As Filed with Securities and Exchange Commission on _____________, 2002
Registration No. ___ - _____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CAPITOL GROUP HOLDINGS CORPORATION
(Exact name of the registrant as specified in its charter)
Nevada 6552 33-0830828
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No)
4600 East Sunset Road, Suite 320 4600 East Sunset Road, Suite 320
Henderson, Nevada 89014 Henderson, Nevada 89014
(702) 948-5500 (702) 948-5500
(Address and telephone number of (Address of principal place of business or
principal executive offices) intended principal place of business)
Mr. Frank J. Dobrucki With a Copy to:
Capitol Group Holdings Corporation Norman T. Reynolds, Esq.
4600 East Sunset Road, Suite 320 1401 McKinney, Suite 1900
Henderson, Nevada 89014 Houston, Texas 77010
(702) 948-5500 (Office) (713) 752-4512 (Office)
(702) 948-5501 (Facsimile) (713) 752-4221 (Facsimile)
(Name, address and telephone
number of agent for service)
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this registration statement has been declared
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- -------------- -------------- ----------------- ----------------- --------------
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of To Offering Aggregate Registration
Securities to Be Price Offering Fee
Be Registered Registered Per Share (1) Price
- -------------- -------------- ----------------- ----------------- --------------
- -------------- -------------- ----------------- ----------------- --------------
Common Stock, 6,000,000 (2) $1.00 $6,000,000 $552.00
par value
$0.001
per share
- -------------- -------------- ----------------- ----------------- --------------
- -------------- -------------- ----------------- ----------------- --------------
Common Stock, 27,500,000 (3) $1.00 $27,500,000 $2,530.00
par value
$0.001
per share
- -------------- -------------- ----------------- ----------------- --------------
- ----------------------------------------------------------------- -------------
Total Registration Fee $3,082.00
- ----------------------------------------------------------------- -------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Represents the number of shares of the common stock of Capitol Group
Holdings Corporation to be sold from time to time pursuant to this registration
statement by Capitol Group Holdings Corporation.
(3) Represents an estimated 2,175,028 newly issued shares of the common
stock of Capitol Group Holdings Corporation to be distributed to the
stockholders of U.S. Microbics, Inc. and 25,324,972 shares to be sold from time
to time by some of our existing stockholders pursuant to this registration
statement.
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 this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
CAPITOL GROUP HOLDINGS CORPORATION
Cross-Reference Sheet
Showing Location in the Prospectus of
Information Required by Items of Form SB-2
Form SB-2 Item Number and Caption Location in Prospectus
1. Front of Registration Statement and
Outside Front Cover of Prospectus............. Outside Front Cover
Page
2. Inside Front and Outside Back Cover
Pages of Prospectus........................... Inside Front Cover
Page; Outside Back-
Cover Page
3. Summary Information and Risk Factors............. Prospectus Summary
Risk Factors;Business
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Outside Front Cover
Page
6. Dilution......................................... Dilution
7. Selling Security Holders......................... Selling Stockholders
8. Plan of Distribution............................. Plan of Distribution
and Terms of Offering
9. Legal Proceeding................................. Business-Litigation
10. Directors, Executive Officers, Promoters
and Control Persons........................... Business; Management-
Executive Officer and
Directors
11. Security Ownership of Certain Beneficial
Owners and Management......................... Principal Stckholders
12. Description of Securities........................ Description of
Securities
13. Interest of Named Experts and Counsel............ *
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Description of
Securities-Certain
Provisions of the
Articles of Incor-
poration and Bylaws
15. Organization Within Last Five Years.............. Business
16. Description of Business.......................... Business
17. Management's Discussion and Analysis
or Plan of Operation.......................... Management's Discus-
sion and Analysis of
Financial Condition
and Results of
Operations
18. Description of Property.......................... Business-Properties-
Facilties
19. Certain Relationships and Related
Transactions.................................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters........................... Price Range of Common
Stock and Dividend
Policy; Description
of Securities
21. Executive Compensation........................... Management-Executive
Compensation
22. Financial Statements............................. Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.......................... *
- -----------------------
(*) None or Not Applicable
SUBJECT TO COMPLETION, DATED ______________, 2002
Prospectus
______________, 2002
CAPITOL GROUP HOLDINGS CORPORATION
Shares of Common Stock, Par Value $0.001 Per Share
o We are offering up to a total of 6,000,000 shares of our common stock
at a price of $1.00 per share.
o The shares of our common stock offered by means of this prospectus will
be sold on a "best efforts" basis by Mariner Investment Group, a
licensed broker-dealer which will be paid a commission on all of our
shares sold by means of this offering. In addition, some of our
officers and directors may sell some of our shares, but they will not
be compensated for any of our shares sold by them.
o There is no minimum number of shares that we have to sell. All money
received from this offering will be placed in an escrow account and
withdrawn in $25,000 increments for our immediate use. There will be no
refunds.
o The offering to the new investors will be until __________, 2002, and
may be extended for an additional period up to _______, 2002, if we
choose to do so.
o In addition, we are registering the distribution of an estimated
2,175,028 shares of our common stock by U.S. Microbics, Inc., one of
our stockholders, as a dividend, to certain of its stockholders. There
will be no charge for the distribution of our shares and we will
receive no proceeds as a result of the distribution.
o The shares of our common stock are not currently listed for sale on any
exchange, although we do plan to have our shares quoted on the OTC
Bulletin Board upon the effective date of this prospectus.
o Finally, this prospectus also relates to the aggregate resale of
25,324,972 shares of our common stock held by some of our current
stockholders, all of which may be sold from time to time by the selling
stockholders.
- ------------------------ ------------ --------------- ----------------------
Offering Proceeds, before
Price Commissions expenses to Capitol
Group Holdings
- ------------------------ ------------ --------------- ----------------------
- ------------------------ ------------ --------------- ----------------------
Per Share............... $1.00 $0.025 $0.975
- ------------------------ ------------ --------------- ----------------------
- ------------------------ ------------ --------------- ----------------------
Total Maximum Offering.. $6,000,000 $150,000 $5,850,000
- ------------------------ ------------ --------------- ----------------------
This investment involves risks. See "Risk Factors"
beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
MARINER INVESTMENT GROUP
TABLE OF CONTENTS
Prospectus Summary..........................................................1
- ------------------
Risk Factors................................................................3
- ------------
The Spin-Off................................................................6
- ------------
Use of Proceeds.............................................................8
- ---------------
Determination of Offering Price.............................................9
- -------------------------------
Plan of Distribution and Terms of the Offering..............................9
- ----------------------------------------------
Price Range of Common Stock and Dividend Policy.............................10
- -----------------------------------------------
Dilution....................................................................11
- --------
Capitalization..............................................................13
- --------------
Management's Discussion and Analysis of Financial Condition and Results
- -----------------------------------------------------------------------
of Operations...............................................................14
- -------------
Business....................................................................16
- --------
Management..................................................................19
- ----------
Certain Transactions........................................................20
- --------------------
Principal Stockholders......................................................21
- ----------------------
Description of Securities...................................................21
- -------------------------
Certain Provisions of Our Articles of Incorporation and Bylaws..............22
- --------------------------------------------------------------
Selling Stockholders........................................................25
- --------------------
Spin-Off Shares.............................................................27
- ---------------
Shares Available for Future Sale............................................34
- --------------------------------
Legal Matters...............................................................34
- -------------
Experts.....................................................................34
- -------
Where You Can Find More Information.........................................34
- -----------------------------------
Index to Financial Information..............................................35
- ------------------------------
-i-
PROSPECTUS SUMMARY
Introduction
If you are a stockholder of U.S. Microbics, Inc., we have sent this
document to you because you were an owner of the common stock of U.S. Microbics
on July 3, 2002. U.S. Microbics plans to spin-off (the "Spin-Off") to its
stockholders as a stock dividend an estimated 2,175,028 shares it owns in
Capitol Group Holdings (the "Spin-Off Shares"). No action is required on your
part to participate in the Spin-Off and you do not have to pay any cash or other
consideration to receive your Spin-Off Shares. Unless the reference is to U.S.
Microbics, Inc., all references to "we," "us," "our," or "Capitol Group
Holdings" in this prospectus means Capitol Group Holdings Corporation following
our merger with Applied Microbics Technology, Inc.
This document describes our business, the relationship between U.S.
Microbics and Capitol Group Holdings, and how this transaction affects U.S.
Microbics stockholders. This document also provides other information to assist
U.S. Microbics stockholders in evaluating the benefits and risks of holding or
disposing of the Spin-Off Shares that they will receive in the Spin-Off.
If you are a prospective purchaser of our stock, this prospectus provides
information to assist you in evaluating the benefits and risks of purchasing and
holding our shares.
Capitol Group Holdings
Capitol Group Holdings Corporation, a Nevada corporation incorporated on
March 12, 2002, is engaged in the business of the development and sale of
affordable energy efficient housing to senior citizens. On September 5, 2002, we
merged with and into Applied Microbic Technology, Inc., a dormant Nevada
corporation incorporated on November 20, 1998 and controlled by U.S. Microbics,
Inc. The name of the merged company was changed to Capitol Group Holdings
Corporation.
Corporate Information
Our principal executive offices are located at 4600 East Sunset Road, Suite
320, Henderson, Nevada 89014. Our telephone number is (702) 948-5500 and fax
number is (702) 948-5501. Our e-mail address is info@capitolghc.com. Our
Internet web site is located at www.capitolghc.com.
The Spin-Off
U.S. Microbics, Inc., one of our stockholders, will distribute to certain
of its stockholders of record approximately 2,175,028 shares of our common stock
it owns. The distribution will be one share of our stock for every 18 shares of
U.S. Microbics stock held on July 3, 2002. No fractional shares will be issued.
1
The Offering
The following information assumes that we will sell all 6,000,000 shares of
our common stock being offered by means of this prospectus, although we may
terminate this offering at any time before all of the shares are sold. You
should be aware that shares being sold by Capitol Group Holdings do not include
any of our shares which may be sold by some of our selling stockholders.
Common stock offered for sale by
Capitol Group Holdings............. Up to 6,000,000 shares.
Common stock to be issued as a
dividend by U.S. Microbics, Inc.
to its stockholders............... Approximately 2,175,028 shares.
Common stock to be outstanding
after this offering if all
6,000,000 shares are sold.......... 56,000,000 shares; includes 50,000,000
shares currently outstanding and 6,000,000
shares to be sold in this offering to new
investors.The 50,000,000 shares includes
the 2,175,028 shares to be issued as a
dividend by U.S. Microbics, Inc. to its
stockholders.
Use of proceeds, if all 6,000,000
shares are sold.............. o Approximately $235,000 for payment of
commissions and other expenses
relating to this offering.
o
Approximately $5,765,000 for payment
of development costs, general and
administrative expenses,and working
capital.
Proposed OTC Bulletin Board symbol CGHC
Risk Factors
The U.S. Microbics stockholders should be aware of certain risks
relating to the Spin-Off and the business of Capitol Group Holdings, which are
described beginning on page 3 in this prospectus. If you are a prospective
purchaser of our shares, you should consider the risk factors before investing
in our common stock and the impact from various events which could adversely
affect our business.
2
RISK FACTORS
You should carefully consider each of the following risks and all of
the other information in this prospectus. Some of the following risks relate
principally to the Spin-Off while other risks relate mainly to our business
plan. Finally, other risks relate chiefly to the securities markets and
ownership of our common stock. If any of the following risks and uncertainties
develops into an actual event, our business, financial condition, or results of
operations could be materially and adversely affected. If that happens, the
trading price of our common stock could decline.
Risks Relating to our Business Plan and Securities
Going concern issues
Our auditors have issued a going concern opinion, which means that
there is doubt that we can continue as an ongoing business for the next 12
months. Unless we can raise additional cash, we may not be able to achieve our
objectives and may have to suspend or cease operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
We have an extremely limited operating history
We have no significant operating history upon which an evaluation of
our future success or failure can be made. We just recently commenced our
operations. See "Business - Our History."
Likely future losses
Based upon current plans, we expect to incur operating losses in future
periods due to the expenses associated with the development and marketing of our
properties. Due to the uncertainty of selling our properties to senior citizens,
you should expect that it will be some time, if ever, before we generate any
revenues or any profits. Failure to generate revenues will cause us to go out of
business. See "Business."
Unpaid property taxes
Valle Vista Development Corporation, owned and controlled by Frank J.
Dobrucki, our majority stockholder, chief executive officer, and director, sold
to us on March 28, 2002, some 1,000 lots which we intend to use in our projected
development. At the time that Valle Vista Development Corporation acquired the
land, there was an unpaid compromised tax assessment with respect to the land.
The previous owner had reached an agreement dated August 27, 1999 with the
Mohave County, Arizona Board of Supervisors in which a tax compromise of $500
per lot totaling $500,000 for the 1,000 lots was reached for previously unpaid
taxes, plus interest and penalties amounting to $2.27 million.
The compromised tax assessment agreement provided that in the event the
owner or any successors in interest default in any payment required under the
agreement, the county may after 30 day's written notice declare that they are in
default of said agreement and can restore any compromised taxes, and proceed
with legal remedies available under the Mohave County tax code or any such other
remedy which may be available to the county. The previous owner was in default
as of September 15, 1999. As of the date of this prospectus, Mohave County has
not issued any notice of default or taken any action to enforce its remedies.
