U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIRST AMENDMENT
WINMARK, INC.
(Formerly Ecostructure Corporation)
------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 6770 58-2679116
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(State or Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
607 E Street, S.E.
Washington, D.C. 20003
(202) 544-6562
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(Address and telephone number of Registrant's principal executive offices and
principal place of business)
The O'Neal Law Firm, P.C.
Attention: William D. O'Neal, Esq.
668 North 44th Street
Phoenix, Arizona 85008
Ph: (602) 267-3855
Fax: (602) 267-7400
- --------------------------------------------------------------------------------
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If delivery of the prospectus is expected to be made pursuant to Rule 415, check
the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b)under the Securities Act, please check the following box and list
the Securities Act registration 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 the delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
1
CALCULATION OF REGISTRATION FEE
--------------------------------------------
Title of each Proposed Proposed
Class of Maximum Maximum Amount of
Securities to Amount to be Offering Price Aggregate Registration
be Registered Registered Per Share Offering Price Fee
- ------------------ ------------------ ------------------ ------------------ ------------------
Common Stock 500,000 $0.10 per share (1) $50,000 $4.60
- ------------------ ------------------ ------------------ ------------------ ------------------
The Company hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the Company shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
______________________________________
1. Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
2
WINMARK, INC.
Cross-Reference Sheet
pursuant to Item 501(b)
Showing Location in Prospectus of Information
Required by Items of Form SB-2
Registration Statement Item Caption in Prospectus
----------------------------- -------------------------
1.Front of Registration Statement and Facing Page; Cross-Reference Sheet;
Outside Front Cover of Prospectus Prospectus Cover Page
2.Inside Front and Outside Back Cover Prospectus Cover Page; Prospectus Back
Pages of Prospectus Cover Page
3.Summary Information and Risk Factors Prospectus Summary; The Company; Risk
Factors
4.Use of Proceeds Use of Proceeds
5 Determination of Offering Price Risk Factors; Plan of Distribution
6.Dilution Dilution
7.Selling Security Holders Not Applicable
8.Plan of Distribution Prospectus Cover Page; Plan of
Distribution
9.Legal Proceedings Legal Proceedings
10.Directors, Executive Officers,
Promoters and Control Persons Management; Principal Shareholders
11.Security Ownership of Certain
Beneficial Owners and Management Principal Shareholders
12 Description of Securities Description of Securities
13.Interest of Named Experts and Counsel Legal Matters; Experts
14 Disclosure of Commission Position on
Indemnification for Securities Act Certain Relationships and Related
Liabilities Transactions
15.Organization Within Five Years Prospectus Summary; Proposed Business
16.Description of Business Proposed Business
17.Management's Discussion and Analysis
or Plan of Operation Management's Plan of Operation
18. Description of Property Proposed Business
19.Certain Relations and Related Certain Relationships and Related
Transactions Transactions
20.Market for Common Equity and Related Description of Securities; Selling
Stockholder Matters Security Holders
21.Executive Compensation Management
22.Financial Statements Financial Statements
23.Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure Not applicable
PRELIMINARY PROSPECTUS DATED MAY 10, 2004
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
3
PROSPECTUS
500,000 shares of Common Stock
$0.10 per share
WINMARK, INC.
Prior to this offering, there has been no public market for our securities. We
intend to offer, sell and distribute publicly not less than 50,000 shares our
securities at an offering price of $0.10 per share, for an offering of $50,000.
Our offering is being offered on a "best efforts", "all-or-none" basis during an
offering period of 90 days that may be extended for an additional 90 days. If
less than $50,000 is received from the sale of the shares within the offering
period, all investors' funds will be promptly refunded without interest or
deduction for commission or other expenses.
Subscribers will not be able to obtain return of their funds while in escrow.
There will be a minimum purchase of 5,000 shares at $500. The securities and
proceeds of this offering will be held in an escrow account until the closing of
this offering and the closing of a business opportunity, such as a merger or
acquisition.
We intend to offer our securities directly to the public only through our sole
officer and director in those jurisdictions where sales by such persons are
permitted by law. No broker-dealer will be used to offer our securities to the
public and no commissions will be paid to any third party. The price of our
securities has been arbitrarily determined, and does not bear any relationship
to our assets, book value, net worth or results of operations or any other
established criteria of value.
Investing in our securities involves risk.
See "Risk Factors" beginning on page 9.
Offering Costs(2), Net
Price to Discounts and Proceeds
Public Commissions(3)
------------ ----------------- -------------
Per share $0.10 $0.00
$0.10
Aggregate Offering Amount $50,000.00 $0.00 $50,000.00
____________________________________
(2) Offering costs of approximately $22,000 are being paid out of pre-offering
working capitol.
(3) No commissions will be paid nor discounts given.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May 10, 2004.
4
TABLE OF CONTENTS
-----------------------
Page
Prospectus Summary .....................................................6
Risk Factors............................................................7
Use of Proceeds.........................................................12
Dilution................................................................13
Dividend Policy.........................................................14
Management's Plan of Operation..........................................14
Proposed Business.......................................................15
Management..............................................................25
Principal Stockholders..................................................26
Certain Relationships and Related Transactions..........................26
Description of Securities...............................................26
Plan of Distribution....................................................28
Legal Proceedings.......................................................30
Legal Matters...........................................................30
Experts.................................................................30
Where You Can Find More Information.....................................30
Index to Financial Statements...........................................32
Report of Independent Certified Public Accountants......................32
Information not Required in Prospectus..................................41
Exhibits................................................................43
Undertakings............................................................44
Signatures..............................................................45
5
Reliance on Prospectus
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may be used only where it is
legal to sell these securities. The information in this prospectus may be
accurate only on the date of this prospectus.
PROSPECTUS SUMMARY
The Company
Winmark, a development stage corporation, was organized to provide a corporate
entity in order to participate in certain business opportunities that arise from
time to time. We are a blank check company and are subject to certain regulatory
requirements imposed by Rule 419 of Regulation C under the Securities Act. We
believe that following this offering certain business opportunities may become
available to us due primarily to our status as a reporting publicly held company
with liquid assets and to our flexibility in structuring and participating in
certain business combinations, such as mergers and acquisitions. However, we
have no plans, proposals, arrangements, understandings or agreements to
participate in any specific business opportunity.
Winmark was originally incorporated in Nevada on December 22, 2003. On April 19,
2004 we filed a Certificate of Amendment with the State of Nevada changing our
name to Winmark, Inc. In this prospectus, we refer to Winmark, Inc. as
"Winmark", "we" and "us." Our principal executive offices are located at 607 E
Street, S.E. Washington, D.C. 20003.
The Offering
Securities Offered by Winmark, Inc.: 500,000 shares
Shares Outstanding Prior to Offering 5,000,000 shares
Shares Outstanding After Offering: 5,500,000 shares
Comparative Share Ownership Upon Completion of
Offering:
Current Shareholders (5,000,000 shares) 90.91%
Public Shareholders (500,000 shares) 9.09%
Use of Proceeds Business
development; working capital as
utilized by prospective
business opportunity candidate.
Winmark is offering 500,000 shares at $0.10 per share on a "best efforts",
"all-or-none basis." The public offering price of the shares was arbitrarily
determined by us and does not necessarily relate to our assets, book value or
results of operations or any other established criteria of value.
The securities and proceeds of this offering shall remain in escrow until the
closing of this offering and the closing of a business opportunity, such as a
merger or acquisition.
6
PROSPECTUS SUMMARY - continued
Selected Financial Data
The following table sets forth selected financial
information concerning Winmark:
December 31,
2003
--------------
Balance Sheet:
Current assets $ 0
Total assets 0
Current liabilities 0
Working capital 0
Stockholders' equity
Net tangible book value per share $ 0
Statement of Operations:
Revenue $ 0
Total expenses 22,000
Net loss $ (22,000)
The "Selected Financial Data" is a summary only and has been derived from and is
qualified in its entirety by reference to Winmark's financial statements,
included in this prospectus.
RISK FACTORS
The securities offered are highly speculative in nature and involve a high
degree of risk. They should be purchased only by persons who can afford to lose
their entire investment. Therefore, each prospective investor should, prior to
purchase, consider very carefully the following risk factors among other things,
as well as all other information set forth in this prospectus. We may not be
able to continue to operate as a going concern.
Our ability to operate as a going concern is dependant upon the completion of
this offering and the closing of a business opportunity, such as the merger with
or acquisition of an operating business. If we receive less than all of the
proceeds as a result of later refunds under Rule 419, we may be materially
adversely affected to the extent that we may not be able to implement the
business plan of our business opportunity and we may, otherwise, be
undercapitalized such that we may not have enough capital to implement and
maintain our business operations. These requirements will significantly increase
our time and costs of doing business, which may also have a material adverse
effect on us.
Our sole director and officer is inexperienced in the management of a blank
check company.
Our sole director and officer, Mark Winstein, has no prior experience in
managing a blank check company or in merger and acquisition transactions. While
Mr. Winstein has experience as an environmental consultant, he is inexperienced
in other industries outside the environmental area that we may seek to locate a
merger or acquisition candidate. Mr. Winstein's inexperience could hinder our
ability to locate a suitable merger or acquisition candidate and consummate a
successful transaction with such a candidate. We have no employment agreement
with our sole officer and director.
