company early in the
implementation of our business plan and performing those tasks necessary to
raise the funding to complete the plan.
BANKRUPTCY OR SIMILAR PROCEEDINGS
There has been no bankruptcy, receivership or similar proceedings.
REORGANIZATIONS, PURCHASE OR SALE OF ASSETS
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Gemwood Productions, Inc. intends to market and sell its day spa services to
tourists at resort destinations throughout Mexico. We intend to market and sell
massage, stone therapy, manicure, pedicure, hair salon, aromatherapy, facial
rejuvenation, skin care and cleansing treatments, professional peels, herbal
steam treatments, steam bath and sauna, permanent make up, skin exfoliation,
tanning, hair removal and waxing, body wraps, Moor mud treatments, yoga,
nutrition and diet counseling, and cellulite treatment services to tourist
resorts throughout Mexico. We plan to open our fist day spa in Rosarito Beach,
Baja California, Mexico. We have signed a commercial lease agreement to commence
on April 1st, 2006.
For centuries, massage and other forms of body work and beauty enhancement have
been practiced. The benefits are; relief of stress and tension, increased
circulation, improved emotional and physical well-being, and improved
15
appearance. The different styles of massage that will be offered at our day spa
are:
SWEDISH MASSAGE is designed to relieve everyday stress and tension by using
soothing gentle strokes to relieve sore muscles and relieve stress.
THERAPEUTIC AND DEEP TISSUE MASSAGE is used to target specific areas of
concern. Muscle groups are isolated and massaged to relieve pain and
restore well being.
AROMATHERAPY MASSAGE incorporates Aromatherapy oils with traditional
massage techniques in order to relax the client. Aromatherapy is the art of
using oils extracted from plants for healing. The essential oils are
extracted from the flowers, seeds, fruits, leaves, bark, and roots of
organically grown plants. The oils are absorbed into the body via the
skin's pores during massage. Molecules within the oils enter the
bloodstream, and from there target the nervous system, thus affecting ones
emotional and physical well being. Each essential oil has a number of
different properties. For example, lavender is a sedative, antidepressant
and antispasmodic. It is mainly used to relieve nervous tension and
digestive complaints. Tea tree is a powerful antiseptic, geranium is a mood
enhancer and eucalyptus is a decongestant.
HOT STONE MASSAGE is a specialty massage that uses smooth, heated stones.
They are often basalt, a black volcanic rock that absorbs and retains heat
well. It is a deeply soothing, relaxing form of massage. The heat helps
tight muscles release. The stones are sanitized and then heated in 120 and
150 degree water. The therapist uses traditional strokes of Swedish massage
while holding a heated stone. As the stone cools, the therapist replaces it
with another. Heated stones are also placed in specific points along the
spine, the palms of the hands, and between the toes to improve the flow of
energy in the body. If inflammation or muscle injury is present, cold
stones are sometimes used.
The principles of facial rejuvenation are to stimulate the facial muscles to
stimulate muscle tone. Facial massage stimulates circulation in the skin which
improves skin tone, collagen, and elastin levels. This is also called the
non-surgical facelift. It is intended to help with wrinkles and sagging facial
muscles.
A manicure is a cosmetic beauty treatment for fingernails and hands. A manicure
can treat just the hands, just the nails, or both. During a spa manicure hands
are soaked in warm water that is treated with tea tree oils and sea salt to
clean and moisturize the finger nails and cuticles. The nails are then clipped,
filed, buffed and polished. A similar treatment performed on the feet is a
pedicure. We intend to perform both services at our day spas.
Waxing is a temporary method of hair removal which removes the hair at the root.
New hairs do not grow back in the waxed area for up to three to eight weeks.
Almost any area of the body can be waxed, including eyebrows, face, bikini area,
legs, arms, back, abdomen and feet. Waxing is accomplished by spreading a warmed
wax combination thinly over the skin. A cloth or paper strip is pressed on top
16
and then ripped off with a quick movement against the direction of the hair
growth. This removes the wax along with the hair and dead skin cells leaving the
skin smooth. New hair growth in the waxed areas is soft and fine, not sharp and
coarse like shaved hair.
Moor mud is imported from France and is known for its cleansing, healing and
detoxifying properties. The therapeutic benefits of Moor mud include relieving
joint pain and skin inflammations, improving blood flow and lymphatic
circulation, and nourishing the skin. This treatment is a full body mask that
combines the therapeutic properties of the Moor with the use of essential oils
and massage for releasing stress and enhancing deep relaxation.
The most popular body treatment is a "body scrub" -- sometimes called a sea-salt
scrub or salt glow. This is an exfoliating treatment that takes place on a
massage table covered with a sheet and a large, thin piece of plastic. As the
client lays on their stomach, the massage therapist rubs a mixture of sea salt,
oil, and aromatics like lemon into the skin. This removes the outermost layer of
dead skin cells and leaves skin feeling velvety soft. Once the whole body is
scrubbed, which takes ten or fifteen minutes, the therapist drapes plastic over
the client and goes away for about 20 minutes while the client rests. Variations
can come from the essential oils or scrub materials: some of the most popular
being the orange blossom/peppermint salt glow, the cucumber salt glow, and the
grape seed scrub.
