As filed with the Securities and Exchange Commission on May 11, 2006
REGISTRATION NO. 333-119959
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 TO FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ROYAL CAPITAL MANAGEMENT, INC.
(Name of Small Business Issuer in its Charter)
New Jersey 3272 22-3276909 (State or other jurisdiction of (Primary
Standard Industrial (I.R.S.Employer incorporation or organization)
Classification Code Number) Identification No.)
325 Flower Lane
Morganville, New Jersey 07751
(908) 770-7369
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
YEVSEY D. ZILMAN
PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER
ROYAL CAPITAL MANAGEMENT, INC.
325 FLOWER LANE
MORGANVILLE, NEW JERSEY 07751
(908) 770-7369
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of communications to:
RICHARD I. ANSLOW, ESQ.
ANSLOW & JACLIN, LLP
195 ROUTE 9 SOUTH, SUITE 204
MANALAPAN, NEW JERSEY 07726
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
-i-
- --------------------------------------------------------------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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 of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act
of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| If delivery of the prospectus
is expected to be made pursuant to Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED PROPOSED AMOUNT OF
SECURITIES BE MAXIMUM MAXIMUM REGISTRATION FEE
TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE
PER SHARE OFFERING PRICE
Common Stock of par value, 2,331,410 $.25 $ 582,853 $ 73.85
$.0001 per share(1)
Common Stock, par value 16,000,000 $.25 $4,000,000 $506.80
$.0001 per share (2)
Total 18,331,410 $4,582,853 $580.65
(1) Represents Selling Security Holders shares being sold to the public. The
price of $.25 per share is being estimated solely for the purpose of computing
the registration fee pursuant to Rule 457(c) of the Securities Act.
(2) Represents shares being sold to the public. The price of $.25 per share is
being estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
1
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS 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.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED , 2006
ROYAL CAPITAL MANAGEMENT, INC.
16,000,000 SHARES OF COMMON STOCK
2,331,410 SELLING SECURITY HOLDER SHARES OF COMMON STOCK
We are offering 16,000,000 shares of our common stock at $0.25 per share on a
self- underwritten, no minimum basis. There is no minimum purchase requirement.
The offering will be undertaken for a twelve (12) month period from
commencement. In addition, our selling security holders are offering to sell
2,331,410 shares of our common stock.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITES 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 selling stockholders will sell their common stock at the price of $.25 per
share until our shares of common stock are quoted on the OTC Bulletin Board (or
any other recognized exchange). Thereafter, the selling stockholders may sell
their shares at prevailing market prices or privately negotiated prices. There
is no assurance that our shares of common stock will be quoted on the OTC
Bulletin Board (or any other recognized exchange). Based on this, the purchasers
in this offering may be receiving an illiquid security. There is currently no
market for our shares of common stock.
The date of this prospectus is ________________, 2006
Price to public Underwriting Commissions Proceeds to Company
Per Share $ 0.25 -0- $ 0.25
Total $4,000,000 -0- $4,000,000
This prospectus also relates to the resale by the selling stockholders of up to
2,331,410 shares of common stock. The selling stockholders may sell the stock
from time to time at the prevailing market price or in negotiable transactions.
We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds from the sale of the 16,000,000
shares.
2
TABLE OF CONTENTS
ABOUT US 4
RISK FACTORS 6
USE OF PROCEEDS. 11
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION. 15
BUSINESS 24
LEGAL PROCEEDINGS. 36
MANAGEMENT 37
PRINCIPAL STOCKHOLDERS 41
DILUTION 42
SELLING STOCKHOLDERS 43
PLAN OF DISTRIBUTION 44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 46
DESCRIPTION OF SECURITIES. 48
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 48
ACCOUNTING AND FINANCIAL DISCLOSURE.
TRANSFER AGENT 49
EXPERTS. 49
LEGAL MATTERS. 49
FINANCIALS F-1
RECENT SALES OF UNREGISTERED SECURITIES. II-2
3
ABOUT US
HOW WE ARE ORGANIZED AND OUR OPERATIONS
We were originally incorporated under the laws of the State of New Jersey on
January 11, 1994. We specialize in development and management of a variety of
business activities and diverse projects. We transact business operations as
follows: (1) through our subsidiary, City Mix LLC, in Abu Dhabi, the United Arab
Emirates, we own 49% and have full and exclusive rights to exercise 100%
beneficial ownership of and to operate, manage and control a ready-mix concrete
plant, representing a technology and equipment to produce ready-to-use fresh
concrete containing a few ingredients (sand, pebble, cement, water) mixed to
customer specifications; (2) we develop a program for teaching American English
as a second language with the aid of a personal computer and plan to market and
distribute it in the countries where we are able to attract local partners
granting them licenses and exclusive marketing rights.
We have had losses in each fiscal year (we had a net profit in one interim
period) since inception including our most recent interim period ending
September 30, 2005 (which financial statements are included in this filing) and
rely upon either the sale of our securities or loans from management to fund any
shortfalls in operations.
WHERE YOU CAN FIND US
We are located at 325 Flower Lane, Morganville, New Jersey 07751. Our telephone
number is (908) 770-7369 and our facsimile number is (732) 617-8658.
SECURITIES OFFERED BY US
We are offering a maximum amount of 16,000,000 shares of common stock, $.0001
par value, at $0.25 per share. Currently, we have not established an
underwriting arrangement for the sale of these shares. All funds that are
received by us in the offering are available for immediate use. There is no
minimum number of shares that must be sold before we can utilize the proceeds of
the offering. Funds will not be placed in an escrow or similar account until a
minimum amount has been raised. In addition, our selling security holders are
offering to sell up to 2,331,410 shares of our common stock. We will not receive
any proceeds from the sale of any common shares by our selling security holders.
4
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary financial information set forth below is derived from and should be
read in conjunction with our consolidated financial statements, including the
notes thereto, appearing elsewhere in this prospectus.
Year Ended on
December 31,
2005 2004
Restated
--------
Statement of Operations Data
Revenue $ 359,914 $ 447,837
Costs and general and administrative expenses 489,470 449,502
-------
Operating Income (Loss) (129,556) (1,665)
------
Other income (expense) (316,576) (292,245)
Net Income (Loss) (446,132) (293,910)
--------
Net Loss per Common Share (0.01) (0.01)
------
Weighted Average Common share Outstanding 42,647,610 42,600,000
Dec. 31, 2005
Balance Sheet Data
Current Assets 31,826
Current Liabilities 112,147
Total Assets 2,986,554
Shareholders' Equity 2,406,121
5
RISK FACTORS
An investment in our common stock is highly speculative and involves a high
degree of risk. Therefore, you should consider all of the risk factors discussed
below, as well as the other information contained in this document. You should
not invest in our common stock unless you can afford to lose your entire
investment and you are not dependent on the funds you are investing.
Please note that throughout this prospectus, the words "we", "our" or "us" refer
to Royal Capital Management, Inc. and not to the selling shareholders.
We discuss all of our material risks in this section.
WE LACK AN OPERATING HISTORY AND OUR SURVIVAL AND THE SUCCESS OF OUR TWO DIVERSE
OPERATIONS IS DEPENDENT ON OUR ABILITY TO RECEIVE AND MAINTAIN NEW BUYERS AND
ORDERS FOR OUR CONCRETE PLANT AND THE DEVELOPMENT OF OUR SOFTWARE FOR THE
AMERCIAN ENGLISH TEACHING PROGRAM
Although we were incorporated in 1994, we lack an operating history. Our future
success of our two diverse operations can not be determined. Our ability to
achieve and maintain profitability and positive cash flow is dependent upon the
following:
- - our ability to receive and maintain new buyers and orders for our concrete
produced in Abu Dhabi, United Arab Emirates.
- - our ability to develop software for teaching American English as a second
language and receiving buy orders for this software.
If we can not achieve either of these goals, our success and future operations
are in doubt.
WE WILL BE REQUIRED TO RAISE CAPITAL TO PAY FOR CERTAIN EXPENSES OR WE WILL NOT
GROW OR SURVIVE
Our ability to raise the capital necessary to meet the costs of salary,
production, and marketing required and anticipated for the two (concrete plant
and software for teaching American English) projects is required. If we fail to
raise capital in this offering or through other sources of financing, our
continued growth and survival is in jeopardy.
6
We have a claim from an off shore bank in Grenada in the amount $551,848. All
off shore banks in that country have come under government supervision and our
account has been frozen. Because of the time lapse since the account was
originally frozen in 2002, we have fully reserved the amount.
EVEN THOUGH OUR OWNERSHIP IN CITY MIX L.L.C., OUR SUBSIDIARY IN ABU DHABI,
UNITED ARAB EMIRATES PROVIDES US WITH 100% BENEFICIAL OWNERSHIP TO OPERATE,
MANAGE AND CONTROL THE BUSINESS OF CITY MIX, LLC, WE DO NOT HAVE 100% LEGAL
OWNERSHIP IF THE BUSINESS IS SOLD
We acquired City Mix LLC, a company incorporated in Abu Dhabi, the United Arab
Emirates, which owns a ready-mix concrete plant. In City Mix LLC we own 49%,
which is the maximum shareholding ownership allowed for non-residents by the
United Arab Emirate laws. The remaining 51% is owned by a U.A.E. national,
Mubarak S. Jaber Al Ahbabi, who has effectively given away all his controlling
rights to us in consideration for annual sponsorship fees of about $55,000 and a
2% share in gross revenues by virtue of an agreement and power of attorney,
whereby Mr. Mubarak authorized us to act on his behalf in connection with his
51% shareholdings in City Mix LLC, represented by 51 shares, and to vote in any
manner we deem appropriate for and on his behalf at all meetings of the General
Assembly of City Mix LLC. Even though pursuant to the United Arab Emirates laws,
we have full and exclusive rights to exercise 100% beneficial ownership of the
company and to operate, manage and control all the assets and business of City
Mix LLC, there is an element of risk involved with reference to a 51% ownership
in our subsidiary since we are not granted 100% legal ownership in City Mix LLC.
OUR AGREEMENT WITH MR. MUBARAK, THE 51% OWNER OF CITY MIX, L.L.C. OBLIGATES US
TO MAKE ANNUAL LEASE PAYMENTS WHICH DEFAULT ON SUCH PAYMENTS CAN TERMINATE OUR
AGREEMENT WITH MR. MUBARAK RESULTING IN THE LOSS OF OUR INTEREST IN CITY MIX,
L.L.C.
Our agreement with Mr. Mubarak providing for the 49% ownership interest in City
Mix, L.L.C., requires us to make annual lease payments. These payments are
considered to be a normal business expense and we do not intend to allow such
payments to be in default as they are a top priority because of their importance
for the company, however if we default on such annual lease payments, this could
result in our loss of City Mix, LLC, our main business operation.
SINCE WE HAVE TWO DEVELOPING PROJECTS AND INSUFFICENT CAPITAL, WE MAY GIVE
PREFERENCE TO THE READY-MIX CONCRETE PLANT PROJECT BEFORE THE AMERICAN ENGLISH
TEACHING PROGRAM PROJECT AND AS A RESULT THE LATTER PROJECT MAY NOT GROW OR
DEVELOP
Our two ventures are new and thus we do not have significant capital for these
projects. In addition, since this offering is a "best efforts" offering, we may
decide to use the funds received to aid the ready-mix concrete plant project
over the American English teaching program project, and thus negatively impact
the growth of the latter project.
SINCE WE LEASE THE LAND WHERE OUR CITY MIX OPERATION IS LOCATED FROM THE UAE
GOVERNMENT, ANY TERMINATION OF SUCH LEASE WILL RESULT IN THE CESSATION OF OUR
CITY MIX OPERATIONS
The land where we operate our City Mix operations is owned and leased from the
7
UAE government. Although the UAE is a country with a stable developing economy
and the policy of such government is to avoid any damages to businesses, there
is still a risk that the City Mix lease for such property can be terminated,
spec ifically, if we do not make all lease payments when due. This would cause
our City Mix operations in the UAE to cease operations. Notwithstanding this,
the land lease payment is only $2,600 a year and it is incomparable with the
value of the City Mix LLC assets. In addition, the UAE government can only
terminate the lease for matters of national importance or security only, in
which case the UAE government will provide businesses with compensation reducing
any possible damages.
SINCE OUR CITY MIX, LLC SUBSIDIARY IS PRESENTLY LOCATED IN THE UNITED ARAB
EMIRATES AND SUBJECT TO THE RULES AND REGULATIONS OF THE UNITED ARAB EMIRATES,
YOU MAY NOT BE FAMILIAR WITH SUCH RULES AND REGULATIONS AND MAY NOT HAVE THE
CAPABILITY TO MAKE AN INFORMED DECISION FOR YOUR INVESTMENT
Our subsidiary, City Mix, LLC's (our concrete plant) business operations are
based in the United Arab Emirates. The City Mix LLC products and services are
subject to the rules and regulations of the United Arab Emirates. If you are a
United States investor, you may not be knowledgeable of the rules and
regulations in the United Arab Emirates. This may lead to your inability to make
an informed decision about an investment in us.
OUR BUSINESS OPERATIONS ARE TRANSACTED IN THE CURRENCY OF THE UNITED ARAB
EMIRATES AND SUBJECT TO FOREIGN CURRENCY FLUCTUATIONS WHICH CAN DECREASE THE
VALUE OF OUR ASSETS
Our operating subsidiary, City Mix, LLC has operations based in the United Arab
Emirates. Although the financial information in this document is presented in
United States dollars, our subsidiary, City Mix, LLC transacts its business in
the currency of the United Arab Emirates. Any negative price fluctuations in
such currency to the United States dollar will have the effect of decreasing the
value of our assets and, in turn, decreasing the value of your investment.
8
SINCE THERE IS NO MINIMUM PURCHASE REQUIREMENT IN THIS OFFERING, WE MAY RECEIVE
ONLY PARTIAL PROCEEDS FROM THIS OFFERING, WHICH WILL NOT ALLOW US TO ATTAIN OUR
INTENDED USE OF PROCEEDS AND CAUSE AN INVESTOR TO POSSIBLY LOSE SOME OR ALL OF
HIS INVESTMENT
There is no minimum purchase requirement in this offering. Therefore, we may
only receive a partial amount of the intended offering. If we do not receive the
full amount of proceeds from this offering, we may not be able to attain our
intended use of proceeds, specifically, monies needed for commissioning and
start up of the Ready-mix plant in Abu Dhabi and product development and
marketing of the English Software Teaching Program. In addition, we may not even
be able to pay the costs of this registration statement. This would affect our
ability to grow our business. Any investor may lose some or all of his or her
investment in the event that insufficient funds are raised and we are unable to
grow our business.
WE ARE ONE OF THE READY-MIX CONCRETE PRODUCERS AMONGST MANY IN ABU DHABI AND WE
MAY LOSE BUSINESS TO OUR COMPETITORS, HAVE LOWER REVENUES, GROSS MARGINS AND
OPERATING INCOME
There are a number of producers of ready-mix concrete presently in Au Dhabi. In
the future, it is possible that their quality and production might improve and
be superior to ours. Their improvements may cause us to lose our future client
base and also reduce our ability to get new clients. We continue to experience
intense competition across all markets for our products and services. These
competitive pressures may result in decreased sales volumes, price reductions,
and/or increased operating costs, such as for marketing and sales incentives,
resulting in lower revenues, gross margins and operating income.
CERTAIN STATES MAY NOT ALLOW SALES OF OUR COMMON SHARES PURCHASED IN THIS
OFFERING OR RESALES BY OUR SELLING SHAREHOLDERS AND SUCH SHAREHOLDERS MAY BE
REQUIRED TO HOLD THEIR COMMON SHARES INDEFINITELY
The selling shareholders shares registered in this offering and the common
shares purchased in this offering are intended to be qualified or exempt for
sale only in a limited number of states. Such shareholders may move to
jurisdictions in which the common shares are not qualified or exempt. No
assurances can be given that we will be able to effect any required
qualification or that any exemption will be available permitting such
shareholder to sell his common shares, and, as a result, such common shares may
be required to be held indefinitely.
SALES BY SELLING SECURITY HOLDERS BELOW THE $.25 OFFERING PRICE MAY CAUSE OUR
STOCK PRICE TO FALL AND DECREASE DEMAND IN THE PRIMARY OFFERING WHICH MAY
DECREASE THE VALUE OF YOUR INVESTMENT
9
The selling security holder offering will run concurrently with the primary
offering. All of the stock owned by the selling security holders will be
registered by the registration statement of which this prospectus is a part. The
selling security holders may sell some or all of their shares immediately after
they are registered. There is no restriction on the selling security holders to
address the negative effect on the price of your shares due to the concurrent
primary and secondary offering. In the event that the selling security holders
sell some or all of their shares, which could occur while we are still selling
shares directly to investors in this offering, trading prices for the shares
could fall below the offering price of the shares. In such event, it may be
difficult to sell all of the shares to investors. As a result, our planned
operations may suffer from inadequate working capital.