7
RISK FACTORS - continued
Mr. Winstein's term as our sole director and officer expires on December 21,
2004. We presently have no employment agreement with Mr. Winstein nor do we
intend to enter into such an agreement in the foreseeable future. Further, we
have no agreement currently in place with Mr. Winstein for his services beyond
his initial term. Thus he could elect to resign his position without recourse
before the expiration of his term or before the completion of this offering. Our
business is difficult to evaluate because we have no operating history. Our
operations are subject to all of the risks inherent in the establishment of a
new business enterprise, including, but not limited to:
o the absence of an operating history;
o the problems, expenses, difficulties, complications and delays
frequently encountered by a new business; and
o we have not been in business long enough to enable an investor to make
a reasonable judgment as to our future performance.
Decisions as to which business opportunity to participate in will be
unilaterally made by our sole officer and director, Mark Winstein, who may act
without the consent, vote or approval of our shareholders. We have no plans,
proposals, arrangements, understandings or agreements to participate in any
specific business opportunity, such that, among other aforementioned factors,
this offering is a "blank check" offering.
Our business will have no revenues unless and until we merge with or acquire an
operating business.
We are a development stage company and have had no revenues from operations. We
may not realize any revenues unless and until we successfully merge with or
acquire an operating business.
We intend to issue more shares in a merger or acquisition, which will result in
substantial dilution.
Our certificate of incorporation authorizes the issuance of a maximum of
25,000,000 shares of common stock, $.001 par value. Any merger or acquisition
effected by us may result in the issuance of additional securities without
shareholder approval and may result in substantial dilution in the percentage of
our common stock held by our then existing shareholders. Moreover, the common
stock issued in any such merger or acquisition transaction may be valued on an
arbitrary or non-arms-length basis by our management, resulting in an additional
reduction in the percentage of common stock held by our then existing
shareholders.
We have substantial competition for business opportunities, which may affect our
ability to merge with or acquire a business.
We are and will continue to be an insignificant participant in the business of
seeking business opportunities. A substantial number of established and well
financed entities, including investment banking and venture capital firms, have
recently increased their merger and acquisition activities, especially. Nearly
all such entities have substantially greater financial resources, technical
expertise and managerial capabilities than we have and, consequently, we will be
at a competitive disadvantage in identifying suitable merger or acquisition
candidates and successfully concluding a proposed merger or acquisition.
8
RISK FACTORS - continued
We have conducted no market research or identification of business
opportunities, which may affect our ability to identify a business to merge with
or acquire.
We have neither conducted nor have others made available to us results of market
research concerning prospective business opportunities. Therefore, we have no
assurances that market demand exists for a merger or acquisition as contemplated
by us. Mr. Winstein has not identified any specific business combination or
other transactions for formal evaluation, such that it may be expected that any
such target business or transaction will present such a level of risk that
conventional private or public offerings of securities or conventional bank
financing will not be available. There is no assurance that we will be able to
acquire a business opportunity on terms favorable to us. Decisions as to which
business opportunity to participate in will be unilaterally made by Mr.
Winstein, who may act without the consent, vote or approval of our shareholders.
Our offering is significantly regulated by Rule 419 of Regulation C under the
Securities Act, which will significantly increase our time and costs of doing
business.
Rule 419 of Regulation C under the Securities Act generally requires:
o the deposit of the securities and proceeds of our offering in an
escrow account, and that the investors may not have access to their
securities and funds for up to 18 months from the date of the
prospectus;
o that if the money is returned to the investors they will not be
receiving interest on their funds; and
o that if a significant number of investors do not reconfirm their
investment, the business combination may not be closed and the
investors will not be issued their securities.
In a best efforts distribution of securities conducted on an "all or nothing"
basis, or on any other basis in which payment will not be made to the issuer
until some further event or contingency occurs, Rule 15c2-4 under the Exchange
Act requires that a broker-dealer participant be obligated to either segregate
funds received in a separate bank account, as agent or trustee, or to deposit
promptly such funds with a bank pursuant to a written escrow agreement, pending
the occurrence of the contingency. Broker-dealers that do not carry customer
accounts or that are affiliated with the issuer must deposit offering funds in
an escrow account established at a bank.
In contingency offerings, Rule 419 provisions relating to the release of funds
and Exchange Act Rule 10b-9 obligations will apply. Rule 10b-9 prohibits as a
"manipulative or deceptive device or contrivance" under Section 10(b) of the
Exchange Act any representations that a security is being offered on an "all or
none" or "part or none" basis, unless prompt refunds are made to purchasers if
the represented number of securities is not sold at the specified price within
the specified time and the total amount due the seller is not received by the
seller by the specified date. Also, Rule 15c2-4 does not permit the payment of
underwriting commissions or disbursal of deposited funds to us until the
specified contingency is satisfied. With respect to a blank check offering
subject to both Rule 419 and Rule 15c2-4, the requirements of Rule 15c2-4 are
9
RISK FACTORS - continued
applicable only until the conditions of the offering governed by that Rule are
met, for example, reaching the total offering amount in an all-or-none offering,
such as our offering. Upon satisfaction of these conditions, Rule 419 continues
to govern the use of offering proceeds.
Just as with Rule 15c2-4, for blank check offerings subject to both Rule 419 and
Rule 10b-9, the requirements of Rule 10b-9 apply until the conditions of the
offering governed by that Rule are met, for example, reaching the total offering
amount in an all-or-none offering. Upon satisfaction of Rule 10b-9, the
provisions of Rule 419 will continue to govern. Since we are a blank check
company filing our initial registration statement for a contingent offering
subject to Rule 10b-9, the provisions of the Rule apply only until the
conditions subject to that Rule are met, but after satisfaction of such
conditions an investor is not guaranteed a return of proceeds even if, as a
result of investor refund requests under 419, the Rule 10b-9 conditions would no
longer be met.
We may be regulated under the Investment Company Act of 1940, which will
significantly increase our compliance costs.
Although we will be subject to regulation under the Securities Act and the
Exchange Act, we believe that we will not be subject to regulation under the
Investment Act insofar as (i) we will not be engaged in the business of
investing or trading in securities, and (ii) we will attempt to obtain a
controlling interest in any merger or acquisition candidate. We have not
obtained a formal determination from the Commission as to our status under the
Investment Act and, consequently, any violation of such Investment Act or any
proposed activities which may bring it within the Investment Act may subject us
to material adverse consequences, including significant registration and
compliance costs. Because we do not intend to register under the Investment Act,
investors will not have the benefit of the various protective provisions imposed
on investment companies, including requirements for independent board members,
mandated by such Investment Act.
We may be subject to certain tax consequences in our business, which may
increase our costs of doing business.
In the course of any merger or acquisition that we may undertake, a substantial
amount of attention will be focused upon federal and state tax consequences to
both us and the "target" company. Presently, under the provisions of federal and
various state tax laws, a qualified reorganization between entities will
generally result in tax-free treatment to the parties to the reorganization.
While we expect to undertake any merger or acquisition so as to minimize federal
and state tax consequences to both us and the "target" company, there is no
assurance that such business combination will meet the statutory requirements of
a reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization may result
in the imposition of both federal and state taxes that may have a material
adverse effect on us.
We may need additional capital to fund our operations and finance our growth
beyond the initial 18 months operating period and we may not be able to obtain
it on terms acceptable to us or at all.
Mr. Winstein intends to fund our operations and other capital needs, which are
anticipated to be minor, for the next 18 months until such time as the closing
of this offering and the closing of a business opportunity, such as a merger or
10
RISK FACTORS - continued
acquisition. We do not anticipate requiring additional funds during the next 18
months. Our plan of operation following the effective date of this offering
encompasses a merger with or acquisition of an operating business, but we will
not know what our cash requirements will be until we close such merger or
acquisition. We will not use any of the proceeds of this offering unless and
until we close this offering and close a business opportunity. Should the
business opportunity have profitable operations, its capital needs may not
require the use of our proceeds that, in such event, will be held as working
capital for future contingencies. We have made no arrangements to obtain future
additional financing beyond this 18 months period, if required, and there can be
no assurance that such financing will be available, or that it will be available
on terms acceptable to us.
Rule 419 requires the deposit of the securities and proceeds of the offering in
an escrow account, which affects the liquidity for the escrowed securities.
Rule 419 of Regulation C under the Securities Act generally requires among other
things, the deposit of the securities and proceeds of the offering in an escrow
account. During the term of the escrow, there is no liquidity for the escrowed
securities since they may not be offered and sold, which may have a material
adverse effect on your investment. The securities sold in this offering will be
held in an escrow account and you will not be able to sell them until they are
released upon the consummation of a business opportunity, such as a merger or
acquisition. The securities may be held as long as 18 months from the date of
this prospectus.
Our management has other financial and business interests to which a significant
amount of time is devoted, which may pose significant conflicts of interest.
Because Mr. Winstein has other financial and business interests, conflicts of
interest may arise which may compete for his services and time. Mr. Winstein has
no plans, proposals, arrangements, understandings or agreements to participate
with any specific business opportunity with us. Mr. Winstein may, in the future,
hold similar positions in other blank check companies, which may conflict with
the interests of Winmark. Conflicts may also arise in important matters such as
identifying and selecting a merger or acquisition candidate. There can be no
assurance that Mr. Winstein will resolve all conflicts of interest in our favor.