We believe the unpaid tax obligation will be repaid with the proceeds
of this offering. In the event we cannot raise enough money before Mohave County
moves to enforce its rights, we would not be able to pay the back taxes, the
land would be sold at a foreclosure action, and our business plan would fail.
The value of your stock could be worthless, if we cannot raise enough money to
implement our business plan
We may not have enough money to realize our anticipated goals as
outlined in this prospectus. We expect to raise enough money to satisfy our cash
needs for 12 months, by means of this offering to new investors. If it turns out
that we have not raised enough money, we will try to raise other funds from
another public offering, a private placement, or loans. At the present time, we
have not made any plans to raise further money and there is a possibility that
we would be unable to raise additional money in the future. If we need
additional money and cannot raise it, we will have to suspend or cease our
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."
3
Our management owns a significant amount of our common stock, giving them
influence or control in corporate transactions and other matters, and their
interests could differ from those of our other stockholders
As of the date of this prospectus, our directors and executive
officers, beneficially own approximately 48 percent of our outstanding common
stock. Following the Spin-Off, even if we sell all 6,000,000 shares offered by
this prospectus, some of our directors and executive officers will own or
control a controlling percentage of our stock. Consequently, they will continue
to be in a position to significantly influence or control the outcome of matters
requiring a stockholder vote, including the election of directors, the adoption
of any amendment to our articles of incorporation or bylaws, and the approval of
mergers and other significant corporate transactions. Their control of Capitol
Group Holdings may delay or prevent a change of control on terms favorable to
the other stockholders and may negatively impact the voting and additional
rights of our other stockholders. See "Principal Stockholders" and "Certain
Provisions of Our Articles of Incorporation and Bylaws."
Our articles of incorporation and bylaws and applicable Nevada law contain
provisions that could discourage an acquisition or change of control of Capitol
Group Holdings
Our articles of incorporation authorize our board of directors to issue
preferred stock and common stock without stockholder approval. If our board of
directors elects to issue additional shares of our stock, it could be more
difficult for a third party to acquire control of Capitol Group Holdings.
Similarly, provisions of Nevada corporate law, our articles of incorporation and
bylaws may delay, or prevent a tender offer or takeover attempt that a
stockholder might consider in his best interest, including attempts that might
result in a premium over the market price for our common stock. These provisions
include a denial of cumulative voting rights and restrictions on the ability of
our stockholders to call special meetings.
No public market exists
Although the issuance of the shares of our common stock with respect to
the Spin-Off and the sale of our stock to new investors is being registered
under the Securities Act of 1933, as amended, and we expect to have our shares
quoted for sale on the OTC Bulletin Board, there can be no guarantee that an
active trading market in our shares will develop, and if developed, that a
trading market will be sustained. If a market should develop, the price may be
highly volatile. Factors such as those discussed in this "Risk Factors" section
may have a significant impact upon the market price of the securities to be
distributed by us. Many brokerage firms may not be willing to participate in
transactions in a security if a low price develops in the trading of the
security. Even if a purchaser finds a broker willing to effect a transaction in
our securities, the combination of brokerage commissions, state transfer taxes,
if any, and any other selling costs may exceed the selling price. Further, many
lending institutions will not permit the use of our securities as collateral for
any loans.
Shares of our common stock may be "penny stocks"
At all times when the current market price per share of our common
stock is less than $5.00, our shares of common stock will be considered "penny
stocks" as defined in the Securities Exchange Act of 1934, as amended. As a
result, an investor may find it more difficult to dispose of or obtain accurate
quotations as to the price of the shares of our common stock being issued under
this prospectus. In addition, the penny stock rules adopted by the Securities
and Exchange Commission under the Exchange Act would subject the sale of shares
of our common stock to regulations which impose sales practice requirements on
broker-dealers. For example, broker-dealers selling penny stocks must, prior to
effecting the transaction, provide their customers with a document which
discloses the risks of investing in penny stocks.
4
Furthermore, if the person purchasing penny stocks is someone other
than an accredited investor, as defined in the Securities Act, or an established
customer of the broker-dealer, the broker-dealer must also approve the potential
customer's account by obtaining information concerning the customer's financial
situation, investment experience and investment objectives. The broker-dealer
must also make a determination whether the transaction is suitable for the
customer and whether the customer has sufficient knowledge and experience in
financial matters to be reasonably expected to be capable of evaluating the risk
of transactions in penny stocks. Accordingly, the SEC's rules may limit the
number of potential purchasers of shares of our common stock. Moreover, various
state securities laws impose restrictions on transferring penny stocks, and, as
a result, investors in our common stock may have their ability to sell their
shares impaired.
We have conflicts of interest
Our directors and officers, are, or may become in their individual
capacities, officers, directors, controlling stockholders and/or partners of
other entities engaged in a variety of businesses. Thus, there exist potential
conflicts of interest including, among other things, time, effort, and corporate
opportunity involved in participation with other business entities. The amount
of time which our officers and directors will devote to our business may be
limited. It is not anticipated that any other business interests will be ones
that are, or will be, in competition with us. See "Management" and "Certain
Transactions."
Risk Factors Relating to the Spin-Off
Federal tax consequences of the Spin-Off to U.S. Microbics and its stockholders
Neither we nor U.S. Microbics have requested a ruling from the Internal
Revenue Service relating to the tax consequences of the Spin-Off. We believe
that the Spin-Off will be taxable to U.S. Microbics and to its stockholders. If
it is determined that the Spin-Off is taxable, then:
o U.S. Microbics, Inc. would recognize a gain equal to the excess of the
fair market value of our common stock distributed to its stockholders
over its basis in our common stock; and
o Each United States holder of U.S. Microbics common stock would be
generally treated as if the stockholder had received a taxable
dividend, to the extent of earnings and profits, in an amount equal to
the fair market value of our common stock received.
The combined post-Spin-Off value of U.S. Microbics and the Spin-Off Shares may
not equal or exceed the pre-Spin-Off value of U.S. Microbics shares
We cannot assure the stockholders of U.S. Microbics that the combined
trading prices of U.S. Microbics common stock and Capitol Group Holdings common
stock after the Spin-Off will be equal to or greater than the quotations or any
trading price of U.S. Microbics common stock prior to the Spin-Off.
Creditors of U.S. Microbics, Inc. at the time of the Spin-Off may challenge the
Spin-Off
If a court in a lawsuit by an unpaid creditor or representative of
creditors of U.S. Microbics, such as a trustee in bankruptcy, were to find that
among other reasons, at the time of the Spin-Off, U.S. Microbics or Capitol
Group Holdings:
o Were insolvent;
o Were rendered insolvent by reason of the Spin-Off;
o Were engaged in a business or transaction for which U.S. Microbics or
our remaining assets constituted unreasonably small capital; or
o Intended to incur, or believed it would incur, debts beyond its ability
to pay such debts as they matured;
5
the court may be asked to void the Spin-Off (in whole or in part) as a
fraudulent conveyance. The court could then require that the stockholders return
some or all of the shares of our common stock, or require U.S. Microbics or
Capitol Group Holdings, as the case may be, to fund certain liabilities of the
other for the benefit of creditors. The measure of insolvency for purposes of
this discussion will vary depending upon the jurisdiction whose law is being
applied. Generally, however, U.S. Microbics or Capitol Group Holdings would be
considered insolvent if the fair value of its assets was less than the amount of
its liabilities or if it incurred debt beyond its ability to repay the debt as
it matures.
THE SPIN-OFF
Reasons for the Spin-Off
We believe that the Spin-Off will meaningfully enhance value for U.S.
Microbics stockholders in the following ways:
o By making U.S. Microbics a more viable business entity by stripping off
an inactive subsidiary;
o By providing an additional opportunity through Capitol Group Holdings
to successfully consummate a sound business plan; and
o By diversifying the risks associated with U.S. Microbics' business
strategy through adding an additional opportunity.
Manner of Effecting the Spin-Off
The Spin-Off will be accomplished as quickly as possible following the
date of this prospectus by means of a stock dividend paid to the holders of
record of U.S. Microbics common stock on July 3, 2002. The Spin-Off ratio will
be one share of the common stock of Capitol Group Holdings for every 18 shares
of U.S. Microbics common stock held by its stockholders. We estimate that the
Spin-Off Shares will total approximately 2,175,028 shares. There will be no
fractional shares issued. U.S. Microbics stockholders will not be required to
pay for the Spin-Off Shares received in the Spin-Off. Additionally, U.S.
Microbics stockholders will not need to surrender or exchange U.S. Microbics
common stock in order to receive the Spin-Off Shares. All shares of our common
stock received by U.S. Microbics stockholders in connection with the Spin-Off
will be fully paid and non-assessable. U.S. Microbics stockholders do not have
any appraisal rights in connection with the Spin-Off.
Results of the Spin-Off
Following the Spin-Off, Capitol Group Holdings will be a separate,
publicly-held company. Immediately after the Spin-Off, but before the sale of
any of our shares to new investors, based on the number of outstanding shares of
U.S. Microbics on July 3, 2002, we will have 50,000,000 shares of common stock
outstanding, held by approximately 1,100 record holders. Any of our shares owned
by U.S. Microbics not distributed as a dividend to its stockholders will be
retained by U.S. Microbics.
The Spin-Off will not affect the number of outstanding shares of U.S.
Microbics common stock or any rights of U.S. Microbics stockholders.
Trading of the Spin-Off Shares
Following the effective date of our registration statement for this
prospectus and the Spin-Off, the Spin-Off Shares to be issued to U.S. Microbics
stockholders will be freely transferable, except for shares received by persons
who may be deemed our "affiliates" under the Securities Act. See "Shares
Available for Future Sale."
6
Material Federal Income Tax Consequences
Because we have not been engaged in an actual trade or business for a
period of five years before the distribution of the Spin-Off Shares (our
predecessor company was only incorporated on November 20, 1998), the
distribution of our shares to the stockholders of U.S. Microbics will not
qualify as tax free under Section 355 of the Internal Revenue Code of 1986, as
amended. We believe, based upon the advice of our tax adviser, that the
distribution will be a taxable event to U.S. Microbics and to each of its
stockholders receiving any of the Spin-Off Shares. Gain (but not loss) would be
recognized by U.S. Microbics under Section 311 of the Internal Revenue Code for
any excess of the fair market value of Capitol Group Holdings stock on the date
of actual distribution over the tax basis to U.S. Microbics of our stock.
As for U.S. Microbics stockholders who receive Spin-Off Shares, we take
the view that the fair market value of the Spin-Off Shares on the date of the
Spin-Off should be essentially zero (or not have increased over the negligible
book value of the shares as reflected in our financial statements, being
approximately $0.01 per share).
U.S. Microbics has no current or accumulated earnings, and the
distribution is being made from excess capital. Each stockholder of U.S.
Microbics should reduce the adjusted basis of his U.S. Microbics stock by the
fair market value of the distribution to him, and any remaining portion will be
treated as capital gain in the same manner as a sale or exchange of the stock.
This fair market value is assumed to be $0.01 per share, the estimated book
value of Capitol Group Holdings on the dividend date. We have undertaken to
advise our stockholders in late 2002 or early 2003 should we deem the fair
market value of any of the distributed Spin-Off Shares on the date of
distribution to have been different than $0.01 per share or should we discover
that U.S. Microbics has had earnings in 2002, which would cause the
distribution, to the extent of such earnings, to be taxed as a dividend and as
ordinary income.
In summary, the following material federal income tax consequences to
U.S. Microbics stockholders and U.S. Microbics are expected to result from the
Spin-Off:
o A U.S. Microbics stockholder will recognize taxable gain or dividend
income as a result of the Spin-Off equal to no more than the book value
of the Spin-Off Shares, being approximately $0.01 per share.
o A U.S. Microbics stockholder must allocate his pre-distribution tax
basis in his U.S. Microbics stock over the U.S. Microbics and Spin-Off
Shares according to the relative fair market value of each.
o U.S. Microbics may recognize minimal gain as a result of the Spin-Off.
The federal income tax consequences set forth above are for general
information only and may not be pertinent to stockholders who receive Spin-Off
Shares through the exercise of employee stock options or otherwise as
compensation or who are subject to special treatment under the Internal Revenue
Code. All stockholders should consult their own tax advisers as to the
particular tax consequences which may be relevant to them, including the
applicability and effect of state, local, and foreign tax laws.
Current Treasury regulations require each U.S. Microbics stockholder
who receives Spin-Off Shares in the Spin-Off to attach to his federal income tax
return for the year in which the Spin-Off occurs, a detailed statement setting
forth the data as may be fitting in order to show the applicability of Section
355 of the Internal Revenue Code to the Spin-Off. Capitol Group Holdings, upon
written request, will provide the appropriate information to each stockholder of
record of U.S. Microbics on July 3, 2002.
The holding period for the Spin-Off Shares to be received by a U.S.
Microbics stockholder in the Spin-Off should include the period during which he
held the U.S. Microbics stock on which our common stock is distributed, if the
stockholder holds the U.S. Microbics stock as a capital asset on the date of the
Spin-Off.
