U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FOURTH AMENDMENT
WINMARK, INC.
(Name of Small Business Issuer in its Charter)
Nevada 6770 58-2679116
________________________________________________________________________________
(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
________________________________________________________________________________
(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 $6.34
- ---------------- --------------- ----------------- ---------------- ------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
Winmark hereby amends this registration statement on such date or dates as may
be necessary to delay its effective date until Winmark 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.
PRELIMINARY PROSPECTUS DATED OCTOBER 26, 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.
2
PROSPECTUS
500,000 shares of Common Stock
$0.10 per share
WINMARK, INC.
There has been no public market for our securities. We intend to offer, sell and
distribute publicly not less than 500,000 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 and without any deductions 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 such time that we have identified a potential merger or
acquisition candidate and proposed it to our investors, and our investors have
had an opportunity to re-affirm their investment in accordance with the
requirements of Rule 419 of Regulation C.
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. Mark Winstein, our
sole officer and director, will not purchase any of our securities in this
offering.
Investing in our securities involves risk. See "Risk Factors" beginning on page
7.
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 October 26, 2004.
3
TABLE OF CONTENTS
Page
Prospectus Summary.............................................................5
Risk Factors...................................................................7
Use of Proceeds...............................................................11
Determination of Offering Price...............................................11
Dilution......................................................................12
Dividend Policy...............................................................13
Management's Plan of Operation................................................15
Description of Property.......................................................20
Management....................................................................22
Executive Compensation........................................................23
Principal Stockholders........................................................23
Certain Relationships and Related Transactions................................24
Market for Common Equity and Related Shareholder Matters......................24
Description of Securities.....................................................25
Plan of Distribution..........................................................26
Legal Proceedings ............................................................27
Legal Matters.................................................................27
Experts.......................................................................28
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures....................................................28
Where You Can Find More Information...........................................28
Index to Financial Statements.................................................29
4
Reliance on Prospectus
You should rely only on the information contained in this prospectus. 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.
Dealer Prospectus Delivery Obligation
Until 90 days from the date of this prospectus, all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealer's
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
PROSPECTUS SUMMARY
The Company
Winmark, a development stage corporation, was organized to provide a corporate
entity in order to participate in a merger or acquisition with another entity
meeting the requirements of Rule 419 of Regulation C. 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 opportunities to merge with, or acquire the assets of another
corporate entity may become available to us due primarily to our status as a
reporting publicly held company 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 merger or acquisition.
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 capita 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." 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.
5
The Offering - continued.
Mark Winstein, our sole director and officer will not purchase any of our
securities in this offering. 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, but in no event shall the
proceeds remain in escrow for more than 18 months.
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 held in escrow until such time we have
consummated a merger or an acquisition, at which time the proceeds will be
available for use by the target company. As a target company has not yet been
identified, it is impossible to accurately predict how these proceeds will be
used. If we have not identified a target company and consummated a merger or
acquisition within 18 months, the proceeds will be returned to the investors
without interest and without deduction for commissions or discounts.
Selected Financial Data
-------------------------
The following table sets forth selected financial information concerning
Winmark:
December 31, September 30,
2003 2004
(Audited) (Unaudited)
------------ -------------
Balance Sheet:
Current assets $ 0 $ 0
Total assets 0 0
Current liabilities 0 0
Working capital 0 0
Stockholders' equity 0 0
Net tangible book value per share $ 0 $ 0
Statement of Operations:
Revenue $ 0 $ 0
Total expenses 22,000 22,000
Net loss
$(22,000) $(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.
6
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. This section sets forth all material risks known to
management with respect to this offering. Therefore, each prospective investor
should, prior to purchase, consider very carefully each of the following known
material risk factors among other things, as well as all other information set
forth in this prospectus. Our business is difficult to evaluate because we have
no operating history and could result in additional expenses, difficulties and
delays and could negatively impact our ability to raise future capital.
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.
Our sole officer and director has unilateral decision-making authority.
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 has no revenues and will likely fail unless 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. If we do not find a suitable merger or
acquisition candidate, our business will likely fail.
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.
7
RISK FACTORS - continued.
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. 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 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. Upon satisfaction of these conditions, Rule 419
continues to govern the use of offering proceeds.
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.
8
RISK FACTORS - continued.
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 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.
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 that 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 result in an
increased cost to our business.