Purchase of our securities involves suitability standards, which may limit your
ability to participate in our offering.
Purchase of our securities offered hereby is suitable only for accredited
investors who have no need for liquidity in this investment and who have
adequate means of providing for their annual needs and contingencies.
Accordingly, our securities offered hereby will not be sold to a prospective
accredited investor, as defined in Rule 501 of Regulation D, unless such
investor: (i) has a net worth (inclusive of homes, personal property and
automobiles) of at least $1 million, or (ii) has during the last two years, and
expects to have during the current year, gross income from any source of at
least $200,000.
This prospectus contains forward-looking statements and information relating to
us, our industry and to other businesses. These forward-looking statements are
based on the beliefs of our management, as well as assumptions made by and
information currently available to our management. When used in this prospectus,
the words "estimate," "project," "believe," "anticipate," "intend," "expect" and
similar expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are
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RISK FACTORS - continued
subject to risks and uncertainties that may cause our actual results to differ
materially from those contemplated in our forward-looking statements. We caution
you not to place undue reliance on these forward-looking statements, which speak
only as of the date of this prospectus. We do not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
USE OF PROCEEDS.
Mr. Winstein estimates we will receive net proceeds of approximately $50,000
from our sale of 500,000 shares offered by us. This estimate is based upon an
offering price of $0.10 per share of common stock with no deduction for
estimated offering expenses as these costs are being paid out of our
pre-offering working capital. Also, we will pay no commissions or offer any
discounts. These proceeds will be utilized in order of priority as listed below
for approximately 18 months substantially as follows:
Use of Net Offering %
Proceeds Proceeds
----------------------------------------
Business $ 45,000 90.00
development
Working capital 5,000 10.00
---------- ----------
$ 50,000 100.00
Since this offering is a "blank check" offering, and we have not identified a
business opportunity, the use of proceeds of this offering cannot be described
with specificity. We have no plans, proposals, arrangements, understandings or
preliminary agreements to participate in any specific business opportunity. All
of the net proceeds will be utilized by our merger or acquisition candidate for
the development of its business and for working capital. Uses of working capital
will include, but not be limited to, general and administrative salaries,
exclusive of management salaries, associated benefits, office lease and
expenses. The salaries of the management of the business opportunity candidate
will be paid from such company's cash flow and not from the proceeds of this
offering.
We intend to escrow all of the proceeds of this offering with Manufacturers and
Traders Trust Company, a New York banking company, until the closing of this
offering and the closing of a merger with or acquisition of a business.
Following the completion of a merger with or acquisition of a business, all of
the net proceeds will be used for business development and working capital.
Working capital will be utilized by us to enhance and, otherwise, stabilize cash
flow during the initial 18 months of operations following the completion of a
merger with or acquisition of a business, such that any shortfalls between cash
generated by operating revenues and costs will be covered by working capital.
Our working capital may also be used for unforeseen requirements. Although we
prefer to retain our working capital in reserve, we may be required to expend
part or all of these proceeds as financial demands dictate. We may find it
12
RISK FACTORS - continued
necessary or advisable to use portions of the proceeds for other purposes.
Pending application of the net proceeds as described above, we may invest the
net proceeds of this offering in insured, short-term, investment-grade,
interest-bearing securities.
DILUTION
"Dilution" is the difference between the offering price and the net tangible
book value of our shares of common stock immediately after the offering. "Net
tangible book value" is determined by dividing the number of shares of common
stock issued and outstanding into our net tangible worth (tangible assets less
liabilities).
Our net tangible book value at December 31, 2003, was $5,000, or $(0.001) per
share. Our pro forma net tangible book value at the closing of this offering
will be $50,000, or $0.0091 per share, assuming 500,000 shares are sold. These
computations, which do not give effect to discounts and commissions of the
offering as none are to be paid, represent an immediate increase in net tangible
book value of $0.009 per share to present shareholders if the entire 500,000
shares offered are sold. These computations represent an immediate dilution of
$0.091 per share to public investors if the entire 500,000 shares are sold.
The following table illustrates the dilution of a public investor's equity in a
share of common stock as of December 31, 2003, adjusted as described above.
Assuming Fully
Subscribed
Offering
-----------
Public offering price per share $ .10
Net tangible book value per share, before public offering $ (.001)
Increase (to present shareholders) per share attributable
to our proceeds from sale to public investors $ 0.009
Pro forma net tangible book value per share,
after public offering $ 0.0091
Dilution of bookvalue per share to public investors $ 0.091
The public investors purchasing the securities offered hereby for $0.10 per
share will own 500,000 shares of our common stock, or 9.09 percent of the
outstanding shares, for which they will have paid $50,000. Mr. Winstein will own
5,000,000 shares, or 90.91 percent of the 5,500,000 shares that will then be
outstanding upon completion of the offering, for which he shall have paid
$22,000.
The following table compares the public offering price of $0.10 per share and
the percentage of our common stock to be owned by the public investors after
giving effect to this offering, with the cash consideration paid and the
percentage of our common stock to be owned by Mark Winstein, our sole current
stockholder:
13
DILUTION - continued
Average Total Percentage of
Shares Percentage of Price Per Consideration Total
Purchased Total Shares Share Paid Consideration Paid
------------ ------------- ------------- -------------- -------------------
Shares to be Purchased by
Public Investors: 500,000 9.09 $0.10 $50,000 69.44%
Shares Purchased by Mark
Winstein: 5,000,000 90.91 $0.0044 $22,000 30.56%
</table>
DIVIDEND POLICY
We have never paid cash dividends on our common stock and have no plans to do so
in the foreseeable future. The declaration and payment of any dividends in the
future will be determined by our board of directors and will depend on a number
of factors including our earnings, capital requirements and overall financial
condition.
MANAGEMENTS' PLAN OF OPERATION
Our plan of operation should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this prospectus. The
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs of our development stage company. Our actual results may differ
materially from those discussed in the forward-looking statements. Factors that
may cause or contribute to these differences include, but are not limited to,
those discussed below and elsewhere in this prospectus, particularly in "Risk
Factors."
We have not had any revenues since inception. Our sole objective is to acquire
an operating business through a merger or acquisition.
Mr. Winstein intends to fund our operations and other capital needs, which are
anticipated to be minor, for the next 18 months until such time as the closing
of this offering and the closing of a business opportunity, such as a merger or
acquisition. We do not anticipate requiring additional funds during the next 18
months. Our plan of operation following the effective date of this offering
encompasses a merger with or acquisition of an operating business, but we will
not know what our cash requirements will be until we close such merger or
acquisition. We will not use any of the proceeds of this offering unless and
until we close this offering and close a business opportunity. Our management
will bear the expense to locate and identify an operating business candidate,
and those expenditures are expected to be minor. The expenses will be reimbursed
following the closing of the business opportunity with the consent of the
business opportunity candidate. Should the business opportunity have profitable
operations, its capital needs may not require the use of our proceeds that, in
such event, will be held as working capital for future contingencies. We have no
plans, proposals, arrangements, understandings or agreements to participate in
any specific business opportunity. We have made no arrangements to obtain future
additional financing beyond this 18 months period, if required, and there can be
no assurance that such financing will be available, or that it will be available
on terms acceptable to us.
14
MANAGEMENTS' PLAN OF OPERATION - continued
Our ability to continue as a going concern is dependent upon the completion of
this offering. In view of the limited amount of funds available to us in this
offering, we may exhaust our limited financial resources soon after we merge
with or acquire an operating business due to its financial demands.
Subsequent to the closing of this offering and the closing of a business
opportunity, our net proceeds will be for the development of the business
opportunity and for working capital. The development of the business opportunity
may be hampered by our limited resources and, as a result, may have a material
adverse affect on our ability to continue as a going concern.
PROPOSED BUSINESS
Winmark, a development stage company, was incorporated in Nevada in December
2003. Since inception, our principal activity has been directed to
organizational efforts.
Winmark was organized to provide a corporate entity in order to participate in
certain business opportunities that arise from time to time. We believe that
following this offering certain business opportunities may become available to
us due primarily to our status as a reporting publicly held company with liquid
assets and to our flexibility in structuring and participating in certain
business combinations, such as mergers and acquisitions. We will not participate
in any business opportunity for which current audited financial statements
cannot be obtained. Decisions as to which business opportunity to participate in
will be unilaterally made by Mr. Winstein, who may act without the consent, vote
or approval of our shareholders. We have no plans, proposals, arrangements,
understandings or agreements to participate in any specific business
opportunity.
Certain regulatory requirements apply to blank check offerings, such as our
offering. General requirements include:
o the deposit of the securities and proceeds of the offering in an
escrow account;
o the disclosure of certain offering terms of the escrow agreement and
information regarding a probable merger or acquisition;
o a post-effective amendment of a probable merger or acquisition;
o funds held in the escrow account may be released to us and securities
may be delivered to the purchasers or other registered holders
identified on the deposited securities only at the same time as or
after (i) the escrow agent has received a signed representation from
us, together with other evidence acceptable to it, that the
requirements with respect to the terms of the offering and filing with
the Commission have been met; and (ii) consummation of a business
opportunity, such as a merger or acquisition; and
o securities held in escrow may not be offered for sale or sold.