A "body mask," which sometimes takes place after a scrub, involves the
application of product over the entire body. Mud, algae, or seaweed is applied
to the skin and then the client is wrapped in a thermal blanket. It's a
"detoxifying" treatment that stimulates the metabolic system, speeding its
ability to carry away waste products. A very heavy cream product that penetrates
into the body can also be used as a "hydrating" treatment.
A "body wrap" is a wrapping treatment used to treat cellulite. It sometimes has
a diuretic effect that aids in temporary weight reduction. An herbal and amino
acid masque is applied to the body to open pores, flush out toxins and stimulate
circulation. Linen cloths soaked in the amino acid solution are wrapped very
firmly around the body to contour and smooth problem areas. The client then
relaxes under a warm blanket for 30 minutes. The resulting inch loss can be
maintained if the client follows a healthy lifestyle. Added benefits include
stimulation of the lymphatic system, reduction of cellulite and a boost in
metabolism.
We also plan to offer tanning services to our customers. Tanning leaves skin
with a healthy glow. It is used by men and women alike. Tanning helps keep a
natural tan or provide enhancement during a vacation. The types of tanning
services we plan to offer are:
AIRBRUSH TANNING - A perfect all-over tan in less than 20 minutes, fully
developed within 4-6 hours. The FDA approved active ingredient,
dihydroxyacetone (DHA), reacts with the amino acids (proteins) in the
outermost layer of the skin to produce a golden brown color. The body is
evenly bronzed with healthy color for 5-12 days. Airbrush tanning provides
a beautiful natural-looking tan without the long-term skin damage
associated with UV exposure or the streaks and drips of other self tanning
systems. The micro-fine mist is administered by a certified Airbrush
Tanning technician who can customize and perfect the tan.
17
SUNLESS BRONZING LOTION - A two step spa treatment. The client is
exfoliated with a salt body rub, then a sunless tanning lotion is applied
by the esthetician and rubbed into the skin. The treatment generally takes
1 hour.
TANNING BEDS - A true melanin tan is achieved by exposing the skin to
ultraviolet rays produced by lights in the beds and capsules. Approximately
three visits are necessary to build a strong base tan.
Sauna and Steam Room treatments will also be offered. The sauna utilizes dry
heat in a wooden structure which forces sweating and the elimination of toxins,
open pores. It is followed by a cold shower that will close the opened pores and
stop the sweating process. The steam room utilizes wet, hot steam which promotes
sweating, opening pores and ridding of toxins.
Permanent cosmetic makeup is a state of the art form of cosmetic tattooing. The
specialized techniques used for permanent cosmetics are often referred to as
"micro-pigmentation", "micro-pigment implantation" or "derma-graphics". The
cosmetic implantation technique deposits tiny individual implants of pigment
into the dermal layer of the skin. Permanent cosmetics procedures are performed
using various machines and methods, including the traditional (or specialized)
tattoo or coil machines, the pen or rotary machine and the non-machine or hand
method. These procedures are a process which includes the initial consultation,
initial application of pigment, and usually one or two follow up visits for
adjusting the shape and color or density of the pigment. The most popular
permanent makeup services are for eyebrows, eyeliner, eyelash enhancement,
lip-liner and full lip color.
DISTRIBUTION METHODS OF PRODUCTS OR SERVICES
Gemwood plans to utilize its management's background in the salon and spa
services industry to offer our services to tourists at resort destinations
throughout Mexico. Our director has a background in the salon and spa services
industry. We plan to offer our services through a web site, hotels and resorts,
and travel agencies.
STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS OR SERVICES
Gemwood has no new product or service planned or announced to the public.
COMPETITION AND COMPETITIVE POSITION
Gemwood Productions intends to compete in the salon and day spa services
industry. Gemwood Productions Inc. competitors Cielo, Spa Vital, and Spa at the
Riviera Alta have longer operating histories, larger customer bases, and greater
brand recognition than Gemwood Productions Inc.
SUPPLIERS AND SOURCES OF RAW MATERIALS
We have no principal suppliers or sources for raw materials. We will utilize our
management's background to offer our salon and spa services without the use of
major suppliers of raw materials.
18
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
Gemwood will not depend on any one or a few major customers. Management has
experience in the management of salon and spa services in Mexico.
PATENTS, TRADEMARKS, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS, OR LABOR
CONTRACTS
We have no current plans for any registrations such as patents, trademarks,
copyrights, franchises, concessions, royalty agreements or labor contracts. We
will assess the need for any copyright, trademark or patent applications on an
ongoing basis.
NEED FOR GOVERNMENT APPROVAL FOR ITS PRODUCTS OR SERVICES
Gemwood is not required to apply for or have any government approval for its
products or services.
EFFECT OF GOVERNMENTAL REGULATIONS ON THE COMPANY'S BUSINESS
Gemwood will be subject to federal laws and regulations that relate directly or
indirectly to its operations. We will be subject to common business and tax
rules and regulations pertaining to the operation of our business in Mexico.