We may need additional capital to fund our operations and finance our growth
during the 18 month offering period and we may not be able to obtain it on terms
acceptable to us or at all, which could affect our ability to continue to
operate as a going concern. Mr. Winstein intends to fund our operations and
other capital needs, which are anticipated to be nominal, during the 18 month
offering period, or until the closing of a merger or acquisition in accordance
with the requirements of Rule 419 of Regulation C. Mr. Winstein will provide
funds as required to pay for any filings required to maintain our corporate and
reporting status, and to keep us in good standing with regulators and tax
authorities. There is no cap on the amount of funds Mr. Winstein has agreed to
provide. There is no written arrangement or agreement with Mr. Winstein for
repayment of any such funds, and all advances are being made without interest,
are unsecured, and will not be repaid out of the proceeds of this offering.
If Mr. Winstein is repaid at all, it will be from the working capital of the
target company after a merger or acquisition is consummated; however, repayment
of Mr. Winstein will not be a condition to the closing of any such transaction.
9
RISK FACTORS - continued.
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.
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. The
proceeds of this offering must be placed in an escrow account. The proceeds
could remain in the escrow account for up to 18 months from the date of this
prospectus and an investor will not have access to such funds. 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.
If a sufficient number of investors do not reconfirm their investment, the
merger or acquisition will not be closed and investors will not be issued their
securities.
A reconfirmation offer must commence within five (5) business days after the
effective date of the post-effective amendment. If we do not receive written
notification from any investor within 45 business days following the effective
date, the funds held in the escrow account on such investor's behalf will be
returned to the investor within five business days by first class mail or other
equally prompt means. The merger or acquisition will be consummated only if upon
execution of an agreement for the acquisition of a business or assets that will
constitute our business (or a line of business) and for 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 upon
the exercise or conversion of any securities offered, but excluding amounts
payable to non-affiliates for underwriting commissions, underwriting expenses,
and dealer allowances. If a sufficient number of investors fail to reconfirm
their investment, the merger or acquisition will not be closed and investors
will not be issued their securities.
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. We shall require each investor to execute a
subscription agreement containing representations from the prospective
accredited investor that such individual meets the above requirements.
10
RISK FACTORS - continued.
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
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. Since this offering is a "blank check" offering, and we have not
identified a merger or acquisition candidate, 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 merger or acquisition. 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 as described in the preceding paragraph. We have
incurred expenses in connection with this offering totaling $25,956.34, which
exceeds our pre-offering working capital of $22,000. Mr. Winstein has paid the
difference of $3,956.34 out of his own personal funds without expectation of
repayment from the proceeds of this offering.
DETERMINATION OF OFFERING PRICE
---------------------------------
The offering price is not based upon our net worth, total asset value, or any
other objective measure of value based upon accounting measurements. The
offering price was determined by Mr. Winstein and was determined based upon the
amount of funds needed by Winmark to start-up the business, and the number of
shares Mr. Winstein, as the sole shareholder, was willing to allow to be sold.
11
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 $0.00, or $0.00 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 $ 0.00) 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 book
value 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:
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%
- ------------------------- ----------- ------------- ------------ ------------- -------------------
12
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.
DESCRIPTION OF BUSINESS
Winmark, a development stage company, was incorporated in Nevada on December 22,
2003. Since inception, our principal activity has been directed to
organizational efforts. We have not had any revenues since inception. Our sole
objective is to acquire an operating business through a merger or acquisition.
Winmark was organized to provide a corporate entity in order to participate in a
merger or acquisition in accordance with the requirements of Rule 419 of
Regulation C. We believe that following this offering certain opportunities to
merge with or acquire an operating company may become available to us due
primarily to our status as a reporting publicly held company. 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 currently have no plans, proposals, arrangements, understandings or
agreements to participate in any specific business opportunity.
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.
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 an opportunity
with an operating business, through merger or acquisition.
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 operating
businesses with any substantial cash or other assets. However, Mr. Winstein
believes that we will offer owners of operating businesses 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 operating business 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 or merger of an
operating business including:
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.
13
DESCRIPTION OF BUSINESS - continued.
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.
Dependence on One or a Few Suppliers
As we are a blank check company and conduct no operations other than seeking a
suitable merger or acquisition candidate, our business is not dependent on one
or a few suppliers.
Patents, Trademarks, Licenses, Concessions, Royalty Agreements
or Labor Contracts.
We do not hold any patents or trademarks, nor are we subject to any licenses,
concessions, royalty agreements or labor contracts.
Need For Government Approval for our Products or Services
We are not required to apply for or have any government approval for our
products or services.