15
PROPOSED BUSINESS - continued
The terms of the post-effective amendment must provide, and we must satisfy, the
following general conditions:
o delivery of a current prospectus contained in the post-effective
amendment;
o notification in writing that the purchaser elects to remain an
investor;
o the acquisition will be consummated if a sufficient number of
purchasers confirm their investment with us; and
o if an acquisition has not occurred within 18 months following the
effective date of this offering, the securities and funds held in
escrow shall be promptly returned to the purchasers.
Mr. Winstein has substantial experience in the area of environmental consulting.
Because of our limited resources, however, it may be anticipated that we may
acquire an interest in one or a few business opportunities to which Mr. Winstein
is exposed and which is determined to be reasonably suitable.
Persons purchasing shares in this offering and other shareholders will not have
the opportunity to participate in any of our ordinary business decisions. Our
proposed business is characteristically referred to as a blind pool since
investors will entrust their investment funds to our management before they have
the chance to analyze any ultimate use to which their funds may be used.
Consequently, our potential success is heavily dependent on Mr. Winstein, who
will have unilateral discretion in identifying and entering into a business
opportunity, such as a merger or acquisition.
Mr. Winstein anticipates that we may be able to participate in only one
potential business venture, due primarily to our limited financing. This lack of
diversification should be considered a risk factor in investing in us because it
will not permit us to offset potential losses from one venture against gains
from another.
There are no plans, proposals, arrangements, understandings or agreements with
respect to the sale of additional securities to affiliates or others following
the registered distribution herein and prior to the identification of a business
opportunity.
We have, and will continue to have following the completion of this offering,
insufficient capital with which to provide the owners of business opportunities
with any substantial cash or other assets. However, Mr. Winstein believes that
we will offer owners of business opportunities the opportunity to acquire a
controlling ownership interest in a public company at substantially less cost
than is required to conduct an initial public offering of securities. The owners
of the business opportunities will, however, incur significant post-merger or
acquisition registration costs in the event they wish to register a portion of
their shares for subsequent sale. We will also incur significant legal fees and
expenses in connection with the acquisition of a business opportunity including:
16
PROPOSED BUSINESS - continued
o the costs of preparing post-effective amendments, interim reports,
quarterly reports, annual reports and proxy materials; and
o legal fees and expenses incurred in the preparation of legal documents
for mergers and acquisitions.
Nevertheless, Mr. Winstein has not conducted market research and is not aware of
statistical data that would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
Compensation may be paid or profit transactions may occur in connection with a
merger or acquisition by us by means of a stock exchange transaction or other
similar means, including, but not limited to, payments of business advisory,
legal and accounting fees, sales of current securities, positions and other
methods of payment by which current security holders receive funds, securities
or other assets.
Following the closing of this offering, we must maintain a current registration
statement that may require updating by the filing of a post-effective amendment.
A post-effective amendment is required when facts or events have occurred which
represent a fundamental change in the information contained in the registration
statement, such as the participation in a business opportunity related to a
merger or acquisition. Further, upon the closing of the merger or acquisition,
the successor company would assume significant compliance and reporting
obligations and costs before the Commission, including the filing of a Form 8-K
and a registration statement with the Commission in order to become an Exchange
Act reporting company, which may have a material adverse effect on such company.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of Mr. Winstein. Mr. Winstein intends to concentrate on identifying
preliminary prospective business opportunities upon the closing of this
offering. Mr. Winstein shall attempt to locate suitable merger or acquisition
candidates by personally contacting his network of professional contacts
obtained over many years of providing environmental consulting services to the
private business sector. We may retain paid outside business advisors to assist
in locating and evaluating business opportunities. Any cash fee earned by such
parties will need to be paid by the prospective merger/acquisition candidate,
and such payment by the target company shall be a condition for consummating a
merger or acquisition. Members of our management will not be entitled to a
finder's fee for locating a merger or acquisition candidate. Such advisors, if
any, will not be affiliated with us or our management. We have no preliminary
plans, proposals, arrangements, understandings or agreements with any party to
borrow funds to increase the amount of capital available.
17
PROPOSED BUSINESS - continued
In analyzing prospective business opportunities, Mr. Winstein will consider such
matters as:
o the available technical, financial and managerial resources;
o working capital and other financial requirements;
o history of operations, if any;
o prospects for the future;
o nature of present and expected competition;
o the quality and experience of management services which may be
available and the depth of that management;
o the potential further research, development or exploration;
o specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of us;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition or acceptance of products, services
or trades;
o name identification; and
o other relevant factors.
Mr. Winstein will meet personally with management and key personnel of the firm
sponsoring the business opportunity as part of their investigation. To the
extent possible, we intend to utilize written reports and personal and
professional investigations to evaluate the above factors. We will not merge
with or acquire any company for which audited current financial statements
cannot be obtained. Further, Mr. Winstein has passed a resolution that prohibits
us from engaging in an acquisition or merger with any entity in which Mr.
Winstein or his affiliates or associates serve as an officer or director or hold
an ownership interest.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture or licensing
agreement with another corporation or entity. We may also purchase stock or
assets of any existing business. On the consummation of a transaction, it is
possible that our present management and shareholders will not be in control of
Winmark. In addition, our management may, as part of the terms of the
acquisition transaction, resign and be replaced by new management without a vote
of our shareholders.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration under applicable federal and
state securities laws. In some circumstances, however, as a negotiated element
of this transaction, we may agree to register such securities either at the time
18
PROPOSED BUSINESS - continued
the transaction is consummated, under certain conditions or at specified times
thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that may develop in our securities may
have a depressive and material adverse effect on such market.
While the actual terms of a transaction to which we may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so-called "tax-free" reorganization under the Internal
Revenue Code of 1986, as amended. In order to obtain tax-free treatment under
the Code, it may be necessary for the owners of the acquired business to own 80
percent or more of the voting stock of the surviving entity. In such event, our
shareholders, including investors in this offering, will retain 20 percent or
less of the issued and outstanding shares of the surviving entity, which will
result in significant dilution in the equity of such shareholders.
As part of our investigation, Mr. Winstein will meet personally with management
and key personnel, may visit and inspect facilities, obtain independent analysis
or verification of certain information provided, check references of management
and key personnel and take other reasonable and investigative measures, as part
of its due diligence, to the extent of our limited resources and management
expertise.
The manner in which we participate in an opportunity will depend on the nature
of the opportunity, our respective needs and desires and other parties, the
management of the opportunity and our relative negotiating strength and such
other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of our company that
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, our shareholders will in all likelihood hold a lesser
percentage ownership interest in us following any merger or acquisition. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with substantial assets. Any merger or acquisition
effected by us can be expected to have a significant dilutive effect on the
percentage of shares held by our then existing shareholders, including
purchasers in this offering.
Securities owned or controlled by Mr. Winstein will not be sold in any business
combination transaction without affording all of our shareholders a similar
opportunity.
It is unlikely that we will have sufficient funds from the proceeds of this
offering to undertake any significant development, marketing and manufacturing
of any products that may be acquired. Accordingly, following the acquisition of
such product, we will, in all likelihood, be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which we would probably be required to give up a substantial portion of our
interest in any acquired product. There is no assurance that we will be able to
either obtain additional financing or interest third parties in providing
funding for the further development, marketing and manufacturing of any products
acquired.
19
PROPOSED BUSINESS - continued
We will participate in a business opportunity only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require specific
representations and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and conditions which
must be satisfied by each of the parties prior to such closing, will outline the
manner of bearing costs if the transaction is not closed, will set forth
remedies on default and will include miscellaneous other terms.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant merger and acquisition
agreements, disclosure documents and other instruments will require substantial
management time and attention and significant fees and expenses for attorneys,
accountants and others. If a decision is made not to participate in a specific
business opportunity, the costs and expenses therefore incurred in the related
investigation would not be recoverable. Futhermore, even if an agreement is
reached for the participation in a specific business opportunity, the failure to
consummate that transaction may result in the loss to us of the related costs
and expenses incurred.
Mr. Winstein believes that we may be able to benefit from the use of "leverage"
in the acquisition of a business opportunity. Leveraging a transaction involves
the acquisition of a business through incurring indebtedness for a portion of
the purchase price of that business. Through a leveraged transaction, we would
be able to participate in a larger venture to have funds available to the
operations of the business opportunity, the acquisition of other business
opportunities or to other activities. The borrowing involved in a leveraged
transaction will ordinarily be secured by our combined assets and the business
opportunity to be acquired. If the combined enterprises are not able to generate
sufficient revenues or make payments on the debt incurred to acquire that
business opportunity, the lender would be able to exercise the remedies provided
by law or by contract. These leveraging techniques, while reducing the amount of
funds that we must commit to a business opportunity acquisition may
correspondingly increase our risk of loss. No assurance can be given as to the
terms or the availability of financing for any acquisition by us. During periods
when interest rates are relatively high, the benefits of the leveraging are not
as great as during periods of lower interest rates because the investment in the
business opportunity held on a leveraged basis will only be profitable if it
generates sufficient revenues to cover the related debt and other costs of the
financing. Lenders from which we may obtain funds for purposes of a leveraged
buyout may impose restrictions on our future borrowing, dividend and operating
policies. It is not possible at this time to predict the restrictions, if any,
which lenders may impose or the impact thereof on us.
