As Filed with the Securities and Exchange Commission August 27, 2004
Registration No.: 333- 116791
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2/Pre-EffectiveAmendment No. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Davison Arts Management, Inc.
(Name of Small Business Issuer in its Charter)
Nevada 422990 20-0092299
- ------------------------------- ------------------ ----------------------
(State or other jurisdiction of Primary Industrial (I.R.S. Employer
incorporation or organization) Class Code No. Identification No.)
82 Mountain Road
Wilbraham, MA 01095
413-596-3298
(Address and telephone number of principal executive offices)
Elizabeth A. Davison
Davison Arts Management, Inc.
82 Mountain Road
Wilbraham, MA 01095
413-596-3298
(Name, address and telephone number of agent for service)
WITH A COPY TO
Gary B. Wolff, P.C.
805 Third Avenue
New York, New York 10022
212-644-6446
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [ X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum Amount of
Title of Each Class Of Amount To Be Offering Price Aggregate Offering Registration
Securities To Be Registered Registered Per Unit 1 Price 1 Fee
- ---------------------------- ------------------ ------------------ ------------------------- --------------
Common stock, $ .001 1,587,500 shares $.01 $15,875 $2.01
Par value per share
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 Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Subject to completion August , 2004
The information contained in this preliminary prospectus is not complete and may
be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
- --------
1 Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of '33, as amended and
based upon the amount of consideration received by Davison Arts Management, Inc.
As of the date hereof, there is no established public market for the common
stock being registered. Accordingly, and in accordance with Item 505 of
Regulation S-B requirements certain factor(s) must be considered and utilized in
determining the offering price. The factor considered and utilized herein
consisted of and is based upon the issuance price of all securities issued (in
February 2004) which shares of common stock were all issued at $.01 per share.
1,587,500 SHARES
DAVISON ARTS MANAGEMENT, INC.
COMMON STOCK
As of July 31, 2004, we had 10,975,000 shares of our common shares
outstanding.
This is a resale prospectus for the resale of up to 1,587,500 shares of
our common stock by the selling stockholders listed herein. We will not receive
any proceeds from the sale of the shares.
Our common stock is not traded on any market.
Selling stockholders will sell at a fixed price of $.01 per share until
our common shares are quoted on the Over-the-Counter Bulletin Board and
thereafter at prevailing market prices, or privately negotiated prices.
Investing in our common stock involves very high risks. See "High Risk
Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August , 2004.
PROSPECTUS SUMMARY
About Davison Arts Management, Inc.
Davison Arts Management, Inc. was incorporated under the laws of the
State of Nevada on June 24, 2003 (inception) to succeed HC Davison Editions, an
unincorporated entity controlled and operated by our founder since 1999. We are
a consulting firm serving artists and other members of the creative arts
professional community. We may refer to ourselves in this document as "DAM",
"we," or "us." All references to our operations include HC Davison Edition's
operations. Our principal executive offices are located at 82 Mountain Road,
Wilbraham, MA 01095, and our telephone number at that address is 413-596-3298.
DAM has not yet generated material amounts of revenue in part because
of personal family issues that affected our founder. Most of these
family-related issues appear to be on their way to resolution and may be
substantially resolved during the second half of 2004. We generated $30,157 in
3
revenue since inception through December 31, 2003. In July 2004 we were actively
seeking to generate revenue-producing business assisting artists and began
performing services (See section entitled "Business", sub-heading "Recent
Developments"). We do not consider ourselves to be a blank check company as that
term is defined in Regulation C, Rule 419 of the Securities Act Rules, which
defines a "blank check" company as a "...development stage company that has no
specific business plan or purpose or has indicated that its business plan is to
engage in a merger or acquisition with an unidentified company or companies, or
other entity or person. To date, no DAM officer, director, affiliate or
associate has had any preliminary contact or discussions with, nor are there any
present plans, proposals, arrangements or understanding with any representatives
of the owners of any business or company regarding the possibility of an
acquisition or merger transaction referred to herein or otherwise. To the
contrary, we have a specific business plan which has been initiated and no
intention to merge with or acquire another company in the foreseeable future.
Summary Financial Data
The following summary financial data should be read in conjunction with
the financial statements and the notes thereto included elsewhere in this
prospectus. The acquisition of HC Davison Editions ("HCD") by Davison Arts
Management, Inc. ("DAM") has been accounted for as a recapitalization of HCD for
financial accounting purposes. Since DAM had no operations prior to the
recapitalization, the financial statements of HCD and DAM are being combined for
the period from January 1, 2002 through December 31, 2003 with retroactive
effect being given to the issuance of the common stock.
Balance Sheet Data:
December 31, 2003 June 30, 2004
----------------- -------------
(Unaudited)
Loans and advances payable $64,124 $ 64,891
Current liabilities 73,874 77,391
Common stock 10,000 10,975
Net stockholders' deficit (73,874) (77,391)
Income Statement Data: Six Months Ended June 30,
2003 2002 2004 2003
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenue $ 542 $ 5,430 - $ 533
Net loss $ (23,871) $ (14,314) $(18,267) $ (5,443)
Weighted average number
of shares outstanding 10,000,000 10,000,000 10,731,250 10,000,000
2Loss per share $ (.00) $ (.00) $(.00) $(.00)
- ----------------------
2 Basic loss per common share has been calculated based on the weighted
average number of shares outstanding assuming that we incorporated as of the
beginning of the first period presented.
4
The Offering
The shares being offered for resale under this prospectus consist of
approximately 14% of the outstanding shares of our common stock held by the
selling stockholders identified herein.
Shares of common stock offered by us None
Shares of common stock which may be sold by the
selling stockholders 1,587,500
Use of proceeds We will not receive
any proceeds from the
resale of shares
offered by the
selling stockholders
hereby, all of which
proceeds will be paid
to the selling
stockholders.
Risk factors The purchase of our
common stock involves
a high degree of
risk.
Trading Market None
Selling stockholders will sell at a fixed price of $.01 per share until
our common shares are quoted on the Over-the-Counter Bulletin Board and
thereafter at prevailing market prices, or privately negotiated prices.
HIGH RISK FACTORS
You should be aware that there are various risks to an investment in
our common stock, including those described below. You should carefully consider
these risk factors, together with all of the other information included in this
prospectus, before you decide to invest in shares of our common stock. The risks
and uncertainties described below are all of the material risks known to
management.
If any of the following risks develop into actual events, then our
business, financial condition, results of operations or prospects could be
materially adversely affected. If that happens, the market price of our common
stock, if any, could decline, and investors may lose all or part of their
investment.
1. DAM is an early stage company with a limited operating history, limited
revenues and on going losses and, therefore, no adequate means exist
to evaluate future performance.
We have generated only limited revenues, have no assets and have an accumulated
deficit of $122,141 as of June 30, 2004. A substantial portion of our recent
activities has involved developing a business plan, preparing this Prospectus
and soliciting business. Therefore, we have insufficient operating history upon
5
which an evaluation of our future performance and prospects can be made. DAM's
future prospects must be considered in light of the risks, expenses, delays,
problems and difficulties frequently encountered in the establishment of a new
business.
DAM cannot be certain that its business strategy will be successful or
that it will ever be able to commence significant revenue generating activities.
Furthermore, DAM believes that it is probable that it will incur operating
losses and negative cash flow for the foreseeable future.
2. DAM has no financial resources, and our auditors' report states that
there is substantial doubt about our ability to continue as a going
concern.
DAM has virtually no financial resources and an accumulated deficit of
$122,141 and no cash at June 30, 2004. Our auditors state in their opinion on
DAM's financial statements that this lack of resources causes substantial doubt
about DAM's ability to continue as a going concern. No assurances can be given
that DAM will generate sufficient revenue or obtain necessary financing to
continue as a going concern.
3. Shareholders may be diluted significantly through our efforts to obtain
financing and satisfy obligations through issuance of additional shares
of DAM common stock.
We have no committed source of financing. Wherever possible, our board
of directors will attempt to use noncash consideration to satisfy obligations.
In many instances, we believe that the noncash consideration will consist of
shares of our stock. Our board of directors has authority, without action or
vote of the shareholders, to issue all or part of the authorized (24,000,000)
but un-issued (13,025,000) shares. In addition, if a trading market develops for
our common stock, we may attempt to raise capital by selling shares of our
common stock, possibly at a discount to market. These actions will result in
dilution of the ownership interests of existing shareholders, may further dilute
common stock book value, and that dilution may be material. Such issuances may
also serve to enhance existing management's ability to maintain control of DAM.
4. Dependence upon sole officer and employee the loss of whose services
may cause our business operations to cease and need for additional
personnel.
Our chief executive officer and sole employee, Elizabeth A. Davison, is
entirely responsible for the development and execution of our business and
currently only devotes less than 25% of her time to our day-to-day operations.
She is under no contractual obligation to remain employed by us, although she
has no intent to leave. If she should choose to leave us for any reason before
we have hired additional personnel, our operations may fail. Even if we are able
to find additional personnel, it is uncertain whether we could find someone who
could develop our business along the lines described herein. We will fail
without Ms. Davison or an appropriate replacement(s). We intend to acquire
key-man life insurance on the life of Ms. Davison naming us as the beneficiary
when and if we obtain the resources to do so. We have not yet procured such
insurance, and there is no guarantee that we will be able to obtain such
insurance in the future. Accordingly, it is important that we are able to
attract, motivate and retain highly qualified and talented personnel and
independent contractors.
Ms. Davison's current intentions are to remain with us regardless of
whether she sells all or a substantial portion of her stockholdings in us. She,
nevertheless, is offering 9.74% or 1,000,000 of the 10,262,500 Company common
shares owned by her in this offering (approximately 14% of all outstanding
common shares), since otherwise sales by her would be restricted to 1% (or
approximately 109,750 shares) of all outstanding DAM shares every three months
in accordance with Rule 144. As an officer/control person of DAM, Ms. Davison
may not avail herself of the provisions of Rule 144(k) which otherwise would
permit a non-affiliate to sell an unlimited number of restricted shares provided
that she satisfies a two-year holding period requirement.
6
5. We may be adversely affected by a weak economy.
The purchase of artwork is highly discretionary. If the economy remains
weak, consumers may be unwilling or unable to purchase significant amounts of
artwork. If the sale of art becomes or remains depressed, artists may be unable
or unwilling to engage our services.
6. The ability of our President to control our business limits minority
shareholders' ability to influence corporate affairs.
Upon the completion of this offering, our president will beneficially
own approximately 84% of our outstanding common stock assuming that Selling
Shareholders sell all shares being registered. Because of such beneficial stock
ownership, our president will be in a position to continue to elect a majority
of the board of directors, decide all matters requiring stockholder approval and
determine our policies. The interests of our president's shareholders may differ
from the interests of other shareholders with respect to the issuance of shares,
mergers with or sales to other companies, selection of officers and directors
and all other business decisions. The minority shareholders would have no way of
overriding decisions made by the majority shareholders. The level of control may
also have an adverse impact on the market value of our shares.
7. Our articles of incorporation provide for indemnification of officers
and directors at our expense and limit their liability which may result
in a major cost to us and hurt the interests of our shareholders as
corporate resources may be expended for the benefit of directors.
Our articles of incorporation and applicable Nevada law provide for the
indemnification of our directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on behalf of DAM. We will also bear the expenses of such
litigation for any of our directors, officers, employees, or agents, upon such
person's promise to repay us therefore if it is ultimately determined that any
such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by us which we
will be unable to recoup.
8. There are potential conflicts of interest which may result in us not
receiving the full benefits of our association with officers and
directors.
None of our key personnel is required to commit full time to our
affairs and, accordingly, these individuals may have conflicts of interest in
allocating management time among their various business activities. Both our
president and our director are affiliated with other entities that are involved
in providing services associated with art. In the course of their other business
activities, certain key personnel may become aware of business opportunities
which may be appropriate for presentation to us, as well as the other entities
with which they are affiliated. As such, they may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented.