ALTHOUGH THERE IS PRESENTLY NO MARKET FOR OUR SHARES OF COMMON STOCK, THE PRICE
OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY BASED ON THE NUMBER OF SHARES WE
ARE REGISTERING FOR SELLING SECURITY HOLDERS AND YOU MAY FIND IT DIFFICULT TO
SELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID FOR THEM
There has been no trading market for the shares of our common stock and none is
anticipated to develop in the near future. We intend to apply for a quotation on
the Over the Counter Bulletin Board concurrently with the filing of this
offering. It is unlikely that our trading market will develop in the near term,
or that if developed, it will be sustained. In the event the regular public
trading market does not develop, any investment in our stock would be highly
illiquid. We do not know the extent to which the market for our shares of common
stock will expand or contract upon the resale of the shares registered under
this prospectus since we presently do not have a market for our securities.
Therefore, your ability to resell your shares may be limited. Actions or
announcements by our competitors, regulatory developments and economic
conditions, as well as period-to-period fluctuations in our financial results,
may have significant effects on the price of our common stock and prevent you
from selling your shares at or above the price you paid for them.
SHARES ELIGIBLE FOR PUBLIC SALE IN THE FUTURE COULD DECREASE THE PRICE OF OUR
COMMON SHARES AND REDUCE OUR FUTURE ABILITY TO RAISE CAPITAL
We are registering 18,331,410 shares for sale in this offering. Since we have
100,000,000 shares authorized with 57,325,000 shares that have not been issued;
and 40,318,590 shares issued and outstanding but not registered, sales of
substantial amounts of our common stock in the public market could decrease the
prevailing market price of our common stock and our ability to raise equity
capital in the future.
10
USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. The gross proceeds to us from the sale of up to the
additional 16,000,000 shares of our common stock at a price of $0.25 per share
are estimated to be $4,000,000, assuming all of the shares offered by us in this
offering are sold. The proceeds, if any, may be significantly less than
$4,000,000, and there is the possibility that the proceeds may not be sufficient
to cover the costs associated with this offering. We expect to use the net
proceeds from this offering for the purposes described in the table below. Any
gross proceeds will be used first to pay the offering expenses of $102,500.00.
Any gross proceeds after the offering expenses will be used as listed in the
table below. We have agreed to bear the expenses relating to the registration of
our own shares as well as the shares for the selling security holders.
Gross Proceeds $ 4,000,000
Offering Expenses $ 102,500
USE OF PROCEEDS
Description Amount of Proceeds Received
- ------------ -----------------------------
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
5% 15% 25% 50% 75% 100%
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Commissioning and start-up of the ready-mix
concrete plant
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Stage 1
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
1. Purchase of one/two concrete pumps $ 350,000 700,000 700,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
2. Purchase of raw materials $ 67,000 110,000 405,000 470,000 470,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
3. Payment of outstanding bank loan (*) $ 90,000 90,000 90,000 90,000 90,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
4. General and administrative expenses, $ 85.000 94,500 190,000 200,000 200,000
including employment of plant personnel
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
5. Computer control systems $ 38.500 44,500 44,500 89,000 89,000 89,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
6. Testing and commissioning $ 50,000 50,000 70,000 70,000 70,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
7. Connection of permanent water and $ 58,000 58,000 58,000 58,000 58,000 58,000
electricity $
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
8. Aggregate silos modification $ 48,000 48,000 48,000 48,000 48,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
9. Purchase of pick-up vehicles $ 15,000 15,000 30,000 30,000 30,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
10. Workshop equipment, tools, furniture $ 25,000 25,000 30,000 30,000 30,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
11. Telephones, network, miscellaneous $ 15,000 15,000 15,000 15,000 15,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Sub-Total $ 96,500 497,500 550,000 1,375,000 1,800,000 1,800,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Stage 2
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
1. Purchase of four/seven transit mixers $ 320,000 560,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
2. Purchase of one truck-mounted concrete $ 350,000
pump
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
3. Purchase of raw materials $ 50,000 150,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
4. General and administrative expenses, $ 75,000 110,000
including employment of plant personnel $
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
5. Purchase of pick-up vehicles $ 30,000 30,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Sub-Total $ 475,000 1,200,000
$
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Total for Stage 1 and Stage 2 $ 97,500 497,500 550,000 1,375,000 2,275,000 3,000,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Program for teaching American English as a
second language
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
1. Product development $ 80,000 80,000 80,000 80,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
2. Legal support $ 70,000 70,000 70,000 70,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Total $ 150,000 150,000 150,000 150,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
General Corporate Purposes
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Office rent $ 60,000 60,000 60,000 120,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Marketing $ 37,500 75,000 90,000 150,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Sales $ 6,000 50,000 60,000 100,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Development $ 30,000 60,000 70,000 120,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
New computer equipment $ 7,500 14,500 22,000 30,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Miscellaneous $ 1,500 3,000 5,500 7,500
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Total $ 142,500 262,500 307,500 527,500
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Salaries
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Y. Zilman $ 25,000 50,000 75,000 100,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Y. Ginzburg $ 15,000 30,000 45,000 60,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
E. Klebanov $ 7,500 15,000 22,500 30,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
O. Safonova $ 7,500 15,000 22,500 30,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Total $ 55,000 110,000 165,000 220,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Gross Proceeds $ 200,000 600,000 1,000,000 2,000,000 3,000,000 4,000,000
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Less Offering Expenses $ 102,500 102,500 102,500 102,500 102,500 102,500
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
Net Proceeds $ 97,500 497,500 897,500 1,897,500 2,897,500 3,897,500
- ---------------------------------------------- ---- ------------ ---------------- --------------- ------------ ------------ --------
(*) Payment of outstanding bank loan represents a provision for payment of the
balance of City Mix, LLC's loan to the First Gulf Bank, Abu Dhabi, United Arab
Emirates, outstanding at the time the proceeds are received. This loan had been
obtained from First Gulf Bank by the former owners of City Mix LLC to finance
the construction of the concrete plant before City Mix LLC was put up for sale
through a private auction in November 2000. The original loan amount was
$1,061,225 and carried an interest rate of 10.5% per annum. The funds were used
to finance the purchase of the plant machineries in Italy and shipment to Abu
Dhabi and to cover local construction costs. The loan has no fixed maturity
date. As of July 1, 2003 the interest rate on the loan was renegotiated with and
accepted by the bank from 10.5% to 5% and at present, City Mix, LLC, is paying
$6,803 per month including approximately $6,000 of principal and $803 of
interest. The outstanding balance of the loan as at December 31, 2005 was
11
$113,187. In the event that the outstanding balance of the loan has been paid
off by the time the proceeds are received, the allocated amounts as stated will
be used for the purchase of raw materials in order to increase production from
the plant.
(**) If and when necessary, we may decide to use the amounts currently allocated
for the development of the program for teaching American English as a second
language to aid the ready-mix concrete plant project at any stage and at any
level of proceeds received from this offering.
In the event that less than 25% of the proceeds are raised, we will be using any
funds received to test, commission and prepare our ready-mix concrete plant in
Abu Dhabi for operation until we receive an aggregate investment of $550,000
(which includes all of the activities from Stage 1 with the amounts allocated as
stated above) to start pilot and small-size contract production from the plant
and are then able to proceed with further expenses as above. If we are unable to
accumulate enough funds to commission the plant and start production, we will
consider other options to utilize our production facilities, including a lease
arrangement, or an operating management agreement with one of the local
producers.
12
DETERMINATION OF OFFERING PRICE
The initial public offering price of $0.25 per share for the offering of
16,000,000 shares has been determined arbitrarily by us and does not necessarily
bear any relationship to our book value, assets, past operating results,
financial condition or any other established criteria of value. Although our
common stock is not listed on a public exchange, we will be filing to obtain a
quotation on the OTC Bulletin Board concurrently with the filing of this
prospectus. There is no assurance that our shares of common stock will be quoted
on the OTC Bulletin Board. In addition, however, there is no assurance that our
common stock, once it becomes publicly quoted or listed, will trade at market
prices in excess of the initial public offering price as prices for the common
stock in any public market which may develop will be determined by the market
and may be influenced by many factors, including the depth and liquidity of the
market for the common stock, investor perception of us, and general economic and
market conditions.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not traded on any recognized securities exchange. Thus there
is no available public trading market to sell our shares. Upon this registration
statement being declared effective, we intend to have a registered broker-dealer
file a Form 211 with the NASD for the purpose of obtaining a quote on the OTC
Bulletin Board. As of May 10, 2006, based on our records, we had 57
shareholders holding 42,675,000 shares of our common stock.
As of May 10, 2006, we did not have any outstanding options or warrants to
purchase, or securities convertible into, shares of our common stock. We have
agreed to register 2,331,410 shares of our common stock held by selling security
holders. In addition, we are offering a maximum of 16,000,000 shares of our
common stock at $0.25 per share.
As of May 10, 2006, 42,600,000 shares are eligible for sale in accordance
with Rule 144 of the Securities Act of 1933, of which 14,592,590 are owned by
our officers and directors.
13
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of May 10, 2006,
with respect to compensation plans under which our equity securities are
authorized for issuance:
(a) (b) (c)
----------------- ----------------- -----------------
Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding options, future issuance
outstanding options warrants and rights equity compensation
warrants and rights plans (excluding
securities reflected
in column (a))
Equity compensation None
plans approved by
security holders
Equity compensation None
plans not approved
by security holders
Total None
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy
to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends. There can be
no assurance that we can achieve such earnings.
PENNY STOCK CONSIDERATIONS
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker- dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit their
market price and liquidity of our securities. Broker- dealers who sell penny
stocks to certain types of investors are required to comply with the
Commission's regulations concerning the transfer of penny stocks. These
regulations require broker- dealers to:
14
- - Make a suitability determination prior to selling a penny stock to the
purchaser;
- - Receive the purchaser's written consent to the transaction; and
- - Provide certain written disclosures to the purchaser .
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our audited financial statements for the year ended December 31, 2005 and
their notes appearing elsewhere in this prospectus. The following discussion and
analysis contains forward-looking statements, which involve risks and
uncertainties. Our actual results may differ significantly from the results,
expectations and plans discussed in these forward - looking statements.
Overview
We were incorporated under the laws of the State of New Jersey on January 11,
1994 as an international trade consulting firm and were rendering business
consulting services until July 2002, when we commenced our activities in
developing computer software products designed for teaching foreign languages,
based on the technology for improved perception and memorization of information
using electronic visual devices, such as a personal computer, which we acquired
by virtue of a license agreement with YZ Business Consulting. During the time
period between 1994 and 2002, we provided consulting services to Mr. Zilman who
was working on the "English as a second language program." As a result of our
joint work, we decided to concentrate on this program in our future activity
ceasing other consulting activities. As a further development of our joint
efforts, on July 26, 2002, we entered into a license agreement with YZ Business
Consulting. As a consideration for the license agreement, the following
individuals were issued shares of our common stock: Yuli Ginzburg - 2,429,000;
Yevsey Zilman - 1,493,790; Olga Safonova - 1,400,000; Eugene Gurevitch -
1,686,530; Vera Shatokhina - 609,270; Teresa Bergstrom - 220,000; Sonia Bromberg
- - 500,000; Nikita Sukhin - 20,000; Margarita Ginzburg - 10,000 and Anna Kanevsky
- - 20,000. Upon the issuance of these shares, this group obtained control of the
company.
In December 2003, as a result of the purchase of assets of City Mix Management,
Inc., we acquired 49% of City Mix LLC, a company incorporated in Abu Dhabi, the
United Arab Emirates, which owns a ready-mix concrete plant. In City Mix LLC, we
own 49% (which is the maximum shareholding ownership allowed for non-residents
by the United Arab Emirate laws) and have full and exclusive rights to exercise
100% beneficial ownership of the company and to operate, manage and control all
the assets and business of City Mix LLC. The remaining 51% is owned by a United
Arab Emirates national, Mubarak Al Ahbabi. Our total assets (consisting mainly
of City Mix, LLC) as of December 31, 2005 were $2,986,554.
The above rights in City Mix LLC were acquired based on the following
shareholding and other legal documents (attached hereto):
o Share Transfer and Amendment to the Memorandum of Associations, signed with
Mubarak Al Ahbabi, holder of 51% of City Mix LLC, whereby we acquired
ownership of 49% of City Mix LLC and are appointed manager of City Mix LLC
with all powers to exclusively operate and manage the business of City Mix
LLC;
o Power of Attorney from Mubarak Al Ahbabi, whereby we are authorized to act
on his behalf in connection with his 51% ownership, to vote for and on his
behalf in any manner we deem appropriate at all meetings of City Mix LLC,
and to exercise all the rights whatsoever attached to the said 51%
ownership. The Power of Attorney cannot be revoked without our written
consent; and
o Agreement dated November 26, 2000 signed with Mubarak Al Ahbabi confirming
the above and setting obligations and relationships of the parties in City
Mix LLC.
All the above documents are governed by the appropriate laws of the UAE and are
fully enforceable as any other transactions and/or agreements concluded in the
UAE and registered with the appropriate authorities.
In the years to follow, we are planning to develop our activities in two major
business segments:
(1) Commissioning, start up and operation of our ready-mix concrete plant in
Abu Dhabi, the United Arab Emirates;
(2) Development, marketing and distribution of a program for teaching American
English as a second language with the aid of a personal computer.
15
(1.) Commissioning, start up and operation of our ready-mix concrete plant in
Abu Dhabi, the United Arab Emirates
We are planning to develop this project through our subsidiary City Mix LLC. The
United Arab Emirates and the Emirate of Abu Dhabi, in particular, have attracted
multi-billion dollar investments, including foreign capital investments, for the
development of major construction projects. The construction and industrial
sector is the second largest industry in the UAE after oil and gas. In the next
few years, Abu Dhabi expects local and foreign investments to invest at least
$10 billion into emerging industrial zones (`Abu Dhabi Economy', Issue 381,
March 2004). All Abu Dhabi construction projects are based on concrete
structures. Concrete is the only locally available, and thus widely used,
construction material.
Our ready-mix concrete plant comprising two batching plants is a technology
manufactured and acquired by us in 1999, and a set of machineries designed to
produce fresh concrete of any type to local and international quality standards
by controlling all technological processes in strict accordance with the
required mix design. The plant has not yet been used to mix concrete. As of
today, the project is in its final stage. Specifically, all civil construction
works have been completed and all the machineries have been erected. Once the
necessary funds are provided, the machineries will be tested and commissioned
and the plant will be ready for production in approximately 3 months thereafter.
We will need approximately $300,000 to test and commission the plant and to
prepare it for operation. The said $300,000 will be used to purchase and install
new computer control systems, connect permanent water, electricity and telephone
lines, procure necessary workshop tools, make necessary testing and adjustment
of all the machineries, including replacement of any faulty spare parts,
purchase small quantities of raw materials for trial operation, and to employ
primary personnel.. After the plant is prepared for operation we will need
further approximately $140,000 primarily to purchase more raw materials and
employ additional personnel in order to start-up pilot and small-size contract
production. At the initial stage, we intend to lease truck mounted concrete
pumps. The mobile pumps are not part of the plant machinery. At later stages, if
our financial situation will allow, we will purchase our own truck-mounted
concrete pumps in accordance with the Use of Proceeds plan.
Our management is responsible for the overall executive management and control
of the project. In Abu Dhabi, the day-to-day management of the operations will
be carried out by City Mix LLC. The project will be realized in two stages.
Stage 1 is commissioning and operation of the first batching plant; and Stage 2
is commissioning and operation of the second batching plant. On the whole, we
are planning to spend $3,000,000 to finance the two stages of the project
including the consecutive start-up of the two batching units of the plant,
purchase of raw materials, employment of production and administrative
personnel, acquisition of additional technological and transportation equipment,
and gradual increase of the plant's production to its optimal capacity. At the
first stage of the project we will need approximately $440,000 to start-up pilot
and small-size contract production utilizing only one batching unit of the two.
(2.) Development, marketing and distribution of a program for teaching American
English as a second language with the aid of a personal computer.