RESEARCH AND DEVELOPMENT COSTS DURING THE LAST TWO YEARS
Gemwood has not expended funds for research and development costs since
inception.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Environmental regulations have had no materially adverse effect on Gemwood's
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on our business, financial condition or results of
operation. Public interest in the protection of the environment has increased
dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, the
business and prospects of Gemwood could be adversely affected.
NUMBER OF EMPLOYEES
Gemwood's only current employee is its officer who will devote as much time as
the board of directors determines is necessary to manage the affairs of the
company. The officer intends to work on a full time basis when Gemwood raises
capital per its business plan.
19
REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited financial information to our
shareholders. We will make our financial information equally available to any
interested parties or investors through compliance with the disclosure rules of
Regulation S-B for a small business issuer under the Securities Exchange Act of
1934. We will become subject to disclosure filing requirements once our SB-2
registration statement becomes effective, including filing Form 10-KSB annually
and Form 10-QSB quarterly. In addition, we will file Form 8K and other proxy and
information statements from time to time as required. We do not intend to
voluntarily file the above reports in the event that our obligation to file such
reports is suspended under the Exchange Act. The public may read and copy any
materials that we file with the Securities and Exchange Commission, ("SEC"), at
the SEC's Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
PLAN OF OPERATION
Gemwood's current cash balance is $20,000. We believe our cash balance is
sufficient to fund our planned levels of operations until we are able to secure
the additional financing from the offering. If we experience a shortage of funds
prior to funding we may utilize our director has informally agreed to advance
funds to allow us to pay for offering costs and filing fees, however our
director has no formal commitment, arrangement or legal obligation to advance or
loan funds to Gemwood. In order to achieve our business plan goals, we will need
to raise capital through the sale of equity securities. We are a development
stage company and have generated no revenue to date. We have sold $20,000 in
equity securities to pay for our minimum level of operations.
We have received a going concern opinion on our financial statements that raises
substantial doubt as to our ability to continue as a going concern. As described
in Note 1 of our accompanying financial statements, our lack of any guaranteed
sources of future capital creates substantial doubt as to our ability to
continue as a going concern. If our business plan does not work, we could remain
as a start-up company with limited material operations, revenues, or profits.
Although management has believes their plan for Gemwood will generate revenue
and profit, there is no guarantee their past experiences will provide Gemwood
with similar future successes.
As of the date of this filing, we have taken the following steps: developed our
business plan, determined the market in which we intend to open our first day
spa location Rosarito Beach, Baja California, Mexico. Gemwood has signed a
commercial lease agreement to commence on April 1st, 2006 and will continue
month-to-month thereafter until canceled upon 30 days prior notice by either
party. We have paid a deposit of $500.00 for the location. The monthly rent will
cost $300.00. We have received a letter-of-intent from Gran Baja Resorts
authorizing Gemwood Productions, Inc. to provide day spa and salon services to
their guests beginning spring of 2006. We are now in the process of registering
our securities with the Securities and Exchange Commission in order to raise
20
funds to implement our business plan. Our business plan includes a need for cash
of $46,740, including the cost of this registration statement.
PROPOSED MILESTONES TO IMPLEMENT OUR PLAN OF OPERATIONS:
The following milestones are estimates from our director. They are estimates
only. The number of employees, number of initial stores, subsequent costs, and
other projected milestones are approximations only, and are subject to
adjustments based upon the requirements of the business and costs of those
requirements.
We intend to execute the following portions of our business plan over a twelve
month period:
APRIL 2006:
We intend to begin the remodeling and build out process for our first location
during the month of April. The cost for the first month of remodeling is
estimated to cost approximately $1,500. We will design the space with the
intention of creating a soothing environment for customers to relax and enjoy a
full day of being pampered. Our color choices will be neutral. We plan to paint
and do finishing work to create an environment suitable for a day spa. We will
also begin paying rent on our first location at a cost of $300 per month, phone
$60 per month, utilities $50 per month, postage and supplies $100 per month,
salary $1000 per month, $1,200 one time fee to purchase salon and spa equipment,
$35 per month cost for a bookkeeper. Total cost for the month of April is
$4,245.
MAY 2006:
During the month of May, we intend to continue our remodeling and build out
efforts for our day spa. We will spend and additional $1,500 during this month
on, flooring, molding and tile work. The material choices during this month of
our build out will also be based on our goal of creating a soothing and
comfortable environment for our customers. Our total cost of operations for the
month of May including $300 per month for rent, phone $60 per month, utilities
$50 per month, postage and supplies $100 per month, salary $1000 per month,
$1,500 for remodeling, $35 per month cost for a bookkeeper. Our total cost for
the month of May is estimated to be $3,045.
JUNE 2006:
In June, we will continue the remodeling efforts for our store at a cost of
$1500. We will include aesthetically pleasing artwork, comfortable furnishings,
new fixtures, and a musical sound system will be installed to provide meditation
and ambient music for our patrons. Our total cost of operations for the month of
June, including $300 per month for rent, phone $60 per month, utilities $50 per
month, postage and supplies $100 per month, salary $1,000 per month, $1,500 for
remodeling, $35 per month cost for a bookkeeper. Our total cost for the month of
June is estimated to be $3,045.