7
Each officer and director is, so long as he or she is officer or
director subject to the restriction that all opportunities contemplated by our
plan of operation that come to her attention, either in the performance of her
duties or in any other manner, will be considered opportunities of, and be made
available to us and the companies that she is affiliated with on an equal basis.
A breach of this requirement will be a breach of the fiduciary duties of the
officer or director. If we or the companies to which the officer or director is
affiliated each desire to take advantage of an opportunity, then the applicable
officer or director would abstain from negotiating and voting upon the
opportunity. However, the officer or director may still take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy in connection with these types
of transactions.
9. Because there is currently no market for our securities, and there can
be no assurances that any market will ever develop or that our common
stock will be quoted for trading and if quoted, it is likely to be
subject to significant price fluctuation. Shareholders may be unable
to sell shares of our stock.
Prior to the date of this Prospectus there has not been any established
trading market for our common stock, and there is currently no market whatsoever
for our securities. We will seek to have a market maker file an application with
the NASD on our behalf to quote the shares of our common stock on the NASD OTC
Bulletin Board ("OTCBB") or similar quotation service when we have a sufficient
number of shareholders, if ever. There can be no assurance as to whether such
market maker's application will be accepted or, if accepted, the prices at which
our common stock will trade if a trading market develops, of which there can be
no assurance. We are not permitted to file such application on our own behalf.
If the application is accepted, we cannot predict the extent to which investor
interest in us will lead to the development of an active, liquid trading market.
Active trading markets generally result in lower price volatility and more
efficient execution of buy and sell orders for investors.
In addition, our common stock is unlikely to be followed by any market
analysts, and there may be few institutions acting as market makers for the
common stock. Either of these factors could adversely affect the liquidity and
trading price of our common stock. Until our common stock is fully distributed
and an orderly market develops in our common stock, if ever, the price at which
it trades is likely to fluctuate significantly. Prices for our common stock will
be determined in the marketplace and may be influenced by many factors,
including the depth and liquidity of the market for shares of our common stock,
developments affecting our business, including the impact of the factors
referred to elsewhere in these High Risk Factors, investor perception of DAM and
general economic and market conditions. No assurances can be given that an
orderly or liquid market will ever develop for the shares of our common stock.
Because of the anticipated low price of the securities, many brokerage
firms may not be willing to effect transactions in these securities. See "Risk
Factor 12" below.
8
10. If a market develops for our shares, Rule 144 sales may depress prices
in that market. Other shareholders may realize little or nothing from
the sale of their shares.
All of our outstanding shares of common stock that are held by present
stockholders are "restricted securities" within the meaning of Rule 144 under
the Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a person who
has held restricted securities for a prescribed period may, under certain
conditions, sell every three months, in brokerage transactions, a number of
shares that does not exceed 1.0% of a company's outstanding common stock. The
alternative average weekly trading volume during the four calendar weeks prior
to the sale is not available to our shareholders being that the OTCBB (once
listed thereon) is not an "automated quotation system" and, accordingly, market
based volume limitations are not available for securities quoted only over the
OTCBB. As a result of revisions to Rule 144 which became effective on or about
April 29, 1997, there is no limit on the amount of restricted securities that
may be sold by a non-affiliate (i.e., a stockholder who is not an officer,
director or control person) after the restricted securities have been held by
the owner for a period of two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to registration of shares of
common stock of present stockholders, may have a depressive effect upon the
price of the common stock in any market that may develop.
11. Any market that develops in shares of our common stock will be subject
to the penny stock restrictions. These restrictions may make it
difficult or impossible for shareholders to sell their shares and are
likely to limit market interest in our shares.
Until our shares of common stock qualify for inclusion in the NASDAQ
system, if ever, the trading of our securities, if any, will be in the
over-the-counter markets which are commonly referred to as the OTCBB. As a
result, an investor may find it difficult to dispose of, or to obtain accurate
quotations as to the price of, our securities.
SEC Rule 15g-9 establishes the definition of a "penny stock," for
purposes relevant to us, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to a limited number of exceptions. It is likely that our shares will be
considered to be penny stocks for the immediately foreseeable future. For any
transaction involving a penny stock, unless exempt, the penny stock rules
require that a broker or dealer approve a person's account for transactions in
penny stocks and the broker or dealer receive from the investor a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased.
In order to approve a person's account for transactions in penny
stocks, the broker or dealer must obtain financial information and investment
experience and objectives of the person and make a reasonable determination that
9
the transactions in penny stocks are suitable for that person and that person
has sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prepared by the SEC relating to the penny
stock market, which, in highlight form, sets forth:
o the basis on which the broker or dealer made the suitability
determination, and
o that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stock in
both public offerings and in secondary trading and commissions payable to both
the broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
12. Any trading market that may develop may be restricted by virtue of
state securities "Blue Sky" laws which prohibit trading absent
compliance with individual state laws. These restrictions may make it
difficult or impossible to sell our shares in those states.
There is no public market for our common stock, and there can be no
assurance that any market will develop in the foreseeable future. Transfer of
our common stock may also be restricted under the securities or securities
regulations laws promulgated by various states and foreign jurisdictions,
commonly referred to as "Blue Sky" laws. Absent compliance with such individual
state laws, our common stock may not be traded in such jurisdictions. Because
the securities registered hereunder have not been registered for resale under
the blue sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading market that might develop in the future,
should be aware that there may be significant state blue-sky law restrictions
upon the ability of investors to sell the securities and of purchasers to
purchase the securities. Accordingly, investors should consider the secondary
market for our securities to be a limited one.
13. Our board of directors has the authority, without stockholder approval,
to issue preferred stock with terms that may not be beneficial to
common stock holders and with the ability to adversely affect
stockholder voting power and perpetuate their control over DAM.
Our certificate of incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock, par value $ .001 per share.
10
The specific terms of the preferred stock have not been determined,
including:
o designations;
o preferences;
o conversions rights;
o cumulative, relative;
o participating; and
o optional or other rights, including:
o voting rights;
o qualifications;
o limitations; or
o restrictions
Our board of directors is entitled to authorize the issuance of up to
1,000,000 shares of preferred stock in one or more series with such limitations
and restrictions as may be determined in its sole discretion, with no further
authorization by security holders required for the issuance thereof.
If preferred stock were to be issued, it could contain provisions
requiring mandatory payment of dividend which would have to be paid before any
dividends could be paid to holders of common stock. The provisions also could
limit the amount of income that could be used for the payment of dividends to
holders of common shares.
The issuance of preferred stock could adversely affect the voting power
and other rights of the holders of common stock. Preferred stock may be issued
quickly with terms calculated to discourage, make more difficult, delay or
prevent a change in control of DAM or make removal of management more difficult.
As a result, the board of directors' ability to issue preferred stock may
discourage the potential hostility of an acquirer, possibly resulting in
beneficial negotiations. Negotiating with an unfriendly acquirer may result in,
among other things, terms more favorable to us and our stockholders. Conversely,
the issuance of preferred stock may adversely affect any market price of, and
the voting and other rights of the holders of the common stock.
We presently have no plans to issue any preferred stock.
14. All 1,587,500 shares of our common stock currently being registered may
be sold by selling stockholders subsequent to the effectiveness of this
registration statement. These sales may depress the market value of our
shares and result in making it difficult for shareholders to sell their
shares.
All 1,587,500 shares of our common stock being registered in this
offering and being held by 35 shareholders may be sold subsequent to
effectiveness of this registration statement either at once and/or over a period
11
of time. These sales may take place because the 1,587,500 shares of common stock
are being registered hereunder and, accordingly, reliance upon Rule 144 is not
necessary. See also "Selling Stockholders" and "Plan of Distribution"
hereinafter. The ability to sell these shares of common stock and/or the sale
thereof reduces the likelihood of the establishment and/or maintenance of an
orderly trading market for our shares at any time in the near future.
15. We face specific industry obstacles which, if not overcome, will
prevent us from being successful and could result in us not continuing
as a going concern. We face obstacles to our success, including:
o Becoming well known in the art world involves marketing which, in
turn, requires financial resources, of which we have few;
o Many artists may lack an interest in the financial aspect of art or
do not have the resources to pay fees;
o Some artists who have an interest in the financial aspect of art may
lack the artistic ability to take full advantage of their financial
acumen; and
o Internet and auction businesses are working hard to convince artists
that they can and do provide an inexpensive and easily understood
venue to sell fine art.
It is not possible to estimate the likelihood of meeting artists with a
high level of professional and artistic skill and a strong interest in the
financial aspects of art so as to maximize our revenue on engagements. It is
likely that most artists who we work with over the next 12 months will have
modest earnings capacity which, in turn, limits our ability to charge and
collect fees.
If we do not overcome these obstacles, of which there can be no
assurances, we may not generate sufficient revenues to remain a going concern.
For all of the foregoing reasons and others set forth herein, an
investment in our securities in any market which may develop in the future
involves a high degree of risk.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of the
common stock offered by the selling stockholders. We are registering 1,587,500
of our 10,975,000 of the currently outstanding shares for resale to provide the
holders thereof with freely tradable securities, but the registration of such
shares does not necessarily mean that any of such shares will be offered or sold
by the holders thereof.
12
SELLING STOCKHOLDERS
All shares offered under this prospectus may be sold from time to time
for the account of the selling stockholders named in the following table. The
table also contains information regarding each selling stockholder's beneficial
ownership of shares of our common stock as of July 31, 2004, and as adjusted to
give effect to the sale of the shares offered hereunder.
*DAM Shares
To Be Owned
DAM Shares After
Owned Before Shares Being Offering and Relationship To DAM Or
Selling Security Holders Offering Offered Percentage Affiliates
- ------------------------ ------------ ------------ ------------ ----------------------
**Elizabeth A. Davison 10,262,500 1,000,000 9,262,500 Chairman and President
84.40%
Carla L. Santia 200,000 75,000 125,000 Director
1.14%
Katherine D. Gothner 2,900 2,900 -0- Daughter of K. Ivan F. Gothner
Emma H. Gothner 2,900 2,900 -0- Daughter of K. Ivan F. Gothner
Andrew Goolishian 2,900 2,900 -0- Elizabeth Davison's son
Sarah E. Goolishian 2,900 2,900 -0- Elizabeth Davison's daughter
Kyle G. Howland 750 750 -0- K. Ivan F. Gothner's sister
Sean Howland 500 500 -0- Kyle Howland's husband
Eliza D. Howland 1,500 1,500 -0- Kyle Howland's daughter
Tess C. Howland 1,500 1,500 -0- Kyle Howland's daughter
James J. McTernan 2,000 2,000 -0- Stockholder only
Sean McTernan 2,000 2,000 -0- Stockholder only
Lani H. Davison 750 750 -0- Elizabeth Davison's sister
Jacob Singer 1,500 1,500 -0- Elizabeth Davison's nephew
Elyse O. Singer 1,500 1,500 -0- Elizabeth Davison's niece
Linda D. Michonski 750 750 -0- Elizabeth Davison's sister
Katherine Michonski 1,500 1,500 -0- Elizabeth Davison's niece
Michael Michonski 1,500 1,500 -0- Elizabeth Davison's nephew
Barbara V. McBride 1,000 1,000 -0- Elizabeth Davison's mother
Peter McBride 900 900 -0- Elizabeth Davison's brother
Bernadette Gilson 750 750 -0- Stockholder only
Shawn Lawrence 500 500 -0- Stockholder only
David W. Lawrence 1,000 1,000 -0- Stockholder only
Sarah H. Lawrence 1,000 1,000 -0- Stockholder only
13
Emma L. Lawrence 1,000 1,000 -0- Stockholder only
Ellyn A. Moriarty 1,000 1,000 -0- Stockholder only
Lori Polep Saffer 1,000 1,000 -0- Stockholder only
Jeremy Seitz 1,000 1,000 -0- Stockholder only
Mary Lawler 1,000 1,000 -0- Stockholder only
K. Ivan F. Gothner 200,000 200,000 -0- Stockholder only
Gary B. Wolff 100,000 100,000 -0- DAM's Counsel
Holly Bottega 25,000 25,000 -0- Assistant to DAM's Counsel
R. Bret Jenkins 25,000 25,000 -0- Stockholder only
Stephen B. Schneer 25,000 25,000 -0- Stockholder only
Edward A. Heil 100,000 100,000 -0- Stockholder only
Totals 10,975,000 1,587,500 9,387,580
* Percentage is only indicated if greater than 1%
** Andrew Goolishian and Sarah E. Goolishian are Ms. Davison's minor
children who live with her. Ms. Davison does not have any beneficial interest or
control over those shares of common stock owned by any other relative of hers,
nor do any contracts or agreements exist (written or oral) whereby DAM's
president obtains any benefits equivalent to ownership (as a result of her
relatives' ownership of DAM common stock).