With this project, we are planning to develop our activities internationally
within the educational sector. Our purpose is to establish long-term commercial
presence in this international market and to develop a number of educational
projects and activities.
At the moment we are making use of our 16 concrete mixer trucks by renting them
out to RMC Supermix LLC, a local concrete producer, to provide cash in order to
finance our day-to-day expenses, including costs required to proceed with the
English language program project. The trucks are rented subject to Rental
Agreement dated 6/26/05 (the "Rental Agreement"), which carries the following
main terms and conditions.
o Subject of Rental Agreement. RMC Supermix LLC ("RMC") rents 16 mixer trucks
from City Mix LLC ("City Mix") pursuant to the terms and conditions of the
Rental Agreement.
o Terms of Payment. RMC pays to City Mix an aggregate rental of approximately
$26,000 per month for all 16 mixer trucks for the current month by 90 days
postdated checks on the first current month.
o Major Obligations. City Mix maintains valid truck insurance and
registration, and RMC supplies drivers and technical personnel to service
and operate the trucks at no cost to City Mix except for any major
malfunction due to the manufacturer's default, in which case City Mix is to
cover the expenses of such malfunctions.
16
o Duration and Termination. The Rental Agreement is for 12 months and is
automatically renewable. Either party can terminate the Rental Agreement
prior to expiration by a one-month notice to the other party, in which case
RMC must deliver the trucks to the City Mix's plant site on the expiration
of the termination period.
The fact that we are renting all mixer trucks to a single party represents a
dependence on one major customer, however in the event of termination of the
Rental Agreement to whatever reason, there is a provision for a one-month
termination notice, and it will be sufficient for us to enter into similar
agreements with another customer. The Rental Agreement also provides for the
return of the trucks on a one-month notice basis at any time we deem necessary,
and therefore all the trucks will be available for the company before the
production from the City Mix's plant commences.
We will start with developing, marketing and distribution of a computer
software product designed for teaching foreign languages, based on the
technology, which we acquired in 2002 under a contract with YZ Business
Consulting, a company owned by our officer and director, Yevsey Zilman. The
principal terms and conditions of the contract are as follows.
o Subject of the Agreement. YZ Business Consulting ("YZ") provides us with
the technical know-how and the intellectual property designed to develop
educational aids in form of a software program on CD's used to study
foreign languages with the help of using electronic visual devices, such as
a personal computer ("the Technology"), and we develop, produce and market
product(s) based on the Technology, provide legal protection for the
Technology and pay royalties to YZ.
o Obligations. YZ grants to us an exclusive proprietary right to the
Educational Aids in form of a software program used to teach foreign
languages developed on the basis of the Technology, as well as an exclusive
right to develop, improve, upgrade and sell the Educational Aids. We also
have a non-exclusive right to carry out activities in order to utilize the
Educational Aids for the benefit of both Parties, e.g. establishing any
educational systems, opening any teaching centers, schools, training
courses, individual classes and the like. YZ provides technical support,
supervision, and professional advice to us in the development of the
Educational Aids. We undertake to develop and organize production and
commercial sales of an Educational Aid for teaching the English language as
a second language, as well as to carry out business development and
marketing research to expand the scope and the geography of sales of the
products, and pay royalties to YZ in accordance with the terms of the
contract. We do not share any improvements or developments of the
Technology-based products with YZ in a way, which may allow YZ to take
advantage of such improvements.
o Royalties. We will make regular payments to YZ up to forty per cent (40%)
of the total revenues ("Royalties") from our sales of any product, services
or any other activities utilizing the educational aids after deduction of
all related costs of development, legal protection, advertising and
production incurred by us prior to such sales. The regular payments of the
Royalty are reduced if necessary to insure that there is no loss for us in
this type of activity.
o Term of the contract and termination. The term is unlimited with a
termination clause by mutual consent or in the event of violation of the
contract by either party."
Based on the technology, we developed an educational aid named "American
English, Primary Course, Part I" designed to teach American English as a
second/foreign language to non-English speakers, as well as to expand the
vocabulary and improve general knowledge of the language of those who command
American English in one degree or another. The product can be used for
self-studying and can assist in memorization, correct pronunciation, spelling
and practical utilization of the spoken English material of about 2,000 most
frequently used words and word expressions. It will be followed by creation of
other products, which can assist in the development of good command of American
English assisting students for entrance examinations at US educational
institutions.
Following the technology acquisition we commenced our activities on this project
by carrying out research and development work, which was threefold.
(i.) Legal protection of the computer software program; and
(ii.) Development of the primary course educational aid and lexical and
grammatical material thereto; and
(iii.) Search for potential partners and carrying out preliminary negotiations
with publishing, educational and commercial institutions to organize
future commercial sales.
17
We have cooperated with major international companies such as Wizzard Software
Corporation, based in Pennsylvania and Jupiter Images, based in Arizona, to
complete our program with high quality components, namely audio material in the
form of AT&T natural speech text to speech engine and video material in the form
of ClipArt vector images respectively. Based on contracts signed with these two
companies, we purchase the above-referenced components to complete our program
and our agreement with both of them does not allow us to mention their names in
our product or related materials.
In order to develop the lexical material for the program and to format it in
accordance with teaching techniques applied in the program a number of highly
qualified language experts have been consulted including the leader of one of
the organizations affiliated with TESOL. This organization is known as TESOL
Ukraine (Teachers of English to Speakers of Other Languages in Ukraine), an
affiliate of the International Association. TESOL, Inc. (Teachers of English to
Speakers of Other Languages) with headquarters in Alexandria, Virginia. TESOL
Ukraine's President Nina A. Lyulkun reviewed all matters related to the
development of the English lexical and grammatical material for our program in
the normal course of her responsibilities as president of TESOL Ukraine, a
social organization interested in popularization of any new methods of teaching
the English language, and our arrangement with her has no financial obligations
on either side.
Except for royalty payments to YZ Business Consulting, Inc. described above, we
are not obligated to share our revenues from the sales of our program products
with any other party.
As of today, we have completed the development of the educational aid "American
English, Primary Course, Part I" in two versions: standard and extended. The
extended version differs from the standard one by a bigger volume of the
studying material. The lexical, grammatical and methodological material for this
educational aid has been developed for both versions. The product software has
been developed and debugged. We ensured legal protection of the computer program
by registering it with the patent authority of the Russian Federation, the first
country of application of the program and a country, which signed an
international convention on intellectual property protection. We purchased 500
licenses for Wizzard Software Corporation's components for software program, and
ClipArt vector images from Jupiter. Necessary production facilities have been
set up and the production technology has been developed and introduced together
with the technical protection against unauthorized reproduction. The first
version of the product prototype has been issued. The technology and the
prototype are undergoing necessary finishing procedures. The trade name ZS
SuperTutor has been developed for the Technology. The logo and the trade name ZS
for our products and services have been registered with the appropriate
authorities of the Russian Federation. Preparation is underway for the
organization in Russia of experimental American English training with the use of
both versions of the educational aid "American English, Primary Course, Part I".
18
Plan of Operation for the Next 12 Months
In light of the lack of revenues from our proposed core business activity we are
planning to focus on the English language educational program, which we are
developing in collaboration with YZ Business Consulting (YZ). YZ will complete
finishing of the prototype of our products in the second quarter of 2006 and
will is planning to enter into a partnership arrangement to set up online
training with the use of the educational aid "American English, Primary Course,
Part I" two versions. YZ will also commence the organization in Russia of
experimental American English training, and for this purpose it is planned to
set up an American English experimental course in one of the Russian education
institutions, whereat the Online Training web site and the "American English,
Primary Course, Part I" educational aids owned by Royal Capital Management Inc.
will be used to study the primary course material. This stage is expected to
cover a period from the end of the second quarter to beginning of the fourth
quarter of 2006. This activity will be organized by YZ maintaining our exclusive
rights to the registered trade mark and any and all educational aids.
We are planning to commence commercial sales of the educational aids in Russia
in the fourth quarter of 2006. Subject to our marketing strategy the sales of
these educational aids may take different forms in the course of the project,
but there will be one obligatory principle implemented, i.e. each and every end
user (student) taking a training course at any location will have to buy the
"American English, Primary Course, Part I" educational aid program.
As we raise funds from this offering, we will commence the City Mix LLC
ready-mix concrete project in Abu Dhabi, United Arab Emirates. For this purpose
we will use the first approximately $550,000 raised from the public offering to
commission and start-up the first batching unit of the City Mix LLC plant to
provide production for small-size supply contracts. We will need approximately 3
months to make the first batching unit of the plant ready for operation. The
$550,000 will be used to purchase raw materials, connect permanent water,
electricity and telephone lines, commission and try the batching unit, employ
personnel and to complete other associated activities.
The above amount of $550,000 includes a provision for payment of the balance of
City Mix, LLC's loan to the First Gulf Bank, Abu Dhabi, United Arab Emirates,
outstanding at the time the proceeds are received (approximately $90,000). In
the event that the outstanding balance has been paid off by the time the
proceeds are received, the provision of $90,000 will be used to purchase more
raw materials in order to increase the plant production.
With the increase of proceeds, we will make further contributions to our
ready-mix concrete project in Abu Dhabi to commission and start-up the second
batching unit, for which we will need approximately three weeks, purchase
additional transit mixer trucks and truck-mounted concrete pumps, purchase
additional quantities of raw materials, hire additional production and technical
personnel in order to gradually increase production volumes and reach optimal
operation of the plant. The time frame for commencing and completing these
activities will largely depend on the availability of funds raised from this
offering as well as the market situation in Abu Dhabi at the time.
In parallel with the operation of our ready-mix concrete plant in Au Dhabi, we
will use the proceeds from this offering to finance and further develop our
English educational software project. For this purpose we will use the allocated
$150,000 to expand the scope of educational aids, translate them into other
languages, provide necessary intellectual property and copyright protection and
develop the dealers network in order to expand the geography of sales.
In the event that we are unable to raise $550,000 from this offering required to
commission the plant and start-up pilot and small-size contract production, we
will consider other options to utilize our production facilities, including a
lease arrangement, or an operating management agreement with one of the local
producers, whereby our plant will be operated by a professional operator in the
interest of both parties on a profit sharing or a fixed fee basis, or any other
options, which may be available to us at the time. In such case, the operating
partner would bear the cost associated with the start-up of the plant.
The number of our employees will not change significantly. However, as we start
our ready-mix concrete activities, we expect the number of employees to grow and
reach approximately 55 employees in City Mix LLC.
19
Results of Operations
Comparison of year ended December 31, 2005 to December 31, 2004.
(All figures are expressed in U.S. Dollars)
Year ended on December Year ended on December Increase / (Decrease)
31, 2005 31, 2004 in December 2005
- -----------------------------------------------------------------------------------------------------------
Revenue, truck rentals $ 359,914 $ 447,837 $ (87,923)
Costs and general and (489,470) (449,502) 39,968
administrative expenses
Operating Income (Loss) (129,556) (1,665) 127,891
Other Income (expenses)
- - Provision for loss on receivable (275,924) (275,924) 0
from bank
- - Finance Cost (40,652) (38,718) 1,934
- - Non Operating (expenses) / Income 0 22,397 (22,397)
Other Expenses (Net) (316,576) (292,245) 24,331
Net Income (Loss) $ (446,132) $ (293,910) $ 152,222
Revenue: We are a development stage company that is yet to commence its
operations of ready mix cement. However, our subsidiary in the U.A.E., City Mix
L.L.C. is making use of their 16 cement mixer trucks by renting to generate
revenue. In May 2005 a new owner acquired the company, which was renting the
trucks, and City Mix L.L.C. received a notice of termination of the renting
agreement from June 16, 2005 for 8 trucks. Effective from July 01, 2005 all the
16 trucks were re-rented out to the same party, but the truck rentals were
reduced from $37,000 to $26,000 based on a new rental agreement dated 06/26/05
due to natural aging of the trucks over the last three years and hence increased
maintenance costs borne by the hirer. This caused a reduction of the truck
rentals for the year 2005 by $87,923 or 19.63% compare to 2004. In the future,
if the hirer terminates the agreement for all or part of the trucks it will
reduce our revenues, however, there is a provision for a one-month termination
notice, and it will be sufficient for us to enter into similar agreements with
another customer. The expected truck rental revenue of approximately $310,000 in
the next 12 months was estimated based on new monthly rental of $26,000
effective from July 01, 2005, which represents a 30% reduction from the previous
periods; however it may further decrease in the future periods due to the
natural aging of the trucks and growing maintenance costs. The development of
the English language educational program will continue as a collaborate effort
of Royal Capital Management Inc and YZ Business Consulting. Further improvement
and development costs will be funded by YZ Business Consulting.
Cost and General and Administrative expenses: The cost and general
administrative expenses for the year 2005 increased by $39,968 or 8.9% compared
to 2004. This increase was mainly caused by following ;
i.) Depreciation on office equipment reduced by $4,382 as there are few assets
which are fully depreciated in year 2004,
ii.) Salary and benefits reduced by 16,326 as in year 2005 as no house rent
allowances and bonuses were paid,
iii.) Issuance of 75,000 shares of common stock, valued at $18,750, to our
presidents as compensation,
20
iv.) Increase in the sponsorship fee of $24,527, which represents an agreement
reached with Mr. Mubarak Al Ahbabi, our partner in City Mix LLC, by the end
of 2004, whereby we agreed to pay him 2% of our truck rental revenues from
the date the truck rent commenced in September 2002 and until to date. This
agreement was confirmed by our letter to Mr. Mubarak Al Ahbabi dated
January 4, 2005. Therefore, an amount of $17,329 was paid for the period
prior to December 31, 2004 and another $7,198 was paid for the year 2005.
In earlier years, prior to 2005, there was no such a truck rent revenue
sharing agreement, and only the normal annual fee of $54,422 was paid to
the partner,
v.) Legal fees increased by $13,996 mainly due to the increase in translation
expenses for legal documents and additional payments made to lawyers for
legal services for subsidiary, City Mix LLC, Abu Dhabi, UAE,
vi.) Consultancy fees paid to YZ Business Consulting Inc. increased by $4,500 as
in year 2004 it was paid only for 11 months while in 2005 the same was paid
for the full year,
vii.) Decreased in Other expenses by $2,348 compared to year 2004 resulting from
compensating effects of following major variances in few expenses:
a.) Increase of vehicle rent by $12,310 as there were no such payments in
the initial months of 2004. Effective from April 14, 2004 City Mix LLC is
renting a pick-up truck from the UAE government under a UAE law requiring
all limited liability companies working in the industrial sector to rent
passenger or heavy-duty vehicles from the government for the purpose of
financial support of low-income UAE nationals. City Mix LLC has been paying
approximately $1,470 per month for this rent. Due to the above, there was
an increase in gas, car wash and parking expenses by $4,158 but partially
compensated by reduction in vehicle registration by $3,236 and vehicle
maintenance by $8,023 compared to 2004.
b.) Increase in professional fees for audit and accounting fees by $5,146
due to increased amount of services associated with the public offering
preparations.
c.) Telephone expenses increased by $3,492 due to a general increase of
work amount related to the English language educational software program.
d.) variances in other administrative expenses viz: office sundries reduced
by $1,688; repairs and maintenance reduced by $2,087; miscellaneous
expenses reduced by $2,009, public relation officer's services fee reduced
by $14,966 as there was much less work in year 2005, which required such
services, bank charges reduced by $2,364 while the land fee and associated
expenses increased by $2,612 and insurance on plant & trucks was increased
by $3,604 due to a general increase of insurance costs in year 2005
compared to year 2004.
Provision for loss on receivable from bank: We have a receivable of $551,848
from a closed bank, the Anglo American Bank, located in Grenada, which is
undergoing liquidation. The Ministry of Finance of that country is supervising
the liquidation process and return of the funds to the account holders. The
company has made provision in year 2004 of $ 275,924 for the doubtful recovery
from that bank. Since the status quo of the receivable is the same, an
additional provisions for balance $275,924 were made during the year 2005.
Finance costs: Finance cost increased marginally by $1,934 or 5% compared to
2004. It comprised interest paid on First Gulf Bank's loan, imputed interest on
Ramoil loan and check discounting charges. The interest on our loans was reduced
by $2,269 and for discounting increased by $4,203 compared to 2004 as all the
checks received for truck rentals in year 2005 while in year 2004 a few checks
were not discounted but cashed on due date.
Non Operating Income: Such income of $22,397 in year 2004 consisted mainly of an
audit fee refunded of $4,218 relating to our initial operating period and
$18,179 related to adjustment of an inter company transactions.