Our operations following our acquisition of an interest in a business
opportunity will be dependent on the nature of the opportunity and interest
acquired. We are unable to predict whether we will be in control of the
opportunity or whether present management will be in control of us following the
acquisition. It may be expected that the business of the opportunity will
present various risks to investors, certain of which have been generally
summarized herein.
20
PROPOSED BUSINESS - continued
Regulation
Your Rights and Substantive Protections Under Rule 419
Deposit of Offering Proceeds and Securities
The Securities Act imposes certain regulatory requirements on blank check
offerings, such as our offering. In particular, Rule 419 of Regulation C under
the Securities Act generally requires:
o the deposit of the securities and proceeds of the offering in an
escrow account;
o the disclosure of certain offering terms of the escrow agreement and
information regarding a probable merger or acquisition;
o a post-effective amendment of a probable merger or acquisition; and
o the disclosure of certain conditions on the release of deposited funds
and securities of the offering.
For purposes of Rule 419, a blank check offering is a company, such as ours,
that is a development stage company that has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies. Rule 419 also applies in
its entirety to the offering by the selling security holders, including the
escrow of their securities and funds until the closing of a business
opportunity, such as a merger with or acquisition of an operating company.
We have established an escrow account for the funds and securities of our
offering with Manufacturers and Traders Trust Company, an FDIC insured
depository institution, in compliance with the Securities Act. If funds and
securities are deposited into an escrow account maintained by an insured
depository institution, the Act requires that the deposit account records of the
insured depository institution must provide that funds and securities in the
escrow account are held for the benefit of the purchasers named and identified
in accordance with the regulations of the Federal Deposit Insurance Corporation,
and the records of the escrow agent, maintained in good faith and in the regular
course of business, must show the name and interest of each party to the
account.
All offering proceeds shall be deposited promptly into the escrow account;
provided, however, that no deduction may be made for underwriting commissions,
underwriting expenses or dealer allowances payable to an affiliate of us.
We intend to invest the deposited proceeds of our offering into an obligation
that constitutes a "deposit," as that term is defined in the Federal Deposit
Act, or in securities that are direct obligations of, or obligations guaranteed
as to principal or interest by, the United States, in compliance with the
Securities Act.
Interest or dividends earned on the funds, if any, shall be held in the escrow
account until the funds are released. If funds held in the escrow account are
released to a purchaser of the securities, the purchasers shall receive interest
or dividends earned, if any, on such funds up to the date of release. If funds
held in the escrow account are released to us, interest or dividends earned on
such funds up to the date of release may also be released to us.
21
PROPOSED BUSINESS - continued
All securities issued in connection with the offering, including securities
offered by selling security holders, whether or not for cash consideration, and
any other securities issued with respect to such securities, including
securities issued with respect to stock splits, stock dividends or similar
rights, shall be deposited directly into the escrow account promptly upon
issuance until the closing of this offering and the closing of a business
opportunity, such as a merger or acquisition, and until the conditions for
release of deposited funds and securities have been met. The identity of the
purchaser of the securities shall be included on the stock certificates or other
documents evidencing such securities.
Securities held in the escrow account are to remain as issued and deposited and
shall be held for the sole benefit of the purchasers, who shall have voting
rights, if any, with respect to securities held in their names, as provided by
applicable state law. No transfer or other disposition of securities held in the
escrow account or any interest related to such securities shall be permitted
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended, or the Employee Retirement Income Security Act, as amended.
A copy of the escrow agreement, which outlines the terms and conditions above,
has been included as an exhibit to our registration statement, of which this
prospectus forms a part.
Prescribed Acquisition Criteria and Post-Effective Amendment
If, during any period in which offers or sales of our securities are being made,
a significant merger or acquisition becomes probable, we shall promptly file a
post-effective amendment disclosing the information specified by the applicable
registration statement form, including our financial statements and the company
to be merged with or acquired as well as pro forma financial information
required by the form and applicable rules and regulations.
Upon the execution of any agreement for the merger with or acquisition of a
business or assets that will constitute our business and which the fair value of
the business or net assets to be acquired represents at least 80 percent of the
maximum offering proceeds, including proceeds received or to be received by
selling security holders and upon the exercise or conversion of any securities
offered, but excluding amounts payable to non-affiliates for underwriting
commissions, underwriting commissions and dealer allowances, we shall file a
post-effective amendment that:
o discloses the information specified by the applicable registration
statement form, including our financial statements and the company
acquired or to be acquired and pro forma financial information
required by the form and applicable rules and regulations; and
o discloses the results of our initial offering, including, but not
limited to the gross offering proceeds received to date, specifying
the amounts paid for underwriting commissions, underwriting expenses
and dealer allowances, amounts disbursed to us and amounts remaining
in the escrow account; and the specific amount, use and application of
funds disbursed to us to date, including, but not limited to, the
amounts paid to officers, directors, promoters, controlling
shareholders or affiliates, either directly or indirectly, specifying
the amounts and purposes of such payments; and discloses the terms of
the offering. Reconfirmation of Offering
22
PROPOSED BUSINESS - continued
The terms of the offering must provide, and we must satisfy, the following
conditions:
o within five business days after the effective date of the
post-effective amendment, we shall send by first class mail to each
purchaser of securities held in escrow, a copy of the prospectus
contained in the post-effective amendment and any amendment or
supplement thereto;
o each purchaser shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective
amendment to notify us in writing that the purchaser elects to remain
an investor. If we have not received such written notification by the
45th business day following the effective date of the post-effective
amendment, funds and interest or dividends, if any held in escrow
shall be sent by first class mail or other equally prompt means to the
purchaser within five business days; should we return investors' funds
under Rule 419 and only satisfy the minimum offering, it may have a
material adverse effect on our ability to implement our business plan;
o the acquisition meeting the criteria set forth above will be
consummated if a sufficient number of purchasers confirm their
investment with us; and
o if a consummated acquisition meeting the requirements above has not
occurred by a date 18 months after the effective date of our initial
registration statement, funds held in escrow shall be returned by
first class mail to the purchasers within five business days following
that date.
Release of Securities and Funds
Funds held in the escrow account may be released to us and securities may be
delivered to the purchasers or other registered holders identified on the
deposited securities only at the same time as or after:
o the escrow agent has received a signed representation from us,
together with other evidence acceptable to it, that the requirements
with respect to the terms of the offering and filing with the
Commission when we sign an agreement as described above have been met;
and
o consummation of an acquisition meeting the above described
requirements.
If funds and securities are released from the escrow account to us as described
above, our prospectus will be supplemented to indicate the amount of funds and
securities released and the date of the release.
We will furnish to our security holders audited financial statements for our
first full fiscal year of operations following consummation of an acquisition,
together with other required information no later than 90 days after the end of
the fiscal year and file the financial statements and additional information
with the Commission.
If a consummated acquisition meeting the criteria described above has not
occurred within 18 months after the date of this prospectus, funds held in the
escrow account will be returned to the purchasers.
23
PROPOSED BUSINESS - continued
Also, pursuant to the terms of the escrow agreement, funds held in the escrow
account may be released to us and securities may be delivered to the purchasers
or other registered holders identified on the deposited securities only at the
same time as or after:
o the escrow agent has received a signed representation from us,
together with other evidence acceptable to the escrow agent, that the
above requirements have been met; and
o the consummation of the merger or acquisition has occurred.
If the funds and securities are released from the escrow to us, the prospectus
shall be supplemented to indicate the amount of funds and securities released
and the date of release.
Investment Company Act of 1940
The Investment Act defines an "investment company" as an issuer that is or holds
itself out as being engaged primarily in the business of investing, reinvesting
or trading of securities. While we do not intend to engage in such activities,
we may become subject to regulation under the Investment Act in the event we
obtain or continue to hold a minority interest in any number of enterprises. We
may be expected to incur significant registration and compliance costs if
required to register under the Investment Act. Accordingly, Mr. Winstein will
continue to review our activities from time to time with a view toward reducing
the likelihood that we may be classified as an "investment company."
We may participate in a business opportunity by purchasing, trading or selling
the securities of such business. However, we do not intend to engage primarily
in such activities and are not registered and do not propose to register as an
"investment company" under the Investment Act. We believe that such registration
is not required. Specifically, we intend to conduct our activities so as to
avoid being classified as an "investment company" under the Investment Act, and
therefore avoid application of the costly and restrictive registration and other
provisions of the Investment Act and the regulations promulgated thereunder.
We intend to implement our proposed business in a manner that will not result in
we being classified as an "investment company." Consequently, our participation
in a business or opportunity through the purchase and sale of investment
securities will be limited. In order to avoid classification as an investment
company, we will use a significant portion of the net proceeds of this offering
to search for, analyze, merge, acquire or participate in a business or
opportunity by acquiring a majority interest therein, which does not involve the
acquisition of investment securities as defined in the Investment Act.