None of the Selling Security Holders are broker/dealers or affiliates
of broker/dealers.
Elizabeth A. Davison, our President and a Selling Security holder will
be considered to be an underwriter for purposes of this offering.
Selling stockholders will sell at a fixed price of $.01 per share until
our common shares are quoted on the Over-The-Counter Bulletin Board and
thereafter at prevailing market prices, or privately negotiated prices.
DETERMINATION OF OFFERING PRICE
There is no established public market for the common equity being
registered. As of June 30, 2004, our liabilities exceeded our assets by $77,391
and our per share book value was negative. Accordingly, in determining the
offering price, DAM has utilized the price of its most recent sales transaction
whereby 975,000 options issued were exercised at $.01 per share in February
2004.
14
DIVIDEND POLICY
We have never paid a cash dividend on our common stock and we do not
anticipate paying cash dividends in the foreseeable future. Moreover, any future
credit facilities might contain restrictions on our ability to declare and pay
dividends on our common stock. We plan to retain all earnings, if any, for the
foreseeable future for use in the operation of our business and to fund the
pursuit of future growth. Future dividends, if any, will depend on, among other
things, our results of operations, capital requirements and on such other
factors as our board of directors, in its discretion, may consider relevant.
MARKET FOR SECURITIES
There is no public market for our common stock, and a public market may
never develop. While we will seek to obtain a market maker after the effective
date of this prospectus to apply for the inclusion of our common stock in the
OTCBB we may not be successful in our efforts, and owners of our common stock
may not have a market in which to sell the shares. Even if the common stock were
quoted in a market, there may never be substantial activity in such market, if
there is substantial activity, such activity may not be maintained, and no
prediction can be made as to what prices may prevail in such market.
There is no DAM common equity subject to outstanding options or
warrants to purchase or securities convertible into common equity of DAM.
The number of shares of our common stock that could be sold pursuant to
Rule 144 (once we are eligible therefor) is up to 1% of 10,975,500 (i.e.,
109,750) each three months bv each DAM shareholder.
DAM has agreed to register 1,587,500 shares of the 10,975,000 shares
currently outstanding for sale by security holders.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this registration statement on Form SB-2
are forward-looking statements. Such forward-looking statements contained in
this registration statement involve risks and uncertainties, including
statements as to:
o our future operating results,
o our business prospects,
o our contractual arrangements and relationships with third
parties,
o the dependence of our future success on the general economy,
o our possible financings, and
o the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as we "believe," "anticipate,"
"expect," "estimate" or words of similar meaning. Similarly, statements that
describe our future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
15
uncertainties which are described in close proximity to such statements and
which could cause actual results to differ materially from those anticipated as
of the date of this prospectus. Shareholders, potential investors and other
readers are urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements included herein are only made as of
the date of this prospectus, and we undertake no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview and Past Operations
DAM has not yet generated material amounts of revenue in part because
of personal family issues that affected our founder. Most of these issues appear
to be resolved or on their way to resolution and may be completely resolved
during the second half of 2004.
Our auditors indicated in their report on our financial statements as
of December 31, 2003 and the year then ended that there are doubts about our
ability to continue as a going concern, These doubts include the fact that we
have realized no significant operating revenues to date. We generated revenue of
$542 in 2003, $5,430 in 2002 and $2,384 in 2001. Prior thereto, it generated
revenue of $15,570 in 1999 and $6,231 in 2000. Cost of revenues in each period
related to the direct costs incurred to provide our services. We incurred
operating losses in 1999, 2000 and 2001 without paying any salaries. The
principal costs consisted of website costs, tradeshow attendance and consulting
fees. The consulting fees ($8,750) in 2003 related to the costs incurred to
unrelated consultants to review our overall business strategy. Interest expense
increased in 2003 ($2,807) from 2002 ($847) because of a settlement reached with
a bank in connection with a loan taken out by our president on behalf of us.
That loan will be repaid in full in 2004. The other principal costs consist of
the estimated value of services provided by our president for no charge. Those
costs have been estimated to be $2,500 per quarter.
Our operations, to date, have been very limited. Therefore, we do not
believe that period-to-period comparisons of our operating results are
meaningful nor should they be relied upon as reliable indicators of future
performance, thus making it difficult or impossible to accurately forecast
quarterly and annual revenues and results of operations. In addition, our
operating results are likely to fluctuate significantly from quarter to quarter,
and year-to-year, as a result of several factors, many of which are outside our
control, and any of which could materially harm our business. These factors
include the:
o timing and size of individual engagements;
o availability of our president's time;
o success in obtaining resources to permit us to undertake
marketing efforts; and
16
o perceived success of engagements that we do obtain.
In addition, the demand for fine art appears to be heavily dependent on the
economy. Therefore, a downturn in the economy affects the demand for fine art
quickly. That demand seems to recover late in the period of economic recovery.
Low demand for fine art reduces the ability of artists to pay consulting fees.
Plan of Operations
The extent of operations over the next 12 months commencing May 1, 2004
will be determined by:
o The number of engagements that we obtain, if any, and
o Our ability to negotiate non-cash compensation to satisfy
commitments.
We cannot predict what our level of activity will be over the next 12
months because we do not know how many, if any, client engagements we will be
able to obtain. As a corporate policy, we will not incur any cash obligations
that we cannot satisfy with known resources, of which there are currently none
except as described in "Liquidity" below. We have embarked upon an effort to
become a public company and, by doing so, have incurred and will continue to
incur additional significant expenses for legal, accounting and related
services. Once we become a public entity, subject to the reporting requirements
of the Exchange Act of '34, we will incur ongoing expenses associated with the
professional fees for accounting, legal and a host of other expenses for annual
reports and proxy statements. We estimate that these costs will range up to
$50,000 per year for the nest few years and will be higher if our business
volume and activity increases. These obligations will reduce our ability and
resources to fund other aspects of our business. We hope to be able to use our
status as a public company to increase our ability to use non-cash means of
settling obligations and compensate independent contractors, although there can
be no assurances that we will be successful in any of those efforts.
Company Goals
Our mission is to provide consulting and management services to artists
and other creative arts professionals. Our principal goal is to assist artists
to become more successful and astute financially. Accomplishing this goal
involves working with artists to improve their skills meeting and dealing with
galleries and other distributors and purchasers of fine art. For us to be
successful, we must:
o Meet and obtain engagements from artists who have the ability
to generate sufficient revenue to pay fees;
o Establish relationships with galleries and other purchasers of
fine art who will work with our clients; and
17
o Attend tradeshows and similar events to become and remain
familiar with current trends in the art world.
Our basic plan for the next 12 months beginning August 1, 2004 assumes
that we will not receive any form of financing. This plan assumes that we will
initially use pricing as the initial factor for obtaining engagements. The
profile of our initial clients is likely to be artists:
o are resident in an area that is close to our headquarters, and
o are not well established or well known within the art
community.
We will use the foregoing profile for prospective clients because:
o These artists are less likely to know or be using other
services, and
o Serving artists with this profile is likely to be inexpensive
because they do not have expectations of seeking out galleries
and patrons in major urban areas.
We anticipate that most, if not all, engagements over the next 12
months will be short-term in nature. The target profile is unlikely to have the
resources or confidence to commit to a long-term relationship. This has been the
case with the limited engagements performed since our inception. All engagements
performed to date have been satisfied by the receipt of cash, and we expect that
to be the case over the next 12 months. Given the nature of our current client
profile, we do not recognize revenue until the engagement has been completed and
cash has been received.
We will keep our marketing costs low by seeking clients by contacting
members of the art community already known to us for referrals and leads. Our
president will perform as much of the work as possible and will not collect a
cash salary until and unless we have the ability to pay such a salary.
The strength of this plan is that it permits us to establish operations
and test and modify our service approach. More importantly, if we provide
quality services, it establishes a performance history to use in seeking future
engagements that are larger and/or longer term than the engagements anticipated
to be performed over the next 12 months.
The weaknesses of this plan are:
o The initial engagements are likely to be small and unlikely to be
profitable or generate significant revenues.
o If we use outside contractors or consultants, the fees paid to those
contractors or consultants may equal or exceed the fees that we receive
from our clients.
18
o We may be unsuccessful in helping unknown clients even if we perform
well because there may be insufficient demand or interest in their art.
o Each individual engagement is likely to represent a material portion of
our efforts and revenue during the next 12 months. If any client
refuses or is unable to pay fees due to us, that decision will have a
material impact on our reported results of operations.
Although the plan for the first year anticipates small engagements that
are likely to operate at a loss, we would actively pursue larger engagements if
we become aware of opportunities. To bid on one of these engagements, we would:
o Bid using what we believe to be aggressive pricing, and
o Use outside consultants which could be firms affiliated with our
president and director.
There is no way to estimate or predict the extent of engagements or the amount
of revenue that we may obtain over the next 12 months. Our goal is obtain six
engagements that will form the foundation for our future story. We cannot
provide any assurances as to the likelihood of obtaining six engagements. If we
do obtain the engagements, we cannot provide any assurances about the level of
success that we will have in meeting the goals or expectations of our clients.
We started implementing this strategy in late July 2004 and will
increase our efforts in the third and fourth quarters of calendar 2004 as our
president's personal and family problems are resolved.
The first engagement received in August appears to meet the anticipated
client profile. See section entitled "Business", subheading "Recent
Developments."
Risks and Uncertainties
We face obstacles to our success, including:
o Becoming well known in the art world involves marketing which, in
turn, requires financial resources, of which we have few;
o Many artists may lack an interest in the financial aspect of art or do
not have the resources to pay fees;
o Some artists who have an interest in the financial aspect of art may
lack the artistic ability to take full advantage of their financial
acumen; and
o Internet and auction businesses are working hard to convince artists
that they can and do provide an inexpensive and easily understood
venue to sell fine art.
It is not possible to estimate the likelihood of meeting artists with a
high level of professional and artistic skill and a strong interest in the
financial aspects of art so as to maximize our revenue on engagements. It is
19
likely that most artists who we work with will have modest earnings capacity
which, in turn, limits our ability to charge and collect fees.
We cannot predict what our level of activity will be over the next 12
months. We will not incur any cash obligations that we cannot satisfy with known
resources of which there are currently none. Our founder will provide her
services at no cost and will advance funds not to exceed $25,000 to cover costs
incurred. These costs will include the costs of seeking engagements,
professional services and incidentals. If we do not seek or obtain financing, we
will seek engagements solely through the contacts of our founder and not incur
significant out-of-pocket cash requirements in the process.
Liquidity
As of June 30, 2004 we had no cash.
DAM does not have any credit facilities or other commitments for debt
or equity beyond the amounts already borrowed. No assurances can be given that
advances when needed will be available. DAM is soliciting engagements. We do not
believe that we need funding to undertake operations in the next 12 months
because we do not have a capital intensive business plan and can also use
independent contractors to assist in many projects if the timing or requirements
preclude our president from performing the service herself. We have no
agreements with independent contractors or consultants. Our president has worked
with and used contractors in the past with other entities and will select
contractors on an engagement-by-engagement basis. Some of these contractors may
be entities that are affiliated with our president and director. Engagements
performed over the next 12 months are not expected to generate significant cash
flow because:
o we anticipate using pricing as a major competitive factor; and
o use of independent contractors or consultants will require some
form of compensation.