Effect of Governmental Regulations on our Business
We will be subject to federal laws and regulations that relate directly or
indirectly to our operations. We will be subject to common business and tax
rules and regulations pertaining to the operation of our business in the State
of Nevada.
Research and Development Costs for the Past Two Years
We have not expended funds for research and development costs in the past two
years.
14
DESCRIPTION OF BUSINESS - continued
Costs and Effects of Compliance with Environmental Laws and Regulations
Environmental regulations have had no materially adverse effect on our
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on our business, financial condition or results of
operation. Public interest in the protection of the environment has increased
dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, our
business and prospects could be adversely affected.
Employees
Our only employee is Mark Winstein, our sole officer and director.
Bankruptcy
We have not been involved in any bankruptcy, receivership or similar
proceedings.
MANAGEMENTS' DISCUSSION AND ANALYSIS OR 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."
Plan of Operation
------------------
Over the next 18 months, or to the date a merger or acquisition of an operating
business is closed, Mr. Winstein intends to fund our operations and other
capital needs, which are anticipated to be minor. This will enable us to close
this offering and to possibly identify and conclude a closing of a merger or
acquisition with an operating business. We do not anticipate requiring any
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 a merger or acquisition with a
qualified operating business and our investors have reconfirmed their investment
in accordance with the requirements of Rule 419 of Regulation C. Mr. Winstein
will bear the expense to locate and identify an operating business candidate,
and those expenditures are expected to be minor. These expenses will be
reimbursed following the closing of the merger or acquisition, with the consent
of the operating business. Should the operating business have profitable
operations, its capital needs may not require the use of our proceeds that, in
such event, will be used in any manner that the new management deems
appropriate. We have no plans, proposals, arrangements, understandings or
agreements to participate in any specific business merger or acquisition. 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.
15
Evaluation of Potential Merger or Acquisition Opportunities
-----------------------------------------------------------
During this period, 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. He may retain paid outside business advisors to
assist in evaluating business opportunities. Mr. Winstein 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 Mr. Winstein or our company. We have no
preliminary plans, proposals, arrangements, understandings or agreements with
any party to borrow funds to increase the amount of capital available to
complete a merger or acquisition.
Mr. Winstein may seek a business combination with firms which:
- -- have recently commenced operations,
- -- are developing companies in need of additional funds for expansion into new
products or markets,
- -- are seeking to develop a new product or service, or
- -- are established businesses which may be experiencing financial or operating
difficulties and are in need of additional capital.
We will not acquire a business unless the fair value of the acquisition
candidate represents 80% of the maximum offering proceeds. Because we will be
subject to ongoing reporting requirements, we will be required to furnish
certain information about significant acquisitions, including audited financial
statements for the business acquired, covering one, two or three years depending
upon the relative size of the acquisition. Consequently, acquisition prospects
that do not have or are unable to obtain the required audited statements will
not be considered.
Mr. Winstein is planning to actively search for potential acquisition candidates
through Internet websites where companies post their intentions to be acquired.
He will also solicit recommendations for possible businesses from friends and
business associates. He may also decide to advertise our intention to acquire a
company through advertisements in financial publications.
Once a promising prospect is identified, Mr. Winstein will review financial,
economic and technological data and projections of a prospective business merger
or acquisition candidate, and will use his best judgment to determine its fair
market value. In doing so, he will consider:
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;
16
MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued.
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
business opportunity as part of his investigation. To the extent possible, he
intend to utilize written reports and personal and professional investigations
to evaluate the above factors. As noted previously, the costs to our company as
we undertake the process of identifying and evaluating potential business
mergers or acquisitions is expected to be nominal. They will generally consist
of costs related to regulatory and corporate compliance filings with regulatory
authorities and will be paid directly by Mr. Winstein as noted herein. Any costs
associated with contracting third parties for evaluation of business prospects
will be at the discretion of Mr. Winstein, and will also be paid directly by Mr.
Winstein. The only other foreseeable cost during this period leading up to the
closing of a merger or acquisition would be for Mr. Winstein' time, which he is
not charging our company for, but is at his discretion as to the amount of time
spent on our business.
The only milestone we are required to meet is to conclude and complete a merger
or acquisition with an operating business within 18 months. During this period,
we are planning to review as many prospects as necessary to complete a
transaction within this milestone, but ultimately the number of prospects we
investigate and evaluate, and the time spent on each prospect, is solely at the
discretion and availability of Mr. Winstein.