Reasons for Furnishing this Prospectus to the Stockholders of U.S. Microbics
This prospectus is being furnished to the stockholders of U.S.
Microbics solely to provide information to them, subject to the satisfaction of
the Spin-Off conditions, about the receipt of Spin-Off Shares as a result of the
Spin-Off. It is not, and should not be construed as, an inducement or
encouragement to buy or sell any of the securities of Capitol Group Holdings or
those of U.S. Microbics. The information contained in this prospectus is
believed by us to be accurate as of the date set forth on the front cover.
Changes may occur after that date, but we will not update the information except
in the normal course of our public disclosure practices or unless required by
law.
7
USE OF PROCEEDS
Our offering expenses will be approximately $110,000, no matter how
many shares we sell to new investors. As for our commissions, they will be 2.5
percent of the amount of our stock sold to new investors. After allowing for our
offering expenses:
o If we sell only 1,500,000 of our shares, our commission expense will be
$37,500, and our net proceeds would be $1,352,500;
o If we sell only 3,000,000 of our shares, our commission expense will be
$75,000, and our net proceeds would be $2,815,000;
o If we sell only 4,500,000 of our shares, our commission expense will be
$112,500, and our net proceeds would be $4,277,500; and
o If we sell all 6,000,000 shares offered, our commission expense will be
$150,000, and our net proceeds would be $5,740,000.
The following table shows the projected use of net proceeds depending
on various levels of sales of our stock to new investors.
Amount of Net Proceeds Raised
Allocated Use $1,352,500 $2,815,000 $4,277,500 $5,740,000
- ------------------ ---------- ---------- ----------- -----------
Advertising and-
Publicity Expenses $20,000.00 $30,000.00 $30,000.00 $30,000.00
Grand Opening Costs 20,000.00 30,000.00 30,000.00 30,000.00
Initial Legal-
Expenses 25,000.00 35,000.00 50,000.00 50,000.00
Audit Fees 15,000.00 15,000.00 15,000.00 15,000.00
Office Setup-
Expenses 30,000.00 30,000.00 30,000.00 30,000.00
Initial Operating-
Expenses 100,000.00 120,000.00 150,000.00 180,000.00
Payoff Existing-
First Mortgage 50,000.00 100,000.00 100,000.00 100,000.00
Real Estate Taxes-
Current 77,173.00 77,173.00 77,173.00 77,173.00
Real Estate Taxes-
Old 200,000.00 500,000.00 500,000.00 500,000.00
---------- ---------- ---------- ------------
Subtotal $537,713.00 $937,713.00 $982,173.00 $1,012,173
Less Direct Project Related Costs:
Initial Paving-
and Utilities-
Setup Expenses $200,000.00 $200,000.00 $200,000.00 $ 200,000.00
Furnishing and Setup-
Five Model Homes 50,000.00 50,000.00 50,000.00 50,000.00
Model Homes and-
Inventory For Sale 416,000.00 624,000.00 832,000.00 1,248,000.00
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------
Subtotal $666,000.00 $874,000.00 $1,082,000.00 $1,498,000.00
Contingencies,Reserves
and Additional Working
Capital $ 148,787.00 $1,003,287.00 $2,213,327.00 $3,229,827.00
------------ ------------- -------------- ---------------
------------ ------------- -------------- ---------------
Grand Total $1,352,500.00 $2,815,000.00 $4,277,500.00 $5,740,00.00
============= ============= ============= ============
The above projected costs are the expenditures we plan to make in
connection with the implementation of our program of acquisition and development
of a residential subdivision for seniors.
8
Working capital is the cost related to operating our office. It is
comprised of expenses for telephone service, mail, stationary, accounting,
acquisition of office equipment and supplies, and the salaries for three to five
employees, if needed.
We have allocated a wide range of money for contingencies, reserves and
additional working capital. That is because we do not know how much will
ultimately be needed for these categories of expenses. Inasmuch as we are
working in a new area for development, there are potentially many circumstances
which might arise. We must be able to respond to any unexpected contingencies.
DETERMINATION OF OFFERING PRICE
The price of the shares we are offering to new investors was
arbitrarily determined in order for us to raise up to a total of $6,000,000 in
this offering. The offering price bears no relationship whatsoever to our
assets, earnings, book value, or other criteria of value, and should not be
considered an indication of the actual value of our securities. Among the
factors considered were:
o Our lack of operating history;
o The proceeds to be raised by this offering;
o The amount of capital to be contributed by purchasers in this offering
in proportion to the amount of stock to be retained by our existing
stockholders;
o Our relative cash requirements; and
o The price we believe a purchaser is willing to pay for our stock.
PLAN OF DISTRIBUTION AND TERMS OF THE OFFERING
The offering price of our stock to new purchasers is $1.00 per share.
There is no minimum number of shares that we have to sell. All money received
from the offering will be placed in an escrow account and withdrawn in $25,000
increments for our immediate use. As a result, investors who purchase shares
early in this offering will be more at risk than investors who purchase later in
the offering, inasmuch as the later investors will have more knowledge with
respect to the success of our sales efforts. Furthermore, if we decide to
terminate the offering before the sale of all 6,000,000 of the shares, it may be
that the proceeds raised by us up to the date of termination will not be
sufficient for our projected operations. There will be no refunds under any
circumstances.
Subscriptions for the shares offered hereby, other than the Spin-Off
Shares, will be solicited on a non-exclusive, "best efforts" basis by Mariner
Investment Group, a licensed broker-dealer which is a member of the National
Association of Securities Dealers, Inc. There is no firm commitment on the part
of Mariner to purchase any of the shares not otherwise sold in this offering. In
addition, some of our officers and directors may sell some of our shares. Any of
our shares sold by our officers and directors will be subject to the escrow the
same as any shares sold by Mariner.
As compensation for its services for the sale of the shares offered in
this prospectus, Mariner will receive from Capitol Group Holdings a commission
equal to 2.5 percent of the cash proceeds of this offering generated from the
sale of our shares to purchasers, whether sales are made by Mariner or any of
our officers and directors. We will pay a commission to Mariner only in those
jurisdictions in which it is lawfully qualified to sell the offered shares. Our
officers and directors will not be compensated for any of our shares sold by
them.
Although we do not currently contemplate doing so, we may enter into
additional relationships with Mariner in the future which could require us to
pay commissions or other compensation to Mariner. Since the issuance of the
Spin-Off Shares to the stockholders of U.S. Microbics is not a sale and no
consideration will be received by us, there will be no compensation paid to any
party with respect to the Spin-Off Shares.
9
Mariner Investment Group will be deemed an "underwriter" as that term
is defined in the Securities Act, and any commissions payable to it may be
deemed underwriting compensation. We have agreed to indemnify Mariner against
certain civil liabilities, including liabilities arising under the Securities
Act.
For details of the distribution of the Spin-Off Shares, see "The
Spin-Off."
Offering period and expiration date
The offering of the shares of our common stock will begin on the
effective date of this prospectus and will terminate, if not sooner terminated,
at 5:00 p.m., San Diego, California time, on ___, 2002. We may extend the
offering period for an additional period expiring ___, 2002 without notice,
unless the offering is completed or otherwise terminated by us.
At any time before the maximum number of 6,000,000 shares have been
sold to purchasers, we may terminate this offering if:
o We determine, in our sole discretion, to terminate this offering;
o Specified actions, usually associated with extremely adverse economic
and market conditions, have been taken by the principal national
securities exchanges or by governmental authorities; or
o Other events have occurred or are pending or threatened which, in our
judgment, materially impair the investment quality of our shares.
Procedures for subscribing for persons other than stockholders of U.S. Microbics
receiving Spin-Off Shares
If you decide to subscribe for any shares in this offering, you must:
o Execute and deliver a subscription agreement;
o Deliver a check or certified funds to us for acceptance or rejection;
and
o All checks for subscriptions must be made payable to "Capitol Group
Holdings Corporation Escrow Account."
Right to reject subscriptions
Subscriptions for the purchase of our shares may be rejected in whole
or in part by us for any reason and need not be accepted in the order received.
All subscriptions are subject to prior sale. Fully paid subscriptions for shares
of our common stock shall be irrevocable by the investors during the offering
period. All monies from rejected subscriptions will be returned immediately by
us to the subscriber, without interest or deductions. Subscriptions for
securities will be accepted or rejected within 48 hours after we receive them.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
As of the date of this prospectus, the shares of our common stock are
not quoted for sale in any public market. We currently have 50,000,000 shares of
our common stock issued and outstanding, which are held of record and
beneficially owned by 47 persons.
As for our shares which we have agreed to register for resale by means
of this prospectus and our shares which may be sold subject to the provisions of
Rule 144 under the Securities Act, please see "Selling Stockholders" and "Shares
Available for Future Sale."
We have not paid or declared any dividends on our common stock, nor do
we anticipate paying any cash dividends or other distributions on our common
stock in the foreseeable future. Any future dividends will be declared at the
discretion of our board of directors and will depend, among other things, on our
earnings, if any, our financial requirements for future operations and growth,
and other facts as our board of directors may then deem appropriate.
10
DILUTION
The following table reflects the possible dilution to our stockholders
depending upon the number of shares we sell to new investors:
Percent Owned After the Value of Shares Sold:
Stockholder Category $1,500,000 $3,000,000 $4,500,000 $6,000,000
- -------------------- ---------- ---------- ---------- ----------
Current Stockholders 97.0% 94.3% 91.7% 89.2%
New Investors 3.0% 5.7% 8.3% 10.8%
If we raise money by means of an offering of our stock at a later time,
each of our stockholders' ownership interest in Capitol Group Holdings would be
proportionately reduced. None of our stockholders have any preemptive rights to
acquire additional shares of our common stock or other securities.
The unaudited net tangible book value of Capitol Group Holdings on a
pro forma basis as of June 30, 2002, was ($674,709), or ($0.013) per share of
the common stock. Also, on a pro-forma basis as of June 30, 2002, after giving
effect to the sale by us of all 6,000,000 shares offered in this prospectus and
the receipt of the net proceeds, the pro forma net tangible book value (deficit)
would have been $5,090,291, or $0.091 per share of the common stock. This
represents an immediate increase in the pro forma net tangible book value of
$0.104 per share to our current stockholders immediately before this offering
and an immediate dilution of ($0.856) per share of the common stock to the new
investors, other than the holders of the Spin-Off Shares. The following table
illustrates this per share dilution.
Offering Price to New Investors................................. $1.00
Net Tangible Book Value before the Offering................... ($0.013)
Increase Per Share Attributable to Sale of the Shares......... $0.104
Pro Forma Net Tangible Book Value after the Offering............ $0.091
Dilution of Net Tangible Book Value to New Investors (1)........ $0.856
(1) Dilution is determined by subtracting pro forma net tangible book value
after the offering from the offering price.
11
The following tables summarize on a pro forma basis as of June 30,
2002, and after the sale of various amounts of the shares offered by this
prospectus, the total consideration paid, and the average price per share paid
to us by investors purchasing shares under this prospectus.
Number of Percent Percent of Effective
Shares of Total Total Price
Purchased Total Consideration Consideration Per
or Owned Shares Paid Paid Share
Current-
Stockholders 50,000,000 (1) 97.10 $854,437 36.29 $0.017
New Investors 1,500,000 2.90 1,500,000 63.71 $1.00
-------------- ------ ----------- -------
Total 51,500,000 100.00 $2,354,437 100.00
========== ====== ========== ======
Number of Percent Percent of Effective
Shares of Total Total Price
Purchased Total Consideration Consideration Per
or Owned Shares Paid Paid Share
Current-
Stockholders 50,000,000 (1) 94.30 $854,437 22.17 $0.017
New Investors 3,000,000 5.70 3,000,000 77.83 $1.00
----------- -------- ----------- --------
Total 53,000,000 100.00 $3,854,437 100.00
========== ====== ========== ======
Number of Percent Percent of Effective
Shares of Total Total Price
Purchased Total Consideration Consideration Per
or Owned Shares Paid Paid Share
Current-
Stockholders 50,000,000 (1) 91.70 $854,437 15.96 $0.017
New Investors 4,500,000 8.30 4,500,000 84.04 $1.00
----------- -------- ----------- -------
Total 54,500,000 100.00 $5,354,437 100.00
========== ====== ========== ======
Number of Percent Percent of Effective
Shares of Total Total Price
Purchased Total Consideration Consideration Per
or Owned Shares Paid Paid Share
Current-
Stockholders 50,000,000 (1) 89.30 $854,437 12.47 $0.017
New Investors 6,000,000 10.7 6,000,000 87.53 $1.00
----------- ------- ----------- ------
Total 56,000,000 100.00 $6,854,437 100.00
========== ====== ========== ======
(1) The current stockholders of Capitol Group Holdings include the stockholders
of U.S. Microbics, following the Spin-Off. See "Business - Our History" and
"The Spin-Off."
12
CAPITALIZATION
The following table describes our total capitalization at June 30, 2002:
o On an actual basis.
o On a pro forma basis to reflect the sale of various amounts of the
shares of our common stock in this offering at an assumed initial
public offering price of $1.00 and the application of the estimated net
proceeds in the manner described in "Use of Proceeds."
You should read the following information in conjunction with our
financial statements and the accompanying notes, which begin on page F-1 of this
prospectus.