If a market develops for our securities, of which there can be no
assurances, we may use shares of our common stock to remunerate subcontractors,
consultants and employees where possible. Private capital, if sought, will be
sought from former business associates of our founder or private investors
referred to us by those business associates. To date, we have not sought any
funding source and have not authorized any person or entity to seek out funding
on our behalf.
Our president has advanced the funds necessary for us to meet our
limited obligations, including the cash needed to service our bank loan. Our
president is not contractually obligated to make these advances, and there are
no assurances that such advances will continue. In the unlikely event that
engagements do generate positive cash flow, we will start paying our president a
20
salary that is likely to be less than $100,000 per year. The exact amount and
terms of the salary will be determined only after we have a better history of
cash flow and a reasonable basis of estimating ongoing cash flow.
If we obtain any financing, of which there can be no assurance, we will
use the funds to pay our president a salary, prepare marketing materials and
attend tradeshows.
DAM will pay all costs relating to this offering estimated at $59,201
Such sum is intended to be paid as and when necessary and required or otherwise
accrued on the books and records of DAM until it is able to pay the amounts owed
either from revenues or loans from our president. Absent sufficient revenues to
pay same over a period of time, DAM's president has agreed to loan DAM funds to
cover the outstanding professional and related fees relating to this Prospectus.
If and when loaned, the loan will be evidenced by a non-interest bearing
unsecured corporate note to be treated as a loan until repaid, if and when DAM
has the financial resources to do so. No formal written arrangement exists with
respect to DAM's president's commitment to loan funds as indicated herein,
although she has orally agreed to obligate herself to do so.
Recent Accounting Pronouncements
No new pronouncement issued by the Financial Accounting Standards
Board, the American Institute of Certified Public Accountants or the Securities
and Exchange Commission is expected to have a material impact on DAM's financial
position or reported results of operations.
Critical Accounting Policies
The preparation of financial statements and related notes requires us
to make judgments, estimates, and assumptions that affect the reported amounts
of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. An accounting policy is considered to be
critical if it requires an accounting estimate to be made based on assumptions
about matters that are highly uncertain at the time the estimate is made, and if
different estimates that reasonably could have been used, or changes in the
accounting estimates that are reasonably likely to occur periodically, could
materially impact the financial statements
Because of our limited level of operations, we have not had to make
material assumptions or estimates other than our assumption that we are a going
concern.
Seasonality
We have no basis to conclude whether our business will be seasonal.
BUSINESS
DAM was incorporated in the state of Nevada on June 24, 2003 to be a
consulting and management firm succeeding the business of HC Davison Editions,
an unincorporated business conducted by our founder since 1999. Our mission is
21
to provide consulting and management services to artists and other creative arts
professionals.
Strategy
We use and will continue to use the contacts of our president,
Elizabeth A. Davison, to identify initial clients. Our president has more than
five years of experience in providing management guidance and consulting
services to artists and other creative arts professionals. Throughout her
career, she has worked to apply fundamental business principles and analytic
techniques to help business enterprises. We believe that many creative arts
professionals are essentially proprietors of small businesses who prefer to
focus on the creation of their art rather than the operation or development of
their small business. As an entrepreneur, the creative arts professional faces
challenges promoting his or her work and interacting with the creative art
trade; gallery owners and corporate art consultants. Our president's experience
over the past five years has provided her with a wide range of contacts in the
creative arts community, including artists, gallery owners and corporate art
consultants. We will approach these contacts in person or by telephone in order
to obtain potential client referrals. Our general method of contact will be in
person, attending tradeshows, by telephone and through mailings.
Our approach is to focus on creative arts professionals and
professional artists. We define a creative arts professional as an artist who
possesses at least two of the following characteristics:
o art gallery representation,
o their own studio,
o participation in a one or two person show,
o sells their own artwork as sole or principal source of income,
o membership in certain artist societies,
o some art education / art teaching experience, or
o completed a commissioned piece of art.
We estimate, based on available information, that there are
approximately 600,000 adults in the United States who could be classified as
creative arts professionals.
DAM's target clients are offered a tailored suite of management and
consulting services based on their individual requirements. These services range
from short-term engagements, two - four months, during which we may advise an
artist on gallery relations and promotion of their work for a fixed monthly fee,
to longer-term engagements under which we may advise an artist on the promotion
of their work receiving a percentage of incremental sales. Alternatively, we may
22
also enter into licensing joint ventures with artists. In general our services
are designed to assist artist to operate their businesses profitably. These
services include:
o introducing artists to dealers and similar outlets,
o identifying tradeshows and conventions that will be beneficial
to specific artists,
o assisting artists in negotiating arrangements with dealers and
galleries, and
o educating artists about the business aspects of selling art.
In essence, we seek to assist an artist to sell his artwork for the best
possible price. To do this, he needs to be introduced to likely buyers,
understand the economics of the art marketplace and increase his negotiating
skills. Our program is designed to accomplish those tasks.
We plan to operate domestically for the foreseeable future and will
market our services through other professional service firms known to our
president, as well as local and regional art associations and guilds. We will
attempt to negotiate fixed minimum fees for engagements but may not be able to
do so during the next 12 months when we may have to use low pricing to obtain
engagements.
Competition
Competition in our industry is intense and most of our competitors have
a greater operating history, number of employees and financial resources than do
we. Our business requires no licenses or permits and is not subject to any
specific government regulations. There are few barriers to entry. Competition
will come from a wide variety of consulting firms and sole practitioners who
provide financial advice to individuals and businesses. They include accounting
and professional service firms, management and promotional firms catering to the
art and entertainment worlds and firms involved in or servicing the Internet
auction community. We intend to compete based on the reputation and contacts of
our founder and the creative and practical approach to services that we offer.
Our president has more than five years of experience in providing management
guidance and consulting services to creative arts professionals. Throughout her
career, she has worked to apply fundamental business principles and analytic
techniques to help business enterprises.
23
No assurances can be given that our competitive strategy will be
successful.
Employees
At July 31, 2004 we had one employee, Elizabeth A. Davison, who devotes
the amount of time to us that is necessary to perform the engagements obtained
and to seek new ones. Various aspects of engagements may be subcontracted to
consultants, some oif whom may be firms that are affiliated with our president
and director.
Recent Developments
DAM has obtained engagements from two artists who meet our standard profile for
new clients under which DAM will assist each artist in developing initial
marketing material with an emphasis on web-based presentations of their work.
Additionally, DAM will assist these artists to develop methods and strategies
for raising market awareness of their work and traffic flows to any web-based
presence that may be developed by the artist in conjunction with their work with
DAM. In addition to consulting fees, which will be based on work performed, DAM
will also be entitled to receive commissions on any sales of the client
materials that are generated as a result of the direct efforts of the engagement
or programs implemented as a result of our advise.
Property
We currently operate out of office space located at 82 Mountain Road,
Wilbraham, MA 01095 provided to us by our founder at no cost which serves as our
principal address. There is no written lease agreement.
Litigation
We are not party to any pending, or to our knowledge, threatened
litigation of any type.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our management consists of:
Name Age Title
.................................................................................
Elizabeth A. Davison 44 President, CEO, CFO and Chairman
.................................................................................
Carla L. Santia 55 Director
Elizabeth A. Davison: Founded us in June 2003. Ms. Davison co-founded Minds
Island, LLC in 1999, an online community for artists, and HC Davison Editions in
1999, a publisher of limited-edition fine art prints. She devotes 25% to us and
24
75% to Minds Island, LLC. She will spend additional time with us if that becomes
necessary to service engagements. Ms. Davison was a product development
executive at Tambrands, Inc. from 1987 until 1992 during which time she was
granted two patents. During the period of 1992 through 1997 Ms. Davison took a
professional sabbatical to raise her children. Ms. Davison received a Bachelor
of Science degree from Purdue University and a Master of Science degree from
Boston University.
Carla L. Santia: Ms. Santia is the founder and chief executive of Carla Santia
& Associates ("CSA") now Creative Solutions With Art, Inc. Founded in 1999, CSA
functions as a corporate art consultant in New England, specializing in serving
corporate and healthcare clients. Prior to her founding of CSA, Ms. Santia
served as an art consultant/project manager for Wilkins Art Consulting from 1987
until 1999. Ms. Santia received a BA with honors from Wellesley College. Ms.
Santia became an independent director of DAM concurrent with our incorporation
in June 2003.
Possible Potential Conflicts
None of our management is engaged by us on a full time basis. Both our
president and our director are affiliated with other entities that are involved
in providing services associated with art. In the course of their other business
activities, certain key personnel may become aware of business opportunities
which may be appropriate for presentation to us, as well as the other entities
with which they are affiliated. As such, they may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. Accordingly, certain conflicts of interest may arise between us and
our officer(s) and director(s) in that they have other business interests to
which they devote their attention, and they may be expected to continue to do so
although management time must also be devoted to our business. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of such judgment as is consistent with each officer's understanding of his
fiduciary duties to us. Currently we have only one officer and one independent
director and are seeking to add additional officer(s) and/or director(s) as and
when the proper personnel are located and terms of employment are mutually
negotiated and agreed to.
Board of Directors
Ms. Davison and Ms. Santia have served as directors of DAM since June
2003 and will continue to serve in such capacity until the annual meeting of
DAM's stockholders, anticipated to be held in April 2005. At that meeting,
directors will be elected for one-year terms. Currently, directors do not
receive compensation.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, the DAM board
of directors will establish an audit committee and a compensation committee. The
audit committee will review the results and scope of the audit and other
services provided by the independent auditors and review and evaluate the system
of internal controls. The compensation committee will manage the stock option
25
plan and review and recommend compensation arrangements for the officers. No
final determination has yet been made as to the memberships of these committees
or when we will have sufficient members to establish committees.
All directors will be reimbursed by DAM for any expenses incurred in
attending directors' meetings provided that DAM has the resources to pay these
fees. DAM will consider applying for officers and directors liability insurance
at such time when it has the resources to do so.
Stock Option Plan
Pursuant to the August 31, 2003 board of directors approval and
subsequent stockholder approval, DAM adopted our 32003 Non-Statutory Stock
Option Plan (the "Plan") whereby we reserved for issuance up to 1,500,000 shares
of our common stock. We intend to file a registration statement on Form S-8 so
as to register those 1,500,000 shares of common stock underlying the aforesaid
options, once eligible to do so which occurs when we are subject to 1934 Act
reporting requirements and have filed all required reports during the preceding
12 months or such shorter period of time as required.
Management has issued options to purchase 975,000 shares under the Plan
to certain current members of its management team as well as other persons whom
it considers to be important to its current and proposed business activities, as
follows with all options exercisable at $.01 per share for a period of ten years
from the date of issuance. The options were exercised in full in February 2004
in consideration for the receipt of services. All of the shares issued upon the
exercise of options are being registered in this registration statement.
Name No. of Options
---- --------------
Elizabeth A. Davison 400,000
Carla L. Santia 100,000
Gary B.Wolff 100,000
Consultants 375,000
Total 975,000
As previously indicated, the board of directors, on August 31, 2003,
adopted the Plan so as to provide a long-term incentive for employees,
non-employee directors, consultants, attorneys and advisors of DAM and our
subsidiaries, if any. The board of directors believes that our policy of
granting stock options to such persons will provide us with a potential critical
advantage in attracting and retaining qualified candidates. In addition, the
Plan is intended to provide us with maximum flexibility to compensate plan
- ---------------------------
3 Non-Statutory Stock Options (NSO) do not meet certain requirements of the
Internal Revenue Service as opposed to Incentive Stock Options (ISO) which meet
the requirements of Section 422 of the Internal Revenue Code. Further, NSO's
have two disadvantages compared to ISO's in that recipients of NSOs must report
taxable income at the time of NSO option exercise and income from NSO's is
treated as compensation which is taxed at higher rates than long-term capital
gains.
26
participants. We believe that such flexibility will be an integral part of our
policy to encourage employees, non-employee directors, consultants, attorneys
and advisors to focus on the long-term growth of stockholder value. The board of
directors believes that important advantages to DAM are gained by an option
program such as the Plan which includes incentives for motivating our employees,
while at the same time promoting a closer identity of interest between
employees, non-employee directors, consultants, attorneys and advisors on the
one hand, and the stockholders on the other.