Implementation of our proposed business, especially if it involves a business
reorganization as discussed above, may be necessitate changes in our capital
structure, management, control and business. Each of these areas is regulated by
the Investment Act, which regulation has the purported purpose of protecting
purchases of investment company securities. Since we do not intend to register
as an investment company, the purchasers in this offering will not otherwise be
afforded these protections.
24
MANAGEMENT
The directors and executive officers currently serving Winmark are as follows:
Name Age Positions Held Expiration of Term
- ------------------ ------- ----------------------------- -------------------
Mark Winstein 47 President/Secretary/Treasurer/ December 21, 2004
607 E Street, S.E. Director
Washington, D.C.
20003
President, Secretary, Treasurer, and Director: Mark Winstein, 44 years of age,
is the sole Officer and Director of Winmark. Mr. Winstein has served as a
Director, Secretary and Treasurer since the inception of the Company on December
22, 2003. His current term as a Director expires, subject to re-election, on
December 21, 2004. Mr. Winstein is currently the founder/ CEO and a director of
Ecostructure Corporation, a Washington D.C. corporation formed in 2001, engaged
in the business of environmental consulting. From 1990 through 2000, Mr.
Winstein seved as the co-founder and director of Save America's Forests located
in Washington, D.C. In 1982, Mr. Winstein earned a B.A degree in Asian Studies
from Washington University in St. Louis, Missouri. Mr. Winstein has not served
and does not now serve as a director for any other public corporation, and has
never been an officer, director or shareholder in any other blank check company.
Employees
Mr. Winstein is our sole director and officer and is our only employee. Mr.
Winstein intends to devote approximately 20 hours per month to our business
following the closing of this offering. Mr. Winstein receives no compensation
for his services during the period of time required to close on a business
opportunity. We may engage, from time to time, business advisory services which
will be rendered on an independent contractor basis following the closing of
this offering. We may also engage, from time to time, professionals at customary
rates to assist us in our operations, if required.
Facilities
Our principal executive offices currently occupy approximately 500 square feet
of space located at 607 E Street, SE, Washington, D.C. 20003, on a lease-free
basis provided by Mr. Winstein. We incur no costs in the use of our offices. Our
telephone number is (202) 544-6562.
Remuneration
We have not paid any remuneration to Mr. Winstein since our inception. Mr.
Winstein has not entered into an employment agreement with us and he does not
intend to do so in the foreseeable future. However, should we consummate a
business combination, such as a merger or acquisition, following the closing of
this offering, Mr. Winstein may negotiate an annual remuneration package not to
exceed $250,000 with the combined company, provided that the candidate company
will be able to afford such remuneration package and which must be approved by
the candidate company. We may consummate a business opportunity even though the
candidate company is not willing or able to afford such a remuneration package.
Nevertheless, certain inherent conflicts of interest exist where management is
seeking annual remuneration from a business candidate while, at the same time,
negotiating the terms and conditions of the merger or acquisition of the
business. The best interests of our stockholders will be paramount in any
decision to merge with or acquire a company, not the remuneration package of Mr.
Winstein. None of the proceeds of this offering will be used to pay Mr.
Winstein's annual remuneration package. We have not obtained any key-man life
insurance on Mr. Winstein and do not intend to do so in the foreseeable future.
25
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding our common stock
owned on the date of this prospectus and, as adjusted, to reflect the sale of
shares offered by this prospectus, by (i) each person who is known by Winmark to
own beneficially more than five percent of our common stock; (ii) each of our
officers and directors; and (iii) all officers and directors as a group:
- ---------------------------- --------------------------- ------------------ --------------------- -------------------
Name and Address Title Number of Shares % of Shares Before % of Shares After
Offering Offering
- ---------------------------- --------------------------- ------------------ -------------------- -------------------
Mark Winstein Director, President, 5,000,000 100% 90.91%
607 E Street, S.E. Secretary, Treasurer
Washington, D.C. 20003
- ---------------------------- --------------------------- ------------------ --------------------- -------------------
All Officers and Directors 5,000,000 100% 90.91%
as a Group
- ---------------------------- --------------------------- ------------------ --------------------- -------------------
</table>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Winmark was incorporated in Nevada in December, 2003. We have authorized capital
of 25,000,000 shares of common stock, $.001 par value. Winmark has 5,000,000
shares of common stock issued and outstanding prior to this offering.
In December, 2003, we issued 5,000,000 shares of common stock to Mark Winstein,
our sole officer and directror, in a private placement transaction for cash
consideration of $22,000. The price of the common stock to Mr. Winstein was
$0.0044 per share.
Mr. Winstein may be deemed to be a promoter of Winmark.
DESCRIPTION OF SECURITIES
General description.
The securities being offered are 500,000, shares of our common stock. Our
Articles of Incorporation authorize the issuance of 25,000,000 shares of common
stock, with a par value of $.001. The holders of the shares: (a) have equal
ratable rights to dividends from funds legally available therefore, when, as,
and if declared by our board of directors; (b) are entitled to share ratably in
all of the assets of Winmark available for distribution upon winding up of the
affairs of Winmark (c) do not have preemptive subscription or conversion rights
and there are no redemption or sinking fund applicable thereto; and (d) are
entitled to one non- cumulative vote per share on all matters on which our
shareholders may vote at all meetings of shareholders. These securities do not
have any of the following rights: (a) cumulative or special voting rights; (b)
preemptive rights to purchase in new issues of shares; (c) preference as to
dividends or interest; (d) preference upon liquidation; or (e) any other special
rights or preferences.
In addition, the shares are not convertible into any other security. There are
no restrictions on dividends under any loan other financing arrangements or
otherwise. See a copy of our Articles of Incorporation, Certificate of Amendment
and Bylaws, attached hereto as Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3,
respectively. We currently have 5,000,000 shares of common stock outstanding.
26
DESCRIPTION OF SECURITIES - continued
Non-Cumulative Voting
The holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares, voting
for the election of director, can elect all of the directors to be elected, if
they so choose. In such event, the holders of the remaining shares will not be
able to elect any of our directors. Prior to and upon the completion of this
offering, Mr. Winstein shall hold more than 50% of our outstanding shares of
common stock.
Upon the completion of this offering (assuming the offering is fully
subscribed), we shall have 5,500,000 shares of our common stock issued and
outstanding.
No Public Market
Our shares have never been available for trading on a public market and no
public market currently exists for our shares.
Shares Eligible for Future Sale
In January 2000, the Commission issued an interpretative letter to the NASD
which concluded that promoters or affiliates of a blank check company and their
transferees would act as "underwriters" under the Securities Act when reselling
the securities of a blank check company. Such letter also indicated that the
Commission believed that those securities can be resold only through a
registered offering. Rule 144 would not be available for those resale
transactions despite technical compliance with the requirements of such Rule.
The Commission also believes that shareholders who obtain securities directly
from a blank check issuer, rather than through promoters and affiliates, may not
use Rule 144 to resell their securities, since their resale transactions would
appear to be designed to distribute or redistribute securities to the public
without compliance with the registration requirements of the Securities Act.
If the outstanding shares were registered for resale, the Commission would take
the view that Rule 419 of Regulation C would apply to those resales. Further,
the resale offering would be considered an offering "by or on behalf of the
registrant" for purposes of Rule 415(a)(4), which applies to "at the market"
offerings, such that:
o the offering includes securities registered (or qualified to be registered)
on Form S-3 or Form F-3 which are to be offered and sold on a continuous or
delayed basis by or on behalf of the registrant, a subsidiary of the
registrant or a person of which the registrant is a subsidiary;
o the amount of securities registered for such purposes must not exceed 10
percent of the aggregate value of our voting stock held by non-affiliates;
o the securities must be sold through an underwriter acting on our behalf;
and
o the underwriter must be named in the prospectus.
27
DESCRIPTION OF SECURITIES - continued
If all of the above requirements are not met, the offering must be priced and
the securities sold only at the price as set forth in the prospectus and not at
market prices.
Transfer Agent
Our transfer agent is First American Transfer Company, 706 East Bell Road, #201,
Phoenix, Arizona 85022: (602) 485-1346 Fax (602) 788-0423.
Report to Securities Holders
We will furnish to holders of our securities annual reports containing audited
financial statements. We may issue other unaudited interim reports to our
securities holders as we deem appropriate. Contemporaneously, with this
offering, we intend to register our securities with the Commission under the
provisions of Section 12(g) of the Exchange Act, as amended, and, in accordance
therewith, we will be required to comply with certain reporting, proxy
solicitation and other requirements of the Exchange Act.
PLAN OF DISTRIBUTION
Winmark intends to offer, sell and distribute publicly 500,000 shares of our
common stock at an offering price of $0.10 per share, for a total offering
amount of $50,000. This offering is being offered on a "best efforts,
"all-or-none" basis during the offering period. If 500,000 shares are not sold
and paid for by midnight Mountain Standard Time on the last day of the offering
period all proceeds will be refunded promptly to subscribers in full, without
interest and deduction for commissions or expenses. If the last day of the sales
period, or extended sales period, falls on a Saturday, Sunday or legal holiday,
the next following business day shall be considered the last day of such period.
No securities will be issued to the public investors until such time as the
funds are deposited in the escrow account of Winmark within the time period
described above. All proceeds will be deposited in an escrow account that we
have established with Manufacturers and Traders Trust Company, a New York
banking company, before we offer any shares in this offering to the public until
such time as the closing of this offering and the closing of a business
opportunity, such as a merger or acquisition.