21
JULY 2006:
Our final month of remodeling is July. We will finalize any interior design
choices remaining, purchase window treatments and complete any outstanding
finishing work. We estimate our costs to be approximately $1,500 for the final
month of remodeling and build out. Our total cost of operations for the month of
July, including $300 per month for rent, phone $60 per month, utilities $50 per
month, postage and supplies $100 per month, salary $1,000 per month, $$1,500 for
remodeling, $35 per month cost for a bookkeeper. Our total cost for the month of
July is estimated to be $3,045.
AUGUST 2006:
In the month of August, we intend to begin our marketing and advertising efforts
and hire initial staff at a cost of $500 per month. Our budget for advertising
in August is $1,500. We will have brochures designed, printed and distributed to
the lobbies of the hotels in Rosarito Beach, Mexico. We will also distribute
brochures to the travel agencies and hotels throughout San Diego, California to
generate sales of our day spa services. Our ongoing cost of monthly operations
is; $300 per month for rent, $500 for staff, phone $60 per month, utilities $50
per month, postage and supplies $100 per month, salary $1,000 per month, $35 per
month cost for a bookkeeper. Our total cost of operations for the month of
August is $3,545.
SEPTEMBER 2006:
We intend for sales to begin in the month of September. We will continue
marketing throughout the month of September. We intend to design and develop a
web site at a cost of $1,500 to promote our services. Our ongoing cost of
monthly operations is; $300 per month for rent, $5000 for staff, phone $60 per
month, utilities $50 per month, postage and supplies $100 per month, salary
$1,000 per month, $35 per month cost for a bookkeeper. Our total cost of
operations for the month of September is $3,545.
OCTOBER 2006:
In October, we will begin our print advertising campaign. We will run ads in
local newspapers and magazines to generate business for our day spa. We intend
to spend $1,500 in print advertising in October. Our ongoing cost of monthly
operations is; $300 per month for rent, $500 for staff, phone $60 per month,
utilities $50 per month, postage and supplies $100 per month, salary $1,000 per
month, $35 per month cost for a bookkeeper. Our total cost of operations for the
month of October is $3,545.
NOVEMBER 2006:
In November, we intend to continue our marketing efforts by offering a free day
at our facility to travel agents, hotel management, restaurant, bar, and
nightclub owners throughout Rosarito Beach and San Diego. The cost for
invitations, mailing, and catering for the day and evening is estimated to be
$1,500. We hope that this open house style approach of one-to-one marketing will
generate interest and sales for our business. Our ongoing cost of monthly
22
operations is; $300 per month for rent, $500 for staff, phone $60 per month,
utilities $50 per month, postage and supplies $100 per month, salary $1,000 per
month, $35 per month cost for a bookkeeper. Our total cost of operations for the
month of November is $3,545.
DECEMBER 2006:
Our marketing efforts during the month of December will include a direct mailing
of coupon Christmas cards to potential clients. We will target women's gift,
bath, and beauty store managers by offering them a free day at our spa. In
return we would like them to put coupons for our store on their register
counters through the holiday season. We anticipate the cost for this effort to
be $1,500. Our ongoing cost of monthly operations is; $300 per month for rent,
$500 for staff, phone $60 per month, utilities $50 per month, postage and
supplies $100 per month, salary $1,000 per month, $35 per month cost for a
bookkeeper. Our total cost of operations for the month of December is $3,545.
JANUARY 2007:
In the month of January, we intend to begin an email marketing campaign. We will
send out emails to targeted potential customers. The cost for our email campaign
is $1,500. Our ongoing cost of monthly operations is; $300 per month for rent,
$500 for staff, phone $60 per month, utilities $50 per month, postage and
supplies $100 per month, salary $1,000 per month, $35 per month cost for a
bookkeeper. Our total cost of operations for the month of January is $3,545.
FEBRUARY 2007:
In February, we intend to continue our marketing efforts by offering a free day
at our facility to travel agents, hotel management, restaurant, bar, and
nightclub owners throughout Rosarito Beach and San Diego. This will be a direct
mailing effort followed by a phone call follow up. Each participant will receive
a full treatment for themselves and a guest. Cost of this campaign is estimated
to be $1,500. Our ongoing cost of monthly operations is; $300 per month for
rent, $500 for staff, phone $60 per month, utilities $50 per month, postage and
supplies $100 per month, salary $1,000 per month, $35 per month cost for a
bookkeeper. Our total cost of operations for the month of February is $3545.
MARCH 2007:
In March, we intend to advertise in the travel section of the San Diego Union
Tribune. We will offer a buy-one, get-one free coupon redeemable for six months.
We believe the cost of this campaign to be $1,500. Our ongoing cost of monthly
operations is; $300 per month for rent, $500 for staff, phone $60 per month,
utilities $50 per month, postage and supplies $100 per month, salary $1,000 per
month, $35 per month cost for a bookkeeper. Our total cost of operations for the
month of March is $3,545.
Our total cost for twelve months of operations is $41,740.