The principal terms of the Plan are summarized below, however it is not
intended to be a complete description thereof and such summary is qualified in
its entirety by the actual text of the Plan.
Summary Description of the Davison Arts Management, Inc. 2003 Non-Statutory
Stock Option Plan
The purpose of the Plan is to provide directors, officers and employees
of, consultants, attorneys and advisors to DAM and our subsidiaries, if any,
with additional incentives by increasing their ownership interest in DAM.
Directors, officers and other employees of DAM and our subsidiaries are eligible
to participate in the Plan. Options in the form of Non-Statutory Stock Options
("NSO") may also be granted to directors who are not employed by us and
consultants, attorneys and advisors to us providing valuable services to DAM and
our subsidiaries. In addition, individuals who have agreed to become an employee
of, director of or an attorney, consultant or advisor to DAM and/or our
subsidiaries are eligible for option grants, conditional in each case on actual
employment, directorship or attorney, advisor and/or consultant status. The Plan
provides for the issuance of NSO's only, which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, as amended.
Our board of directors or a compensation committee (once established)
will administer the Plan with the discretion generally to determine the terms of
any option grant, including the number of option shares, exercise price, term,
vesting schedule and the post-termination exercise period. Notwithstanding this
discretion (i) the term of any option may not exceed 10 years and (ii) an option
will terminate as follows: (a) if such termination is on account of termination
of employment for any reason other than death, without cause, such options shall
terminate one year thereafter; (b) if such termination is on account of death,
such options shall terminate 15 months thereafter; and (c) if such termination
is for cause (as determined by the board of directors and/or compensation
committee), such options shall terminate immediately. Unless otherwise
determined by the board of directors or compensation committee, the exercise
price per share of common stock subject to an option shall be equal to no less
than 10% of the fair market value of the common stock on the date such option is
granted. No NSO shall be assignable or otherwise transferable except by will or
the laws of descent and distribution or except as permitted in accordance with
SEC Release No.33-7646 as effective April 7, 1999.
The Plan may be amended, altered, suspended, discontinued or terminated
by the board of directors without further stockholder approval, unless such
approval is required by law or regulation or under the rules of the stock
exchange or automated quotation system on which the common stock is then listed
27
or quoted. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the Plan or broaden eligibility
except that no amendment or alteration to the Plan shall be made without the
approval of stockholders which would:
a) Decrease the NSO price (except as provided in paragraph 9 of the
Plan) or change the classes of persons eligible to participate in
the Plan, or
b) extend the NSO period, or
c) materially increase the benefits accruing to Plan participants, or
d) materially modify Plan participation eligibility requirements, or
e) extend the expiration date of the Plan.
Unless otherwise indicated the Plan will remain in effect for a period
of ten years from the date adopted unless terminated earlier by the board of
directors except as to NSOs then outstanding, which shall remain in effect until
they have expired or been exercised.
Equity Compensation Plan Information
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under equity
be issued upon exercise exercise price of compensation plans (excluding
of outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
Plan category (a) (b) (c)
Equity compensation plans
approved by security holders 975,000 $ .01 525,000
Equity compensation plans not
approved by security holders - - -
Total 975,000 $ .01 525,000
Executive Compensation
No officer, director or employee has received any compensation to date,
and no director, officer or employee has a contract or commitment to receive
annual compensation in excess of $100,000. We currently have no formal written
salary arrangement with our president and, while no specific annual salary or
length of employment has been determined, we anticipate providing an annual
salary not to exceed $100,000 commencing with the successful completion of and
collection of fees from several engagements. The salary will be paid out of
revenues, if any, or accrued if sufficient cash is not available to make
payments. The exact amount and terms of the salary will be determined only after
we have a better history of cash flow and a reasonable basis of estimating
ongoing cash flow. There are no other understandings or preliminary
conversations that exist with regard to this matter.
28
The following table sets forth, for the last two years, the annual and long-term
compensation earned by, awarded to or paid to each person who served as a chief
executive officer of CSA during these periods:
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Securities
Year Other Stock Underlying LTIP
Name and Ended Bonus Annual Award(s) Options/ Payouts All Other
Principal Position Dec 31 Salary ($) ($) Compensation ($) ($) SARs (#) ($) Compensation ($)
Elizabeth Davison 2003 $ - - - - 400,000 - -
President 2002 $ - - - - - - -
2001 $ - - - - - - -
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of securities Percent of total
Name underlying options/SARs granted Exercise or base Expiration date
options/SARs granted to employees in price ($/Sh)
(#) fiscal year
(a) (b) (c) (d) (e)
Elizabeth
Davison 400,000 100% $.01 February 6,2014
The options were exercised in February 2004.
PRINCIPAL SHAREHOLDERS
As of July 31, 2004 we had 10,975,000 shares of common stock
outstanding which are held by 35 shareholders. The chart below sets forth the
ownership, or claimed ownership, of certain individuals and entities. This chart
discloses those persons known by the board of directors to have or to claim to
have, beneficial ownership of more than 5% of the outstanding shares of our
common stock as of July 31, 2004; of all directors and executive officers of the
company; and of our directors and officers as a group.
4 Name and Address of 5 Number of Shares
Beneficial Owner Beneficially Owned Percent of Class
- --------------------- --------------------- ----------------
Elizabeth A. Davison 6 7 10,268,300 93.6%
Carla L. Santia 8 200,000 1.8%
Officers and Directors
as a group ( 2 members) 7 9 10,468,300 95.4%
- -------------------------------
4 The address for each person is 82 Mountain Road, Wilbraham, MA 01095.
5 Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of the Common Stock beneficially owned by them. A person is deemed to be
the beneficial owner of securities which may be acquired by such person
within 60 days from the date indicated above upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants or convertible
securities that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the date indicated
above, have been exercised.
6 Includes 400,000 shares issued as a result of option exercise with respect
to 400,000 options issued in accordance with 2003 Non-Statutory Stock
Option Plan.
7 Includes an aggregate of 5,800 shares owned by two (2) minor children of
Elizabeth A. Davison (2,900 shares each) in accordance with SEC Release
33-4819 which states, in part, that a person is regarded as the beneficial
owner of securities held in the name of his or her spouse and their minor
children. Ms. Davison disclaims any beneficial interest in or control over
any of such 5,800 shares other than that which may be attributed to her by
operation of law.
8 Includes 100,000 shares issued as a result of option exercise with respect
to 100,000 options issued in accordance with 2003 Non-Statutory Stock
Option Plan.
9 Includes the aggregate of 505,800 shares referred to in footnotes 6 and
8 above.
29
There are no arrangements, either written or oral, between any DAM stockholders
which may or could result in a change of control of DAM.
CERTAIN TRANSACTIONS
Our president has made advances in the amount of $60,883 outstanding as
of June 30, 2004. These advances do not bear interest and have no specified
maturity date.
In June 2003, 10,000,000 shares of our common stock were issued for
$10,000 in services to our president, Elizabeth A. Davison (9,900,000 shares)
and our director Carla L. Santia (100,000 shares). In accordance with the terms
and conditions of our 2003 Non-Statutory Stock Option Plan, 400,000 options were
issued to Ms. Davison and 100,000 options were issued to Ms. Santia. These
options were exercised in full in February 2004 at an exercise price of $.01 per
share.
We currently operate out of office space located at 82 Mountain Road,
Wilbraham, MA 01095 provided to us by our founder at no cost which serves as our
principal address. There is no written lease agreement.
The sole promoter of DAM is our president, Elizabeth A. Davison.
Share Issuance to Officers and Directors
We issued options to purchase 500,000 shares of our common stock at an
exercise price of $.01 per share to officers and directors in 2003. These
options were exercised in full in February 2004 in consideration for services
performed.
DESCRIPTION OF CAPITAL STOCK
Introduction
DAM is authorized to issue 24,000,000 shares of common stock and
1,000,000 shares of preferred stock.
30
Preferred Stock
DAM's certificate of incorporation authorizes the issuance of 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by its board of directors. No shares of preferred stock have
been designated, issued or are outstanding. Accordingly, DAM's board of
directors is empowered, without stockholder approval, to issue shares of
preferred stock with voting, liquidation, conversion, or other rights that could
adversely affect the rights of the holders of the common stock. Although DAM has
no present intention to issue any shares of preferred stock, there can be no
assurance that DAM will not do so in the future.
Among other rights, our board of directors may determine, without
further vote or action by our stockholders:
o the number of shares and the designation of the series;
o whether to pay dividends on the series and, if so, the dividend
rate, whether dividends will be cumulative and, if so, from
which date or dates, and the relative rights of priority of
payment of dividends on shares of the series;
o whether the series will have voting rights in addition to the
voting rights provided by law and, if so, the terms of the
voting rights;
o whether the series will be convertible into or exchangeable for
shares of any other class or series of stock and, if so, the
terms and conditions of conversion or exchange;
o whether or not the shares of the series will be redeemable and,
if so, the dates, terms and conditions of redemption and
whether there will be a sinking fund for the redemption of that
series and, if so, the terms and amount of the sinking fund;
and
o the rights of the shares of the series in the event of our
voluntary or involuntary liquidation, dissolution or winding up
and the relative rights or priority, if any, of payment of
shares of the series.
We presently do not have plans to issue any shares of preferred stock.
However, preferred stock could be used to dilute a potential hostile acquirer.
Accordingly, any future issuance of preferred stock or any rights to purchase
preferred shares may have the effect of making it more difficult for a third
party to acquire control of us. This may delay, defer or prevent a change of
control in our company or an unsolicited acquisition proposal. The issuance of
preferred stock also could decrease the amount of earnings attributable to, and
assets available for distribution to, the holders of our common stock and could
adversely affect the rights and powers, including voting rights, of the holders
of our common stock.
Common Stock
There are 10,975,000 shares of common stock issued and outstanding at
July 31, 2004 held by 35 shareholders. The holders of DAM's common stock:
o have equal ratable rights to dividends from funds legally
available for payment of dividends when, as and if declared by the
board of directors;
31
o are entitled to share ratably in all of the assets available for
distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs;
o do not have preemptive, subscription or conversion rights, or
redemption or access to any sinking fund; and o are entitled to
one non-cumulative vote per share on all matters submitted to
stockholders for a vote at any meeting of stockholders.
See also Risk Factor entitled "Any market that develops in shares of
our common stock will be subject to the penny stock restrictions" regarding
negative implications of being classified as a "Penny Stock."
Authorized but Un-issued Capital Stock
Nevada law does not require stockholder approval for any issuance of
authorized shares. However, the marketplace rules of the NASDAQ, which would
apply only if DAM's common stock were listed on the NASDAQ, require stockholder
approval of certain issuances of common stock equal to or exceeding 20% of the
then-outstanding voting power or then-outstanding number of shares of common
stock, including in connection with a change of control of DAM, the acquisition
of the stock or assets of another company or the sale or issuance of common
stock below the book or market value price of such stock. These additional
shares may be used for a variety of corporate purposes, including future public
offerings to raise additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved common
stock may be to enable the board of directors of DAM to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of DAM by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of DAM's
management and possibly deprive the stockholders of opportunities to sell their
shares of DAM common stock at prices higher than prevailing market prices.
No Preemptive Rights
No holder of any class of stock of DAM has any preemptive right to
subscribe to any securities of DAM of any kind or class.
Shareholder Matters
As a Nevada corporation, we are subject to the Nevada Revised Statutes
("NRS" or "Nevada law"). Certain provisions of Nevada law create rights that
might be deemed material to our shareholders. Other provisions might delay or
make more difficult acquisitions of our stock or changes in our control or might
also have the effect of preventing changes in our management or might make it
more difficult to accomplish transactions that some of our shareholders may
believe to be in their best interests.