21
Net Loss: For the year ended December 31, 2005 our net loss totaled $446,132 or
124% of revenue, as compared to $293,910, or 65.63% of revenue for the year
ended December 31, 2004. The principal cause of loss for the year 2005 was
decrease in truck rental income of $87,923, provision made for $275,924 for the
provision for loss of the receivable from a closed bank and other reasons stated
above for increased costs and general administrative expenses while loss for the
year 2004 was the $275,924 provision for loss of the receivable from closed bank
charged to operations.
Application of Critical Accounting Policies
The management discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe the
estimate for provision for loss of receivable from bank is critical and has a
material impact on our financial presentation.
Off Balance Sheet Arrangements
We have operating lease commitments for a sublease of land (300 ft x 300 ft) on
which the plant is constructed. In accordance with the laws of the Emirate of
Abu Dhabi, the United Arab Emirates, the land on which the plant is constructed
is owned by the Abu Dhabi Municipality and is leased to Mr. Mubarak Al Ahbabi, a
UAE national and the partner of City Mix LLC. It is a legal requirement in the
UAE for a non-resident entity to have a UAE national in a limited liability
company as a partner. Subject to an agreement dated November 26, 2000, this land
is subleased by Mr. Mubarak Al Ahbabi to City Mix LLC for the duration of the
agreement, which is 20 years and renewed upon expiration. The Abu Dhabi
Municipality issues one certificate for both lease and sublease of the land. The
certificate is automatically renewed by the Abu Dhabi Municipality on an annual
basis provided the annual fee is paid. The sublease amount is $13,000 per annum.
We own 49% of City Mix LLC (which is the maximum shareholding ownership allowed
for non-residents by the United Arab Emirate laws) and have full and exclusive
rights to exercise 100% beneficial ownership of the company and to operate,
manage and control all the assets and business of City Mix LLC. The remaining
51% is owned by a United Arab Emirates national, Mubarak Al Ahbabi. Our total
assets (consisting mainly of City Mix, LLC) as of December 31, 2005 were
$2,986,554.
Issues and Uncertainties
(a.) Pending litigations
Since inception, we are involved in litigation. However, management has
determined that past and current litigation will not have a material effect on
the operation of the company.
City Mix LLC vs. Armitage Engineering LLC:
The basis for the dispute of City Mix LLC ("City Mix") and their main contractor
Armitage Engineering Co. LLC ("Armitage") is the fact that Armitage failed to
complete its work in time as was specified by Contract dated March 28, 1999 and
Annex A-1 dated September 11, 2001. Armitage disputed this fact and has taken a
series of illegal actions to thrust its unfair position upon City Mix, which has
caused substantial damage to City Mix.
22
The court of first instance of Abu Dhabi, United Arab Emirates considered two
actions related to the dispute between City Mix and Armitage.
i.) Urgent Case 73/02 filed by City Mix to stop Armitage's illegal actions of
locking the City Mix's factory site, preventing City Mix's subcontractors,
engineers and technical staff from accessing the site and preventing City Mix
from completing installation and commissioning work. The court rendered its
judgment in this case in favor of City Mix on December 23, 2003 and the
Armitage's actions were found illegal.
ii.) Main Action 422/02 which was initiated as Armitage had failed to complete
the construction works on due time and rejected penalties for that stipulated by
the contract. Armitage demanded that the final payment under the contract in the
amount of $158,514 should be paid in full; however the consultant, who
supervised execution of the contract as required by the UAE law, concluded that
this payment should account for penalties for a period of delays in completion.
Therefore in response to the claim filed by Armitage to recover from City Mix
above amount of the final payment under the contract, City Mix filed a counter
claim claiming penalties from Armitage for failing to complete the project on
due time.
City Mix additionally claimed compensation in the amount of $739,048 plus a
daily compensation of $4,924 for loss of daily profits resulting from City Mix
being deprived from utilizing its factory from February 26, 2002 until a final
judgment is rendered and $2,449 daily as fees for the consultant until a final
judgment is rendered. Armitage additionally claimed moral damages from City Mix
in the amount of $816,326.
On February 27, 2006 the court issued its judgment on main action 422/02,
whereby it satisfied the City Mix's claim for penalties partially in the amount
of $25,404 and therefore reduced the final payment under the contract to
$133,110. The additional compensation claimed by City Mix was not accounted for.
Al Tamimi & Company, an Abu Dhabi law firm and the City Mix's lawyers analyzed
the situation and the court's decision and concluded and recommended that City
Mix should seek compensation for damages in a court of a higher instance. For
this purpose City Mix filed an appeal with the Abu Dhabi Court of Appeal on
March 27, 2006. The appeal was accepted and the court proceedings are underway.
(b.) Receivable from bank
We have a receivable of $551,848 from a closed bank, Anglo American Bank, a
Grenada Corporation (Bank). The Anglo American Bank is undergoing liquidation,
which is supervised by the Ministry of Finance of Grenada. In our letters to the
Ministry of May 30, 2004 and April 5, 2004, we requested the latest development
of the situation, but have not yet received a response. Nevertheless, by
telephone we were notified by Ms. Roth, Secretary of the Ministry of Finance,
that the Ministry was supervising the process of liquidation of the bank and the
issue of the return of the funds to the depositors. None of the funds deposited
in the Anglo American bank are insured. As mentioned above we have recorded an
allowance for the entire amount of $551,848 because all attempts to communicate
with the Ministry during 2005 have failed.
Liquidity and Capital Resources
Since inception, we have financed our operations through bank debt, loan from
third party, equity from our shareholders and funds generated by our business.
Cash and cash equivalents as at December 31, 2005 totaled $14,638 compared to
$108,638 as at December 31, 2004 representing reduction of $94,000 from the
beginning of the year i.e.: January 1, 2005. As we commence our ready-mix
concrete activities, our revenues should come from the plant operation and
products sales instead of truck rental activities.
Net Cash Flow from Operating Activities: Net cash provided from operations
amounted to $318 for the year ended December 31, 2005 compared to $78,222 for
December 31, 2004. The principal cause of the reduction in cash provided was due
to net loss of $446,132 and net loss before change in operating assets and
liabilities of $7,264 in year 2005 compared to net loss of $293,910 and net
profit before change in operating assets and liabilities of $127,964 in year
2004. Contributing to the out flow of cash were payments for accruals of $40,496
which were offset by decrease in accounts receivable of $37,320 and deposits,
advances and prepayments of $10,758 against increase in 2004 in accounts
receivable and deposits, advances and prepayments by $37,320 and $9,717
respectively and further marginal increase in deposits, advances and prepayments
of $2,705.
Net Cash Used In Investing Activities : Net cash used in investing activities
amounted to $3,817 for the year ended December 31, 2005 compared to $15,519 in
December 31, 2004. For the year 2005, there was no addition to plant and
equipment but only payments of $3,817 made for patent cost whereas in similar
corresponding year there was addition of plant and equipment by $5,502 and
payments for patent cost of $10,017.
23
Net Cash Used In Financing Activities : Net cash used in financing activities
for 2005 reduced to $90,501 comprise of net repayment of loan from FGB of
$69,771 and payments for deferred offering cost $20,730 compared to cash outflow
for the year 2004 was $119,707 caused by $52,000 spent for deferred offering
costs and loan repayment of $67,707.
We were contingently liable to HSBC check discounting arrangement of $78,367 as
at December 31, 2005 and $74,639 as at December 31, 2004. Normal trade terms in
the UAE are 90 days. At time of billing we receive a post dated check 90 days
forward. If we require cash for operations these post dated checks are
discounted at the HSBC at an annual rate of 9% much like a factoring
arrangement.
As of March 31, 2006 cash on hand was $25,294.14. This will satisfy our cash
requirement for approximately one month. We will need about $300,000 within the
next 12 months to finance our liabilities and day-to-day costs and we will use
our truck rental revenue for this purpose. All funds that may be raised from
this offering within this period will be used to finance our projected cash
requirements related to the development of the ready-mix concrete plant project
and the English language educational software program as planned.
Our subsidiary City Mix, LLC is liable on a loan payable to the First Gulf Bank,
Abu Dhabi, United Arab Emirates, which is collateralized by 16 concrete mixer
trucks. The trucks will be released to the company once the loan is fully paid
off. This loan had been obtained from First Gulf Bank by the former owners of
City Mix LLC to finance the construction of the concrete plant before City Mix
LLC was put for sale through a private auction in November 2000. The original
loan amount was $1,061,225 and carried an interest rate of 10.5% per annum. The
funds were used to finance the purchase of the plant machineries in Italy and
shipment to Abu Dhabi and to cover local construction costs. The loan has no
fixed maturity date and no covenants and/or restrictions. As of July 1, 2003 the
interest rate on the loan was renegotiated with and accepted by the bank from
10.5% to 5% and at present, City Mix, LLC is paying $6,803 per month including
approximately $6,000 of principal and about $800 of interest. Based on such
repayments the loan is expected to be fully repaid by May 2007. The outstanding
debt to First Gulf Bank was $113,187 as at December 31, 2005. The approximate
$310,000 in projected revenue will be used to repay the bank debt and finance
our day-to-day expenses. Further development of the English language project or
products will be funded by YZ Business Consulting until the proceeds form this
public offering are received.
24
Management anticipates that our primary uses of capital in the future periods
will be allocated to pay off our bank loan and for working capital purposes.
After we receive proceeds from this offering and put our ready-mix concrete
plant into operation our business strategy will be to increase working capital
by internal growth through sales of our products, and externally through the
sale of potentially dilutive securities. We may also continue to incur debt as
needed to meet our operating needs.
We do not currently have material commitments for capital expenditures. However,
we anticipate entering into such commitments for approximately $1,900,000 to
ensure the start-up and the operation of our ready-mix concrete plant and
provided the necessary funds are raised from public investors.
In the ordinary course of business, we enter into contracts that specify that we
will purchase all or a portion of our requirements of a specific product,
commodity, or service from a supplier or vendor. These contracts are generally
entered into in order to secure pricing or other negotiated terms. They do not
specify fixed or minimum quantities to be purchased and, therefore, we do not
consider them to be purchase obligations.
Management anticipates that the capital requirements for operations and
development for the next twelve months for the two major projects will be
$3,600,000, based on cash flow projections.
o $3,000,000 for the ready-mix concrete project ($1,800,000 for Stage 1 and
$1,200,000 for Stage 2);
o $150,000 for the English language software program.
o $450,000 for general corporate purposes.
After the ready-mix concrete plant is operational, our subsidiary, City Mix LLC
will try to obtain debt financing as well as to receive raw materials such as
cement on credit against signed contracts for supply of concrete products from
its plant. In the event we are unable to raise enough funds from this offering,
we will use any possible options to obtain debt financing including those
against a lease arrangement, or an operating management agreement with a
professional operator.
25
BUSINESS - OUR COMPANY
A SUMMARY OF WHAT WE DO
About Us
We were incorporated under the laws of the State of New Jersey on January 11,
1994 as an international trade consulting firm and were rendering business
consulting services until July 2002, when we commenced our activities in
developing computer software products designed for teaching foreign languages,
based on the technology for improved perception and memorization of information
using electronic visual devices, such as a personal computer, which we acquired
by virtue of a license agreement with YZ Business Consulting.
We specialize in development and management of a variety of business activities
and diverse projects. We transact business operations as follows: (1) through
our subsidiary, City Mix LLC, in Abu Dhabi, the United Arab Emirates, we own 49%
and have full and exclusive rights to exercise 100% beneficial ownership of and
to operate, manage and control a ready-mix concrete plant, consisting of a
technology and equipment to produce a ready-to-use fresh concrete containing a
few ingredients (sand, pebble, concrete, water) mixed to customer
specifications; and (2) we develop a program for teaching American English as a
second language with the aid of a personal computer and plan to market and
distribute it in the countries where we are able to attract local partners and
granting them licenses and exclusive marketing rights.
On December 17, 2003, we acquired all the assets of City Mix Management Co. Inc.
in exchange for 32,000,000 shares of Royal Capital Management Inc.. As a result
of the transaction Royal Capital Management became the owner of 49% of City Mix
LLC, in Abu Dhabi, the United Arab Emirates (City Mix) with a contractual right
to exercise 100% beneficial ownership and management and control in City Mix
pursuant to the Power of Attorney granted by agreement of a UAE national Mubarak
Al Ahbabi, the 51% owner. Under United Arab Emirates (UAE) Commercial Companies
Law being Federal Law no. (8) of 1984 as amended, the minimum cumulative
shareholding of UAE nationals in a limited liability company must be a 51% owner
of the paid in capital.
Our ownership, management and control rights in City Mix are fixed in and by the
following shareholding documents of City Mix and other related documents:
26
(1) Share Transfer and Amendment to the Memorandum of Associations of City Mix
signed between us, the Management Company and Mubarak S. Jaber Al Ahbabi, the
owner of the 51% shareholding in City Mix (the Partner) and dated 01/05/05 (the
Share Transfer), whereby we acquired ownership of 49% of City Mix and are
appointed manager of City Mix with all powers to exclusively operate and manage
the business of City Mix;
(2) Power of Attorney issued by the Partner in our favor dated 01/05/05, whereby
we are authorized to act on his behalf in connection with his 51% shareholding
in City Mix, represented by 51 shares, and to vote in any manner we deem
appropriate for and on his behalf at all meetings of the General Assembly of
City Mix with full and unfettered authority, and to exercise all the rights
whatsoever attached to the said 51% shares. The Power of Attorney cannot be
revoked without our written consent; and
(3) Agreement between the shareholders of City Mix dated November 26, 2000,
whereby:
We assumed the assets and liabilities, and the above ownership, management and
operational rights in City Mix by virtue of this agreement and the above Share
Transfer and Power of Attorney.
The Partner shall render all necessary assistance in all matters pertaining to
the federal and Abu Dhabi authorities, arrange and be responsible for the
official registration of the company with the federal and Abu Dhabi authorities,
maintain a valid land lease, and not to sell, transfer, assign or otherwise
dispose any of his shares in the company without a written consent of the other
party, and not to have any role whatsoever in management and operation of City
Mix. Pursuant to our agreement with Mr. Mubarak, our partner, confirmed in City
Mix LLC' letter to him dated January 6, 2005, he is entitled to receive 2% of
gross revenues of City Mix LLC.
The term of the agreement and the Share Transfer is twenty (20) years and
renewable. The agreement may be terminated by a mutual written consent of the
parties or by any party in the event of material violations of terms and
conditions thereof.
27
Mr. Mubarak, our partner in City Mix LLC, is entitled to receive an annual
sponsorship fee of approximately $55,000 and 2% of gross revenues of City Mix
LLC, which we have paid in full to date.
We have had losses in each fiscal year (we had a net profit in one interim
period) since inception including our most recent interim period ending
September 30, 2005 (which financial statements are included in this filing) and
rely upon either the sale of our securities or loans from management to fund any
shortfalls in operations. The management did not make any commitments to provide
the company with the funds.
Presently, we are not required to deliver annual reports to security holders and
do not intend to do so. However, when this registration statement is declared
effective, we will deliver annual reports to security holders.
There is a legal requirement for our subsidiary City Mix LLC in Abu Dhabi, UAE
to maintain its legal status by renewing its licenses on an annual basis, namely
the Abu Dhabi Municipality License and the Abu Dhabi Chamber of Commerce and
Industry License. City Mix LLC is obligated to renew the licenses in order to
maintain its offices in the city of Abu Dhabi (the Abu Dhabi Municipality
License) and to confirm the land lease and the status, environmental and
technical condition of the ready-mix concrete plant in the dedicated industrial
area outside the city of Abu Dhabi (the Abu Dhabi Chamber of Commerce and
Industry License). Each license costs an average of about $1,000. The licenses
were renewed on December 27, 2004 and December 17, 2004 respectively.
There is no need for City Mix LLC to obtain any government approval of principal
products or services, however, when the ready-mix concrete plant becomes
operational and is ready to produce and supply ready-mix products to the market,
the company will need to obtain approvals of its quality procedures, production
techniques, technological set-up, and end product quality from a `consultant',
which is an engineering firm supervising construction and all materials supplies
on behalf of an owner of a construction project. The institution of
`consultants' is mandatory in the construction sector and is maintained by the
government to ensure that any construction project is completed in compliance
with the standards of the International Federation of Consulting Engineers
(FIDIC), British Standards Institute (BS), American Society for Testing and
Materials (ASTM) and similar. Once our ready-mix concrete plant is commissioned
and ready for operation, we will proceed with all the formalities required to
obtain such approvals.