If $1,500,000 Worth of Shares Sold Actual Pro Forma
---------------------------------- ------ ---------
Stockholders' equity (deficit):
Common stock, $0.001 par value, 300,000,000 shares
authorized, 50,000,000 shares issued and outstanding,
actual; 51,500,000 shares issued and outstanding,
pro forma............................................. 50,000 51,500
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued and outstanding actual
or pro forma.......................................... -0- -0-
Paid-in-capital......................................... 804,437 2,302,937
Retained earnings (deficit)............................... (4,428) (1,357,178)
Total stockholders' equity (deficit)...................... $850,009 $997,259
======== ==========
Total capitalization...................................... $854,437 $2,354,437
If $3,000,000 Worth of Shares Sold Actual Pro Forma
---------------------------------- ------ ---------
Stockholders' equity (deficit):
Common stock, $0.001 par value, 300,000,000 shares
authorized, 50,000,000 shares issued and outstanding,
actual; 53,000,000 shares issued and outstanding,
pro forma............................................. 50,000 53,000
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued and outstanding actual
or pro forma.......................................... -0- -0-
Paid-in-capital......................................... 804,437 3,801,437
Retained earnings (deficit)............................... (4,428) (2,819,428)
Total stockholders' equity (deficit)...................... $850,009 $1,035,009
======== ==========
Total capitalization...................................... $854,437 $3,854,437
13
If $4,500,000 Worth of Shares Sold Actual Pro Forma
---------------------------------- ------ ---------
Stockholders' equity (deficit):
Common stock, $0.001 par value, 300,000,000 shares
authorized, 50,000,000 shares issued and outstanding,
actual; 54,500,000 shares issued and outstanding,
pro forma............................................. 50,000 54,500
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued and outstanding actual
or pro forma.......................................... -0- -0-
Paid-in-capital......................................... 804,437 5,299,937
Retained earnings (deficit)............................... (4,428) (4,281,928)
Total stockholders' equity (deficit)...................... $850,009 $1,072,509
======== ==========
Total capitalization...................................... $854,437 $5,354,437
If $6,000,000 Worth of Shares Sold Actual Pro Forma
---------------------------------- ------ ---------
Stockholders' equity (deficit):
Common stock, $0.001 par value, 300,000,000 shares
authorized, 50,000,000 shares issued and outstanding,
actual; 56,000,000 shares issued and outstanding,
pro forma............................................. 50,000 56,000
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued and outstanding actual
or pro forma.......................................... -0- -0-
Paid-in-capital......................................... 804,437 6,798,437
Retained earnings (deficit)............................... (4,428) (5,769,428)
Total stockholders' equity (deficit)...................... $850,009 $1,085,009
======== ==========
Total capitalization.............................. $854,437 $6,854,437
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Capitol Group Holdings Corporation is a start-up, development stage
company. We have not yet generated or realized any revenues from our business
operations. Our auditors have issued a going concern opinion, indicating that
they believe there is doubt that we can continue as an ongoing business for the
next 12 months unless we obtain additional capital to pay our expenses. Their
opinion is based on the fact that we have not generated any revenues and no
revenues are anticipated unless and until phase development and marketing of
lots are commenced. Accordingly, we must raise cash from sources other than the
sale of lots, in order to implement our project and stay in business. Our only
other source for cash at this time is investments by others in our company.
In order to meet our need for cash we are attempting to raise money
from this offering. Whatever money we do raise, will be utilized as provided in
"Use of Proceeds." If we do not raise all of the money we need from this
offering, we will have to find alternative sources, such as a second public
offering, a private placement of securities, or loans from our officers or
others. At the present time, we have not made any arrangements to raise
additional cash, other than through this offering. If we need additional cash
and cannot raise it we will either have to suspend operations until we do raise
the cash, or cease operations entirely.
14
Level of Funding. Our proposed operations depend upon the level of our
funding from sales of shares of our stock under this offering.
See "Use of Proceeds."
Results of Operations
For the period from October 1, 2001, through June 30, 2002, we have
incurred an operating loss of $(867.00). We had no revenues during that period
and our total expenses were $867.00.
Liquidity and Capital Resources
We anticipate that the funds to be raised by this offering will meet
our planned objectives and business operations through December 31, 2003, after
which we expect to establish a cash flow from further development and sale of
lots sufficient to meet our cash requirements to adequately sustain growth. The
costs associated with these activities, as well as our general overhead expenses
for that period, are anticipated to be approximately $5,740,000, as described in
"Use of Proceeds" on page 8 of this prospectus. Thereafter, we hope to rely on
cash flow from operations to satisfy our ongoing cash requirements.
As discussed by our accountants in the audited financial statements
attached to this prospectus, our revenue is currently insufficient to cover our
costs and expenses. To the extent our revenue shortfall exceeds our expectations
and depletes the proceeds of this offering more rapidly than anticipated, we
will be required to raise additional capital from outside investors and/or bank
or mezzanine lenders. As of the date of this prospectus, we have not entered
into any discussions or negotiations in order to increase the likelihood that
future financing will be available to us on acceptable terms. If financing is
not available on satisfactory terms, we may be unable to continue, develop or
expand our operations. Equity financing could result in additional dilution to
existing stockholders.
Forward-Looking Statements
The foregoing Management's Discussion and Analysis or Plan of
Operations contains "forward-looking statements" within the meaning of Rule 175
under the Securities Act, and Rule 3b-6 under the Exchange Act, including
statements regarding, among other items, our business strategies, continued
growth in our markets, projections, and anticipated trends in our business and
the industry in which we operate. The words "believe," "expect," "anticipate,"
"intend," "forecast," "project," and similar expressions identify
forward-looking statements.
These forward-looking statements are based largely on our expectations
and are subject to a number of risks and uncertainties, including but not
limited to, the following:
o Those risks associated with economic conditions generally and the
economy in the area where we have or expect to develop our properties;
o Competitive and other factors affecting our operations, markets,
products and services; and
o Risks relating to changes in interest rates and in the availability,
cost and terms of financing; risks related to the performance of
financial markets; and risks related to changes in domestic laws,
regulations and taxes.
Many of these factors are beyond our control. Actual results could
differ materially from these forward-looking statements. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this prospectus will, in fact, occur. We do not
undertake any obligation to revise these forward-looking statements to reflect
future events or circumstances and other factors discussed elsewhere in this
prospectus and the documents to be filed by us with the SEC.
15
BUSINESS
Our Strategy
Fleetwood Homes is one of the largest builders of manufactured homes.
Working closely with Fleetwood and the energy community, Capitol Group Holdings
will introduce the first-ever "EnergyStar" manufactured housing development. By
taking advantage of the EnergyStar methodologies, home buyers will be able to
save substantially on energy costs, while maintaining a comfortable living
environment.
According to the Associated Press, "The senior housing market is
expected to triple from $126 billion in 2005 to $490 billion by 2030." We hope
to be able to take advantage of this strong growing market by offering what we
feel is a well-suited product at a good location.
In our opinion, the combination of quality manufactured housing and
affordable real estate is the key element to providing for the housing needs of
the senior community. In addition, development in rural communities, which have
adequate services and accessibility, is expected to ensure that our project will
not be saddled with burdensome traffic, crime, and pollution found in more
developed areas.
While country club living may be ideal for some - the majority of
seniors cannot afford this type of living and should not be forgotten. Our
policy is that everybody is entitled to a quality retirement, regardless of
financial ability.
Our History
Capitol Group Holdings Corporation, a Nevada corporation incorporated
on March 12, 2002, is engaged in the business of the development and sale of
affordable energy efficient housing to senior citizens. Applied Microbic
Technology, Inc. was incorporated on November 20, 1998 as a Nevada corporation
to license customers in the United States to use microbial blends that are
specially formulated for microbially enhanced oil recovery and to provide
related technical support services. Since its founding, Applied Microbic
Technology has conducted no active business operations.
At the time of its formation, Applied Microbic Technology was a
wholly-owned subsidiary of U.S. Microbics, Inc., a publicly held Colorado
corporation. However, before the merger of Applied Microbic Technology and
Capitol Group Holdings Corporation, USM Capital Group, Inc., another subsidiary
of U.S. Microbics, became the majority stockholder of Applied Microbic
Technology.
On September 5, 2002, Applied Microbic Technology merged with Capitol
Group Holdings. The merger agreement provided for the following:
o After the merger, our stock was owned 88 percent by the former
stockholders of the original Capitol Group Holdings Corporation, and 12 percent
by the stockholders of Applied Microbic Technology, including U.S. Microbics,
Inc. and USM Capital Group, Inc.;
o The articles of incorporation and bylaws of Applied Microbic Technology
became our articles of incorporation and bylaws;
o The name of the newly merged company was changed to "Capitol Group
Holdings Corporation"; and
o The former officers and directors of Applied Microbic Technology
resigned, and the former officers and directors of Capitol Group Holdings
Corporation became the current officers and directors of Capitol Group Holdings.
16
Proposed Project
We have acquired 1,000 residential lots located in Valle Vista Ranch
from Valle Vista Development Corp., owned by Frank J. Dobrucki, our founder,
president and a director, for the development of our project. The property is
located in Kingman, Arizona, 90 miles south of Las Vegas, Nevada, and 30 miles
from Laughlin, Nevada. Valle Vista Ranch is a 1,600+ lot residential housing
subdivision. All of the lots have been plotted and recorded. All corner markers
are in place. Utilities, consisting of water, power, and telephone lines, are
located at the property line. All necessary government approvals are in place
and the property is ready to be developed.
Kingman, Arizona offers a peaceful and relaxing place to live free from
traffic jams and soaring crime. Moreover, Mohave County where Kingman is located
is in a unique position of having plenty of water and services to support
growth. However, because there has been little development in the area, the tax
base has not increased significantly. We expect that a growth in the senior
population will not increase the demand upon the local job market, but will have
a positive effect on the tax base of the city and county.
The weather in Kingman in the summer is usually 10 degrees cooler than
Las Vegas, with no snow in the winter. Kingman is also well situated on IH-40,
45 miles to Lake Mead, and 45 miles to the Grand Canyon. We feel the area is
well positioned for an active life-style senior population.
Phase I of our development has one major project defined as "Valle
Vista Ranch," where most work will be outsourced to groups well acquainted with
management and the identified operations. Our initial funding as a result of
this offering will be used to complete the construction of 30 single family
homes (five fully furnished models and 25 "ready for sale" inventory homes). In
additional, major infrastructure improvements such as road construction and
utility extensions will be put in place for future expansion.
Phase II will focus on developing the community center, retail shopping
facilities and beginning the construction of the low income senior rental unit
duplex homes. Further development of the single family homes (1,000 total) will
continue with the sale of the initial 30 units. In addition to the residential
lots, we expect to acquire 18 commercial lots to fully support this new
community. To round out the development, we will acquire an additional 500
residential lots to develop 1,000 duplex low-income rental units for seniors.
The projected rent for these units will be $375 per month, which will allow
Capitol Group Holdings to qualify for government rental assistance for qualified
low income seniors. This is expected to ensure an equitable balance for seniors
on a broad economic spectrum, and a uniform residential look and provide for
balance in the community. The duplex units will consist of 900 square feet with
two bedrooms, one bath, laundry facility, living room, dining room and kitchen.
The duplex homes will be situated on the same size residential lots as the
single family homes.
The duplex homes will be known as the "Village Homes." There will be a
North, South, East and West village. It is our intention to prevent a "project"
atmosphere. All residents of the villages and single family homes will have
equal access to the community center and all community amenities.
We plan to acquire five additional sites, equal or greater in size to
Valle Vista Ranch within the states of Arizona, California, and Nevada.
Currently, two additional projects have been identified, and management is in
discussions with the respective owners.
Fleetwood Homes
Fleetwood Enterprises, Inc. is the nation's largest manufacturer of
recreational vehicles and a leading producer and retailer of manufactured
housing. Fleetwood was founded in 1950 and has its headquarters in Riverside,
California. As of the date of this prospectus, Fleetwood has a 17 percent market
share of the manufactured home industry with sales of over 15,033 housing units.
EnergyStar Rating
One of the important elements of our homes will be the "EnergyStar"
rating. The EnergyStar program is a federal guarantee program that states the
acceptable monthly cost of heating and cooling of a particular type of
structure. The rating for our proposed homes in Valle Vista Ranch will be a
"5-Star Gold" rating with a $21 per month guarantee for the cost of heating or
cooling. This feature will be standard on all Valle Vista Ranch homes and is
expected to give us the opportunity to seek a major media focus.
17
Achieving and Maintaining Profitability
Our achieving and maintaining profitability and positive cash flow is
dependent upon:
o The generation of ongoing revenues.
o The success in curtailing our anticipated development and marketing costs.
o The capability to compete with more established residential retirement
companies.
Dependence on Qualified Personnel
Our future success depends significantly on the continued service of
our senior management, particularly Mr. Dobrucki. The familiarity of Mr.
Dobrucki and the other members of management with the residential retirement
market make them especially critical to our ability to achieve our goals. The
loss of the services of one or more of our key employees could have a
significant adverse result on our business. We do not currently have key man
insurance.