34
Dissenters' Rights. Among the rights granted under Nevada law which might be
considered material is the right for shareholders to dissent from certain
corporate actions and obtain payment for their shares (see Nevada Revised
Statutes ("NRS") 92A.380-390). This right is subject to exceptions, summarized
below, and arises in the event of mergers or plans of exchange. This right
normally applies if shareholder approval of the corporate action is required
either by Nevada law or by the terms of the articles of incorporation.
A shareholder does not have the right to dissent with respect to any
plan of merger or exchange, if the shares held by the shareholder are part of a
class of shares which are:
o listed on a national securities exchange,
o included in the national market system by the National
Association of Securities Dealers, or
o held of record by not less than 2,000 holders.
This exception notwithstanding, a shareholder will still have a right of dissent
if it is provided for in the articles of incorporation or if the shareholders
are required under the plan of merger or exchange to accept anything but cash or
owner's interests, or a combination of the two, in the surviving or acquiring
entity, or in any other entity falling in any of the three categories described
above in this paragraph.
Inspection Rights. Nevada law also specifies that shareholders are to have the
right to inspect company records (see NRS 78.105). This right extends to any
person who has been a shareholder of record for at least six months immediately
preceding his demand. It also extends to any person holding, or authorized in
writing by the holders of, at least 5% of outstanding shares. Shareholders
having this right are to be granted inspection rights upon five days' written
notice. The records covered by this right include official copies of:
o the articles of incorporation, and all amendments thereto,
o bylaws and all amendments thereto; and
o a stock ledger or a duplicate stock ledger, revised annually,
containing the names, alphabetically arranged, of all persons
who are stockholders of the corporation, showing their places
of residence, if known, and the number of shares held by them,
respectively.
In lieu of the stock ledger or duplicate stock ledger, Nevada law
provides that the corporation may keep a statement setting out the name of the
custodian of the stock ledger or duplicate stock ledger, and the present and
complete post office address, including street and number, if any, where the
stock ledger or duplicate stock ledger specified in this section is kept.
Control Share Acquisitions. Sections 78.378 to 78.3793 of Nevada law contain
provisions that may prevent any person acquiring a controlling interest in a
Nevada-registered company from exercising voting rights. To the extent that
these rights support the voting power of minority shareholders, these rights may
also be deemed material. These provisions will be applicable to us as soon as we
33
have 200 shareholders of record with at least 100 of these having addresses in
Nevada as reflected on our stock ledger. While we do not yet have the required
number of shareholders in Nevada or elsewhere, it is possible that at some
future point we will reach these numbers and, accordingly, these provisions will
become applicable. We do not intend to notify shareholders when we have reached
the number of shareholders specified under these provisions of Nevada law.
Shareholders can learn this information pursuant to the inspection rights
described above and can see the approximate number of our shareholders by
checking under Item 5 of our annual reports on Form 10-KSB. This form is filed
with the Securities and Exchange Commission within 90 days of the close of each
fiscal year hereafter. You can view these and our other filings at www.sec.gov
in the "EDGAR" database.
Under NRS Sections 78.378 to 78.3793, an acquiring person who acquires
a controlling interest in company shares may not exercise voting rights on any
of these shares unless these voting rights are granted by a majority vote of our
disinterested shareholders at a special shareholders' meeting held upon the
request and at the expense of the acquiring person. If the acquiring person's
shares are accorded full voting rights and the acquiring person acquires control
shares with a majority or more of all the voting power, any shareholder, other
than the acquiring person, who does not vote for authorizing voting rights for
the control shares, is entitled to demand payment for the fair value of their
shares, and we must comply with the demand. An "acquiring person" means any
person who, individually or acting with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in our shares. "Controlling
interest" means the ownership of our outstanding voting shares sufficient to
enable the acquiring person, individually or acting with others, directly or
indirectly, to exercise one-fifth or more but less than one-third, one-third or
more but less than a majority, or a majority or more of the voting power of our
shares in the election of our directors. Voting rights must be given by a
majority of our disinterested shareholders as each threshold is reached or
exceeded. "Control shares" means the company's outstanding voting shares that an
acquiring person acquires or offers to acquire in an acquisition or within 90
days immediately preceding the date when the acquiring person becomes an
acquiring person.
These Nevada statutes do not apply if a company's articles of
incorporation or bylaws in effect on the tenth day following the acquisition of
a controlling interest by an acquiring person provide that these provisions do
not apply.
According to NRS 78.378, the provisions referred to above will not
restrict our directors from taking action to protect the interests of our
Company and its shareholders, including without limitation, adopting or
executing plans, arrangements or instruments that deny rights, privileges, power
or authority to a holder of a specified number of shares or percentage of share
ownership or voting power. Likewise, these provisions do not prevent directors
or shareholders from including stricter requirements in our articles of
incorporation or bylaws relating to the acquisition of a controlling interest in
the Company.
Our articles of incorporation and bylaws do not exclude us from the
restrictions imposed by NRS 78.378 to 78.3793, nor do they impose any more
stringent requirements.
34
Certain Business Combinations. Sections 78.411 to 78.444 of the Nevada law may
restrict our ability to engage in a wide variety of transactions with an
"interested shareholder." As was discussed above in connection with NRS 78.378
to 78.3793, these provisions could be considered material to our shareholders,
particularly to minority shareholders. They might also have the effect of
delaying or making more difficult acquisitions of our stock or changes in our
control. These sections of NRS are applicable to any Nevada company with 200 or
more stockholders of record and that has a class of securities registered under
Section 12 of the 1934 Securities Exchange Act, unless the company's articles of
incorporation provide otherwise. By this registration statement, we are
registering our common stock under Section 12(g) of the Exchange Act.
Accordingly, upon the effectiveness of this registration statement on Form 10-SB
we will be subject to these statutes as our Articles of Incorporation do not
exempt us from them.
These provisions of Nevada law prohibit us from engaging in any
"combination" with an interested stockholder for three years after the
interested stockholder acquired the shares that cause him to become an
interested shareholder, unless he had prior approval of our board of directors.
The term "combination" is described in NRS 78.416 and includes, among other
things, mergers, sales or purchases of assets, and issuances or
reclassifications of securities. If the combination did not have prior approval,
the interested shareholder may proceed after the three-year period only if the
shareholder receives approval from a majority of our disinterested shares or the
offer meets the requirements for fairness that are specified in NRS 78.441-42.
For the above provisions, "resident domestic corporation" means a Nevada
corporation that has 200 or more shareholders. An "interested stockholder" is
defined in NSR 78.423 as someone who is either:
|X| the beneficial owner, directly or indirectly, of 10% or more of
the voting power of our outstanding voting shares; or
|X| our affiliate or associate and who within three years immediately
before the date in question, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of our outstanding
shares at that time.
Directors' Duties. Section 78.138 of the Nevada law allows our directors and
officers, in exercising their powers to further our interests, to consider the
interests of our employees, suppliers, creditors and customers. They can also
consider the economy of the state and the nation, the interests of the community
and of society and our long-term and short-term interests and shareholders,
including the possibility that these interests may be best served by our
continued independence. Our directors may resist a change or potential change in
control if they, by a majority vote of a quorum, determine that the change or
potential change is opposed to or not in our best interest. Our board of
directors may consider these interests or have reasonable grounds to believe
that, within a reasonable time, any debt which might be created as a result of
the change in control would cause our assets to be less than our liabilities,
render us insolvent, or cause us to file for bankruptcy protection
Amendments to Bylaws - Our articles of incorporation provide that the power to
adopt, alter, amend, or repeal our bylaws is vested exclusively with the board
of directors. In exercising this discretion, our board of directors could
35
conceivably alter our bylaws in ways that would affect the rights of our
shareholders and the ability of any shareholder or group to effect a change in
our control; however, the board would not have the right to do so in a way that
would violate law or the applicable terms of our articles of incorporation.
Transfer Agent
Standard Registrar & Transfer Company, Inc. will be appointed as the
transfer agent and registrar for our common stock. The transfer agent's address
is 12528 South 1840 East, Draper, Utah 84020, and its telephone number is
801-571-8844.
PLAN OF DISTRIBUTION
The selling stockholders may offer the shares at various times in one
or more of the following transactions:
o on any market that might develop;
o in transactions other than market transactions;
o by pledge to secure debts or other obligations;
o (if a market should develop) in connection with the writing of
non-traded and exchange-traded call options, in hedge
transactions and in settlement of other transactions in
standardized or over-the-counter options;
o 10 purchases by a broker-dealer as principal and resale by the
broker-dealer for its account; or
o in a combination of any of the above.
Selling stockholders will sell at a fixed price of $.01 per share until
our common shares are quoted on the Over- the-Counter Bulletin Board and
thereafter at prevailing market prices or privately negotiated prices.
The selling stockholders may use broker-dealers to sell shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling stockholders, or they will receive commissions from purchasers of shares
for whom they have acted as agents. To date, no discussions have been held or
agreements reached with any broker/dealers.
Affiliates and/or promoters of DAM who are offering their shares for
resale and any broker-dealers who act in connection with the sale of the shares
hereunder will be deemed to be "underwriters" of this offering within the
- ---------------------
10 If any of the selling shareholders enter into an agreement after the
effectiveness of this registration statement to sell all or a portion of their
shares in Davison Arts Management, Inc. to a broker-dealer as principal and the
broker-dealer is acting as underwriter, Davison Arts Management, Inc.will file a
post-effective amendment to this registration statement identifying the
broker-dealer, providing the required information on the Plan of Distribution,
revising disclosures in this registration statement as required and filing the
agreement as an exhibit to this registration statement.
36
meaning of the Securities Act, and any commissions they receive and proceeds of
any sale of the shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
Selling shareholders and any purchasers of our securities should be
aware that any market that develops in our common stock will be subject to
"penny stock" restrictions.
We will pay all expenses incident to the registration, offering and
sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. We also agreed to indemnify the selling
stockholders against certain liabilities, including liabilities under the
Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.
This offering will terminate on the earlier of:
a) the date on which the shares are eligible for resale without
restrictions pursuant to Rule 144 under the Securities Act, or
b) the date on which all shares offered by this prospectus have been sold
by the selling stockholders.
Limitations Imposed by Regulation M
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of our common
stock by the selling stockholders. We will make copies of this Prospectus
available to the selling stockholders and have informed them of the need for
delivery of copies of this Prospectus to purchasers at or prior to the time of
any sale of the shares offered hereby. We assume no obligation to so deliver
copies of this Prospectus or any related prospectus supplement.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for us by Gary B. Wolff, P.C., 805 Third Avenue, New
York, New York 10022. Gary B. Wolff, president and sole stockholder of Gary B.
Wolff, P.C. owns 100,000 shares of our common stock.
37
EXPERTS
The financial statements of Davison Arts Management, Inc. as of
December 31, 2003 and for the years ended December 31, 2003 and 2002, and for
the period from date of inception on March 23, 1999 to December 31, 2003
included in this prospectus have been audited by independent registered public
accountants and have been so included in reliance upon the report of Madsen &
Associates, CPAs, Inc. given on the authority of such firm as experts in
accounting and auditing.
UNAUDITED INTERIM STATEMENTS
The information for the interim periods ended June 30, 2004 and 2003 is
unaudited; however, it includes all adjustments considered necessary by
management for a fair presentation of our financial position and results of
operations.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2, including exhibits, schedules and
amendments, under the Securities Act with respect to the shares of common stock
to be sold in this offering. This prospectus does not contain all the
information included in the registration statement. For further information
about us and the shares of our common stock to be sold in this offering, please
refer to this registration statement.
As of the date of this prospectus, DAM became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended.
Accordingly, we will file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N. W.,
Washington, D.C. 20549. You should call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings will also be
available to the public at the SEC's web site at "http:/www.sec.gov."
You may request, and we will voluntarily provide, a copy of our
filings, including our annual report which will contain audited financial
statements, at no cost to you, by writing or telephoning us at the following
address:
Davison Arts Management, Inc.
82 Mountain Road
Wilbraham, MA 01095
413-596-3298
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Davison Arts Management, Inc.
Wilbraham, MA
We have audited the accompanying balance sheet of Davison Arts Management, Inc.