We are not presently required to deliver an annual report to our security
holders. However, we will voluntarily mail an annual report to security holders
that will include audited financial statements.
We have filed with the Securities and Exchange Commission in Washington, DC, a
registration statement on Form SB-2 under the Securities Act of 1933 with
respect to the shares we are offering. Prior to the effective date of the
registration statement, we are not subject to the information requirements of
the Securities Exchange Act of 1934. This prospectus does not contain all of the
information set forth in the registration statement, as permitted by the rules
and regulations of the SEC. Reference is hereby made to the registration
statement and exhibits thereto for further information with respect to us and
the shares to which this prospectus relates. Copies of the registration
statement and other information filed by us with the SEC can be inspected and
copied at the public reference facilities maintained by the SEC in Washington,
DC at 100 F Street, Washington, DC 20549. In addition, the SEC maintains a World
Wide Website that contains reports, proxy statements and other information
regarding registrants such as us that file electronically with the SEC at the
following Internet address: (http:www.sec.gov).
Commissioning and start-up of the ready-mix concrete plant in Abu Dhabi, the
United Arab Emirates
On December 17, 2003, we acquired all assets of City Mix in exchange for
32,000,000 shares which were issued to shareholders of City Mix Management Co.,
Inc., namely: Eugene Koupsin - 3,200,000; Alexander Shishkin - 6,400,000; RALY
Partners - 22,400,000. RALY Partners distributed its shares to shareholders of
RALY Partners as follows: Andrei Kharlanov - 2,531,200; Vladimir Davidov -
5,040,000; Yuli Ginzburg - 4,524,000, Yevsey Zilman - 4,480,000; Vera Shatokhina
- - 1,545,600 and Eugene Gurevich - 4,278,400.
Industry and Market
The United Arab Emirates is rapidly becoming an economic role model for the
region with a business friendly environment, an open and liberal economic policy
and ten years of solid GDP growth, which has averaged 5.8 per cent annually and
8% for the non-oil sector. The gross domestic product of the emirate of Abu
Dhabi was $41 billion in 2002. The UAE maintained its high per capita income
standing at $20,602 last year (`Abu Dhabi Economy', Issues 374-376, 2003).
Direct foreign investments into the country reached $4.1 billion in the year
2000 (`Abu Dhabi Economy', Issues 359, 2002). The United Arab Emirates and the
Emirate of Abu Dhabi in particular have attracted multi-billion dollar
investments for the development of major construction projects. The construction
and industrial sector is the second largest industry in the UAE after oil and
gas. Abu Dhabi expects local and foreign investment to invest at least $10
billion into emerging industrial zones (`Abu Dhabi Economy', Issue 381, March
2004).
28
All Abu Dhabi construction projects are based on concrete structures. Concrete
is the only locally available, and thus widely used construction material.
Marketing Strategy
Our marketing strategy will focus on a number of basic principles. These are
ranked in order of strategic importance for us as follows:
o Technology and Product Quality
o Selective Job Portfolio
o Price
o Promotion
Technology and Product Quality
Our ready-mix plant in Abu Dhabi has not yet produced any finished products.
However, our subsidiary, City Mix LLC, did research on the competitive
environment and, particularly, technologies and equipment used by the
competitors. The research was performed by specialists in ready-mix concrete
production, who worked for City Mix LLC at different stages of the plant
construction. Based on this research, as well as the opinion of Arabian Engineer
Trading Est, experts in ready-mix concrete technologies used in the area, we
believe that our ready-mix plant, once commissioned, will be competitive in
terms of production techniques, product quality, safety and environmental
control due to certain principal design elements of the production technology
which are as follows.
(A) Vertical Aggregate Automatic Feed System. The plant is equipped with a
feeding unit, which allows fully automatic unloading of aggregate
directly from supply trucks into storage silos by means of a fast
automatic vertical-type covered belt conveyors, which is
cost-effective as there is no need for wheel loaders.
(B) Advanced Aggregate Storage System. The plant is equipped with a fully
isolated and protected aggregate storage silos that allows for
effective protection of aggregate from direct sun and other
environmental impacts such as winds, rain and dust. This will provide
saving energy and water consumption needed to clean and cool the
aggregate before batching, which in turn will drastically reduce
production costs.
(C) Extensive Cooling of Water. The plant incorporates an underground
concrete reservoir for technology water, which, together with the two
powerful water chillers, provides for a very effective temperature
control at every stage of production process even without the use of
an icing plant, which further reduces production costs.
(D) Concrete Recycling Unit. The plant is equipped with a special unit,
which provides almost 100% utilization of concrete residues.
(E) Truck Mixer Washing Unit. This is designed to give a thorough washing
of truck mixers before exiting the site and washing of truck drums
before loading with concrete. Waste water is recycled and used back in
the production process.
29
The quality of product (ready-mix concrete), which can satisfy international and
local standards, is provided by certain elements of technology and design. These
are as follows:
o The technology equipment of the plant is designed to provide a fully
automatic and a very accurate feeding of ingredients (aggregate, concrete,
water and additives) into the mixing units in strict accordance with a mix
design (formula), which allows us to produce high quality concrete of any
type.
o Strict temperature control at all stages of the production process and
cooling of the ready-mix concrete during transportation (by means of adding
ice into truck mixer drums).
o The plant is equipped with a modern sophisticated laboratory, which allows
a comprehensive quality control of ingredients and ready-mix concrete to BS
and ASTM standards throughout the production process, as well as
post-production tests of fresh and hardened concrete before delivery to
customers. In addition, quality tests will be carried out upon delivery at
the customers' sites with vis-a-vis a mobile laboratory.
Note. British Standards Institute standards (BS) and American Society
for Testing and Materials (ASTM) standards are international quality
control standards used worldwide in the construction sector and
ready-mix production and the same are applied in Abu Dhabi, the United
Arab Emirates.
Selective Job Portfolio
In our marketing activities, we will be very selective and will focus on
entering into long-term relationships with reliable clients, who enjoy a very
good reputation in the market regarding prompt and secured payment for the
supplied concrete.
Pricing
Our pricing strategy will be based on existing local market prices and our
ability to offer competitive product selling prices due to effective technology
and low production costs of our ready-mix concrete plant.
30
For instance, the covered concrete aggregate silos will provide for saving
electric power and water consumption required to wash and cool the aggregate
before feeding to the batching units, which in turn will allow us to reduce
selling prices maintaining product quality.
Simultaneously, we will not lower prices to an extent that would jeopardize the
operating margins or lead to a price war on the market. In the beginning, we
will concentrate on supplying the most widely used types of ready-mix concrete
with high market prices such as 40N SRC ($57 per cubic meter) and 40N SCC ($62
per cubic meter). Simultaneously, we plan to pursue and establish long-term
relationships with suppliers of raw materials. We hope to offset our favorable
receivables policy by negotiating favorable credit terms with our suppliers
including discounted and post-dated payments for the supplies of raw materials.
Common practice in Abu Dhabi is that concrete producers make 6 month post-dated
payments for the raw materials. However, we do not have signed agreements with
the suppliers, and therefore cannot guarantee such favorable credit terms.
Promotion
We plan to pursue the following promotional activities:
o Streamlined presentation of our products, technology and services to
potential customers including governmental institutions;
o Introduction of printed advertising materials to potential customers;
o An aggressive Internet presence, for which we are planning to develop and
maintain our own web site to demonstrate and e-mail to clients promotion
data on our company, specific production techniques and technology, etc..
We do not presently have a company web site.
o Advertising in printed media and industry publications focusing on the
target market segment.
In order to organize, manage and carry out our marketing and promotional
activities we will employ, once the necessary project funding is secured, a
marketing manager and, if necessary, other marketing specialists having proper
expertise in the concrete business. When the need arises we will use local
employment agencies to assist us with staffing.
Raw Materials Sources
Aggregate. The main sources of aggregate are three biggest quarries and crushers
in Al Ain (150 km from Abu Dhabi), Buraimi (200 km from Abu Dhabi) and Ras Al
Khaima (300 km from Abu Dhabi), which supply aggregate to all concrete producers
in the UAE including Abu Dhabi. These three crushers supply the best aggregate
in terms of less dust, chloride and sulphate content and highest crushing and
impact values. The price of the aggregate including supply costs from all the
three sources varies insignificantly and on average is about $7 per cubic meter.
There is a very well established contractual system of the aggregate supplies to
concrete producers. The aggregate is transported to concrete plants in trucks as
31
per purchase orders. There are different terms of payment including post-dated
payments of up to 6 months and a range of discounts on cash payment.
Cement. The cement factory in Al Ain (150 km from Abu Dhabi) is the main source
of cement for concrete producers of Abu Dhabi. It supplies all principal types
of cement such as OPC, SRC and MSRC. The price of cement including
transportation costs is about $60/t. Also there are different terms of payment
including post-dated payments of up to 6 months and a range of discounts on cash
payment.
Water. The City Mix plant is connected to the central water supply system of the
Abu Dhabi Municipality, which supplies technical water to all factories and
plants in Abu Dhabi. Water supplies from the system will commence upon
commissioning of the City Mix plant. Water consumption will be managed as per
daily production needs and the water will be pumped into the plant's underground
insulated concrete reservoir. Water supplies will cost about $0.5 per 1 cubic
meter of concrete."
Customers
The economic statistics and other information published in `The Abu Dhabi
Economy' a monthly magazine of the Abu Dhabi Chamber of Commerce and Industry
(Issues 381 - March 2004, 376 - October 2003, 375 - September 2003, 374 - August
2003, 358 - April 2002), as well as professional opinions of local business
professionals (see attached a letter by N.R. Doshi & Co.) confirm that the
construction sector in the United Arab Emirates is the second largest industry
after oil and gas. The UAE authorities, and the government of the Emirate of Abu
Dhabi in particular, pursue a very active policy of establishing and developing
new commercial, industrial, residential and entertainment zones to attract local
and foreign investments in order to ensure permanent growth of the country. All
Abu Dhabi investment and construction projects are based on concrete structures.
Concrete is the only locally available, and thus widely used construction
material. The construction projects include construction of commercial and
industrial infrastructure objects, residential and office buildings, and
bridges.
Major construction projects in Abu Dhabi are managed by private construction
companies contracted by various governmental institutions such as:
o The Abu Dhabi Municipality
o The Abu Dhabi Water and Electricity Authority
o The Abu Dhabi Sewage Authority
o The Abu Dhabi Department of Public Works
o The Abu Dhabi Defense Ministry
There is also a large variety of private construction projects in Abu Dhabi
owned by large and medium sized private companies. All of the construction
projects are normally tender-based, which means that first project owners
announce tenders and then the winner is selected and awarded with a construction
project based on the best bid in terms of cost and quality of construction,
products and services, term of construction, technical set-up, etc. In upcoming
years, Abu Dhabi expects local and foreign investments to invest at least $10
billion only into emerging industrial zones (`Abu Dhabi Economy', Issue 381,
March 2004).
32
There is a need for concrete in the government and private sectors and our
subsidiary, City Mix LLC, will participate in the bidding for these contracts
once our ready-mix concrete factory is ready for production. We will need
approximately $300,000 in order to have the plant ready for operation, which
will enable City Mix LLC to submit bids for contracts.
How We Compete
A number of producers of ready mixed concrete are active in Abu Dhabi, but most
of them are insignificant in terms of quality and production capacity. There are
about five plants that produce quality output in terms of strict quality and
uninterrupted delivery (Abu Dhabi Ready Mix, Tremix, Unibeton, RMC Supermix, and
Trans Gulf). Some of them have been in business for in excess of 10-15 years.
Our plant, once commissioned, will produce the full range of quality concrete
products at competitive production costs with most of the producers in the area
due to its specific and efficient design described above. The professional
analysis of City Mix LLC's management and Arabian Engineer Trading Est, experts
in ready-mix concrete technologies used in the area, shows that our aggregate
storage system alone comprising fully isolated covered aggregate storage silos
provides saving energy and water consumption of up to 30%, which will
drastically reduce production costs. Therefore, we are planning to compete based
on our ability to offer competitive selling prices and good product quality
provided by our technological set-up.
Development, marketing and distribution of a program for teaching American
English Purpose
Our purpose in this area is to establish a long-term commercial presence in a
growing international market - education, and to develop a number of projects
and activities in this area. We plan to achieve this strategic purpose in
several stages, with the implementation of the Language Program project being
the initial stage. The project will focus on entering the international market
by introducing a technology and products providing advanced teaching materials
and education services in teaching the American English as a second language.
33
The technology applied in our products will provide development of advanced
educational aids, teaching programs and materials for educational purposes. It
can be used to expand the range of our products to cover speakers of different
languages, who study English as a second language based on variety of subjects.
Such subjects will have a wide range from the level for beginners and higher and
will include the English lexis of exact, natural sciences, arts, religion, etc.
(i.e. chemistry and physics, law and medicine, aesthetics and architecture,
theology, the Bible, etc.).
Product
The product offered by us is an educational aid in form of a computer software
program designed to teach American English as a second/foreign language to
non-English speakers, as well as to expand the vocabulary and improve general
knowledge of the language of those who command American English in one degree or
another. The product will be used for self-studying and is designed to help
students to ensure memorization, correct pronunciation, spelling and practical
utilization of the spoken English material of about 4,000 most frequently used
words and word expressions. The software program incorporates a combination of
various techniques designed to develop all language skills: listening, speaking,
reading and writing. It includes the following components:
o Vocabulary (English words and expressions)
o Translation into native language
o Transcription and phonetics
o Audio material (standard pronunciation)
o Video material (images)
o Record and playback
o Practical exercises
o Grammar
o Help (user manual)
The American English educational aid will eventually comprise three levels of
training (courses) designed to promote memorization, correct pronunciation,
spelling and practical utilization of the spoken English material of about
10,000 words, word and expressions, phrases and idioms to assist students in
developing good command of American English helping them in preparation for the
SAT examinations at US educational institutions. The three levels are:
o Primary (for beginners). A student learns basic vocabulary (the most
frequently used English words, word combinations and expressions),
phonetics and grammar, as well as receives practical training how to use
the vocabulary correctly in spoken language. At the end of the course a
student should develop a capability of communicating with English speakers
at the elementary level in most common day-to-day situations.
o Intermediate. A student expands his vocabulary and receives more practical
knowledge and training in the English spoken and written language. At the
end of the course a student should develop a capability of communicating
with English speakers at intellectually higher level on a broader variety
of subjects of human activity.
o Advanced (with extensive grammar). A student further expands his vocabulary
and receives an extensive knowledge and practical training in the English
spoken and written language, as well as the English grammar. At the end of
the course a student should develop a good command of American English and
a capability of communicating with English speakers on most of the subjects
of modern human activity, which will help him sit for SAT examinations at
US educational institutions.
34
Each level is a separate product and will be offered to customers in the form of
a set of compact disks. The first edition of the Primary Education product is
for the speakers of the Russian language and is called `American English.
Primary Course.' It will contain Part I, which has already been developed, and
Part II to follow. The Primary Course will be used to develop good command of
about 4,000 most frequently used English words and word expressions. At later
stages we will issue other editions for the speakers of Spanish, French, Arabic,
Hindi, Chinese and other languages. All lexical materials will be translated
into these languages by highly qualified translators - experts in the subject
language, who will be contracted for this purpose. The translated material will
then be put into the software product with the help of a special software
program.
We have been carrying out research and development work on this project
following the technology acquisition from YZ Business Consulting in July 2002.
This work was related to legal protection of the intellectual property of the
right holders, development of the lexical and grammatical material, and research
and preparatory work with potential partners to organize future commercial sales
of our end products. For this purpose we have spent $30,020 during the last two
years. As of today, we have completed the development of the educational aid
"American English, Primary Course, Part I." The lexical, grammatical and
methodological material for this educational aid has been developed. The product
software has been developed and debugged. Necessary production facilities have
been set up and the production technology has been developed and introduced
together with the technical protection against unauthorized reproduction. The
first version of the product prototype has been issued. The technology and the
prototype are undergoing necessary finishing procedures. The trade name ZS
SuperTutor has been developed for the technology. The logo and the trade name ZS
for our products and services have been registered with the appropriate
authorities of the Russian Federation.