Our future success also depends on our ability to attract and retain
other experienced management and non-management employees, including salesmen,
technical and professional staff. Competition for persons with the requisite
qualifications is intense, and we cannot warrant that we will be able to attract
or retain a sufficient number of highly qualified employees in the future.
Failure to hire and retain personnel in key positions could materially and
unfavorably impinge on our business, financial condition, and results of
operations.
Marketing
We have entered into an exclusive real estate listing agreement with
Century 21, to market our properties to prospective purchasers. In addition, we
expect to create and channel articles of public interest to the national media,
and create major pieces of interest based on the EnergyStar program and
affordable senior housing. We also will attempt to obtain television exposure
and magazine articles, with photographs of our homes placed in national
magazines.
Competition
At present, there are no similar development projects that compare to
what we have planned for Valle Vista Ranch. In addition, we feel that we will be
unique in our price range and quality-of-life market approach. Moreover, the
only lower cost senior housing on the market utilizes independent single family
housing units which do not have any senior community services.
Regulation
Valle Vista Ranch is a fully approved single family subdivision. There
are no additional approvals needed to begin development.
Employees
As of the date of this prospectus, we have one full-time employee and
no part time employees. Our employee is not covered by a collective bargaining
agreement, and we do not anticipate that any of our employees will be covered by
one in the future. If our operations continue to grow as expected, we anticipate
hiring as many as five additional employees over the next 12 months, including
an in-house marketing person, bookkeeper, purchasing manager, administrative
assistant, and customer service representative.
18
Facilities
We do not currently lease any office space. As the need arises, we will
lease facilities which we deem to be adequate for our then current and
anticipated operations.
Litigation
As of the date of this prospectus, we are not involved in any legal
proceedings.
MANAGEMENT
Executive Officers and Directors
The following table sets forth information concerning the directors and
executive officers of Capitol Group Holdings as of the date of this prospectus:
Name Age Position Director Since
- ---- --- -------- --------------
Frank. J. Dobrucki 42 Chairman, Chief Executive Officer, 2002
and President
Bruce Merrin 57 Director 2002
Lynn Woodrum 34 Director 2002
Our executive officers are elected annually by our board of directors.
There are no family relationships among our executive officers and directors.
See "Certain Provisions of Our Articles of Incorporation and Bylaws" for the
manner of election and term of office of our directors.
We may employ additional management personnel as our board or directors
deems necessary. Capitol Group Holdings has not identified or reached an
agreement or understanding with any other individuals to serve in management
positions. We do not anticipate any difficulty in employing qualified staff.
A description of the business experience during the past several years
for each of the directors and executive officers of Capitol Group Holdings is
set forth below.
Frank J. Dobrucki has been president of Valle Vista Development Corp.
since 1997, concentrating on the acquisition, litigation and tax issues
regarding the Valle Vista Ranch project in Kingman, Arizona.
Bruce Merrin has been president of Bruce Merrin Public Relations since
1976, representing celebrities, entertainers and companies nationwide.
Lynn Woodrum has been president of Silver State Mortgage Corp. since
1994. Silver State Mortgage Corp. is a full service mortgage lending company
offering all levels of conventional and government loan packages to home buyers.
Key employees include:
o Eldon Pitts, director of manufactured housing. Mr. Pitts will serve as
our general contractor. As a 30 year resident of Valle Vista, Mr. Pitts has been
responsible for the entire layout of the Valle Vista Subdivision. He will
oversee the installation of all utility lines, road preparations, foundations,
lot preparation and home installation. Mr. Pitts is the owner of Pitts & Sons
Construction and is knowledgeable about the infrastructure network of the
Kingman, Mohave County area.
o Levy Pitts, director of facilities. Mr. Pitts will be responsible for the
ongoing customer service warranty business. These items are covered by a
comprehensive Fleetwood manufacturer's warranty.
19
o Joseph Darin, director of operations. Mr. Darin has experience as a
customer service manager of a major cable services company. His responsibilities
included contractual obligations and maintenance of retail customer accounts.
Mr. Darin will head our customer services department, managing the warranty
claims of the homeowners and acting as our liaison between Fleetwood Homes and
Pitts & Sons Construction to accommodate the needs of the homeowners.
Committees of the Board of Directors
Our board of directors has created a compensation committee and an audit
committee. Neither committee has yet to meet. The compensation committee will
make recommendations to the board of directors concerning salaries and
compensation for our executive officers and employees. The members of the
compensation committee are Messrs. Merrin and Dobrucki. Mr. Dobrucki is the
chairman of the compensation committee.
The audit committee will make recommendations to the board of directors
regarding the selection of independent auditors, review the results and scope of
audits and other accounting related services, and review and evaluate Capitol
Group Holdings' internal control functions. The members of the audit committee
are Messrs. Woodrum and Dobrucki. Mr. Woodrum is the chairman of the audit
committee.
Copies of the charters for the compensation committee and the audit
committee are attached as exhibits to the registration statement to which this
prospectus relates.
Executive Compensation
As of the date of this prospectus, none of our executive officers
receive a salary or any other compensation for the services they provide to
Capitol Group Holdings, although they may receive compensation in the future.
Compensation of Directors
We intend to compensated our directors by issuing them each 200,000
shares of our stock. We have no present plans to provide further compensation,
although we may do so in the future. As of the date of this prospectus, we have
not issued any shares to Messrs. Merrin and Woodrum.
Stock Options and Warrants
As of the date of this prospectus, we have not issued any options or
warrants to purchase shares or securities convertible into our common stock.
Employment Contracts
On July 1, 2002, we entered into a five-year employment contract with our
president and chief executive officer, and director, Frank J. Dobrucki. The
contract provides for an initial salary of $144,000 per year. Mr. Dobrucki has
agreed to a confidentiality agreement and a covenant not to compete for five
years from the date of the agreement.
CERTAIN TRANSACTIONS
On March 29, 2002, we purchased from Valle Vista Development
Corporation, controlled by Mr. Dobrucki, 1,000 lots in exchange for 18,000,000
shares of our common stock. We paid all closing costs and recording fees of
approximately $10.00 per lot. The lots were subject to an existing first
mortgage having a balance of $100,000 payable to City Valley Trading Company in
Las Vegas, Nevada, and delinquent unpaid taxes of approximately $500.00 per lot
as covered in a Property Tax Compromise Agreement with Mohave County, dated
August, 1999 and three years subsequent taxes.
20
PRINCIPAL STOCKHOLDERS
The following table presents information regarding the beneficial
ownership of all shares of our common stock as of the date of this prospectus,
by:
o Each person who beneficially owns more than five percent of our
outstanding shares common stock;
o Each director of Capitol Group Holdings;
o Each named executive officer; and
o All directors and officers as a group.
Shares Beneficially
Owned (2)
Name and Address of Beneficial Owner (1) Number Percent
- ---------------------------------------- ------ -------
Frank J. Dobrucki (3)....................................22,500,000....45.0.....
Bruce Merrin................................................-0-......... -0-....
Lynn Woodrum................................................-0-..........-0-....
All directors and officers as a group (three persons)..22,500,000....45.0.....
-----------------------
(1) Unless otherwise indicated, the address for each of these stockholders
is c/o Capitol Group Holdings Corporation, 4600 East Sunset Road, Suite
320, Henderson, Nevada 89014. Each person named in the table above has the
sole voting and investment power with respect to his shares of our common
stock beneficially owned.
(2) Beneficial ownership is determined in accordance with the rules of the SEC.
(3) Mr. Dobrucki owns directly 4,500,000 shares of our stock.
The Dobrucki Family Trust, of which Mr. Dobrucki is the Trustee, but not a
beneficiary, owns 18,000,000 of our shares.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 300,000,000 shares of common
stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, par
value $0.001 per share. The following summary of the material matters relating
to our common stock and preferred stock is qualified in its entirety by
reference to our articles of incorporation and bylaws, which are attached as
exhibits to the registration statement of which this prospectus is a part.
Common Stock
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of our stockholders, including
the election of directors. Our stockholders do not have cumulative voting
rights. Subject to preferences that may be applicable to any then outstanding
series of our preferred stock, holders of our common stock are entitled to
receive ratably dividends, if any, as may be declared by our board of directors
out of legally available funds. Upon our liquidation, dissolution, or winding
up, the holders of our common stock will be entitled to share ratably in the net
assets legally available for distribution to our stockholders after the payment
of all our debts and other liabilities, subject to the prior rights of any
series of our preferred stock then outstanding. The holders of our common stock
have no preemptive or conversion rights or other subscription rights and there
are no redemption or sinking fund provisions applicable to our common stock. All
outstanding shares of our common stock are fully paid and nonassessable.
21
Preferred Stock
Our board of directors has the authority, without further action by our
stockholders, to provide for the issuance of shares of our preferred stock in
one or more series and to fix the number of shares, designations, preferences,
powers and relative, participating, optional or other special rights and the
qualifications or restrictions on the rights. The preferences, powers, rights
and restrictions of different series of our preferred stock may vary with
respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions, purchase
funds, and other matters. The issuance of a series of our preferred stock could
decrease the amount of earnings and assets available for distribution to holders
of our common stock or affect adversely the rights and powers, including voting
rights, of the holders of our common stock. Likewise, any issuance may have the
effect of delaying, deferring or preventing a change in control of Capitol Group
Holdings. As of the date of this prospectus, our board has not authorized the
issuance of any preferred stock.
Transfer Agent and Registrar
The transfer agent for our common stock is Public Ease, 3663, East
Sunset Road, Suite 104, Las Vegas, Nevada 89120, telephone (702) 212-8797, and
facsimile (702) 796-5650.
CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
General
Provisions of our articles of incorporation and bylaws concern matters
of corporate governance and the rights of our stockholders, such as the ability
of our board of directors to issue shares of our common and preferred stock and
to set the voting rights, preferences, and other terms of our preferred stock
without further stockholder action. These provisions could also delay or
frustrate the removal of incumbent directors or the assumption of control of our
board of directors by our stockholders, and may be deemed to discourage takeover
attempts, mergers, tender offers, or proxy contests not first approved by our
board of directors, which some stockholders may deem to be in their best
interests.
Board of Directors
The business and affairs of Capitol Group Holdings are managed under
the direction of our board of directors, which currently consists of three
members. The number of members on our board of directors is fixed by, and may be
increased or decreased from time to time by, the affirmative vote of a majority
of the members at any time constituting our board of directors.
Newly created directorships resulting from any increase in the number
of directors and any vacancies on our board of directors resulting from death,
resignation, disqualification, removal or other causes shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term for which the new directorship was created or the vacancy occurred
and until the director's successor shall have been elected and qualified or
until his earlier death, resignation, or removal. No decrease in the number of
directors constituting the board of directors shall shorten the term of any
incumbent director. Our board of directors may not have less than one member.
There is no limit on the maximum size of our board.
Whenever the holders of any class or series of our capital stock are
entitled to elect one or more directors under any resolution or resolutions of
our board of directors designating a series of our preferred stock, vacancies
and newly created directorships of a class or series may be filled by a majority
of the directors then in office elected by the applicable class or series, by a
sole remaining director so elected, or by the unanimous written consent, or the
affirmative vote of a majority of the outstanding shares of the class or series
entitled to elect the directors.
22
Any director may be removed from office only by the affirmative vote of
the holders of a majority of the combined voting power of our then outstanding
shares of capital stock entitled to vote at a meeting of stockholders called for
that purpose, voting together as a single class.
Meetings of Stockholders
Our articles of incorporation provide that a special meeting of our
stockholders may only be called by:
o Our president;
o The holders of at least 10 percent of the outstanding shares of our
capital stock entitled to vote at the proposed special
meeting; or
o Our board of directors by means of a duly adopted resolution.
Special stockholder meetings may not be called by any other person or
in any other manner. Our bylaws provide that only those matters set forth in the
notice of the special meeting may be considered or acted upon at the special
meeting. Our articles of incorporation do not permit our stockholders to take an
action by written consent unless the action to be taken and the taking of that
action by written consent have been approved in advance by our board of
directors.
Annual meetings of our stockholders will be held on a date and at a
place and time designated by our board of directors. Our next annual meeting
will be held in 2003.
Limitation of Liability
Our articles of incorporation provide that any director or officer
shall not be personally liable to Capitol Group Holdings or its stockholders for
damages as a result of any act or failure to act in his capacity as a director
or officer, unless (a) it is proven that his act or failure to act constituted a
breach of his fiduciary duties and involved intentional misconduct, fraud, or a
knowing violation of law, or (b) such person is a director liable under Section
78.300 of the Nevada Revised Statutes for the payment of an improper
distribution by Capitol Group Holdings to its stockholders.
Indemnification. Our articles of incorporation provide that Capitol
Group Holdings shall indemnify anyone who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by Capitol Group Holdings or in its right, by reason of the fact that he
is or was a director, officer, employee, or agent of Capitol Group Holdings, or
is or was serving at Capitol Group Holdings' request as a director, officer
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if:
o The liability did not result from any act or failure to act which
constituted a breach of that person's fiduciary duties in his capacity
as a director or officer, and involved intentional misconduct, fraud,
or a knowing violation of law; or
o The person acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, our best interests, and with
respect to any criminal action or proceeding, he had no reasonable
cause to believe his conduct was unlawful.