Structuring and Closing a Merger or Acquisition with a Prospective Candidate
Should we enter into an agreement to acquire or merge with a business candidate
within the deadline milestone noted herein, it will likely be on the basis of a
share exchange using our common stock, due to our lack of cash resources, and
the prerequisite that all cash resources raised under this offering are to be
used subsequent to a merger or acquisition for the operating business. 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
our company. In addition, Mr. Winstein 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
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.
17
MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
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. 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.
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.
Our operations following our acquisition of an interest in a business
opportunity will be dependent on the nature of the opportunity and interest
acquired.
18
MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued.
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.
Subsequent to the closing of this offering and the closing of an acquisition or
merger, our net proceeds will be for the development of the business 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. 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.
Regulation
Your Rights and Substantive Protections Under Rule 419
Escrowing 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.
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.
19
Investment of Net Proceeds
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. 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 not receive
interest or dividends earned, if any, on such funds. If funds held in the escrow
account are released to us, interest or dividends earned on such funds up to the
date of release will be released to us.
Securities Issued
All securities issued in connection with the offering 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.
Post-Effective Amendment
If, during any period in which offers or sales of our securities are being made,
a significant 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,
but excluding amounts payable to non-affiliates for underwriting commissions,
underwriting commissions and dealer allowances, we shall promptly 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. Election to Remain an Investor
20
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, 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 80% of the 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.
Business Combination Deadline
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.
21
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.
DESCRIPTION OF PROPERTY
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.
MANAGEMENT
The directors and executive officers currently serving Winmark are as follows:
Name Age Positions Held Expiration of Term
- ------------------ ----- --------------------------------- -------------------
Mark Winstein 44 President/Secretary/Treasurer/ December 21, 2004
607 E Street, S.E. Director
Washington, D.C.
20003
22
MANAGEMENT - continued.
Mark Winstein, Age 44,President, Secretary, Treasurer, and Director: Mr.
Winstein 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. From 1984-1990, Mr. Winstein was the founder
and president of Energy Saving Equipment Company located in St. Louis, Missouri.
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.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
paid by Winmark for services rendered in all capacities to Winmark from December
22, 2003 through the date of this prospectus of all officers and directors of
our company.
Name and Principal Underlying
Positions at 10/26/04 Salary Bonus Compensation Options
------------------------------------------------------------------
Mark Winstein (1) 0 0 0 0
President/Treasurer
Secretary/Director
607 E Street, S.E.
Washington, D.C.
20003
(1) We have not paid any remuneration to Mr. Winstein since our inception. Mr.
Winstein has not entered into an employment agreement with us and does not
intend to do so in the foreseeable future.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding our common stock
owned on the date of this prospectus, and 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
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
In December, 2003, we issued 5,000,000 shares of common stock to Mark Winstein,
our sole officer and directror, in private placement transaction for
consideration of $22,000. The price of the common stock to such persons was
$0.0044 per share. Mr. Winstein may be deemed to be a promoter of Winmark. Our
principal executive offices are provided on a lease-free basis by our sole
officer and director, Mark Winstein. We incur no costs in the use of our
offices.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Principal Market or Markets
Our common stock is not listed on any exchange and there is no public trading
market for our common stock.
Approximate Number of Common Stock Holders
As of October 26, 2004 we had 5,000,000 shares of common stock issued and
outstanding, held by a single shareholders. We have no issued and outstanding
options or warrants. We have no other class of stock.
Shares Eligible for Future Sale.
Upon completion of the offering, we will have 5,500,000 shares of common stock
outstanding. A current shareholder who is an "affiliate" of Winmark, defined in
Rule 144 as a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
Winmark, will be required to comply with the resale limitations of Rule 144.
Purchasers of shares in the offering, other than affiliates, may resell their
shares immediately. Sales by affiliates will be subject to the volume and other
limitations of Rule 144, including certain restrictions regarding the manner of
sale, notice requirements, and the availability of current public information
about Sew Cal. The number of shares of our common stock that may potentially be
resold subject to Rule 144 is 5,000,000 shares. The volume limitations generally
permit an affiliate to sell, within any three month period, a number of shares
that does not exceed the greater of one percent of the outstanding shares of
common stock or the average weekly trading volume during the four calendar weeks
preceding his sale. A person who ceases to be an affiliate at least three months
before the sale of restricted securities beneficially owned for at least two
years may sell the restricted securities under Rule 144 without regard to any of
the Rule 144 limitations.