23
In order to meet all of our current business plan goals, we need to receive
funding. We intend to use funding we receive to provide cash for our business
plan during the next twelve months as cash flow from sales is not estimated to
begin until the 2nd quarter of 2006. We anticipate our expenditures through
December, 2005 will not exceed $5,000. These costs will consist primarily of
offering costs and filing fees. We will face considerable risk in each of our
business plan steps, such as difficulty of hiring competent personnel within our
budget, longer than anticipated lead time necessary for us to complete our
marketing plan, and a shortfall of funding due to our inability to raise
capital. If no funding is received during the next twelve months, we may utilize
one or more options such as use existing cash in the bank or funds loaned by our
director. While our director has informally agreed to advance funds to allow us
to pay for offering costs, filing fees, and miscellaneous business expenses, our
director has no formal commitments, arrangements or legal obligation to advance
or loan funds to Gemwood. To date, there have been no loans by the director to
Gemwood, no negotiated material terms or agreed upon amounts, and no formalized
agreements of any kind.
DESCRIPTION OF PROPERTY
Gemwood's principal executive office address is C Alta Mar 157 Fracc Baja Del
Mar, Playas De Rosarito, B.C. 22710. The principal executive office and
telephone number are provided by the officer of the corporation. The office is
used by the officer for other business interests and is estimated to be
sufficient for our business needs until such time as we receive funding and
should remain sufficient to accommodate our hiring requirements during the
initial phases of our business. We consider our current principal office space
arrangement adequate until such time as we achieve our business plan goal of
raising capital and then begin hiring new employees for our day spa per our
business plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The principal executive office and telephone number are provided by Mr. Savceda,
an officer of the corporation. The director has determined that based on the
fair market value of his services and the use of his offices the Company will
begin paying $200 per month to Mr. Savceda beginning in October 2005.
Mr. Savceda purchased 2,000,000 shares of the company's common stock for cash in
the amount of $20,000. The stock was valued at $0.01 per share.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
No public market currently exists for shares of our common stock. Following
completion of this offering, we intend to contact a market maker to file an
application on our behalf to have our common stock listed for quotation on the
Over-the-Counter Bulletin Board.
24
PENNY STOCK RULES
The Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
A purchaser is purchasing penny stock which limits the ability to sell the
stock. The shares offered by this prospectus constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stocks for the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, which makes it
more difficult for a purchaser to liquidate his/her investment. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and
Exchange Act. Rather than creating a need to comply with those rules, some
broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the Commission, which:
a. contains a description of the nature and level of risk in the market
for penny stocks in both public offerings and secondary trading;
b. contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to a violation to such duties or other requirements of the
Securities Act of 1934, as amended;
c. contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" prices for penny stocks and the significance
of the spread between the bid and ask price;
d. contains a toll-free telephone number for inquiries on disciplinary
actions;
e. defines significant terms in the disclosure document or in the conduct
of trading penny stocks; and
f. contains such other information and is in such form (including
language, type, size and format) as the Securities and Exchange
Commission shall require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in a
penny stock, to the customer:
a. the bid and offer quotations for the penny stock;
b. the compensation of the broker-dealer and its salesperson in the
transaction;
c. the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
d. monthly account statements showing the market value of each penny
stock held in the customer's account.
25
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
REGULATION M
Our officer and director, who will offer and sell the Shares, is aware that he
is required to comply with the provisions of Regulation M promulgated under the
Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation
M precludes the officer and director, sales agents, any broker-dealer or other
person who participates in the distribution of shares in this offering from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase any security which is the subject of the distribution until the entire
distribution is complete.
As an exception to these rules, an underwriter may engage in transactions
effected in accordance with Regulation M that are intended to stabilize,
maintain or otherwise affect the price of our common stock. The underwriter may
engage in over-allotment sales, syndicate covering transactions, stabilizing
transactions and penalty bids in accordance with Regulation M. Over-allotments
occur when an underwriter sells more shares than it purchases in an offering. In
order to cover the resulting short position, the underwriter may exercise the
over-allotment option described above. Additionally, an underwriter may engage
in syndicate covering transactions. Syndicate covering transactions are bids for
or purchases of stock on the open market by the underwriter in order to reduce a
short position incurred by the underwriter on behalf of the underwriting
syndicate. There is no contractual limit on the size of any syndicate covering
transaction. Stabilizing transactions consist of bids or purchases made by an
underwriter for the purpose of preventing or slowing a decline in the market
price of our securities while the offering is in progress. A penalty bid is an
arrangement permitting the underwriter to reclaim the selling concession that
would otherwise accrue to an underwriter if the common stock originally sold by
the underwriter was later repurchased by the underwriter and therefore was not
effectively sold to the public by such underwriter.
We have not and do not intend to engage the services of an underwriter in
connection with the offer and sale of the shares in this offering.
In general, the purchase of a security to stabilize or to reduce a short
position could cause the price of the security to be higher than it might
otherwise be. Sales of securities by us or even the potential of these sales
could have a negative effect on the market price of the shares of common stock
offered hereby.
26
EXECUTIVE COMPENSATION
Gemwood's current officer has received no compensation to date. Beginning in
April 2006 our business plan allows for a salary for Mr. Savceda of $1,000 per
month if we receive funding. The current Board of Directors is comprised of only
Mr. Victor Manuel Savceda.