Distinctive and Unique Features
The program for teaching the American English with the help of a personal
computer developed by us incorporates a number of distinctive features. These
can be summarized as follows:
o The educational material (vocabulary) is presented by means of
demonstrating vocabulary units in the subject language on the computer
screen with a frequency of 25 frames per second, each unit together with an
illustration in the same frame. No native language is used in this mode of
program operation in order to create an associative link between a unit in
the subject language and its image in form of an illustration. Then by
means of practical exercises, in which the units equivalents in the native
language are now introduced, and students study the subject units both in
English and native language, listen to their standard pronunciation, learn
to translate from one language to another and to use the units correctly in
the spoken language.
o All the vocabulary is displayed in form of images with English equivalents
with frequency 25 frames per second.
o Presentation of the material is accompanied by the Mozart music
o The program trains all types of human memory in attempt to develop all
language skills: listening, speaking, reading and writing.
o Any teaching function can be utilized momentarily any time during the
learning process. o The program is highly ergonomic and requires no other
teaching instruments or materials.
The effectiveness of our products has not been verified yet.
35
o The program is highly ergonomic and requires no other teaching instruments
or materials.
o Technology applied in the program can be used as an effective instrument in
a continuous process of creating and upgrading teaching programs for
studying foreign languages to any level of diversification and
sophistication, as well as creating other teaching programs for any other
subject, which requires reliable comprehension of large volumes of
information in a reasonably short time.
The program makes a complex intellectual work of studying foreign languages a
well-organized and easy activity. The studying process becomes spontaneous and
reliable memorization of new information takes place faster than under available
learning techniques, which deal with similar volumes of information.
Our products are aimed at studying English as a second language utilizing
resources of a personal computer. Our software program contains functions which
allow a student to do the following:
1. Use illustrations in order to memorize English lexis.
2. Listen to the correct English pronunciation, record own pronunciation and
compare it with the correct pronunciation. 3. Translate from the native language
into English and backwards and verify against the correctness of the
translation.
4. Type in English using the English pronunciation playback or the text in the
native language.
Marketing
Our marketing strategy for the sales of our educational aids may take different
forms in the course of the project. One of the forms we are planning to
implement is that we will establish agency and dealership agreements with
educational institutions for the establishment of a network of English training
centers in certain regions of the world, which will use our software products in
their educational activities. Each of the agency and dealership contracts will
provide for an extensive marketing effort, including but not limited to:
o Presentation of our products and services to potential customers including
governmental and private educational institutions;
o Introduction of printed advertising materials to potential customers;
o Advertising in printed media and industry publications focusing on the
target market segment.
In addition, we are planning to carry out an advertising and promotion campaign
through the Internet. For this purpose we are developing our web site dedicated
to the English Learning Program. This activity is funded by YZ Business
Consulting until the proceeds form this public offering are received. We are
planning to have the web site functional in the second quarter of 2006. Our
Internet-based marketing campaign will focus on the key principles as follows:
o education of potential customers about the benefits and unique features of
our English Learning Program;
o advertising publications in English and the native languages;
o direct sales of our educational software products;
36
o demo version with a download option;
o technical support
Our advertising campaign through Internet will be carried out initially in the
English and Russian languages and then, at later stages, in other languages such
as Spanish, Arabic, Hindi, Chinese, etc. prior to and in accordance with
introduction to the market of our educational software products in such
languages.
License Agreement with YZ Business Consulting
Effective August 8, 2005, we signed a license agreement with YZ Business
Consulting. The License Agreement is the primary asset we are using to develop,
market and distribute educational aids in the form of a computer program for
teaching American English as a second language with the aid of a personal
computer. Yevsey D.Zilman, our President and Deputy Chairman of the Board of
Directors owns YZ Business Consulting. Pursuant to the agreement, we are
required to pay royalties to YZ Business Consulting as follows: 40% of the total
revenues from our sales of any products, services or other activities utilizing
the educational aids after complete recovery of all our initial stage operation
costs, including legal fees, advertising and production. The regular payments of
the royalties will be reduced if necessary to insure that there is no loss for
us in this type of activity.
Customers
Our software product is designed to teach American English as a second/foreign
language to non-English speakers will be distributed to a variety of potential
customers. The target audience falls into two major categories.
o Individual customers of any sex, nationality, religion, social status and
profession from fourteen years and older.
o Governmental and private educational institutions, including any type of
training centers, schools, colleges and universities.
Based on the fact that our product does not require any specific training means,
materials or knowledge and that the learning techniques are very simple and
easy-to-understand, it can be used effectively and is designed for any user.
How We Compete
There are various software products in the international markets related to
teaching foreign languages and the English language in particular. These
products are manufactured and marketed by different producers and differ
substantially both in terms of quality and price. It should be noted though that
the educational sector is one the world's permanently growing business markets
and has practically no limits in demand for effective educational material.
Our ability to successfully compete on the international arena is based on the
following major factors. Distinctive character of our product. In our marketing
campaign, we will focus on educating our potential customers about the
distinctive features and benefits of our product such as subconscious mode of
perception of the teaching material, ability to develop all language skills
37
(listening, speaking, reading and writing), etc., described above.
Many of the educational software products currently available in the market do
not provide for the subconscious mode of instruction. Those which do, normally
require the use of additional technical means such as TV sets or overhead
projectors or double-side cards. For example, the autogenic training, which
requires a substantial amount of additional time and which is not effective with
every individual. Our product makes a complex intellectual work of studying
foreign languages a well-organized and easy activity. The studying process
becomes spontaneous and reliable memorization of new information occurs much
faster than under available learning techniques, offered by other products.
Balanced Marketing Strategy. In accordance with our strategy for the development
of the English language teaching program, we are planning to market and
distribute our products through a network of regional agents and dealers. These
agents and dealers will enter into agreements with and supply our educational
aids to education institutions in such countries of the world as, Russia,
Ukraine and other countries of the former Soviet Union.
Sound Price Policy. The selling prices for educational software products
currently available in the markets, which are designed for teaching foreign
languages, and the English language in particular, range from a few dozens to
several thousand US dollars. In order to ensure the market entry and low entry
barriers into this market, we are planning to maintain the selling prices for
our product in average range of local market prices. Final determination of the
actual and minimum selling price will be made in the course of the American
English experimental training in one of the Russian education institutions in
the second and third quarters of 2006.
RESEARCH AND DEVELOPMENT COSTS
We spent $30,020 during the last two years on research and development related
primarily to the development and completion of our software product with
necessary components, development of the lexical and grammatical material, legal
protection of the intellectual property, as well as preparatory work to organize
future sales of the end product. We have not incurred any research and
development costs in our ready-mix concrete business.
INTELLECTUAL PROPERTY
On June 28, 2004, International Application No. PCT/US2004/02/07/64 was filed
with the International Bureau of WIPO, Geneva, Switzerland and Confirmation No.
4543 was registered with the United States Patent and Trademark Office. However,
we decided at present to change the way of protecting our intellectual property.
We ensured the appropriate registration of our computer program instead of
registering a patent for the software development technology. To date,
protection of the right holders' intellectual property has been completed. We
have secured the copyright of the right holders to the computer program for
teaching the English language by ZS SuperTutor method by registering the
computer program with Rospatent, the patent authority of the Russian Federation
(Certificate 2005610779 dated April 4, 2005), the first country of application
of the program, where we are planning to commence experimental training with the
use of the Educational aid "American English. Primary Course. Part I". The
Russian Federation is among countries who signed an international convention on
intellectual property protection, which covers all the countries, including the
United States, where we are planning to market this product.
Employees
As of May 10, 2006, we have five (5) employees who are all full time. We
consider our relations with our employees to be good. From time to time, we also
utilize services of independent contractors for specific projects or to support
our research and development effort. City Mix LLC, our subsidiary, currently has
one employee, Andrey Kharlanov, its General Manager.
38
DESCRIPTION OF PROPERTY
New Jersey Corporate Headquarters: We presently utilize the home office of
Eduard Klebanov located at 325 Flower Lane, Morganville, New Jersey as our
corporate headquarters. Mr. Klebanov is our Vice President and Chairman of the
Board of Directors. This is at no cost to us.
Abu Dhabi, UAE Lease: City Mix, LLC, our subsidiary, entered into a sublease
agreement with our UAE national partner for sublease of land on which the
concrete plant is constructed. The original agreement was dated November 26,
2000. Subject to this agreement, the term of the sublease is 20 years and
renewable. The sublease payment is $13,605 per year. The Abu Dhabi Municipality
registers the land sublease on an annual basis after an annual registration fee
is paid.
City Mix, LLC, our subsidiary, has a lease agreement for office space. The
annual lease payment is approximately $10,500. This amount is paid at the
commencement of the lease. On June 14, 2005, we signed a new lease agreement for
office space located in the center of the City of Abu Dhabi for the period from
July 13, 2005 to July 12, 2006 with the same annual payment.
LEGAL PROCEEDINGS
From time to time in the normal course of business, we have been involved in
litigation.
At present, we have one on-going litigation, which involves our subsidiary, City
Mix LLC. It is connected with our claims against Armitage Engineering Co., LLC
("Armitage"), the main contractor of City Mix LLC. These claims are based on the
fact that Armitage failed to complete its work on time in violation of its
contractual agreement as per Contract of 03/28/99 and AnnexA-1 of 09/11/01 and
refused to assume liabilities as stipulated by the contract. Armitage disputed
the allegation of untimely performance and took a series of actions against us
including locking of the City Mix LLC's factory site in order to thrust its
unfair position on City Mix LLC, which resulted in substantial material damage
to City Mix LLC. City Mix LLC consulted Al Tamimi & Company, one of the leading
law firms in the United Arab Emirates, who studied the situation and concluded
that Armitage's actions were illegal. In response to City Mix LLC's proposal to
Armitage to resolve the dispute in an amicable way, in June 2002, Armitage filed
Case 422/02 against City Mix LLC with the Abu Dhabi Court of First Instance, Abu
Dhabi, United Arab Emirates seeking recovery from City Mix LLC of $158,514
representing final payment under the contract. At the same time, Armitage
continued locking the City Mix LLC's site and refused to resume and complete the
contractual work or assume contractual sanctions for untimely performance. Then
City Mix LLC was advised by its lawyers to seek in court compensation from
Armitage for the damage incurred due to non-performance by Armitage of its
contractual obligations and illegal locking of City Mix LLC's site, which led to
the inability of City Mix LLC to operate its factory. Therefore, City Mix LLC
filed Urgent Case 72/02 against Armitage seeking to hold Armitage liable for
illegal actions and to stop Armitage from locking City Mix, LLC's factory site
so that City Mix LLC can use its own property. At the same time, City Mix LLC
counter-sued Armitage under Case 422/02 for $739,048, daily compensation of
$4,924 for loss of daily profits, and $2,449 for daily fees for a consultant. On
December 23, 2003 the Abu Dhabi Court of First Instance, Abu Dhabi, UnitedArab
Emirates issued a judgment in case 72/02, in which it confirmed the findings of
its expert Saeed Geisah, who had been appointed by the court to investigate the
issue, and ruled that Armitage's action to lock City Mix LLC's factory was
illegal. This judgment is now being used as evidence against Armitage in Case
422/02 where City Mix LLC counter-sued Armitage and seeks compensation from
Armitage for damages incurred.
39
As of May 2005, Armitage's claim and the City Mix LLC's counter-claim in Case
422/02 are still being examined by the court. The court has appointed an
engineering expert to examine the claims of both parties In addition, we have
one claim regarding the Anglo American Bank. We have $551,848 cash restricted by
the Anglo American Bank, a Grenada Corporation, which is undergoing liquidation
supervised by the Ministry of Finance of Grenada. In our letters to the Ministry
of May 30, 2004 and April 5, 2004, we requested the latest development of the
situation, but have not yet received a response. Nevertheless, by telephone we
were notified by Ms. Roth, Secretary of the Ministry of Finance, that the
Ministry was supervising the process of liquidation of the bank and the issue of
the return of the funds to the depositors. None of the funds deposited in the
Anglo American bank are insured. At this time, there is no intention to become a
party to the case in order to reclaim our funds but such a determination can be
made at a later date. At December 31, 2004, we set up a provision for loss on
this account in the amount of $275,924, due to the age of the matter.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and
directors.
Name Age Position
Yuli Ginzburg 67 Vice President and Director
Yevsey D. Zilman 60 President, Principal Executive Officer
and Deputy Chairman of the Board of
Directors
Eduard Klebanov 41 Vice President, Principal Financial
Officer, Principal Accounting Officer
and Chairman of the Board of Directors
Leonard Khodorovsky 52 Director
Andrei Kharlanov 44 General Manager, City Mix, L.L.C.
All directors set forth above have terms that commenced January 1, 2006 and
expire December 31, 2006.
Our officers, Messrs. Ginzburg, Zilman and Kharlanov devote 100% of their time
to our business. Messrs. Khodorovsky and Klebanov presently devote a minimal
amount of time to our business. Once we raised the proceeds of this offering,
they each intend to devote more significant time to our business.
Set forth below is certain biographical information regarding our executive
officers and directors:
On March 11, 2005, Yan Jacob Rusanov resigned as our President. Thereafter,
Andrei Petrov was appointed our President and Principal Executive Officer. On
June 7, 2005, Mr. Petrov resigned as our President. Yevsey D. Zilman was
appointed our President and Principal Executive Officer.
40
Yuli Ginzburg has been our Vice President and Director since December 2003. He
has been our advisor in the engineering and technology areas. Mr. Ginzburg has
more than 40 years experience in development and implementation of highly
complex projects in electronic, chemical and paper industries. He has been an
independent engineering consultant for several industrial clients since 2000.
From 1983 to 2000, he was a Project Engineer with Sweitzer-Mauduit In., Inc.
(NYSE: SWM), based in Spotswood, New Jersey. Its principal activity is to
produce specialty papers and supply fine papers to the tobacco industry. The
activities are separated into two segments: tobacco products and non-tobacco
products. The tobacco products segment includes cigarette, plug wrap and tipping
papers used to wrap various parts of a cigarette, reconstituted tobacco leaf for
use as filler in cigarettes, reconstituted tobacco wrappers and binders for
cigars and paper products used in cigarette packaging. The non-tobacco products
segment includes lightweight printing and writing papers, coated papers for
packaging and labeling applications, business forms, furniture laminates,
battery separator paper, drinking straw wrap, filter papers and other
specialized papers. From 1965 to 1982,he was the Group Leader at the Leningrad
Project Bureau, based in Leningrad, Russia. He supervised the development of new
processes, equipment and machinery for the light industry. The Leningrad Project
Bureau designed equipment and machinery for the textile and paper industry. In
1959, he received a Master of Science degree in Mechanical Engineering from
Technological Institute, based in Leningrad, Russia. From 1962-63, he studied
Electro-Measuring Instruments at Polytechnic Institute, Leningrad, Russia. Mr.
Ginzburg is a holder of 12 patents in Russia, and a trade secret in the United
States.
Yevsey D. Zilman has been our Vice President and Deputy Chairman of the Board of
Directors since December 2003. On June 7, 2005, Mr. Zilman was appointed our
President and Principal Executive Officer. Mr. Zilman is an expert in
development and management of technological, production processes and commercial
projects. He has 30 years experience as a Technical and Administrative Manager
in major governmental and commercial institutions. He had been the President,
and Vice President of R.A.L.Y. Partners, Inc. R.A.L.Y. Partners, Inc. owned 70%
outstanding shares of City Mix Management Inc. and exercised control over City
Mix LLC through its controlling interest in City Mix Management Inc. One of Mr.
Zilman's responsibilities as president of R.A.L.Y. Partners, Inc. was to oversee
and advise on the management of City Mix LLC. He also was reviewing and
analyzing additional projects for potential acquisition by R.A.L.Y. Partners,
Inc. R.A.L.Y. Partners, Inc. ceased operations on October 31, 2004. It filed a
certificate of dissolution with the New York State Department of State on
January 14, 2005. From 2000 to the present, Mr. Zilman has been the President of
Y.Z. Business Consulting, Inc., where he provides consulting services for a
variety of commercial business projects. He also has significant experience in
rail shipments, production of polyetheric garment accessories, and in cryogenic
engineering. In 1968, he received his Masters in Mechanical Engineering from
Russian Polytechnic Institute, Novocherkassk, Russia, and completed
post-graduate education at the Russian Agricultural Institute. He also holds a
Russian State Patent.
Eduard Klebanov has been our Vice President and Director since December 2003. In
March 2005, he was appointed our Chairman of the Board of Directors. In May
2005, he became our Principal Financial Officer and Principal Accounting
Officer. In May 2005, he became our Principal Accounting Officer. From 1998 to
the present, he has been an Audit Manager at Shanholt Glassman Klein Kramer &
Co., certified public accountants located in New York, New York. As an audit
manager, he supervises, plans and performs certified audits, reviews and
compilation engagements for medium sized public firms, with an emphasis on
commercial and residential real estate. From 1990 to 1998, he was the Audit
Supervisor at Ellenbogen Rubenstein Eisdorfer & Co., LLP. In 1986, he received
his Bachelor of Science degree in Accounting from Brooklyn College, City
University of New York.