(a development stage company) as of December 31, 2003 and the related statements
of operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 2003 and 2002 and for the period from March 23, 1999 (date of
inception) through December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Davison Arts Management, Inc.
(a development stage company) as of December 31, 2003 and the results of its
operations and cash flows for the years ended December 31, 2003 and 2002 and for
the period from March 23, 1999 (date of inception) through December 31, 2003 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company is a development stage company with, among other things,
no significant operating revenues to date which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Madsen & Associates, CPAs Inc.
Salt Lake City, Utah
May 24, 2004
F-1
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
ASSETS December 31,
2003
------------
Current Assets:
Cash $ -
----------
Total Current Assets -
----------
TOTAL ASSETS $ -
==========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Advances from officer $ 58,524
Loan payable and accumulated interest 5,600
Accrued expenses 9,750
----------
Total Current Liabilities 73,874
----------
Stockholders' Deficit:
Preferred Stock; $ .001 par value; 1,000,000
Shares authorized, no shares issued And
outstanding at December 31, 2003. -
Common Stock, $ .001 par value; authorized
24,000,000 shares; 10,000,000 shares issued and
outstanding at December 31, 2003. 10,000
Additional Paid-in Capital 20,000
Deficit Accumulated During Development Stage (103,874)
----------
Total Stockholders' Deficit (73,874)
----------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ -
==========
See accompanying notes to the financial statements.
F-2
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
From Inception
Year Ended Year Ended (March 23, 1999) through
December 31, 2003 December 31, 2002 December 31, 2003
----------------- ----------------- ----------------------
Revenue $ 542 $ 5,430 $ 30,157
Cost of Services Provided 317 2,124 25,337
------------ ------------ ---------------
Gross Profit 225 3,306 4,820
Expenses:
Services provided by officer 10,000 10,000 20,000
General and administrative 1,539 1,405 9,475
Management fees - 4,362 10,000
Consulting costs 8,750 - 9,450
Development costs - 872 52,604
Marketing expenses - 134 623
Interest expense 2,807 847 5,542
Professional fees 1,000 - 1,000
------------ ------------ ---------------
Total Expenses 24,096 17,620 108,694
------------ ------------ ---------------
Net Loss $ (23,871) $ (14,314) $ (103,874)
============ ============ ===============
Net loss Per Common Share
(Basic and Fully Dilutive) $ (0.00) $ (0.00)
============ ============ ===============
Weighted Average Shares
Common Stock Outstanding 10,000,000 10,000,000
============ ============ ===============
See accompanying notes to the financial statements.
F-3
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM MARCH 23, 1999 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2003
Common Common
Stock Stock Paid-In Accumulated Total
Shares Amount Capital Deficit Deficit
---------- --------- --------- ------------ ---------
Common stock issued for acquisition of 10,000,000 $ 10,000 $ - $ - $ 10,000
HC Davison Editions on June 24, 2003
Net loss for the year ended December 31,1999 - - - (22,406) (22,406)
Net loss for the year ended December 31,2000 - - - (35,955) (35,955)
Net loss for the year ended December 31,2001 - - - (7,328) (7,328)
Contribution of services by president - - 10,000 - 10,000
Net loss for the year ended December 31,2002 - - - (14,314) (14,314)
---------- -------- ------- ----------- ---------
Balances at December 31, 2002 10,000,000 10,000 10,000 (80,003) (60,003)
---------- -------- ------- ----------- ---------
Contribution of services by president - - 10,000 - 10,000
Net loss for the year ended December 31,2003 - - - (23,871) (23,871)
---------- -------- ------- ----------- ---------
Balances at December 31, 2003 10,000,000 $ 10,000 $ 20,000 $ (103,874) $ (73,874)
========== ======== ======= =========== =========
See accompanying notes to the financial statements.
F-4
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From Inception
Year Ended Year Ended (March 23, 1999) through
December 31, 2003 December 31, 2002 December 31, 2003
----------------- ----------------- ----------------------
Cash Flows Used in Operating
Activities:
Net Loss $ (23,871) $ (14,314) $ (103,874)
Expenses not Requiring an
Outlay of Cash:
Common stock issued for
compensation of management
fees 10,000 - 10,000
----------- ------------ ------------
Net Cash Used in Operating (13,871) (14,314) (93,874)
Activities
Changes to Operating Assets
and Liabilities:
Increase (decrease) in accrued
management fees - officers (10,000) 4,362 -
Increase (decrease) in accrued
consulting fees 9,750 (700) 9,750
----------- ------------ ------------
Net Cash (Used in) Provided by
Operating Activities (250) 3,662 9,750
Cash Flows Provided by Financing
Activities:
Increase in advances from
officers 11,459 1,496 58,524
Capital contributions 10,000 10,000 20,000
Increase (decrease) in advances
from line of credit (7,338) (844) 5,600
----------- ------------ ------------
Net Cash Provided by Financing
Activities 14,121 10,652 84,124
----------- ------------ ------------
Net Change in Cash - - -
Cash at Beginning of Period - - -
----------- ------------ ------------
Cash at End of Period $ - $ - $ -
=========== ============ =============
See accompanying notes to the financial statements.
F-5
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 1 - ORGANIZATION
Davison Arts Management, Inc. (the "Company") was incorporated under
the laws of the State of Nevada on June 24, 2003 to succeed HC Davison Editions,
an unincorporated entity controlled and operated by the founder of the Company
since March 23, 1999 (date of inception). The Company functions as a consulting
firm serving artists and other creative arts professionals community.
The acquisition of HC Davison Editions ("HCD") by Davison Arts
Management, Inc. ("DAM") has been accounted for as a recapitalization of HCD for
financial accounting purposes. Since DAM had no operations prior to the
recapitalization, the financial statements of HCD and DAM are being combined for
the period from January 1, 2002 through December 31, 2003 with retroactive
effect being given to the issuance of the common stock.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company recognizes income and expenses based on the accrual
method of accounting.
b. Provision for Taxes
The Company utilizes liability method of accounting for income
taxes. Under the liability method, deferred tax assets and
liabilities are determined based upon the differences between
financial reporting and the tax bases of the assets and
liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. An allowance against deferred tax assets is recognized,
when it is more likely than not, that such tax benefits will not
be realized.
On December 31, 2003, the Company had net operating loss
carryforwards of approximately $23,871 that may be offset
against future taxable income through 2022. No tax benefit has
been reported with respect to these net operating loss
carryforwards in the accompanying financial statements because
the Company believes that realization is not likely.
Accordingly, the potential tax benefits of the net loss
carryforwards are fully offset by a valuation allowance.
F-6
The losses incurred prior to 2003 related the HC Davison
Editions and were included in the tax return of the Company's
founder. The Company is not entitled to the potential benefit of
any of those losses.
c. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
d. Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
e. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the
weighted average number of shares outstanding assuming that the
Company incorporated as of the beginning of the first period
presented.
f. Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent
accounting pronouncements will have a material impact on its
financial statements.
g. Revenue Recognition
Revenue is recognized on the sale or delivery of a product or
the completion of services rendered and the receipt of cash. If
a product is sold, the sale is recognized at the time that the
product is delivered to our customer.
h. Cost of Revenue
Cost of revenue relates to payments made or direct costs
incurred to provide a service.
i. Stock Options and Warrants
As permitted by Statement of Financial Accounting Standards No.
123 "Accounting for Stock based Compensation" ("SFAS No. 123"),
the Company has elected to measure and record compensation cost
relative to employee stock option and warrant costs in
F-7
accordance with Accounting Principles Board (`APB") Opinion 25,
"Accounting for Stock Issued to Employees," and related
Interpretations and will make pro forma disclosures of net
income and earnings per share as if the fair value method of
valuing stock options and warrants had been applied. Under APB
Opinion 25. compensation cost is recognized for stock options
and warrants granted to employees when the option or warrant
price is less than the market price of the underlying common
stock on the date of grant..
Options and warrants issued to individuals other than employees
or directors will be accounted for in accordance with SFAS
No.123 which requires recognition of compensation expense for
grants of stock, stock options, and other equity instruments
over the vesting periods of such grants, based on the estimated
grant-date fair values of those grants.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern that contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established revenues sufficient to cover its
operating costs to allow it to continue as a going concern.
Company will engage in very limited activities without incurring any liabilities
that must be satisfied in cash until a source of funding is secured. The Company
will offer noncash consideration and perform services that do not require cash
outlays as a means of financing its operations. If the Company is unsuccessful
in these efforts and cannot obtain a source of funding, it may substantially
curtail or terminate its operations or seek other business opportunities through
strategic alliances, acquisitions or other arrangements that may dilute the
interests of existing stockholders.
NOTE 4 - COMMON STOCK
On June 24, 2003, the Board of Directors issued 10,000,000 shares of
common stock for $10,000 in services to the founding shareholders of the
Company.
Stock Option Plan
Pursuant to an August 31, 2003 Board of Directors approval and
subsequent stockholder approval, the Company adopted its 2003 Non-Statutory
Stock Option Plan (the "Plan") whereby it reserved for issuance up to 1,500,000
shares of its common stock. The purpose of the Plan is to provide directors,
officers and employees of, consultants, attorneys and advisors to the Company
and its subsidiaries with additional incentives by increasing their ownership
interest in the Company. Directors, officers and other employees of the Company
and its subsidiaries are eligible to participate in the Plan. Options in the
form of Non-Statutory Stock Options ("NSO") may also be granted to directors who
are not employed by the Company and consultants, attorneys and advisors to the
Company providing valuable services to the Company and its subsidiaries. In
F-8
addition, individuals who have agreed to become an employee of, director of or
an attorney, consultant or advisor to the Company and/or its subsidiaries are
eligible for option grants, conditional in each case on actual employment,
directorship or attorney, advisor and/or consultant status. The Plan provides
for the issuance of NSO's only, which are not intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code,
as amended.
The Board of Directors of the Company or a Compensation Committee (once
established) will administer the Plan with the discretion generally to determine
the terms of any option grant, including the number of option shares, exercise
price, term, vesting schedule and the post-termination exercise period.
Notwithstanding this discretion (i) the term of any option may not exceed 10
years and (ii) an option will terminate as follows: (a) if such termination is
on account of termination of employment for any reason other than death, without
cause, such options shall terminate one year thereafter; (b) if such termination
is on account of death, such options shall terminate 15 months thereafter; and
(c) if such termination is for cause (as determined by the Board of Directors
and/or Compensation Committee), such options shall terminate immediately. Unless
otherwise determined by the Board of Directors or Compensation Committee, the
exercise price per share of common stock subject to an option shall be equal to
no less than 10% of the fair market value of the common stock on the date such
option is granted. No NSO shall be assignable or otherwise transferable except
by will or the laws of descent and distribution or except as permitted in
accordance with SEC Release No.33-7646 as effective April 7, 1999.
The Plan may be amended, altered, suspended, discontinued or terminated
by the Board of Directors without further stockholder approval, unless such
approval is required by law or regulation or under the rules of the stock
exchange or automated quotation system on which the common stock is then listed
or quoted. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the Plan or broaden eligibility
except that no amendment or alteration to the Plan shall be made without the
approval of stockholders which would (a) increase the total number of shares
reserved for the purposes of the Plan or decrease the NSO price (except as
provided in paragraph 9 of the Plan) or change the classes of persons eligible
to participate in the Plan or (b) extend the NSO period or (c) materially
increase the benefits accruing to Plan participants or (d) materially modify
Plan participation eligibility requirements or (e) extend the expiration date of
the Plan. Unless otherwise indicated the Plan will remain in effect until
terminated by the Board of Directors.
Management has issued 975,000 of the aforesaid options to certain
current members of its management team as well as other persons whom it
considers to be important to its current and proposed business activities, with
all options exercisable at $.01 per share for a period of ten years from date of
issuance. All options were exercised in February 2004.