Further, our articles of incorporation permit Capitol Group Holdings to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by Capitol Group Holdings
or in its right, to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of Capitol Group Holdings,
or is or was serving at our request as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise,
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with defense or settlement
of the action or suit, if:
23
o The liability did not result from any act or failure to act which
constituted a breach of that person's fiduciary duties in his capacity
as a director or officer, and involved intentional misconduct, fraud or
a knowing violation of law; or
o The person acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, our best interests.
However, Capitol Group Holdings is prohibited from indemnifying any
person with respect to any action, suit, or proceeding by a court of competent
jurisdiction, if he has been finally adjudged to be liable to Capitol Group
Holdings, unless, and only to the extent that, the court of competent
jurisdiction determines upon application that the person is fairly and
reasonably entitled to indemnification in view of all the circumstances of the
case.
Our bylaws contain similar indemnification and limitation of liability
provisions. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
Capitol Group Holdings under the indemnification provisions, or otherwise,
Capitol Group Holdings is aware that, in the opinion of the SEC, the
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Permitted Combinations
Our articles of incorporation expressly provide that we will not be
governed by Nevada Revised Statutes 78.411 to 78.444, inclusive, which means
that we not subject to the restrictions contained in the NRS applicable to
mergers and other forms of combinations with holders of 10 percent or more of
our stock.
Amendment of Bylaws
Under our articles of incorporation, our bylaws may be amended by our
board of directors or by the affirmative vote of the holders of at least a
majority of the combined voting power of the outstanding shares of our capital
stock then outstanding and entitled to vote, voting together as a single class.
24
SELLING STOCKHOLDERS
This prospectus also relates to the aggregate resale of 25,324,972
shares of our common stock by our current stockholders, all of which may be sold
from time to time by the selling stockholders. Capitol Group Holdings will not
receive any proceeds from the resale of any of our common stock by the selling
stockholders. The following table sets forth certain information with respect to
the resale of our common stock by the selling stockholders.
Sales by the Selling Stockholders
Shares Shares
Beneficially Percent Beneficially Percent
Owned Before Amount Owned After
Stockholder Before Sale Sale Offered After Sale Sale (1)
- ----------- ----------- ----- ------- ---------- --------
(1)
Paul J. Bessette 200,000 * 200,000 -0- -0-
Adolf Dobrucki 700,000 1.4 700,000 -0- -0-
Luci Cardona 100,000 * 100,000 -0- -0-
David Abrams 250,000 * 250,000 -0- -0-
Marta M. Fernandez 100,000 * 100,000 -0- -0-
Richard Koch 50,000 * 50,000 -0- -0-
Dean Bennion and-
Leslie Bennion 250,000 * 250,000 -0- -0-
Alexander & Wade,Inc. 2,450,000 4.9 2,450,000 -0- -0-
Norman T. Reynolds 400,000 * 400,000 -0- -0-
William M. Woo 905,000 1.8 905,000 -0- -0-
Francis A. Zubrowski 1,500,000 3.0 1,500,000 -0- -0-
Advanced CenturyCorp. 450,000 * 450,000 -0- -0-
Lisar Inc. 410,000 * 410,000 -0- -0-
AG Spencer Corp. 130,000 * 130,000 -0- -0-
Select Commerce Inc. 130,000 * 130,000 -0- -0-
Wah C. Wong 250,000 * 250,000 -0- -0-
Edify Capital GroupInc. 170,000 * 270,000 -0- -0-
Ultra InternationalInc. 270,000 * 270,000 -0- -0-
A2A Industries Corp. 2,145,000 4.2 2,145,000 -0- -0-
Michael Patrick 2,400,000 4.8 2,400,000 -0- -0-
Robert K. Fujita 300,000 * 300,000 -0- -0-
Crown Holding Corp. 500,000 1.0 500,000 -0- -0-
Patricia Acevedo 125,000 * 125,000 -0- -0-
Richard H. Thurber 1,000,000 2.0 1,000,000 -0- -0-
Michael Natula 25,000 * 25,000 -0- -0-
Lolita Gatchalian 680,000 1.3 680,000 -0- -0-
Sik Ming Ip 310,000 * 310,000 -0- -0-
Commerce Development-
Corporation 250,000 * 250,000 -0- -0-
Sol Tech Corporation 100,000 * 100,000 -0- -0-
Vance Anderson 1,150,000 2.3 1,150,000 -0- -0-
Matthew Wolberd 600,000 1.2 600,000 -0- -0-
Mark Ellis 1,000,000 2.0 1,000,000 -0- -0-
Boyd Patrick Donahoo 2,200,000 4.4 2,200,000 -0- -0-
U.S. Microbics, Inc. 224,972 * 224,972 -0- -0-
USM Capital Group,Inc 2,350,000 4.7 2,350,000 -0- -0-
Robert C. Brehm 14,000 * 14,000 -0- -0-
Mery Robinson 321,500 * 321,500 -0- -0-
Conrad Nagel 90,500 * 90,500 -0- -0-
Steve Hopkins 14,000 * 14,000 -0- -0-
Capri International,Inc 100,000 * 100,000 -0- -0-
Edify Capital Group,Inc 100,000 * 100,000 -0- -0-
Mark Holmstedt 10,000 * 10,000 -0- -0-
25
Michael Holmstedt 40,000 * 40,000 -0- -0-
Darwin Ting and-
KueiMei Ting 550,000 1.1 550,000 -0- -0-
BR Investor, LLC 10,000 * 10,000 -0- -0-
Total 25,324,972 50.65 25,324,972 -0- -0-
* less than one percent
(1) Based on 50,000,000 shares of our common stock outstanding on the date
of this prospectus.
26
SPIN-OFF SHARES
U.S. Microbics, Inc. intends to spin-off 2,175,028 shares of our common
stock to its stockholders of record as of July 3, 2002. The following table sets
forth certain information with respect to the stockholders of U.S. Microbics who
will receive shares of our stock as a result of the Spin-Off.
U.S. Microbics Stockholders
Number of Shares
to be
Stockholder Received
Steve Abruzzo 333
Gregory Alan Aburns 5
ACSI Profit Sharing Plan 556
Herbert G. Adcox 42
Agnes M.J. Rasmussen Trust 2,222
Jerry W. Ahlberg 1
Alba M. Altube 5
Gloria Ambrosini 3
Victor Androvich 40
Richard Anfuso 28
Arivest Corporation 2,778
William H. Ashenbrenner 69
Marc Baker 5,555
Art Baker 833
Harry Banks 28
David Baraga 139
Charles E. Barry 1
Lance Bauerlein 7,331
Jack Bazz 7
Bruce Beattie 13,889
Hikmat Behnam 6
A Y Behnam 1
Judy Belf 2
Carylyn K. Bell 66
David S. Belz 1
Irving Benjamin 1
James F. Biggs 4
William L. Blaine 4
Alvi B. Blasi 1
Robert J. Blesius 1
Bleu Ridge Consultants 4
Boca Investments 2,266
Joe A. Boswell 278
BR Investco 1,389
Brasel Family Partners, Ltd. 8
Robert C. Brehm 274,313
Lindsay Brehm 1,389
Waldemar and Caryl L. Brehm Itf 834
Anne Lo Brewer 3
Brobeck, Phileger and Harrison LLP 5,273
Amanda Brooks 3
Chris Brown 56
Tiffany R. Brown 2
Eric Brown 84
27
Brown Wharton & Co. Inc. 11
Chris B. Bruce 1
William J. Bryan Jr. 7
Arthur Brykman 6
Gerald G. Bryne 4
Thomas L. Brynwood 4
Roger Buchanan 139
Ted Buder 18
Lavera Burns 1
Calif State Controller 7
Malcom Campbell 1
Peter Cardiello 2
Gilbert Cassagnol 2
Thierry Cassagnol 3
Tom A. Cecrle 3
Cede & Co. 784,857
Robert Cerda 4
David H. Chaney 1
Charles Schwab & Co Inc. 889
Barry R. Clark 2778
Edwin C. Clark Sr. 28
Samuel Ben Haiy Cohen 13
Dominic J. Colasito 1,333
Common Media Services Inc. 3,596
Michael Contreras 1
Robert A. Cook 4
Pat Corbett 2
Richard Coren 1
Sean Coughlin 6
Ernest C. Coulter 4
Elizabeth Crofoot 6
Brett Curry 84
Frank Dabney 28
John P. Demoleas 2,780
Bobbie Jean Denny 556
Enos Derbonne 2,500
Angela Dipasquale 2
Charles Dittus 2
Charles A. Dittus 9
Donald C. Dittus Ira 4
Lou Dubravac 1
Brian Dyson 5,556
Barbara H. Eakie 1
Theresa S. Ehrlich Marital Trust 73
Dale E. Einspahir 2
Debra Evers 1
John P. Feighner 27,778
Robert L. Ferris 1
Daniel C. Ferrone 7
Fiddlers Company 6,667
28
First Bourse Marketing Consultants Inc. 2
Roger K. Knight First Venture Group Inc. 35,637
David Fleming 1
Lautic Fordham 2
Forman Defined Benefit Plan 2
Bruce E. Franz 1
Tom Freaney 39
Jeri Freidman 2
G.A. Partnership 79
Martin A. Garafalo 3
John D. and Clare C. Garber 43,518
Jesse A. Garner 278
Lee Yok Sal Gee 1
Herman L. George Jr. 1
Paul Gigante 1
Ray Gilbert 278
R. Andres Girardot 20
Joan G. Glasser 2
Edward Gonzalez 74
Nathan Greene 3
Dr. Jose Cosme Guerrero R. 56
Anthony Guidice 56
Helen J. Harper 1
David J. Harris 11
Bruce R. Harrison 1
Zuhair Hashim 4,171
Hisham Hashim 204
Robert H. Hawke 20
Ried Haywood 2
James Heath 28
Gary Held 4
G. Gordon Hendrickson 389
John Hill 2,778
Judy A. Hinley 3
E. David Hohl 5
Dave Holden 1,111
George Holmes 1
Mark Holmstedt 8,333
Stephen C. Hopkins 5,556
Steve and Denise Hopkins Family Trust 27,778
Gary D. Hornsby 3
Chester O. Houston Jr. 17
Harrison Hudson 69
Hulsey Living Trust DTD 12 2 92 3,333
Allen Hutkins 1,111
Icapital 2,224
James O. Ito 1
Robert Iwasa 17
Mike R. Johnsong 1
Eric Jones 1
29
Dan L. Jones 67
Michael W. Jordan 43,982
Cameron L. Karg 10,733
Cameron Karg 18,944
Stephen D. Katchen 3
Lawrence Katz 3
Gary Keene 3
Robert L. Kelly 22,222
Steven P. Kelly 1
Eugene Kim 56
Julainne Kim 28
Urian Kim 56
Vuryl Klassen 2,778
Donald J. Klee 7
Donald S. Klein 278
Paula M. Knight 556
Jane M. Knight 556
Gail M. Knight 556
Janie Knight 3
Sally M. Knight 556
Lewis Kurtz 1,111
Raymond Lamb 2
Stacey Lapuk 6
Larko 4,000
Fred Laughter 2,770
Lewis Lavey 1
Gabriel Lee 28
James W. Leonard TTEE FBO SBS 3
Lucien A. Letteiello 28
Michael B. Leve 1
Edward Licho 10
Stephan Liguzinski 1
Robert Lin 1,112
Lincoln Trust Company Custodian Fbo 556
Norman Litman 1
Ronnie Long 28
Michael Lucci 1
Harold Lucey 8
Thomas E. Lunnon 2
John Lusk 14
Roy Macaluso 14
Darelle Macpherson 1
Angus Macpherson 14
David Maidlow 1,111
Robert W. Maier 7
Troy L. Maness 4
Webb Marcantel 2,223
John W. Marshall 4
Paul E. Maslin 5
Granville Mason 1
30
Norman O. Mauk 2,222
Cheryl Mcclean 2
Levern Mcgee 2
Robert W. Mcginness 1
Melba R. Medford 556
Greg Merriam 40
Dori R. Merriam Cust 8
Michael Randy Meyerson 1
Charlie Meyerson 7
Abram Milechtaich 2
Douglas D. Miller 278
Kathleen Miller 28
Bradford Harry Miller 39
Behzad Mirzayi 13,889
Wayne Mohle 3
Jim Montreuil 4
Louise Morris 28
Richard Morris 28
George H. Moseman 2,778
Mountain Truck & Equipment Co. 69
Carsten Mueller 1
Claus Mueller 1
Conrad Nagel 24,847
Kathrina B. Nagel 33
Harold Neal 556
Jason Nesseth 2,806
Charles D. Newton 1
Michael Nielsen 139
Lisa Ann Nolta 4
Maria Nonnenmacher 1
Chail Topping Norton 3
Richard Nuanes 1
Gary L. Ohlrich 1
Ok Associates Pension Trust 14
Chota Oum 6,016
Pacific & Co 7
Me Rene De S Palomares P 1,583
Thomas Panko 278
George W. Pankovcin 4
Bruce Parks 1
George B. Paspalof 56
Dean Patterson 358
George Pay 3
Linda S. Peterson 1
John Pizzoferrato 2
Janet L. Podboy Cust 1
Bernard Podrovsky 1
Ronald A. Pratt 3
Robert J. Pratt 2
Prudential Securities Inc. 2
31
Quality Surplus Sales 694
Gary K. Rasmussen 2,681
Gary K. and Doris Abel Rasmussen 930
Mark W. Rasmussen 56
Weston Richter 8,333
Robert Riveroll 1,667
James C. Roach 42
Robert C. Brehm Consulting Inc. 36,627
Jeff Roberts 1,075
Dana G. Robinette 42
Mery C. Robinson 312,008
Michelle Robinson 174
Stella Y. Robinson 278
Anthony Romag 28
Laurie Romag 8,361
Stanley Rosenberg 3
Richard G. Ross II 1
Rpt Texas State Treasurer 11
Ronald W. Rupp 1
Amber Rushing 6
Donald Rust 2
S W Devanney & Co Inc 1
Scott A. Sabins 26,861
Scott A. Sabins TTEE 56,833
Dan Saletta 303
Sanchez Living Trust 139
Julette Scaglione 3
John M. Schlagel 139
John L. Schmidt 69
Peter Schmidt 541
Prudence Serl 42
Joseph Shcop 6
Sierra Pacific King Cola Inc 4
Thelma M. Simmons TTEE FBO 556
Robert Singer 28
Maurice Slivnick 2
Small Cap Voice.com Inc 2,391
Richard C. Smith 1
Robert D. Smith 1
Roger Sokenis 1
Diana Solomon 1
Danial John Spisak 556
Jackie Statler 4
Edward J. Stauffer 3,876
Jerrold L. Stauffer 15,504
Gary Stehle 1
Rene S. Stierli 20
John W. Stoneking 1,667
Gilbert and Rosalinda Strange 1988 7,333
Josephine G. Sullivan 56
32
Roy L. Sullivan 56
Susan A. Sullivan 56
William Robert Sullivan Jr. 17
Summa Investment Partners Inc 556
Swartz Private Equity LLC 159,174
SWS Securities Inc FBO 13,889
The Brehm Family Trust 2,222
The Brehm Family Trust Dated 1,389
The McFadden Family Trust DTD 11 79
The Mcintyre Family Trust Angela 58
Carol Thomas 4
R. Kirk Thomasson 1
Erin Ting 556
Henry S. Ting 1389
Ryan Ting 556
Jack C. Tobin Jr. 7
Albert J. Tolsch 1
John Toruk 1
Ralph T. Behling Ttee 2
Brian Edward Tully 3
Darren Patrick Tully 3
Uplink Capital Inc. 2,778
Tom T.S. Wang 556
Tony Tsung-Tien 833
William Ward 1
Delmar F. Ward 1
Keith L. Wedin M.D. Inc. 4
Thomas Guy Westhoff 2,778
James Allen Westhoff 2,778
R. Thomas Westoff 2,778
Vance White 111
Morris Wigman 2
Ludmila Wilkerson 28
John I. Williams 278
William M. Woo 2,294
Jay E. Wright 8
George W.M. Wright Jr. 1,111
Jules Lee Wurzel 3
Jeffrey Yee 1,222
Walter Zech 4
Neta Zorn 3,891
---------
Total 2,175,028
=========
33
SHARES AVAILABLE FOR FUTURE SALE
Following the effective date of this prospectus, 33,500,000 shares of
common stock will be freely tradable, including:
o The Spin-Off Shares;
o All 6,000,000 shares being sold to new purchasers, if all of the shares
are sold; and
o The shares registered for resale.