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. 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;
24
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - continued
o the amount of securities registered for such purposes must not exceed ten
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. 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.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and anticipate
that future earnings, if any, will be retained for development of our business.
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 our 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. We currently have 5,000,000 shares of common stock outstanding.
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.
25
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 Eastern 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
intend to establish with Manufacturers and Traders Trust Company, a New York
banking corporation, 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 Mr. Winstein qualifies for the safe harbor
from broker-dealer registration set out in Rule 3a4-1(a)(2) of the Exchange Act
as (i) Mr. Winstein will be the only individual offering the securities on
behalf of Winmark and is not an associated person of any broker-dealer nor has
he been in the prior 12 months; (ii) no commission or any other remuneration
will be paid to Mr. Winstein on account of any such sales; (iii) Mr. Winstein
intends primarily to perform at the end of the offering, substantial duties for
or on behalf of Winmark otherwise than in connection with transactions in
securities; and (iv) Mr. Winstein has not participated in the sale of any
securities for any issuer in the past 12 months and does not intend to do so in
the future except in accordance with Rule 3a4-1(a)4(ii)(C). 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.
26
Penny Stock Regulations
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.
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
-----------------
We are not a party to any pending legal proceedings and, to the best of Mr.
Winstein's knowledge, no such action by or against the us has been threatened.
LEGAL MATTERS
--------------
We have retained William D. O'Neal, Esq., as legal counsel for Winmark. 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.
27
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our By-Laws allow for the indemnification of company officers and directors in
regard to their carrying out the duties of their offices. We have been advised
that in the opinion of the Securities and Exchange Commission indemnification
for liabilities arising under the Securities Act is against public policy as
expressed in the Securities Act, and is, therefore unenforceable. In the event
that a claim for indemnification against such liabilities is asserted by one of
our directors, officers, or other controlling persons in connection with the
securities registered, we will, unless in the opinion of our legal counsel the
matter has been settled by controlling precedent, submit the question of whether
such indemnification is against public policy to a court of appropriate
jurisdiction. We will then be governed by the court's decision.
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.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in and/or disagreements with Shelley International,
C.P.A. on accounting and financial disclosure matters.
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
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.
28
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants .........................30
Financial Statements for Fiscal Year ending December 31, 2003
Balance Sheet...............................................................31
Statement of Operations.....................................................32
Statement of Stockholders' Equity...........................................33
Statement of Cash Flows.....................................................34
Notes to Financial Statements...............................................35
Financial Statements for the Period ending September 30, 2004
Balance Sheet...............................................................38
Statement of Operations.....................................................39
Statement of Stockholders' Equity...........................................40
Statement of Cash Flows.....................................................41
Notes to Financial Statements...............................................42
29
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors/Audit Committee
Winmark, Inc.
I have audited the accompanying balance sheet of Winmark, Inc. (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 Winmark, Inc. 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
30
WINMARK, INC.
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
31
WINMARK, INC.
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
32
WINMARK, INC.
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
---------- -------- --------- --------- ---------
The accompanying notes are an integral part of these statements
33
WINMARK, INC
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
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
34
WINMARK, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Winmark, Inc. (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.
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.
35
Notes to Financial Statements - continued.
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.
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 15% 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.
36
Notes to Financial Statements - continued.
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.
WINMARK, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 2004
37
WINMARK, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, December 31,
2004 2003
- ------------------------------------------- ----------------- -----------------
(Unaudited)
ASSETS
Current assets
$ - $ -
---------------- ----------------
Total current assets - -
Other assets - -
---------------- ----------------
Total assets $ - $ -
======================================== ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
$ - $ -
---------------- ----------------
Total current liabilities - -
---------------- ----------------
Stockholders' equity
Common stock
Authorized
25,000,000 shares with a par
value of $0.001
Issued and outstanding
5,000,000 shares 5,000 5,000
Additional paid-in capital 17,000 17,000
Deficit accumulated during
the development stage (22,000) (22,000)
---------------- ----------------
Total stockholders' equity - -
---------------- ----------------
Total liabilities and stockholders' equity $ - $ -
========================================== ================= =================
The accompanying notes are an integral part of these financial statements.