We intend to offer the securities directly to the public through our sole
officer and director, Mark Winstein, in those jurisdictions where sales by such
persons are permitted by law and, otherwise, pursuant to Rule 3a4-1(a)(2) of the
Exchange Act. Accordingly, we believe that such persons will qualify for the
safe harbor from broker-dealer registration set out in Rule 3a4-1(a)(2) of the
Exchange Act. No commission will be paid to any officer or director on account
of any such sales. No broker-dealers will be engaged to assist us in this
offering.
Mr. Winstein will not purchase any of the securities of this offering.
We have no plans, proposals, arrangements, understandings or agreements with any
market maker regarding participation in the aftermarket for our securities.
There are no plans, proposals, arrangements, understandings or agreements with
respect to the sale of additional securities to affiliates or others following
the registered distribution but prior to the identification of a business
opportunity.
28
PLAN OF DISTRIBUTION - continued
Pricing of the Offering
Prior to this offering, there has been no public market for our securities.
Consequently, the initial public offering prices for the securities have been
determined by Mr. Winstein. Among the factors considered in determining the
public offering price were the history of, and the prospects for:
o our proposed business;
o an assessment of our management;
o our proposed operations;
o our development; and
o the general condition of the securities market.
The initial public offering price does not necessarily bear any relationship to
our assets, book value, lack of earnings or other established criteria of value.
Such prices are subject to change as a result of market conditions and other
factors, and no assurance can be given that a public market for the securities
will develop after the closing, or if a public market develops, that such public
market will be sustained, or that the securities can be resold at any time at
the offering or any other price.
Inasmuch as we are offering the securities and an underwriter has not been
retained for such purpose, Mr. Winstein' establishment of the offering price of
the shares has not been determined by negotiation with an underwriter as is
customary in an initial public offering. Thus, subscribers are subject to an
increased risk that the price our shares have been arbitrarily determined.
The Commission has adopted regulations that generally define penny stock to be
any equity security that has a market price less than $5.00 per share, subject
to certain exceptions. Upon authorization of the securities offered hereby for
quotation, such securities will not initially be exempt from the definition of
penny stock. If the securities offered hereby fall within the definition of a
penny stock following the effective date, our securities may become subject to
rules that impose additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to the broker-dealer,
current quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the penny stock
rules may restrict the ability of broker-dealers to sell our securities and may
affect the ability of purchasers in this offering to sell our securities in the
secondary market.
29
PLAN OF DISTRIBUTION - continued
EXEMPTION FROM STATE REGISTRATION
Winmark intends to offer and sell this offering to accredited investors pursuant
to exemptions from registration in a limited number of states. As such,
purchasers of the securities in this offering, and in any subsequent trading
market, must be residents of such exempt states. However, Winmark intends to
register this offering in the State of Nevada. As such, purchasers of the
securities in this offering, and in any subsequent trading market, must be
residents of such jurisdiction, absent an exemption from registration. Winmark
will file a post-effective amendment to the registration statement, and related
prospectus, for the purpose of disclosing additional states, if any, in which
its securities will be eligible for sale.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings and, to the best of
Mr. Winstein's knowledge, no such action by or against the Company has been
threatened.
LEGAL MATTERS
We have retained William D. O'Neal, Esq., as legal counsel for the Company. The
address is: The O'Neal Law Firm, P.C., 668 North 44th Street, Suite 233,
Phoenix, Arizona 85008. Mr. O'Neal has no involvement with the day-to-day
activities of Winmark.
EXPERTS
No named expert or counsel was hired on a contingent basis. No named expert or
counsel will receive a direct or indirect interest in the small business issuer.
No named expert or counsel was a promoter, underwriter, voting trustee,
director, officer, or employee of the small business issuer. The financial
statements of Winmark as of December 31, 2003, included in the registration
statement and this prospectus have been included herein in reliance on the
report of Shelley International, C.P.A, independent certified public
accountants, given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered in this prospectus.
This prospectus does not contain all of the information contained in the
registration statement and the exhibits and schedules to the registration
statement. Some items are omitted in accordance with the rules and regulations
of the Commission. For further information about Winmark and the securities
offered under this prospectus, you should review the registration statement and
the exhibits and schedules filed as a part of the registration statement.
Descriptions of contracts or other documents referred to in this prospectus are
not necessarily complete. If the contract or document is filed as an exhibit to
the registration statement, you should review that contract or document. You
should be aware that when we discuss these contracts or documents in the
prospectus we are assuming that you will read the exhibits to the registration
statement for a more complete understanding of the contract or document. The
registration statement and its exhibits and schedules may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may be obtained
from the Commission after payment of fees prescribed by the Commission. The
Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants, including
30
WHERE YOU CAN FIND MORE INFORMATION - continued
United States, that file electronically with the Commission. The address of this
Web site is www.sec.gov. You may also contact the Commission by telephone at
(800) 732-0330.
31
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants .............. F-1
Financial Statements
Balance Sheet ................................................. F-2
Statement of Operations ....................................... F-3
Statement of Stockholders' Equity ............................. F-4
Statement of Cash Flows ....................................... F-5
Notes to Financial Statements ................................. F-6 - F-8
32
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
-------------------------------------------------
To the Board of Directors/Audit Committee
Ecostructure Corporation
I have audited the accompanying balance sheet of Ecostructure Corporation
(a development stage company and a Nevada corporation) as of December 31, 2003
and the related statements of operations, stockholders' equity, and cash flows
for the period from December 22, 2003 (inception) to December 31, 2003. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with auditing standards generally
accepted in the United States. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ecostructure Corporation as
of December 31, 2003 and the related statements of operations, stockholders'
equity, and cash flows for the period from December 22, 2003 (inception) to
December 31, 2003 in conformity with United States generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is new and has no
operations or revenues. The lack of operations raises substantial doubt about
the Company's ability to continue as a going concern. See Note 3 for more
details. These financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be unable
to continue as a going concern.
Shelley International CPA
January 26, 2004
Mesa, Arizona
F-1
33
ECOSTRUCTURE CORPORATION
Balance Sheet
(a development stage company)
as of December 31, 2003
12/31/03
ASSETS
----------
Cash 0
Total Current Assets 0
Other Assets 0
Total Assets 0
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------
Liabilities
Accounts Payable 0
Total Current Liabilities 0
----------
Stockholders' Equity
Common Stock, authorized
25,000,000 shares, issued and
outstanding 5,000,000 shares,
par value $0.001 5,000
Additional Paid in Capital 17,000
Deficit accumulated during development stage (22,000)
----------
Total Stockholders' Equity 0
----------
Total Liabilities and Stockholders' Equity 0
----------
The accompanying notes are an integral part of these statements
F-2
34
ECOSTRUCTURE CORPORATION
Statement of Operations
(a development stage company)
For the period from December 22, 2003 (inception) to December 31, 2003
Revenue 0
-----------
Expenses
Legal and Accounting 22,000
Total Expenses (22,000)
Income before Taxes (22,000)
Provision for Income Taxes 0
Net Income (Loss) (22,000)
-----------
Primary and Diluted Earnings per Share a
Weighted Average Number of Shares 5,000,000
-----------
a = less than $0.01
The accompanying notes are an integral part of these statements
F-3
35
ECOSTRUCTURE CORPORATION
Statement of Stockholders' Equity
(a development stage company)
From December 22, 2003 to December 31, 2003
Common Stock Paid in Accumulated Total
Shares Amount Capital Deficit Equity
Balance, December 22, 2003 0 0 0 0 0
Initial capitalization
Sale of common stock 5,000,000 5,000 17,000 22,000
Retained Deficit (22,000) (22,000)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2003 5,000,000 5,000 17,000 (22,000) 0
---------- ---------- ---------- ---------- ----------
</table>
The accompanying notes are an integral part of these statements
F-4
36
ECOSTRUCTURE CORPORATION
Statement of Cash Flows
(a development stage company)
for the period from December 22, 2003 to December 31, 2003
Cash from Operations
Net Loss (22,000)
Changes in Receivable or Payables 0
Cash (Used)Provided by Operations (22,000)
Cash Used for Investing 0
Cash Provided by Financing 0
Sale of Common Stock 22,000
Cash Provided by Financing 22,000
Net Change in Cash 0
Beginning Cash 0
----------
Ending Cash 0
----------
Supplemental Cash Flow Information
Taxes Paid
Year 2003 $0
Interest Paid
Year 2003 $0
The accompanying notes are an integral part of these statements
F-5
37
ECOSTRUCTURE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Ecostructure Corporation (the Company) was incorporated under the laws of the
state of Nevada on December 22, 2003. The Company has one sole officer, director
and shareholder. The Company is a blank check company subject to Rule 419. The
Company was organized to acquire or merge with another business or company. The
officer is currently looking for potential merger candidates but currently has
none.
The Company has been in the development stage since inception and has no
operations to date. Other than issuing shares to the sole shareholder there have
been no operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The Company has no assets or debt as of December 31, 2003. The relevant
accounting policies and procedures are listed below.
Accounting Basis
The basis is generally accepted accounting principles.