In addition, we will have shares which are not being registered for
sale or resale. Those shares are "restricted securities" as defined in the
Securities Act, and are subject to the resale provisions of Rule 144 promulgated
under the Securities Act. See "The Spin-Off." Sales of shares of common stock in
the public markets may have an adverse effect on prevailing market prices for
the common stock.
Rule 144 governs resale of "restricted securities" for the account of
any person (other than an issuer), and restricted and unrestricted securities
for the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates which were not issued or sold in connection with a public offering
registered under the Securities Act. An affiliate of the issuer is any person
who directly or indirectly controls, is controlled by, or is under common
control with the issuer. Affiliates of Capitol Group Holdings may include its
directors, executive officers, and any person directly or indirectly owning 10
percent or more of our outstanding common stock. See "Management" and "Principal
Stockholders."
Under Rule 144 unregistered resales of restricted common stock cannot
be made until it has been held for one year from the later of its acquisition
from the company or an affiliate of the company. Thereafter, shares of common
stock may be resold without registration subject to Rule 144's volume
limitation, aggregation, broker transaction, notice filing requirements, and
requirements concerning publicly available information about the company.
Resales by our affiliates of restricted and unrestricted common stock are
subject to the requirements described in the preceding sentence.
The volume limitations provide that a person (or persons who must
aggregate their sales) cannot, within any three-month period, sell more that the
greater of one percent of the then outstanding shares, or the average weekly
reported trading volume during the four calendar weeks preceding each such sale.
A non-affiliate may resell restricted common stock which has been held for two
years free of the requirements described above.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Norman T. Reynolds, Esq., Houston, Texas.
EXPERTS
Our financial statements for the period from August 24,2001 to June 30,
2002 included in this prospectus have been so included in reliance on the report
of Vasquez & Company LLP, certified public accountants, given on that firm's
authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 under the
Securities Act with the SEC with respect to our common stock offered as
described in this prospectus. This prospectus constitutes our prospectus filed
as part of the registration statement. This prospectus does not contain all of
the information set forth in the registration statement because certain parts of
the registration statement are omitted in accordance with the rules and
regulations of the SEC. The registration statement and its exhibits are
available for inspection and copying from the Public Reference Section of the
SEC, located at 450 Fifth Street, N.W., Washington, D.C. 20549, or by calling
the SEC at (800) SEC-0330. The SEC maintains an Internet web site that contains
reports, proxy statements and other information regarding Capitol Group
Holdings. The address of the SEC web site is http://www.sec.gov.
34
Capitol Group Holdings has not been previously subject to the reporting
requirements of the Exchange Act, although we will become subject to those
reporting requirements following the effective date of the registration
statement to which this prospectus relates. In accordance with the Exchange Act,
we will file reports, proxy statements and other information with the SEC. In
addition, we intend to furnish our stockholders with annual reports containing
audited financial statements and interim reports as we deem appropriate. No
person is authorized by us to give any information or to make any
representations other than those contained in this prospectus, and, if given or
made, you should not rely upon that information.
This prospectus does not constitute an offer to sell, or a solicitation
of an offer to purchase, the securities offered by this prospectus in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
such offer in such jurisdiction. Neither the delivery of this prospectus nor any
distribution of securities pursuant to this prospectus shall, under any
circumstances, create any implications that there has been no change in the
information set forth or incorporated into this prospectus by reference or in
our affairs since the date of this prospectus.
Until ____, 2002 all dealers effecting transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
INDEX TO FINANCIAL INFORMATION
Report of Independent Certified Public Accountants........................F-1
Audited Financial Statements:
Balance Sheet...........................................................F-2
Statement of Operations.................................................F-3
Statement of Cash Flows.................................................F-4
Statement of Changes in Stockholders' Equity (Deficit)..................F-5
Notes to Financial Statements...........................................F-6/9
35
INDEPENDENT AUDITORS' REPORT
Board of Directors
Capitol Group Holdings Corporation
(formerly known as Applied Microbic Technology, Inc.)
Las Vegas, Nevada
We have audited the accompanying balance sheet of Capitol Group Holdings
Corporation (formerly known as Applied Microbic Technology, Inc.) as of
September 30, 2000 and September 30, 2001 and the related statements of
operations, cash flows and changes in stockholders' equity for the two years
ended September 30, 2000 and September 30, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements as of September 30, 2000 and September
30, 2001 and for the two years ended September 30, 2000 and September 30, 2001,
present fairly, in all material respects, the financial position of Capitol
Group Holdings Corporation (formerly known as Applied Microbic Technology, Inc.)
as of September 30, 2000 and September 30, 2001, and the results of its
operations, cash flows and changes in stockholders' equity for the two years
ended September 30, 2000 and September 30, 2001 in conformity with generally
accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is a development stage enterprise, and its
success is contingent on its ability to raise capital and generate revenue that
raise substantial doubt in 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.
/s/Vasquez & Company LLP
Los Angeles, California
September 3, 2002
F-1
Capitol Group Holdings Corporation
(Formerly Known As Applied Microbic Technology, Inc.)
(A Development Stage Company)
Balance Sheet
9/30/2000 9/30/2001 6/30/2002
(UNAUDITED)
ASSETS
Cash $ - $ - $ 5,497
----------- ---------- ---------
Property and Equipment 6,800
Accumulated Depreciation (368)
-----
Property and Equipment, Net 6,432
-----
Land 1,524,718
---------
Total Assets $ - $ - $ 1,536,647
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ - $ - $ 9,465
Loans Payable to Shareholders 1,845 2,561 -
Trust Deed Payable 100,000
Unpaid Compromised Property Tax Assessments 500,000
Unpaid Property Taxes - - 77,173
---- ----- ------
1,845 2,561 686,638
Total Liabilities
---- ------ ------
Stockholders' Equity(Deficit):
Preferred Stock - -
Common Stock 1,000 1,000 50,000
Additional paid-in-capital - - 804,437
Retained (Deficit) (1,450) (2,845) (3,561)
Net (Loss) For the Period (1,395) (716) (867)
------- -------- -------
Stockholders' Equity (1,845) (2,561) 850,009
--------- ------- -------
Total Liabilities and Stockholders'Equity $ - $ - $1,536,647
=========== =========== =========
The accompanying notes to financial statements are an integral part of
these financial statements.
F-2
Capitol Group Holdings Corporation
(Formerly Known As Applied Microbic Technology, Inc.)
(A Development Stage Company)
Statement of Operations
For the Year For the Year October 1, 2001
to
Ended 9/30/00 Ended 9/30/01 June 30 2002
(UNAUDITED)
Revenue $ - $ - $ -
Operating Expenses:
Interest Expense - - 592
Selling,General&Administrative 1,395 716 275
------------- ------------- ---------------
Total Operating Expenses 1,395 716 867
------------- ------------- ---------------
Operating (Loss) (1,395) (716) (867)
Income Taxes(Benefit) - - -
------------- ------------ ---------------
Net (Loss) (1,395) (716) (867)
============= ============ ===============
Loss Per Common Share
(Basic and Diluted) $ - $ - $ -
============ ============ ===============
Weighted Average Common
Shares Outstanding 1,000,000 1,000,000 4,062,271
The accompanying notes to financial statements are an integral part
of these financial statements.
F-3
Capitol Group Holdings Corporation
(Formerly Known As Applied Microbic Technology, Inc.)
(A Development Stage Company)
Statement of Cash Flows
For the Year For the Year October 1, 2001
Ended 9/30/00 Ended 9/30/01 to June 30, 2002
(UNAUDITED)
Cash Flows from Operating
Activities:
Net (Loss) for the Period $ (1,395) $ (716) $ (867)
Adjustments to Reconcile
Net (Loss) to Net Cash Provided
By Operating Activities:
Depreciation - - 91
Increase(Decrease) in:
Accounts Payable and
Accrued Expenses, net - - 776
------- ------- --------
Net Cash (Used) by
Operating Activities (1,395) (716) -
Cash Flows Provided (Used)
in Financing Activities:
Net Cash Acquired - - 5,497
Loans From Shareholder 1,395 716 -
-------- -------- ---------
Net Cash Provided by
Financing Activities 1,395 716 5,497
-------- -------- ---------
Net Increase(Decrease)
in Cash - - 5,497
Cash at Beginning of Period - - -
-----------------------------------------------
Cash at End of Period $ - $ - $ 5,497
=========== ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS INFORMATION
Cash Paid During the Period-
for Interest $ - $ - $ -
Income Taxes Paid $ - $ - $ -
NONCASH INVESTING ACTIVITIES
Assets Acquired: Land - - $1,524,718
Property & Equipment - 6,523
NONCASH FINANCING ACTIVITIES:
Assumption of Liabilities 688,301
Stock Issued 848,437
------------
Net Cash Acquired $ 5,497
============
The accompanying notes to financial statements are an integral part
of these financial statements.
F-4
Capitol Group Holdings Corporation
(Formerly Known As Applied Microbic Technology, Inc.)
(A Development Stage Company)
Statement of Changes in Stockholder's Equity (Deficit)
Common Additional Total
Stock Paid-in- Retained Stkholders
Authorized Issued Amount Capital (Deficit) Equity
(Deficit)
---------- --------- ------- --------- --------- ----------
Balance,
October 1,
1999 25,000,000 1,000,000 $1,000 $ - $(1,450) $(450)
Net (Loss)
September 30,
2000 - - - - (1,395) (1,395)
--------- --------- -------- --------- --------- ----------
Balance,
September 30,
2000 25,000,000 1,000,000 1,000 - (2,845) (1,845)
Net (Loss)
September 30,2001 - - - - (716) (716)
---------- --------- -------- --------- ---------- --------
Balance,
September 30,
2001 25,000,000 1,000,000 1,000 - (3,561) (2,561)
Increase in
authorized and
issuance of
common stock:
June 12, 2002,
UNAUDITED 275,000,000 5,000,000 5,000 - - 5,000
June 12, 2002,
UNAUDITED - 44,000,000 44,000 804,437 - 848,437
Net (Loss),
October 1, 2001
to June 30, 2002,
UNAUDITED - - - - (867) (867)
---------- ----------- -------- --------- --------- --------
Balance,
June 30, 2002,
UNAUDITED 300,000,000 50,000,000 $50,000 $804,437 $(4,428) $850,009
=========== ========== ======== ========= ========== ========
The accompanying notes to financial statements are an integral part of these
financial statements.