38
WINMARK, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
Cumulative
Amounts From
Date of
Incorporation
Nine Month Six Month on December 22,
Period Ended Period Ended 2003 to
September 30, June 30, September 30,
2004 2004 2004
------------- ------------- ---------------
REVENUE $ $ $
------------- ------------- ---------------
- - -
------------- ------------- ---------------
OPERATING EXPENSES
Legal and accounting
- - 22,000
------------- ------------- ---------------
Loss before income taxes
- -
Provision for income taxes
- - -
Net loss for the period $ - $ - $ (22,000)
================================== ============= ============= ===============
Basic and diluted loss per
common share $ - $ -
================================== ============= ============= ===============
Weighted average number
of common shares
outstanding 5,000,000 5,000,000
================================== ============= ============= ===============
The accompanying notes are an integral part of these financial statements.
39
WINMARK, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Common Stock Deficit
----------------------------- Accumulated
Additional During the Total
Paid in Development Stockholders'
Shares Amount Capital Stage Equity
---------------------------------- -------------- -------------- -------------- -------------- --------------
Inception, December 22, 2003 - $ - $ - $ - $ -
Initial capitalization
Sale of common stock 5,000,000 5,000 17,000 - 22,000
Net loss for the year - - - (22,000) (22,000)
------------- ------------- ------------- ------------- -------------
Balance, December 31, 2003 5,000,000 5,000 17,000 (22,000) -
Net loss for the period - - - - -
------------- ------------- ------------- ------------- -------------
Balance, September 30, 2004 5,000,000 $ 5,000 $ 17,000 $ (22,000) $ -
================================== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements.
40
WINMARK, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
Cumulative
Amounts From
Date of
Incorporation
Nine Month Six Month on December
Period Ended Period Ended 22,
September 30, June 30, 2003 to
2004 2004 September 30,
2004
- ------------------------------------------------------------ ---------------- ---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (22,000)
-------------------------------------------------
Net cash used in operating activities (22,000)
-------------------------------------------------
- -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 22,000
-------------------------------------------------
- -
Net cash provided by financing activities 22,000
-------------------------------------------------
- -
Change in cash during the period -
- -
Cash, beginning of the period -
-------------------------------------------------
- -
Cash, end of the period $ $ $ -
- -
============================================================ ================ ================ ===============
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ - $ - $ -
Cash paid for interest $ - $ - $ -
============================================================ ================ ================ ===============
The accompanying notes are an integral part of these financial statements.
41
WINMARK, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited) SEPTEMBER 30, 2004
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Winmark, Inc. (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 September 30, 2004. 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.
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.
42
WINMARK, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited) SEPTEMBER 30, 2004
NOTE 2. 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, or 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 may 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 Canada. 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.
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
43
WINMARK, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited) SEPTEMBER 30, 2004
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 15% 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 -
Current Taxes Payable -
-----------
Net Provision for Income Taxes -
-----------
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 in the process of filing documents 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.
44
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers.
Our 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 our company. The effect of these provisions is
potentially to indemnify our 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 out 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 its 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 directors 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 to Winmark 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 the
registrant 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 Winmark.
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
45
INFORMATION NOT REQUIRED IN PROSPECTUS - continued.
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 that
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 us 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 the registrant does
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 us in
connection with the issuance and distribution of the securities being offered
hereby.
Commission Registration and Filing Fee $ 6.34
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 25,956.34
Mr. Winstein shall be responsible for the payment of any and all expenses
incurred by registrant in connection with the issuance and distribution of
securities being offered hereby that exceed our initial pre-offering capital of
$22,000.
46
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, at a price of 0.0044 per share, or $22,000.
Mr. Winstein's capital contribution of $22,000 is our pre-offering working
capital. There have been no other sales of our unregistered securities. All
unregistered securities issued by us 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 the registrant 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, our business, financial and other
matters. Transactions by us 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. We have been 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. Our transfer agent 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.
47
Undertakings
We undertake:
(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;
(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.
48
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Winmark
certifies that we have reasonable grounds to believe that we meets all of the
requirements of filing Form SB-2 and authorized this Registration Statement to
be signed on our behalf by the undersigned, in the City of Washington, D.C., in
the District of Columbia.
WINMARK, INC.
By: /s/ Mark Winstein
- ------------------------------
Mark Winstein
Principal Executive Officer
Dated: October 26, 2004
By: /s/ Mark Winstein
- ------------------------------
Mark Winstein
Principal Accounting Officer
Dated: October 26, 2004
By: /s/ Mark Winstein
- ------------------------------
Mark Winstein
Principal Financial Officer
Dated: October 26, 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
Director
Dated: October 26, 2004
49