Leonard Khodorovsky has been our director since December 2003. Since 1981, he
has worked as an electrical engineer and support maintainer for the NYC Transit
Authority. His responsibilities include testing different systems of a car,
locating problems, repairing and testing electrical systems, wiring and
installing electrical components, running tests of subway cars, tests and
repairs of electrical motors and tests and repair of temperature control systems
of cars. In 1983, he received his diploma in Business Management Administration
from Touro College of New York, based in New York City. In 1976, he received his
Masters Degree in Telecommunication Systems from the University of
Telecommunications based in Odessa, Ukraine.
41
Andrei Kharlanov has been the General Manager of our subsidiary, City Mix, LLC
since 2000. City Mix, LLC is located in Abu Dhabi, United Arab Emirates. He is
responsible for managing the operations of City Mix, LLC. From 1978 to 1983, he
attended the Foreign Languages Institute located in Moscow, Russia.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information
concerning the annual and long-term compensation awarded to, earned by, or paid
to the named executive officer for all services rendered in all capacities to
our company, or any of its subsidiaries, for the years ended December 31, 2005,
2004 and 2003. Since Mr. Zilman just became our President and Principal
Executive officer on June 7, 2005, we have not included information for him for
the years ended December 31, 2004 and 2003:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Name and Principal Position Year Salary Bonus Other Annual Restricted Securities
(1)(3) Compensation Stock Award(s) Underlying Options
2005 0 0 0 0 0
Yevsey Zilman, President and
Principal Executive Officer 2004 0 0 0 0 0
2003 0 0 0 0 0
Jacob Rusanov, Former President 2005 0 0 0 0 0
2004 0 0 0 0 0
2003 0 0 0 0 0
Andrei Kharlanov, General Manager 2005 $44,816 0 0 0 0
of City Mix, LLC
0 0 0
2004 $59,755 $10,885
0 0 0
2003 $63,289 $30,281
2002 $51,812 $ 4,952
Andrei Petrov, Former President and 2005 0 0 50,000 Shares of 0 0
of Common stock
Principal Executive Officer (2)
2004 0 0 0 0 0
2003 0 0 0 0 0
42
(1) Since inception, the only person that has received salary is our general
manager. We have paid our general manager, Andrei Kharlanov, for our
subsidiary, City Mix LLC, the sum of $4,490 per month pursuant to a
contract that commenced on November 27, 2001.
(2) Mr. Petrov was appointed President and Principal Executive Officer in March
2005. Pursuant to his agreement to become our President and Principal
Executive Officer, he received 50,000 shares with an agreement that he
shall receive an additional 50,000 shares every 3 months thereafter until
he receives an aggregate of 300,000 shares. Since he resigned on June 7,
2005, he retained the initial 50,000 shares he received and the remainder
of his agreement was nullified. Such 50,000 shares were valued at $0.25 per
share for a total value of $12,500
(3) In the fiscal year 2004, we paid Eduard Klebanov, our Chairman of the Board
of Directors, the sum of $3,000 for his services to us for internal
bookkeeping. In addition, in 2003, he received 150,000 shares of our common
stock for his work on the Board of Directors.
Option Grants Table. The following table sets forth information concerning
individual grants of stock options to purchase our common stock made to the
executive officer named in the Summary Compensation Table during fiscal 2003.
OPTIONS GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Name Number of securities Percent of total Exercise or base Price
underlying options options granted to Expiration Date ($/Share)
granted (#) employees in last
fiscal year
None
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The
following table sets forth certain information regarding stock options exercised
during fiscal 2005 and held as of December 31, 2005, by the executive
officer named in the Summary Compensation Table.
Name Shares acquired on Value realized ($) Number of Securities Value of Unexercised
exercise (#) Underlying Unexercised In-the-Money Options at
Options at Fiscal Fiscal Year-
Year-End(#) End($)(1)
Exercisable/ Unexercisable Exercisable/
Unexercisable
None
Employment Contracts
We presently do not have any employment agreements with our officers except for
Andrei Kharlanov, general manager of our subsidiary, City Mix LLC. His
employment contract commenced on November 27, 2001. It is an unlimited period
contract with an annual 30 days leave and a monthly salary of $4,490. The
contract is terminable at any time by either party with one month prior notice.
The contract can also be terminated immediately without any notice (a) by us if
Mr. Kharlanov fails to perform his basic duties and continues to do so in spite
of a written warning; is absent without a legitimate reason for more than seven
continuous days; or commits other violations as per the labor laws of the UAE;
and (b) by Mr. Kharlanov if we fail to perform our obligations as per the
contract. Upon the contract termination for whatever reason, Mr. Kharlanov is
entitled to severance equal to 21 days wages for each year of the first five
years of employment and 30 days wages for each additional year of employment
provided that the total severance payment does not exceed the wages of two
years.
We recently agreed to give Mr. Klebanov the following shares based on his
position as our Vice President: 100,000 shares of our restricted common stock
which shall vest in four (4) quarterly installments of 25,000 shares each. The
initial 25,000 shares vest on September 15, 2005.
43
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their
services as directors. The Board of Directors has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued to,
directors in such capacity.
Stock Option and Stock Issuance Plans We presently do not have any stock option
plans.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information derived from the named
person, or from the transfer agent, concerning the ownership of common stock as
of May 10, 2006, of (i) each person who is known to us to be the beneficial
owner of more than 5 percent of the common stock; (ii) all directors and
executive officers; and (iii) directors and executive officers as a group:
Name and Address of Amount and Nature of Percent of Percent of
Beneficial Owner Beneficial Ownership Class (1) Class (2)
Andrei Petrov (former officer)
158C East Main Street 50,000 * *
Ramsey, NJ 07446
Yevsey Zilman (3)
182 Myrtle Ave 7,473,790 17.52% 12.74%
Mahwah, NJ 07430
Yuli Ginzburg
4 Schindler Drive South 6,953,800 16.30% 11.85%
Old Bridge, NJ 08857
Eduard Klebanov
325 Flower Lane 165,000 * *
Morganville, NJ 07751
Leonard Khodorovsky
2738 East 28th Street 70,000 * *
Brooklyn, New York 11235
Eugene Gurevich
2-01 50th Ave., Apt 28B 5,964,930 13.98% 10.17%
Long Island City, NY 11101
Vladimir Davidov
23 Place 5,040,000 11.81% 8.59%
Karhula Finland 48601
44
Andrey Kharlanov
1101, Sultan Tower, Liwa Street 2,531,200 5.93% 4.31%
Abu Dhabi, P.O.Box 47427,
United Arab Emirates
Alexander Shishkin
Apt. #310, 6 Bibliotechnaya, 6,400,000 15.00% 10.91%
Moscow, Russia 129090
Eugene Koupsin
15-17 Rubinsteyn Street 3,200,000 7.50% 5.45%
St. Petersburg, Russia
Officers and Directors
as a Group (6 including Mr. 17,243,790 40.42% 29.39%
Kharlanov, the general manager
of City Mix, LLC )
* - Less than 1%
(1) percent of class before offering based on 42,665,000 shares issued and
outstanding after giving effect to a 1 for 10 forward split of our shares
of common stock undertaken on October 20, 2004.
(2) percent of class after offering based on 58,665,000 shares issued and
outstanding, assuming the maximum offering is sold .
(3) Includes 1,400,000 shares held by Olga Safanova, Mr. Zilman's wife; and
100,000 shares held by Mikhail Safonova, Mr. Zilman's minor son.
DILUTION
Royal Capital Management, Inc.
Dilution Table Under Regulation S-B, Item 506
Year Ended December 31, 2005
Net tangible book value (NTBV) as of December 31, 2005 was $2,319,557 or $.05
per share of common stock. NTBV per share represents tangible assets less
liabilities divided by the number of shares of common stock outstanding. The
following table illustrates the dilution to purchasers of common stock in this
offering at various arbitrarily determined sales levels, at an assumed public
offering price of $.25 per share. At sales levels indicated, our proforma net
tangible book value at December 31, 2005 would have been $3,303,621, $4,303,621,
$5,303,621 and $6,303,621 respectively.
Number of Shares of Common Stock to be Sold in the Offering:
4,000,000 8,000,000 12,000,000 16,000,000
--------------------------------------------------------------------
Public offering price per share $0.25 $0.25 $0.25 $0.25
--------------------------------------------------------------------
NTBV per share before the offering 0.05 0.05 0.05 0.05
Increase in NTBV per share
attributable to new investors 0.02 0.03 0.04 0.05
--------------------------------------------------------------------
Pro forma NTBV per share after
the offering 0.07 0.08 0.10 0.11
--------------------------------------------------------------------
Dilution per share to new public $0.18 $0.17 $0.15 $0.14
====================================================================
There were no sales to officers, directors, promoters and affiliated person of
common stock in the past five years at prices significantly less than the
offering price.
45
SELLING STOCKHOLDERS
The shares being offered for resale by the selling stockholders consist of the
total of 2,331,410 shares of our common stock. None of the selling shareholders
listed below are affiliates of broker-dealers.
The following table sets forth the name of the selling stockholders, the number
of shares of common stock beneficially owned by each of the selling stockholders
as of January 31, 2006 and the number of shares of common stock being offered by
the selling stockholders. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholders may offer all
or part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
Percent of
common
Name of selling stockholder Shares of shares owned Shares of common Number of Percent of shares
common stock prior to the stock to be sold in shares owned owned after
owned prior to offering(1) the offering (1) after the offering
the offering offering
Anna Ginzburg (2) 991,410 2.32% 991,410 0 0
Nikita Sukhin
20,000 * 20,000 0 0
Mikhail Khrakovsky
10,000 * 10,000 0 0
Victoria Reznik 10,000 * 10,000 0 0
Ilya Bykov
20,000 * 20,000 0 0
Mark Filstein
20,000 * 20,000 0 0
Margarita Ginzburg (2) 10,000 * 10,000 0 0
Tatiana Klatz
20,000 * 20,000 0 0
Julia Parsons
50,000 * 50,000 0 0
Julie Litvinova
10,000 * 10,000 0 0
Alla Shor
30,000 * 30,000 0 0
Mikhail Kupsis
10,000 * 10,000 0 0
Ekaterina Gavin
10,000 * 10,000 0 0
Tigran Makarian
10,000 * 10,000 0 0
Mikhail Shor
10,000 * 10,000 0 0
46
Julian Parsons
10,000 * 10,000 0 0
Elena Marcucci
10,000 * 10,000 0 0
Boris Zavlin
10,000 * 10,000 0 0
Larisa Garcia
10,000 * 10,000 0 0
Walter Eizenberg
10,000 * 10,000 0 0
Ashley Goodman
30,000 * 30,000 0 0
Marina Ivanova
10,000 * 10,000 0 0
Berci Cherpician
10,000 * 10,000 0 0
Vadim Nebuchin
10,000 * 10,000 0 0
Yury Rubinovich
10,000 * 10,000 0 0
Elena Smirnova
10,000 * 10,000 0 0
Dilbar Sultanova
10,000 * 10,000 0 0
Gla Ni
10,000 * 10,000 0 0
Lana Koifman
20,000 * 20,000 0 0
Igor Sluzhevsky
20,000 * 20,000 0 0
Zhana Kvetnaya
10,000 * 10,000 0 0
Araz Khachatrian
20,000 * 20,000 0 0
Oksana Tkachenko
10,000 * 10,000 0 0
Natalia Sarafanova
10,000 * 10,000 0 0
Teresa Bergstrom
220,000 * 220,000 0 0
Galina Polina
10,000 * 10,000 0 0
Marina Terletsky
30,000 * 30,000 0 0
Alexander Terletsky
20,000 * 20,000 0 0
Boris Magidenko
20,000 * 20,000 0 0
Souren Soumbatov
20,000 * 20,000 0 0
Sonia Bromberg
500,000 1.17% 500,000 0 0
Jacob Fortun
20,000 * 20,000 0 0
Anna Kanevsky
20,000 * 20,000 0 0
*-Less than 1%
(1) Based on 42,665,000 shares issued and outstanding as of May 10, 2006.
(2) Anna Ginzburg and Margarita Ginzburg are the adult daughters of Yuli
Ginzburg, our officer and director.
PLAN OF DISTRIBUTION
We are offering our shares of common stock in a direct public offering basis
through Messrs. Zilman and Ginzburg. There are no minimum purchase requirements.
The offering shall be undertaken for a twelve (12) month period from the date of
commencement. There is no minimum number of shares that we must sell before we
can utilize the proceeds of the offering. Therefore, there is a possibility that
no proceeds will be raised or that if any proceeds are raised, they may not be
sufficient to cover the cost of this offering. Messrs. Zilman and Ginzburg will
be the only people that will conduct the direct public offering. Investors
purchasing the 16,000,000 shares that we are offering will be purchasing their
shares from us and not from our selling security holders. Messrs. Zilman and
Ginzburg intend to offer and sell the shares in the primary offering through
their business and personal contacts. They will not be paid any commissions or
other expenses incurred by him in connection with the offering. The shares may
also be offered by participating broker-dealers which are members of the
National Association of Securities Dealers, Inc. We may, in our discretion, pay
commissions of up to 10%of the offering price to participating broker-dealers
46
who participate in the sale of shares. Our officers and directors may not
purchase shares in this offering.
Messrs. Zilman and Ginzburg are the only persons that plan to sell our common
stock. They are not registered broker-dealers. They intend to claim reliance on
Exchange Act Rule 3a4-1 which provides an exemption from the broker-dealer
registration requirements of the Exchange Act for persons associated with an
issuer. Specifically, both Messrs. Zilman and Ginzburg (i) at the time of sale,
will not be subject to a statutory disqualification as that term is defined in
section 3(a)39 of the Securities Act; (ii) will not be compensated in connection
with their participation in the offering by payment of commissions or other
remuneration; at the time of participation in the sale of shares, they will not
be an associated person of a broker or a dealer; (iii) pursuant to
Rule3a4-1(a)(4)(ii), Messrs. Zilman and Ginzburg will meet all of the following
requirements: at the end of the offering, they will perform substantial duties
for us other than in connection with transactions in securities; they are not a
broker or dealer, or an associated person of a broker or dealer within the
last12 months; and they have not participated in, or do not intend to
participate in, selling an offering of securities for any issuer more than once
every 12 months other than in reliance on paragraph(a)(4)(i) or (iii) of Rule
3a4-1.
The selling security holder offering will run concurrently with the primary
offering. All of the stock owned by the selling security holders will be
registered by the registration statement of which this prospectus is a part. The
selling security holders may sell some or all of their shares immediately after
they are registered. There is no restriction on the selling security holders to
address the negative effect on the price of your shares due to the concurrent
primary and secondary offering. In the event that the selling security holders
sell some or all of their shares, which could occur while we are still selling
shares directly to investors in this offering, trading prices for the shares
could fall below the offering price of the shares. In such event, we may be
unable to sell all of the shares to investors, which would negatively impact the
offering. As a result, our planned operations may suffer from inadequate working
capital.
The selling stockholders will sell their common stock at the price of $.25 per
share until our shares of common stock are quoted on the OTC Bulletin Board (or
any other recognized exchange). Thereafter, the selling stockholders may sell
their shares at prevailing market prices or privately negotiated prices. Based
on this, the purchasers in this offering may be receiving an illiquid security.
The selling security holders shares may be sold or distributed from time to time
by the selling stockholders or by pledgees, donees or transferees of, or
successors in interest to, the selling stockholders, directly to one or more
purchasers (including pledgees) or through brokers, dealers or underwriters who
may act solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be effected in one or more of the following
methods:
* ordinary brokers transactions, which may include long or short sales,
* transactions involving cross or block trades on any securities or market
where our common stock is trading,
47
* purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus, "at the
market" to or through market makers or into an existing market for the
common stock,
* in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
* through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
* any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of
1933,and any commissions received by them and any profit realized by them on
there sale of shares as principals may be deemed underwriting compensation under
the Securities Act of 1933. Neither the selling stockholders nor we can
presently estimate the amount of such compensation. We know of no existing
arrangements between the selling stockholders and any other stockholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $102,500.