F-5
CAPITOL GROUP HOLDINGS CORPORATION
(FORMERLY KNOWN AS APPLIED MICROBIC TECHNOLOGY, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. HISTORY AND ORGANIZATION
Applied Microbic Technology, Inc.("the Company") was incorporated on November
20, 1998, as a Nevada corporation to license customers in the United States to
use microbial blends that are specially formulated for microbially enhanced oil
recovery (MEOR) in the United States and to provide related technical support
services. The Company was a subsidiary of U.S. Microbics, Inc., a publicly held
Colorado corporation, and USM Capital Group, Inc., a wholly-owned subsidiary of
U.S. Microbics, Inc. The Company has conducted no active business operations
from inception. On September 5, 2002, the Company merged with Capitol Group
Holdings Corporation, a Nevada corporation devoted to developing and marketing
affordable housing to senior citizens. The merger agreement provided for the
following:
(a) The surviving corporation (formerly Applied Microbic Technology, Inc.)
changed its name to Capitol Group Holdings Corporation.
(b) After the merger, former stockholders of the original Capitol Group Holdings
Corporation own 44,000,000 shares of common stock representing 88% common stock
of the Company and former stockholders of Applied Microbic Technology, Inc. own
6,000,000 shares of common stock representing the remainder 12% common stock of
the Company.
(c) The articles of incorporation and bylaws of Applied Microbic became the
articles of incorporation and bylaws of the Company.
(d) The former officers and directors of Applied Microbic Technology, Inc.
resigned, and the former officers and directors of Capitol Group Holdings
corporation became the current officers and directors of Capitol Group Holdings
Corporation.
(e) The surviving corporation (formerly Applied Microbic Technology, Inc.)
changesits business to develop and market affordable housing to senior citizens.
The Company is a development stage company and has had limited activity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements and
reporting period. Accordingly, actual results could differ from those estimates.
LAND
Land is carried at cost and represents 1,000 lots of undeveloped vacant land in
Kingman, Arizona.
PROPERTY AND EQUIPMENT
Property and equipment are valued at cost. Depreciation is provided by the
straight-line method. Maintenance and minor repairs are charged to operations
when incurred. When assets are retired or sold, the related costs and
accumulated depreciation are removed from the accounts and the resulting gain or
loss is reflected in current operations.
F-6
The estimated useful lives for depreciation are:
Computer equipment 5 years
Furniture and fixtures 7 years
INCOME TAXES
The Company utilizes Statement of Financial Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in financial statements or tax returns. Under this method,
deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The accompanying
financial statements have no provisions for deferred tax assets or liabilities.
NET LOSS PER SHARE
The Company has adopted SFAS No. 128 "Earnings Per Share Basic loss per share is
computed by dividing the loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed in a manner similar to the basic loss per share, except that the
weighted-average number of shares outstanding is increased to include all common
shares, including those with the potential to be issued by virtue of warrants,
options, convertible debt and other such convertible instruments. Diluted
earnings per share contemplates a complete conversion to common shares of all
convertible instruments only if they are dilutive in nature with regards to
earnings per share. Since the Company has incurred net losses for all periods,
and since there are no convertible instruments, basic loss per share and diluted
loss per share are the same.
3. DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
The Company's activities have been devoted to developing a business plan,
structuring and positioning itself to take advantage of opportunities available
in the senior housing market and raising capital for future operations and
administrative functions.
Net loss during the development stage from June 12, 2002 to June 30, 2002
amounts to $867.
The ability of the Company to achieve its business objectives is contingent upon
its success in raising additional capital until adequate revenues are realized
from operations. The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's cash
flow requirements during this period have been met by contributions of capital
and debt financing. No assurance can be given that these sources of financing
will continue to be available. If the Company is unable to generate profits, or
unable to obtain additional funds for its working capital needs, it may have to
cease operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets or liabilities that might be
necessary should the Company be unable to continue as a going concern.
4. INCOME TAXES
No provisions for income taxes have been made because the Company has sustained
losses since the commencement of operations. The impact of the deferred taxes
benefit is immaterial as of June 30, 2002.
5. NOTE PAYABLE
In connection with the land acquired on June 12, 2002, the Company has assumed a
trust deed payable in the amount of $100,000 secured by the vacant land with a
cost basis of $1,524,718. Interest at an annual rate of 12 percent is being
accrued until the note is paid in full.
F-7
6. UNPAID COMPROMISED TAX ASSESSMENT
The unpaid compromised tax assessment represents compromised tax assessment on
the vacant land consisting of 1,000 undeveloped vacant lots acquired by the
Company on June 12, 2002. The previous owner had reached an agreement dated
August 27, 1999 with the Mohave County Board of Supervisors in which a tax
compromise of $500 per lot totaling $500,000 for said 1,000 lots is reached for
previously unpaid taxes plus interest and penalties amounting to $2.27 million.
The compromised tax assessment agreement provides that in the event the owner or
any successors in interest default in any payment required under the agreement,
the county may after 30 day's written notice declare that they are in default of
said agreement and can restore any compromised taxes, and proceed with legal
remedies available under the Mohave County tax code or any such other remedy
which may be available to the county. The previous owner was in default as of
September 15, 1999 and the Mohave County has not taken any action to enforce
such default condition. The Company believes the unpaid obligation will be
repaid with future raised capital of the Company.
7. UNPAID PROPERTY TAXES
Unpaid property taxes represent unpaid property taxes, interest and penalties on
1,000 lots of vacant land acquired June 12, 2002 for year 1999, 2000, and 2001
as follows:
Amount
Year 1999 $29,386
Year 2000 25,507
Year 2001 22,280
--------
TOTAL $77,173
=======
8. STOCKHOLDERS' EQUITY
On September 5, 2002, the Company amended its articles to increase the
authorized number of common stock from 25 million shares par value $0.001 per
share to 300 million shares par value $0.001 per share and the authorized number
of preferred stock from 0 to 50 million shares par value $0.001 per share.
Pursuant to a merger agreement signed on June 12, 2002, the Company issued
44,000,000 shares common stock in exchange for land, property and equipment with
carrying costs of $1,536,738 and liabilities assumed of $688,301 for a net
consideration of $848,437.
9. RELATED PARTY TRANSACTIONS
Office space and services are provided without charge by an officer, director
and shareholder. Such costs are immaterial to the financial statements and
accordingly, have not been reflected therein.
F-8
PART II
Information Not Required in Prospectus
Item 24. Indemnification of directors and officers
Capitol Group Holdings' articles of incorporation provide that it shall
indemnify anyone who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by Capitol Group
Holdings or in its right, by reason of the fact that he is or was a director,
officer, employee, or agent of Capitol Group Holdings, or is or was serving at
Capitol Group Holdings' request as a director, officer employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if:
o The liability did not result from any act or failure to act which (a)
constituted a breach of such person's fiduciary duties in his capacity
as a director or officer, and (b) involved intentional misconduct,
fraud, or a knowing violation of law; or
o Such person acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, Capitol Group Holdings' best
interests, and with respect to any criminal action or proceeding, he
had no reasonable cause to believe his conduct was unlawful.
Further, our articles of incorporation permit Capitol Group Holdings to
indemnify any person who was or is a party, or is threatened to be made a party
to any threatened, pending or completed action or suit by Capitol Group Holdings
or in its right, to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of Capitol Group Holdings,
or is or was serving at Capitol Group Holdings' request as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with
defense or settlement of the action or suit, if:
o The liability did not result from any act or failure to act which (a)
constituted a breach of such person's fiduciary duties in his capacity
as a director or officer, and (b) involved intentional misconduct,
fraud or a knowing violation of law; or
o Such person acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, Capitol Group Holdings' best
interests.
However, Capitol Group Holdings is prohibited from indemnifying any
person with respect to any action, suit, or proceeding by a court of competent
jurisdiction if he has been finally adjudged to be liable to Capitol Group
Holdings, unless, and only to the extent that, the court of competent
jurisdiction determines upon application that such person is fairly and
reasonably entitled to indemnification in view of all the circumstances of the
case.
Our bylaws contain similar indemnification and limitation of liability
provisions. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
Capitol Group Holdings under the indemnification provisions, or otherwise,
Capitol Group Holdings is aware that, in the opinion of the SEC, the
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-1
Item 25. Other expenses of issuance and distribution
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the 33,500,000 shares being registered,
including the newly issued shares being sold to new investors, the Spin-Off
Shares, and the shares being sold by existing stockholders. The expenses shall
be paid by the registrant. No expenses will be paid by the security holders.
SEC Registration Fee............................................$ 3,082
Printing and Engraving Expenses................................. 3,000
Selling Commissions............................................. 150,000
Legal Fees and Expenses......................................... 75,000
Accounting Fees and Expenses.................................... 10,000
Blue Sky Fees and Expenses...................................... 5,000
Transfer Agent Fees............................................. 25,000
Miscellaneous................................................... 10,000
-------
Total....................................................... $281,082
========
Item 26. Recent sales of unregistered securities
We have not sold any of our shares for cash. However, Frank J. Dobrucki has
given to certain friends and family members various shares our stock owned by
him personally. In another instance, Mr. Dobrucki exchanged 1,000,000 of his
shares of our stock for 1,000,000 shares held by Mark Ellis in Mr. Ellis'
corporation. On one other occasion, our merger with Applied Microbics
Technology, Inc., we issued shares to U.S. Microbics, Inc. and USM Capital
Group, Inc.
The issuance of all shares of our common stock was pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act and
related state private offering exemptions. The individuals were sophisticated
investors who took their shares for investment purposes without a view to
distribution and had access to information concerning Capitol Group Holdings and
our business prospects, as required by the Securities Act. In addition, there
was no general solicitation for the purchase of our shares, inasmuch as our
securities were delivered to less than 35 non-accredited investors. In each
instance, we had a preexisting relationship with every person who received our
shares.
II-2
Item 27. Exhibits
The following exhibits are filed as part of this registration
statement:
Exhibit No. Identification of Exhibit
1.1* Placement Agreement between Capitol Group Holdings Corpora-
tion a Nevada corporation, and Mariner Investment Group,
dated August 30, 2002
2.1* Plan and Agreement of Merger dated June 12, 2002, between
Capitol Group Holdings Corporation, a Nevada corporation,
and Applied Microbic Technology, Inc., a Nevada corporation
and the surviving entity
2.2* Articles of Merger filed September 5, 2002, between Capitol
Group Holdings Corporation, a Nevada corporation, and
Applied Microbic Technology, Inc.
3.1* Articles of Incorporation filed March 12, 2002, by Capitol
Group Holdings Corporation, a Nevada corporation
3.2* Articles of Incorporation filed November 18, 1998, by
Applied Microbic Technology, Inc., a Nevada corporation
3.3* Bylaws of Capitol Group Holdings Corporation, a Nevada
corporation;
Bylaws of Applied Microbic Technology, Inc., a Nevada
corporation
3.4* Amended and Restated Bylaws of Capitol Group Holdings
Corporation (formerly Applied Microbic Technology, Inc., a
Nevada corporation)
3.5 See exhibits 3.1, 3.2, 3.3, and 3.4
4.1* Common Stock Certificate - Sample
4.2* Preferred Stock Certificate - Sample
5* Opinion Regarding Legality
10.1* Frank J. Dobrucki Employment Agreement, dated July 1, 2002
10.2* Purchase and Sale Agreement, dated March 28, 2002
11* Computation of Per Share Earnings
15* See Exhibit 23.2
23.1* Consent of Counsel (included in Exhibit 5)
23.2* Consent of Accountants
99.1* Subscription Agreement
*Filed herewith.
Item 28. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required in
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to the
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering;
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(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 this offering.
(4) That for purposes of determining any liability under the Securities
Act, (i) the information omitted from the prospectus filed as
part of this registration statement, as permitted by Rule 430A of the
Securities Act and to be contained in the form of prospectus to be
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act, shall be deemed to be incorporated by
reference into this registration statement at the time it is
declared effective, and (ii) each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant under the indemnification provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
the indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against those 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 a
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 the indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the issue.
SIGNATURES
As required under the Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on the registration statement on Form SB-2 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Henderson, Nevada,
on October 2, 2002.
CAPITOL GROUP HOLDINGS CORPORATION
By /s/ Frank J. Dobrucki
------------------------------------
Frank J. Dobrucki
Chairman of the Board
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As required under the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
/s/ Frank J. Dobrucki Chairman and Chief Executive Officer October 2, 2002
- ----------------------
FRANK J. DOBRUCKI
Director
/s/ Bruce Merrin October 2, 2002
- ----------------------
BRUCE MERRIN
Director October 2, 2002
/s/ Lynn Woodrum
- ----------------------
LYNN WOODRUM
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