Summary Compensation Table
Other
Name & annual Restricted All other
principle compen- stock Options LTIP compen-
position Year Salary($) Bonus($) sation($) awards($) SARs($) Payouts($) sation($)
- -------- ---- --------- -------- --------- --------- ------- ---------- ---------
VM Savceda 2005 -0- -0- -0- -0- -0- -0- -0-
President
There are no current employment agreements between the company and its executive
officer.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of Gemwood in the event of retirement at normal
retirement date pursuant to any presently existing plan provided or contributed
to by the company or any of its subsidiaries, if any.
FINANCIAL STATEMENTS
The audited financial statements of Gemwood Productions for the year ended
September 30, 2005, and related notes which are included in this offering have
been examined by De Joya Griffith & Company, LLC, Certified Public Accountants,
and have been so included in reliance upon the opinion of such accountants given
upon their authority as an expert in auditing and accounting.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING CONTROL AND
FINANCIAL DISCLOSURE
None.
27
De Joya Griffith & Company, LLC
Certified Public Accountants & Consultants
2425 West Horizon Ridge Parkway
Henderson, Nevada 89052
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Gemwood Productions, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Gemwood Productions, Inc. (A
Development Stage Company) as of September 30, 2005 and the related statements
of operations, stockholders' equity, and cash flows for the period from January
17, 2005 (Inception) through September 30, 2005. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated 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 Gemwood Productions, Inc. (A
Development Stage Company) as of September 30, 2005, and the results of its
operations and cash flows for the period from January 17, 2005 (Inception)
through September 30, 2005 in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations, all of
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ De Joya Griffith & Company, LLC
- ----------------------------------------
De Joya Griffith & Company, LLC
November 1, 2005
Henderson, Nevada
- --------------------------------------------------------------------------------
Telephone (702) 563-1600 * Facsimile (702) 920-8049
F-1
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
As of
September 30, 2005
------------------
ASSETS
Current assets
Cash $ 10,000
Deposits --
--------
Total current assets 10,000
Inventory --
--------
Total assets $ 10,000
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ --
--------
Total current liabilities --
--------
Total liabilities --
Stockholders' equity
Common stock; $.001 par value; 50,000,000 shares
authorized, 1,000,000 shares issued and outstanding 1,000
Additional paid-in capital 9,000
Accumulated deficit --
--------
Total stockholders' equity 10,000
--------
Total liabilities and stockholders' equity $ 10,000
========
See Accompanying Notes to Financial Statements
F-2
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
From January 17, 2005
(Date of inception)
through
September 30, 2005
------------------
Revenue $ --
Operating expenses
General and administrative --
Professional fees --
----------
Total operating expenses --
----------
Loss from operations --
Other income (expenses):
Other expense --
Interest expense --
----------
Total other income (expenses) --
----------
Loss before provision for income taxes
and minority interest --
Provision for income taxes --
----------
Net loss $ --
----------
Basic and diluted loss per common share $ --
==========
Basic and diluted weighted average
common shares outstanding 1,000,000
==========
See Accompanying Notes to Financial Statements
F-3
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From January 17, 2005
(Date of inception)
through
September 30, 2005
------------------
Cash flows from operating activities:
Net loss $ --
Adjustments to reconcile net loss to
net cash used by operating activities:
Changes in operating assets and liabilities:
(Increase) / Decrease in Inventory --
Increase / (Decrease) in Accounts Payable --
Change in deposits --
--------
Net cash used by operating activities --
Cash flows from investing activities:
Purchase of property and equipment --
--------
Net cash used by investing activities --
Cash flows from financing activities:
Proceeds from issuance of common stock 10,000
--------
Net cash provided by financing activities 10,000
--------
Net increase in cash 10,000
Cash, beginning of period --
--------
Cash, end of period $ 10,000
========
See Accompanying Notes to Financial Statements
F-4
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Total
------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<c>
Balance at January 17, 2005 (Date of inception) -- $ -- $ -- $ -- $ --
Common stock issued for cash 1,000,000 1,000 9,000 -- 10,000
Net income (loss) -- -- -- -- --
--------- -------- -------- ------- ---------
Balance, September 30, 2005 1,000,000 $ 1,000 $ 9,000 $ -- $ 10,000
========= ======== ======== ======= =========
See Accompanying Notes to Financial Statements
F-5
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
Description of business and history - Gemwood Productions, Inc., Nevada
Corporation, (hereinafter referred to as the "Gemwood Productions" or "the
Company") was incorporated in the State of Nevada on January 17, 2005. The
Company was formed for the purpose of marketing and selling its day spa services
to tourists at resort destinations throughout Mexico.
Management of Company - The company filed its articles of incorporation with the
Nevada Secretary of State on January 17, 2005, indicating Molly Wheeler as the
incorporator. At that time Adam Barker was named Director, President, Secretary
and Treasurer. On August 13, 2005 Mr. Barker resigned his positions with the
Company and Mr. Victor Manuel Savceda was named Director, President, Secretary
and Treasurer.