The exercise price of these options is the same as the value determined
using a Black-Scholes option pricing model with the following range of
assumptions for the year ended December 31, 2003:
F-9
Risk free interest rate 5.0%
Expected dividend yield 0%
Expected lives 10 years
Expected volatility 0%
NOTE 5 - LOANS AND ADVANCES
Loans and advances consist of:
6% demand loan due to bank (guaranteed by the
Company's President) including accrued interest $ 5,600
Advances from officer 58,524
------
Total $ 64,124
======
The proceeds of the loans were used to fund operations. The amounts due
to an officer do not bear interest and have no specified maturity date. The
President also provided her services and office space without requiring any cash
payment. The estimated value of those services ($10,000 in each of 2003 and
2002) has been recorded as an expense and a capital contribution in the
accompanying financial statements.
A summary of stock option activity follows:
Options Granted Exercise price
--------------- ----------------
Balance outstanding at January 1,
2003 - -
Granted in 2003 975,000 $ .01
Exercised in 2003 - -
--------- --------
Options outstanding at December 31,
2003 (1) 975,000 $ .01
========= ========
All outstanding options were exercised in February 2004.
F-10
DAVISON ARTS MANAGEMENT, INC.
(A Development Stage Company)
Balance Sheet
(Unaudited)
ASSETS June 30, 2004
-------------
Current Assets:
Cash $ -
---------
Total Current Assets -
---------
TOTAL ASSETS $ -
=========
LIABILITIES & NET STOCKHOLDERS' DEFICIT
Current Liabilities:
Advances from officer $ 60,883
Loan payable and accumulated interest 4,008
Accrued expenses 12,500
---------
Total Current Liabilities 77,391
---------
Net Stockholders' Deficit:
Preferred Stock; $ .001 par value;
authorized 1,000,000 shares; no shares
issued and outstanding -
Common Stock, $ .001 par value; authorized
24,000,000 shares; 10,975,000 shares
issued and outstanding at June 30, 2004 10,975
Additional paid-in capital 33,775
Accumulated Deficit (122,141)
---------
Net Stockholders' Deficit (77,391)
---------
TOTAL LIABILITIES & NET STOCKHOLDERS' DEFICIT $ -
=========
The accompanying notes are an integral part of these financial statements.
F-11
DAVISON ARTS MANAGEMENT, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From Inception
Six Months Ended Six Months Ended (March 23, 1999) through
June 30, 2004 June 30, 2003 June 30, 2004
----------------- ----------------- ----------------------
Revenue $ - $ 533 $ 30,157
Cost of Services Provided - - 25,337
------------- ------------ ---------------
Gross Margin - 533 4,820
Administrative and related
expenses 13,267 975 101,961
Services contributed by officer 5,000 5,000 25,000
------------- ------------ ---------------
Net Loss $ (18,267) $ (5,443) $ (122,141)
============= ============ ===============
Basic and diluted loss per
share $ (0.00) $ (0.00)
============= ============
Weighted average number of
common shares outstanding 10,731,250 10,000,000
============= ============
The accompanying notes are an integral part of these financial statements.
F-12
DAVISION ARTS MANAGEMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM MARCH 23, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 2004
(Unaudited)
Common Common
Stock Stock Paid-In Accumulated Total
Shares Amount Capital Deficit Deficit
---------- --------- --------- ------------ ---------
Common stock issued for acquisition of 10,000,000 $ 10,000 $ - $ - $ 10,000
HC Davison Editions on June 24, 2003
Net loss for the year ended December 31,1999 - - - (22,406) (22,406)
Net loss for the year ended December 31,2000 - - - (35,955) (35,955)
Net loss for the year ended December 31,2001 - - - (7,328) (7,328)
Contribution of services by president - - 10,000 - 10,000
Net loss for the year ended December 31,2002 - - - (14,314) (14,314)
---------- -------- ------- ----------- ---------
Balances at December 31, 2002 10,000,000 10,000 10,000 (80,003) (60,003)
---------- -------- ------- ----------- ---------
Contribution of services by president - - 10,000 - 10,000
Net loss for the year ended December 31,2003 - - - (23,871) (23,871)
---------- -------- ------- ----------- ---------
Balances at December 31, 2003 10,000,000 10,000 20,000 (103,874) (73,874)
Contribution of services by president - - 5,000 - 5,000
Issuance of shares 975,000 975 8,775 - 9,750
Net loss for the six months ended June 30,2004 - - - (18,267) (18,267)
---------- -------- ------- ----------- ---------
Balance, June 30, 2004 (unaudited) 10,975,000 $ 10,975 $ 33,775 $ (122,141) $ (77,391)
========== ======== ======= =========== =========
See accompanying notes to the financial statements.
F-13
DAVISON ARTS MANAGEMENT, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From Inception
Six Months Ended Six Months Ended (March 23, 1999) through
June 30, 2004 June 30, 2003 June 30, 2004
----------------- ----------------- ----------------------
Cash Flows From Operating
Activities:
Net Loss $ (18,267) $ (5,443) $ (122,141)
Expenses settled by issuance
of stock - - 10,000
Change in operating assets 2,750 262 12,400
------------- ------------ ---------------
Net Cash Used In
Operating Activities (15,517) (5,181) (99,741)
------------- ------------ ---------------
Cash Flows Provided by
Financing Activities:
Loan payable (1,592) - 4,108
Capital contribution by officer 5,000 5,000 25,000
Increase in advances to officers 2,359 181 60,883
Common Stock issued for cash 9,750 - 9,750
------------- ------------ ---------------
Net Cash Provided by
Financing Activities 15,517 5,181 99,741
Net Change in Cash - - -
Cash and cash equivalents at
Beginning of Period - - -
------------- ------------ ---------------
Cash and cash equivalents at
End of Period $ - $ - $ -
============= ============ ===============
The accompanying notes are an integral part of these financial statements.
F-14
Davison Arts Management, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2004 and 2003
(Unaudited
1. BASIS OF PRESENTATION
The accompanying interim condensed financial statements for the six-month
periods ended June 30, 2004 and 2003 are unaudited and include all adjustments
considered necessary by Management for a fair presentation. The results of
operations realized during an interim period are not necessarily indicative of
results to be expected for a full year. These condensed financial statements
should be read in conjunction with the information filed as part of the
Company's Registration Statement on Form SB-2, of which this Prospectus is a
part.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires Management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amount of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
2. COMMON STOCK
The Company had issued options to purchase 975,000 of its common stock to
certain current members of its management team as well as other persons whom it
considers to be important to its current and proposed business activities, with
all options exercisable at $.01 per share for a period of five years from date
of issuance. All options were exercised in February 2004.
F-15
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
No one (including any salesman or broker) is authorized to provide oral
or written information about this offering that is not included in this
prospectus.
The information contained in this prospectus is correct only as of the
date set forth on the cover page, regardless of the time of the delivery of this
prospectus.
Until ________ , 2004 (90 days after the commencement of the offering),
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.
1,587,500 Shares
Davison Arts Management, Inc.
Common Stock
PROSPECTUS
August , 2004
39
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................3
HIGH RISK FACTORS........................................................5
USE OF PROCEEDS..........................................................12
SELLING STOCKHOLDERS.....................................................13
DETERMINATION OF OFFERING PRICE..........................................14
DIVIDEND POLICY..........................................................15
MARKET FOR SECURITIES....................................................15
NOTE REGARDING FORWARD-LOOKING STATEMENTS................................15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................16
BUSINESS.................................................................21
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.............24
PRINCIPAL SHAREHOLDERS...................................................29
CERTAIN TRANSACTIONS.....................................................30
DESCRIPTION OF CAPITAL STOCK.............................................30
PLAN OF DISTRIBUTION.....................................................36
LEGAL MATTERS............................................................37
EXPERTS..................................................................38
WHERE YOU CAN FIND MORE INFORMATION......................................38
40
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has a provision in its charter, by-laws, or other contracts
providing for indemnification of its officers and directors.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
registrant 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 Company of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any such action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant is bearing all expenses in connection with this registration
statement other than sales commissions, underwriting discounts and underwriter's
expense allowances designated as such. Estimated expenses payable by the
Registrant in connection with the registration and distribution of the Common
Stock registered hereby are as follows:
SEC Registration fee $ 2.01
NASD Filing Fee 100.00
*Accounting fees and expenses 2,500.00
*Legal fees and expenses 50,000.00
*Transfer Agent fees 2,500.00
*Blue Sky fees and expenses 3,500.00
*Miscellaneous expenses 1,498.99
---------
Total $59,201.00
*Indicates expenses have been estimated for filing purposes.
41
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the three years preceding the filing of this Form SB-2,
Registrant has issued securities without registration under the Securities Act
on the terms and circumstances described in the following paragraphs:
On June 24, 2003, 10,000,000 shares of common stock were issued for
$10,000 in services to two individuals as founders as follows: 9,900,000 shares
to Elizabeth A. Davison and 100,000 shares to Carla L. Santia. Ms. Davision
subsequently transferred 37,500 of her 9,900,000 shares to 27 individuals, many
of whom are related to Ms. Davison. There was no general solicitation or general
advertising regarding these transactions. The services consisted of developing a
business plan and preparation of organizational and incorporation documents as
well as this registration statement. The individuals who received shares from
Ms. Davison had an opportunity to ask questions of and receive answers from
executive officers of Registrant and were provided with access to Registrant's
documents and records in order to verify the information provided. All
transactions were negotiated in face-to-face or telephone discussions between
executives of Registrant and the individual stockholders. The securities bear a
restrictive legend, and stop transfer instructions are noted on the stock
transfer records of the Registrant. There was no general solicitation or general
advertising. No underwriter participated in the foregoing transaction, and no
underwriting discounts or commissions were paid to anyone.
The foregoing issuances of securities were effected in reliance upon
the exemption from registration provided by section 4(2) under the Securities
Act of 1933, as amended.
During 2003, management issued 975,000 options to eight persons whom
it considers to be important to its current and proposed business activities.
All options were exercisable at $.01 per share for a period of ten years from
the date of issuance and were exercised in full in February 2004 in
consideration for the receipt of services.
The options were granted under our 2003 Stock Incentive Plan. The
Company intends to file a Registration Statement on Form S-8 so as to register
the shares of common stock underlying the options granted under that plan so
that upon exercise the option holder will be issued Company securities which
will be registered and, therefore, not bear any restrictive legend.
====================================== ======================================
Elizabeth A, Davison 400,000
Carla L. Santia 100,000
Gary B. Wolff 100,000
Consultants 375,000
Total 975,000
====================================== ======================================
42
No underwriter participated in the foregoing transaction, and no underwriting
discounts or commissions were paid to anyone.
The foregoing issuances of options and subsequent issuances of shares of DAM
common stock upon exercise of options were both effected in reliance upon the
exemption from registration provided by Section 4(2) under the Securities Act of
1933, as amended.
ITEM 27. EXHIBITS.
**3.1 Articles of Incorporation
*3.2 By-Laws
*4.1 Specimen of Certificate of Common Stock
*5.1 Opinion of Gary B. Wolff, P.C.
*10.1 2003 Non-Statutory Stock Option Plan
*23.1 Consent of Madsen & Associates, CPAs Inc.
*23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1)
**23.1a Consent of Madsen & Associates, CPAs Inc.
**23.2a Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1)
* Filed with initial filing
** Filed with First Amendment
The exhibits are not part of the prospectus and will not be distributed with the
prospectus.
ITEM 28. UNDERTAKINGS.
The Registrant undertakes:
1. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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 registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant is registering securities under Rule 415 of the Securities Act
and hereby undertakes:
1. To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
43
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement; and
(iii) Notwithstanding the forgoing, 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 prospects filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in the volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iv) Include any additional or changed material information on the plan
of distribution.
2. That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this SB-2 Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Wilbraham,
Massachusetts, on the 26th day of August 2004.
Davison Arts Management, Inc.
/s/ Elizabeth A. Davison
-----------------------------
Elizabeth A. Davison
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
/s/ Elizabeth A. Davison Principal Executive Financial and August 26, 2004
Accounting Officer
- ------------------------
Elizabeth A. Davison
/s/ Carla L. Santia Director August 26, 2004
- -------------------------------------
- -------------------------------------
Carla L. Santia
45