Earnings per Share
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the
net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
F-6
38
Stock Based Compensation
The Company accounts for its stock based compensation based on provisions in
SFAS No. 123, Accounting for Stock-Based Compensation which utilizes the fair
method for the valuation of its securities given as compensation.
Advertising
Advertising is expensed when incurred. There has been no advertising during the
periods.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the liquidation of liabilities in the normal course of business.
However the Company has no current source of revenue, nor operations. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek a suitable merger
candidate which would supply the needed cash flow.
NOTE 4. STOCKHOLDERS' EQUITY
Common Stock
On December 22, 2003 (inception), the Company issued 5,000,000 shares of its
$0.001 par value common stock to it sole shareholder for $22,000. This has been
the structure from that time until the present.
NOTE 5 RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. Most office
services are provided without charge by the president who lives in Washington,
D.C. Such costs are immaterial to the financial statements and accordingly, have
not been reflected therein. Some expenses, as explained above, were reimbursed.
The officer(s) and director(s) of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company has not
formulated a policy for the resolution of such conflicts.
F-7
39
NOTE 6 PROVISION FOR INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting
Standards NO. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $4,840, which is calculated by multiplying a 22% estimated
tax rate by the items making up the deferred tax account, organization costs of
$22,000,. The total valuation allowance is a comparable $4,840.
The provision for income taxes is comprised of the net changes in deferred taxes
less the valuation account plus the current taxes payable as shown in the chart
below.
Net changes in Deferred Tax Benefit less than
valuation account 0
Current Taxes Payable 0
-----------
Net Provision for Income Taxes 0
-----------
NOTE 7 REVENUE AND EXPENSES
The Company currently has no operations and no revenue.
NOTE 8 OPERATING LEASES AND OTHER COMMITMENTS:
As explained in the note pertaining to related parties, the Company uses the
offices of its president with no charge. The Company also has no assets or lease
obligations of any kind. The five year projection of these future obligations of
any kind. The five year projection of these future obligations are as followings
will be zero in each year.
Year 1 Year 2 Year 3 Year 4 Year 5
Operating Leases, etc 0 0 0 0 0
NOTE 9 SUBSEQUENT EVENTS
The Company is currently filing papers to conduct a blank check offering subject
to Rule 419 of Regulation C. This offering is still in the preparation process
and has not been filed nor approved as of the report date. This offering calls
for the sale of 500,000 shares of common stock at a price of $0.10 per share.
When completed, the sale will net the Company $50,000.
F-8
40
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers.
Winmark's Articles of Incorporation provide that we must indemnify our directors
and officers to the fullest extent permitted under Nevada law against all
liabilities incurred by reason of the fact that the person is or was a director
or officer or a fiduciary of Winmark. The effect of these provisions is
potentially to indemnify Winmark's directors and officers from all costs and
expenses of liability incurred by them in connection with any action, suit or
proceeding in which they are involved by reason of their affiliation with
Winmark. Pursuant to Nevada law, a corporation may indemnify a director,
provided that such indemnity shall not apply on account of:
(a) acts or omissions of the director finally adjudged to be intentional
misconduct or a knowing violation of law;
(b) unlawful distributions; or
(c) any transaction with respect to which it was finally adjudged that
such director personally received a benefit in money, property, or
services to which the director was not legally entitled.
Such indemnification provisions are intended to increase the protection provided
directors and, thus, increase our ability to attract and retain qualified
persons to serve as directors. Because directors liability insurance is only
available at considerable cost and with low dollar limits of coverage and broad
policy exclusions, we do not currently maintain a liability insurance policy for
the benefit of our directors although we may attempt to acquire such insurance
in the future. We believe that the substantial increase in the number of
lawsuits being threatened or filed against corporations and their directors and
the general unavailability of directors liability insurance to provide
protection against the increased risk of personal liability resulting from such
lawsuits have combined to result in a growing reluctance on the part of capable
persons to serve as members of boards of directors of public companies. We also
believe that the increased risk of personal liability without adequate insurance
or other indemnity protection for our directors could result in overcautious and
less effective direction and management of our company. Although no directors
have resigned or have threatened to resign as a result of our failure to provide
insurance or other indemnity protection from liability, it is uncertain whether
our director(s) would continue to serve in such capacities if improved
protection from liability were not provided.
The provisions affecting personal liability do not abrogate a director's
fiduciary duty us and our shareholders, but eliminate personal liability for
monetary damages for breach of that duty. The provisions do not, however,
eliminate or limit the liability of a director for failing to act in good faith,
for engaging in intentional misconduct or knowingly violating a law, for
authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of Winmark and those
of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions including grossly negligent business decisions relating to
attempts to change control of our company.
41
The provisions regarding indemnification provide, in essence, that we will
indemnify our directors against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding arising out of the director's
status as a director of Winmark, including actions brought by or on behalf of
Winmark (shareholder derivative actions). The provisions do not require a
showing of good faith. Moreover, they do not provide indemnification for
liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance. However, as mentioned above, we do not currently provide such
insurance to our directors, and there is no guarantee that we will provide such
insurance to our directors in the near future although we may attempt to obtain
such insurance.
The provisions diminish the potential rights of action which might otherwise be
available to shareholders by limiting the liability of officers and directors to
the maximum extent allowable under Nevada law and by affording indemnification
against most damages and settlement amounts paid by a director of Winmark in
connection with any shareholders derivative action. However, the provisions do
not have the effect of limiting the right of a shareholder to enjoin a director
from taking actions in breach of his fiduciary duty, or to cause Winmark to
rescind actions already taken, although as a practical matter courts may be
unwilling to grant such equitable remedies in circumstances in which such
actions have already been taken. Also, because we do not presently have
directors liability insurance and because there is no assurance that we will
procure such insurance or that if such insurance is procured it will provide
coverage to the extent directors would be indemnified under the provisions, we
may be forced to bear a portion or all of the cost of the director's claims for
indemnification under such provisions. If we are forced to bear the costs for
indemnification, the value of our stock may be adversely affected. In the
opinion of the Commission, indemnification for liabilities arising under the
Securities Act is contrary to public policy and, therefore, is unenforceable.
Other Expenses of Issuance and Distribution.
The following is an itemization of expenses, incurred and paid by Winmark in
connection with the issuance and distribution of the securities being offered
hereby.
Commission Registration and Filing Fee $ 4.60
Transfer Agent Fees 250.00
Financial Printing 200.00
Accounting Fees 1,500.00
Legal Fees 20,000.00
Escrow Fees 4,000.00
Miscellaneous 0
--------------
TOTAL $ 25,954.60
--------------
42
Recent Sales of Unregistered Securities.
On December 22, 2003, we issued 5,000,000 shares of our common stock to our sole
officer and director, Mark Winstein for $22,000 in cash, at a price of 0.0044
per share. There have been no other sales of our unregistered securities.
All unregistered securities issued by Winmark prior to this offering are deemed
"restricted securities" within the meaning of that term as defined in Rule 144
of the Securities Act and have been issued pursuant to certain "private
placement" exemptions under Sections 4(2) of the Securities Act and Regulation
D, as promulgated by the Commission, such that the sales of the securities were
to sophisticated or accredited investors, as that latter term is defined in Rule
215 and Rule 501 of Regulation D of the Securities Act, and were transactions by
an issuer not involving any public offering. Such sophisticated or accredited
investors had access to information on Winmark necessary to make an informed
investment decision.
All of the aforesaid securities have been appropriately marked with a restricted
legend and are "restricted securities," as defined in Rule 144 of the rules and
regulations of the Commission, unless otherwise registered. All of the aforesaid
securities were issued for investment purposes only and not with a view to
redistribution, absent registration. All of the aforesaid persons have been
fully informed and advised concerning Winmark, its business, financial and other
matters. Transactions by Winmark involving the sales of these securities set
forth above were issued pursuant to the "private placement" exemptions under the
Securities Act, as amended, as transactions by an issuer not involving any
public offering. Winmark has ben informed that each person is able to bear the
economic risk of his investment and is aware that the securities were not
registered under the Securities Act, and cannot be re-offered or re-sold until
they have been so registered or until the availability of an exemption
therefrom. The transfer agent and registrar of Winmark will be instructed to
mark "stop transfer" on its ledgers to assure that these securities will not be
transferred, absent registration, or until the availability of an exemption
therefrom is determined.
Exhibits
The following is a list of Exhibits filed herewith by the registrant as part of
the SB-2 Registration Statement and related Prospectus:
3.1 Articles of Incorporation.
3.2 Certificate of Amendment
3.3 By-laws.
3.4 Written Consent of Sole Director
4.1 Form of Common Stock Certificate.
5.1 Opinion and Consent of The O'Neal Law Firm, P.C.
10.1 Escrow Agreement.
10.2 Subscription Agreement.
23.1 Consent of Shelley International, C.P.A.
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Undertakings
The undersigned registrant undertakes to:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement:
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13
or section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Washington, D.C., District of Columbia.
WINMARK, INC.
By: /s/ Mark Winstein
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Mark Winstein
President and Director
Dated: May 10, 2004
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following person in the capacity and on
the date stated.
By: /s/ Mark Winstein
- -----------------------------
Mark Winstein
President and Director
Dated: May 10, 2004
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