Going concern - The Company incurred net losses of approximately $0.00 from the
period from January 17, 2005 (Date of Inception) through September 30, 2005 and
has not commenced its operations, rather, still in the development stages,
raising substantial doubt about the Company's ability to continue as a going
concern. The Company will seek additional sources of capital through the
issuance of debt or equity financing, but there can be no assurance the Company
will be successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on
additional sources of capital and the success of the Company's plan. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Year end - The Company's year end is September 30.
Use of estimates - The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Income taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, which requires recognition
of deferred tax assets and liabilities for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in operations in
the period that includes the enactment date.
Management feels the Company will have a net operating loss carryover to be used
for future years. Such losses may not be fully deductible due to the significant
amounts of non-cash service costs. The Company has established a valuation
allowance for the full tax benefit of the operating loss carryovers due to the
uncertainty regarding realization.
Net loss per common share - The Company computes net loss per share in
accordance with SFAS No. 128, Earnings per Share (SFAS 128) and SEC Staff
Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB
98, basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of shares of
common stock outstanding during the period. The calculation of diluted net loss
per share gives effect to common stock equivalents; however, potential common
shares are excluded if their effect is antidilutive. For the period from January
17, 2005 (Date of Inception) through September 30, 2005, no options and warrants
were excluded from the computation of diluted earnings per share because their
effect would be antidilutive.
Foreign Currency Translation - The Company's functional currency is in US
dollars as substantially all of the Company's operations are in USD. The Company
used the United States dollar as its reporting currency for consistency with
registrants of the Securities and Exchange Commission ("SEC") and in accordance
F-6
GEMWOOD PRODUCTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
with the SFAS No. 52 - "Foreign Currency Translation". Assets and liabilities
denominated in a foreign currency are translated at the exchange rate in effect
at the period end and capital accounts are translated at historical rates.
Income statement accounts are translated at the average rates of exchange
prevailing during the period. Translation adjustments from the use of different
exchange rates from period to period are included in the comprehensive income
account in stockholder's equity, if applicable.
Transactions undertaken in currencies other than the functional currency of the
entity are translated using the exchange rate in effect as of the transaction
date. Any exchange gains and losses are included in other items on the statement
of operations.
Concentration of risk - A significant amount of the Company's assets and
resources are dependent on the financial support (inclusive of free rent) of
Victor Manuel Savceda should Victor Manuel Savceda determine to no longer
finance the operations of the company, it may be unlikely for the company to
continue.
Revenue recognition - The Company has no revenues to date from its operations.
Once the revenue is generated, the company will recognize revenues as the
services are rendered.
Inventory valuation - Inventories are stated at the lower of cost or market,
cost being determined on the first in, first out (FIFO) basis.
Advertising costs - The Company recognizes advertising expenses in accordance
with Statement of Position 93-7 "Reporting on Advertising Costs." Accordingly,
the Company expenses the costs of producing advertisements at the time
production occurs, and expenses the costs of communicating advertisements in the
period in which the advertising space or airtime is used. The Company has
recorded no significant advertising costs for the period from January 17, 2005
through September 30, 2005.
Legal Procedures - The Company is not aware of, nor is it involved in any
pending legal proceedings.
Stock-based compensation - The Company applies Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and Related
Interpretations, in accounting for stock options issued to employees. Under APB
No. 25, employee compensation cost is recognized when estimated fair value of
the underlying stock on date of the grant exceeds exercise price of the stock
option. For stock options and warrants issued to non-employees, the Company
applies SFAS No. 123, Accounting for Stock-Based Compensation, which requires
the recognition of compensation cost based upon the fair value of stock options
at the grant date using the Black-Scholes option pricing model.
The following table represents the effect on net loss and loss per share if the
Company had applied the fair value based method and recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", to stock-based employee compensation for the period
from January 17, 2005 through September 30, 2005:
2005
---------
Net loss, as reported $ (-----)
Other comprehensive income (-----)
Add: Stock-based employee compensation expense
included in reported loss, net of related tax effects --
Deduct: Total stock-based employee compensation
expense determined under fair value based methods
for all awards, net of related tax effects --
Pro forma net loss $ (-----)
Net loss per common share:
Basic and fully diluted loss per share, as reported $ (0.00)
Basic and fully diluted loss per share, pro forma $ (0.00)
F-7
There were no stock options granted for the period from January 17, 2005 through
September 30, 2005. There are additionally no written or verbal agreements
related to the sale of any stock, option or warrants of the Company's common
stock.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123. The Company is currently evaluating SFAS
No. 148 to determine if it will adopt SFAS No. 123 to account for employee stock
options using the fair value method and, if so, when to begin transition to that
method.
2. PROPERTY AND EQUIPMENT
As of September 30, 2005, the Company does not own any property and/or
equipment.
3. STOCKHOLDER'S EQUITY
The Company has 50,000,000 shares authorized and 1,000,000 issued and
outstanding as of September 30, 2005. The issued and outstanding shares were
issued as follows:
1,000,000 common shares were issued to Victor Manuel Savceda on August 25, 2005
for the sum of $10,000 in cash.
4. LOAN FROM STOCKHOLDER
As of September 30, 2005, there are no loans to the Company from any
stockholders.
5. RELATED PARTY TRANSACTIONS
The Company currently uses the offices of Mr. Savceda, the officer and director
of the Company. The director has determined that based on the fair market value
of his services and the use of his offices the Company will begin paying $200
per month to Mr. Savceda beginning in October 2005. There is no written lease
agreement or other material terms or arrangements relating to said arrangement.
As of September 30, 2005, there are no related party transactions between the
Company and its officer, other than those mentioned above and in Note 3 -
Stockholder's Equity.
6. STOCK OPTIONS
As of September 30, 2005, the Company does not have any stock options
outstanding, nor does it have any written or verbal agreements for the issuance
or distribution of stock options at any point in the future.
7. LITIGATION
As of September 30, 2005, the Company is not aware of any current or pending
litigation which may affect the Company's operations.
8. SUBSEQUENT EVENTS
On October 25, 2005, 1,000,000 common shares were issued to Victor Manuel
Savceda for the sum of $10,000 in cash.
F-8
DEALER PROSPECTUS DELIVERY OBLIGATION
"UNTIL ______________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS."
PART II
AVAILABLE INFORMATION
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Gemwood's By-Laws allow for the indemnification of the officers and directors in
regard to their carrying out the duties of their offices. The board of directors
will make determination regarding the indemnification of the director, officer
or employee as is proper under the circumstances if he/she has met the
applicable standard of conduct set forth in the Nevada General Corporation Law.
Section 78.751 of the Nevada Business Corporation Act provides that each
corporation shall have the following powers:
"1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of any fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a pleas of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had a reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals there from, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction, determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
II-1
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in sections 1 and 2, or in defense of any claim, issue or
matter therein, he must be indemnified by the corporation against expenses,
including attorneys fees, actually and reasonably incurred by him in connection
with the defense.
4. Any indemnification under sections 1 and 2, unless ordered by a court or
advanced pursuant to section 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
a. By the stockholders;
b. By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
c. If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel, in a written opinion; or
d. If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.
5. The certificate of articles of incorporation, the bylaws or an agreement made
by the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation. The provisions of this section do not affect any
rights to advancement of expenses to which corporate personnel other than
director or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by a
court pursuant to this section:
a. Does not include any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for either an
action in his official capacity or an action in another capacity while
holding his office, except that indemnification, unless ordered by a
court pursuant to section 2 or for the advancement of expenses made
pursuant to section 5, may not be made to or on behalf of any director
or officer if a final adjudication establishes that his acts or
omission involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
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b. Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
c. The Articles of Incorporation provides that "the Corporation shall
indemnify its officers, directors, employees and agents to the fullest
extent permitted by the General Corporation Law of Nevada, as amended
from time to time."
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or persons controlling Gemwood, we have been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of the offering are denoted below. Please note all amounts
are estimates other than the Commission's registration fee.
Securities and Exchange Commission registration fee $ 3
Accounting fees and expenses $2,500
Legal fees $1,800
Transfer Agent fees $ 600
Printing $ 97
------
Total $5,000
======
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of securities
without registration since inception. No such sales involved the use of an
underwriter; no advertising or public solicitation was involved; the securities
bear a restrictive legend; and no commissions were paid in connection with the
sale of any securities.
On August 25, 2005, 1,000,000 shares of common stock were issued to Victor
Manuel Savceda, the officer and director as founders' shares, and additional
1,000,000 shares were issued to him on October 25, 2005. The shares were issued
in exchange for $20,000, or $.01 per share. These securities were issued in
reliance upon the exemption contained in Section 4(2) of the Securities Act of
1933. These securities were issued to the promoters of the company, bear a
restrictive legend and were issued to non-US residents.
EXHIBITS
Exhibit 3.1 Articles of Incorporation Included
Exhibit 3.2 Bylaws Included
Exhibit 5 Opinion re: Legality Included
Exhibit 10 Lease Agreement Included
Exhibit 23.1 Consent of counsel Included in Exhibit 5
Exhibit 23.2 Consent of independent auditor Included
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UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) Reflect in the prospectus any facts 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 percent 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 such 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 registered which remain unsold at the end of the offering.
(b) The undersigned Registrant hereby undertakes to provide to the purchasers
in this offering, certificates in such denominations and registered in such
names as required to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities Act
(the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer, or controlling of the small business issuer
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, the small business issuer will, unless in the
opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities
Act, and will be governed by the final adjudication of such issue.
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(d) The undersigned Registrant hereby undertakes that:
1. For determining any liability under the Securities Act, it will 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 small business issuer 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.
2. For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
bona fide offering of those securities.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, in the city of Playas de
Rosarito, Baja California Mexico, on December 22, 2005.
Gemwood Productions, Inc.
/s/ Victor Manuel Savceda
--------------------------
By Victor Manuel Savceda
(Principal Executive Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
dates stated.
/s/ Victor Manuel Savceda December 22, 2005
- ------------------------------------- -----------------
Victor Manuel Savceda, President Date
(Principal Executive Officer, Principal Financial Officer,
Principal Accounting Officer)
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