We have informed the selling stockholders that certain anti-manipulative rules
contained in Regulation M under the Securities Exchange Act of 1934 may apply to
their sales in the market and have furnished the selling stockholders with a
copy of such rules and have informed them of the need for delivery of copies of
this prospectus. The selling stockholders may also use Rule 144 under the
Securities Act of 1933 to sell the shares if they meet the criteria and conform
to the requirements of such rule.
If there is any change in our selling security holders subsequent to the
effectiveness of this registration statement, we will file either a 424
amendment or a psot-effective amendment to reflect such change.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Eduard Klebanov, our Vice President and Chairman of the Board of Directors,
assists us with our internal accounting on a consultant basis.
48
Effective August 8, 2005, we signed a license agreement with YZ Business
Consulting. The License Agreement is the primary asset we are using to develop,
market and distribute educational aids in the form of a computer program for
teaching American English as a second language with the aid of a personal
computer. Yevsey D.Zilman, our President and Deputy Chairman of the Board of
Directors owns YZ Business Consulting. Pursuant to the agreement, we are
required to pay royalties to YZ Business Consulting as follows: 40% of the total
revenues from our sales of any products, services or other activities utilizing
the educational aids after complete recovery of all our initial stage operation
costs, including legal fees, advertising and production. The regular payments of
the royalties will be reduced if necessary to insure that there is no loss for
us in this type of activity.
In City Mix LLC we have a partner, a U.A.E. national, Mubarak S. Jaber Al Ahbabi
("Mr. Mubarak"), who is a 51% ownership in City Mix LLC. It is a legal
requirement in the United Arab Emirates for a non-resident entity to have a UAE
national in a limited liability company. Our shareholding relationship with Mr.
Mubarak with regard to City Mix LLC is based on and governed by the following:
o Share Transfer and Amendment to the Memorandum of Associations, whereby we
acquired ownership of 49% of City Mix LLC and are appointed manager of City
Mix LLC; with all powers to exclusively operate and manage the business of
City Mix LLC;
o Power of Attorney from Mr. Mubarak, whereby we are authorized to act on his
behalf in connection with his 51% ownership, to vote for and on his behalf
in any manner we deem appropriate at all meetings of the general assembly
of City Mix LLC, and to exercise all the rights whatsoever attached to the
said 51% ownership. The Power of Attorney cannot be revoked without our
written consent; and
o Agreement dated November 26, 2000, whereby:
o We acquired all the assets and liabilities, and the above ownership,
management and operational rights in City Mix LLC by virtue of the above
Share Transfer, Power of Attorney and Agreement.
o Mr. Mubarak shall render all necessary assistance in all matters pertaining
to the federal and Abu Dhabi authorities, arrange and be responsible for
the official registration of the company with the federal and Abu Dhabi
authorities, maintain a valid land lease, and not sell, transfer, assign or
otherwise dispose of his ownership in the company without our written
consent, and not to have any role whatsoever in the management and
operation of City Mix LLC. Mr. Mubarak shall not be liable for any
liabilities of City Mix LLC.
o Mr. Mubarak is entitled to receive, on an annual basis, a fixed fee (named
`sponsorship fee') of approximately $55,000 and 2% of gross revenues of the
company.
o The term of the agreement and the Share Transfer is twenty (20) years and
renewable. The agreement may be terminated by mutual written consent of the
parties or by any party in the event of material violations of terms and
conditions.
49
In the fiscal year 2004, we paid:
(i) $49,000 to YZ Business Consulting, Inc. for business consulting services to
us pursuant to a Consultancy Agreement dated January 6, 2004 between us and YZ
Business Consulting, Inc., which is a separate arrangement from License
Agreement between the same parties dated July 26, 2002, The maim terms and
conditions of the above Consultancy Agreement are as follows.
o Subject of Agreement. YZ renders to Royal Capital business consulting
services on all aspects of organization and conducting of Royal Capital
business.
o Remuneration. In consideration of the services provided thereunder, YZ
receives from Royal Capital remuneration as per invoices issued by YZ to
Royal Capital.
o Duration. The Agreement is in force until terminated either by a mutual
consent of the parties or at any time by one party by giving the other
party a one-month notice of termination. $3,000 to Eduard Klebanov, our
Chairman of the Board of Directors, for his services to us for internal
bookkeeping
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
Common Stock
We are presently authorized to issue 100,000,000 shares of $.0001 par value
common stock. On October 20, 2004, we undertook a 1 for 10 forward split of our
issued and outstanding stock. At May 10, 2006, we had 42,675,000 shares of
common stock outstanding. The holders of our common stock are entitled to equal
dividends and distributions when, as, and if declared by the Board of Directors
from funds legally available therefore. No holder of any shares of common stock
has a preemptive right to subscribe for any of our securities, nor are any
common shares subject to redemption or convertible into other of our securities.
Upon liquidation, dissolution or winding up, and after payment of creditors and
preferred stockholders, if any, the assets will be divided pro-rata on a
share-for-share basis among the holders of the shares of common stock. Each
share of common stock is entitled to one vote with respect to the election of
any director or any other matter upon which shareholders are required or
permitted to vote. Holders of our common stock do not have cumulative voting
rights, so the holders of more than 50% of the combined shares voting for the
election of directors may elect all of the directors if they choose to do so,
and, in that event, the holders of the remaining shares will not be able to
elect any members to the Board of Directors.
Preferred Stock
We are presently authorized to issue up to 10,000,000 shares of $.0001 par value
preferred stock upon such terms and conditions as the Board of Directors may
determine at the time of issuance, without further action of the stockholders
being required. At May 10, 2006, we had no shares of preferred stock
outstanding. Such preferred shares may or may not be: issued in series,
convertible into shares of common stock, redeemable by the corporation and
entitled to cumulative dividends. Other terms and conditions may be imposed at
the time of issuance. In the event that some or all of the preferred stock is
issued with a conversion privilege, any future conversion will cause an increase
in the number of issued and outstanding shares of common stock, and may or may
not have a depressive effect on the market value of the common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
During the most recent fiscal year and interim period subsequent to December 31,
2004, there have been no disagreements with Demetrius & Company, LLC, our
independent auditor, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
50
We engaged Gately & Associates as our independent public accountant on January
27, 2004 for the years ended December 31, 2003, December 31, 2002, and from
inception (as restated) (December 11, 2000) through December 31, 2003. In
February, 2005 we dismissed Gately & Associates, LLC (Gately) as our independent
public accountant, which was approved by our board of directors, and selected
Demetrius & Company, L.L.C. on March 4, 2005 to serve as our independent public
accountant for the year ended December 31, 2004. We have had only these two
independent accountants during the last two fiscal periods. Gately & Associates
audited City Mix Management for the periods prior to the merger.
Our financial statements for the years ended December 31, 2003 and 2002 and the
deficit accumulated from inception until December 31, 2003 were audited by
Gately & Associates, LLC, whose report on such financial statements did not
include any adverse opinion, or disclaimer of opinion, nor qualified or modified
as to audit scope or accounting principles. Gately & Associates, LLC audited our
financial statements since inception. There were no disagreements with Gately &
Associates, LLC on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures in connection with the
audit of the years ended December 31, 2003 and 2002 and the deficit accumulated
from inception until December 31, 2003 and subsequent interim periods preceding
their dismissal in February, 2005.
No report of Gately & Associates on our financial statements for the past two
fiscal years contained an adverse opinion, a disclaimer of opinion or a
qualification or was modified as to uncertainty, audit, scope or accounting
principles. During such fiscal periods, there was no "reportable events" within
the meaning of item 304(a)(1) of Regulation S-B promulgated under the Securities
Act of 1933.
TRANSFER AGENT
To date, we have not hired a transfer agent. We are in the process of retaining
a transfer agent.
EXPERTS
The audited consolidated financial statements as of December 31, 2004 and the
year then ended included in this prospectus have been audited by Demetrius &
Company, LLC, independent registered public accounting firm, and are included
herein in reliance upon the report of said firm given upon their authority as
experts in accounting and auditing. The consolidated financial statements as of
December 31, 2003 and for the period from inception (December 11, 2000 ) were
audited by Gately & Associates, LLC, independent registered public accounting
firm, and are also included herein in reliance upon their report upon their
authority as experts in accounting and auditing
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow &
Jaclin, LLP, Manalapan, New Jersey 07726.
FINANCIAL STATEMENTS
We have attached to this prospectus copies of our audited balance sheet as of
December 31, 2005 and the related statements of operations, stockholders' equity
and cash flows for the two years then ended and the period of December 2000
(Inception) to December 31, 2005.
51
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(A development stage company)
Audited Financial Statements
For the years ending on December 31, 2005 and 2004
Table of Contents
Page
-------------
Audited Financial Statements
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of Stockholders Equity 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6 - 13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Royal Capital Management Inc.
We have audited the accompanying consolidated balance sheet of Royal Capital
Management Inc. (a development stage enterprise) as of December 31, 2005 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years in the ended December 31, 2005 and the period of
December 11, 2000 (inception) to December 31, 2005. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
cumulative statements of operations, cash flows, and changes in stockholders'
equity for the period December 11, 2000 (inception) to December 31, 2003 which
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for the period December
11, 2000 (inception) to December 31, 2003 is based solely on the reports of
other auditors.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements and includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, and based upon the reports of other auditors, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Royal Capital Management Inc. (a development stage
enterprise) as of the year ended December 31, 2005 and the consolidated results
of its operations and its cash flows for each of the two years in the period
ended December 31, 2005 and for the period of December 11, 2000 (inception) to
December 31, 2005 in conformity with accounting principles generally accepted in
the United States of America.
/s/Demetrius & Company, L.L.C.
Wayne, New Jersey
April 26, 2006
F-1
ROYAL CAPITAL MANAGEMENT INC.
(A Development Stage Company)
Consolidated Balance Sheet
- --------------------------
As at December 31, 2005
All figures are expressed in U.S. Dollars
ASSETS
- ------
Current Assets
- --------------
Cash $ 14,638
Accounts receivables, trade
Deposits, advances and prepayments 17,188
-----------------
Total Current Assets 31,826
Vehicles and office equipment, net 230,481
Construction in progress (plant and equipment), at cost 2,637,683
Patent cost 13,834
Deferred offering costs 72,730
-----------------
Total Assets 2,986,554
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
- -------------------
Accruals and provisions 37,978
Bank loan payable, current portion 74,169
-----------------
Total Current Liabilities 112,147
Long term debt:
Long term loan 429,268
Bank loan payable, less current portion 39,018
Equity
- ------
Common stock - $.0001 par value;
authorized 100,000,000 shares;
issued and outstanding: 42,675,000 4,267
Additional paid-in-capital 4,299,535
Deficit accumulated during development stage (1,897,681)
-----------------
Total Equity 2,406,121
-----------------
Total Liabilities And Equity 2,986,554
-----------------
The accompanying notes are an integral part of
these consolidated financial statements.
F-2
ROYAL CAPITAL MANAGEMENT INC.
(A Development Stage Company)
Consolidated Statement of Operations
- -------------------------------------
For the year ended December 31, 2005 and 2004
and for the Period From Inception (December 11, 2000)
through December 31, 2005
All figures are expressed in U.S. Dollars
Period from
Inception Through
2005 2004 Dec. 31, 2005
----- ----- -----------------
Revenue, truck rentals $ 359,914 $ 447,837 $ 1,367,200
---------------- ----------------- -----------------
Costs and general and administrative expenses
Depreciation on vehicles and office equipment 119,896 123,027 620,256
Salary and benefits 59,755 76,081 615,275
Stock Base Compensation 18,750 27,719
Management fees 139,408
Sponsorship fees 78,949 54,422 332,304
Legal fees 33,024 19,028 121,024
Consultancy fees 54,000 49,500 108,360
Other expenses 125,096 127,444 569,887
---------------- ----------------- -----------------
(489,470) (449,502) (2,534,233)
---------------- ----------------- -----------------
Operating Income (Loss) (129,556) (1,665) (1,167,033)
Other income (expense)
Provision for loss - cash in closed bank (275,924) (275,924) (551,848)
Finance costs - interest (31,859) (34,128) (241,477)
- check discounting (8,793) (4,590) (35,619)
Other non-operating Income 22,397 98,296
---------------- ----------------- -----------------
(316,576) (292,245) (730,648)
---------------- ----------------- -----------------
Net Loss $ (446,132) $ (293,910) $(1,897,681)
================ ================= =================
Basic Net Loss Per Common Share $ (0.01) $ (0.01)
Weighted Average Common Shares Outstanding 42,647,610 42,600,000
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
ROYAL CAPITAL MANAGEMENT INC.
(A Development Stage Company)
Consolidated Statement of Changes in Equity
- -------------------------------------------
For the year ended December 31, 2005
and 2004 and for the Period From Inception (December 11, 2000)
through December 31, 2005
All figures are expressed in U.S. Dollars
Common Stock
------------------------------
Shares Amount Additional Paid Accumulated Deficit Total
------------- ------------- ------------- ------------- -------------
Initial Capital at December 11, 2000 32,991,410 $ 3,299 $ 4,242,964 $ 4,246,263
Shares issued in connection with merger 640,000 64 82,304 82,368
Cost of merger (82,368) (82,368)
Net loss for period of
December 11, 2000 to
December 31, 2002 $ (1,128,460) (1,128,460)
------------- ------------- ------------- ------------- -------------
Balance as at January 1, 2003 33,631,410 3,363 4,242,900 (1,128,460) 3,117,803
Additional capital contributed 29,820 29,820
Issuance of shares for services 8,968,590 897 8,072 8,969
Net loss for 2003 (29,179)
------------- ------------- ------------- ------------- -------------
Balance as at December 31, 2003 42,600,000 4,260 4,280,792 (1,157,639) 3,127,413
Net loss for 2004 (293,910) (293,910)
------------- ------------- ------------- ------------- -------------
Balance as at December 31, 2004 42,600,000 4,260 4,280,792 (1,451,549) 2,833,503
Stock Base compensation 75,000 7 18,743 18,750
Net loss for 2005 (446,132) (446,132)
------------- ------------- ------------- ------------- -------------
Balance as at December 31, 2005 42,675,000 $ 4,267 $ 4,299,535 $ (1,897,681) $ 2,406,121
============= ============= ============= ============= =============
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
ROYAL CAPITAL MANAGEMENT INC.
(A Development Stage Company)
Consolidated Cash Flow Statement
- --------------------------------
For the year ended December 31, 2005 and 2004
and for the Period From Inception (December 11, 2000)
through December 31, 2005
All figures are expressed in U.S. Dollars
Period from
Inception Through
2005 2004 Dec. 31, 2005
---------------- ----------------- -----------------
Cash Flow from Operating Activities
Net Loss (446,132) (293,910) (1,897,681)
Adjustments :
- -------------
Depreciation 119,896 123,027 620,256
Accretion on long-term debt 24,298 22,923 126,651
Receivable from bank (551,847)
Stock based compensation 18,750 27,719
Provision for loss - cash in closed bank 275,924 275,924 551,848
Gain on disposal of plant & equipment (25,048)
---------------- ----------------- -----------------
Net profit / (loss) before changes in operating assets and liabilities (7,264) 127,964 (1,148,102)
Decrease / (Increase) in accounts receivables 37,320 (37,320)
Decrease / (Increase) in deposits, advances and prepayments 10,758 (9,717) (17,188)
(Decrease) in accounts payable
(Decrease) / Increase in accruals and provisions (40,496) (2,705) 37,978
---------------- ----------------- -----------------
Net cash flow from / (used in) operating activities 318 78,222 (1,127,312)
---------------- ----------------- -----------------
Cash flow from investing activities
Purchase of plant and equipment (5,502) (3,189,054)
Proceeds from disposal of plant and equipment 28,298
Increase In patent cost (3,817) (10,017) (13,834)
---------------- ----------------- -----------------
Net cash used in investing activities (3,817) (15,519) (3,174,590)
---------------- ----------------- -----------------
Cash flow from financing activities
Cash Receipts for loan payable (for Interest) 7,561 11,205 435,076
Cash Payments for loan payable (Principal + Interest) (77,332) (78,912) (321,889)
Increase In deferred offering cost (20,730) (52,000) (72,730)
Proceeds from issuance of common shares 4,276,083
---------------- ----------------- -----------------
Net cash (used in) / flow from financing activities (90,501) (119,707) 4,316,540
---------------- ----------------- -----------------
(Decrease) / Increase in cash and cash equivalents (94,000) (57,004) 14,638
Cash as at beginning 108,638 165,642
---------------- ----------------- -----------------
Cash and cash equivalents as at end 14,638 108,638 14,638
================ ================= =================
Supplemental Cash Flow Statement Information
- --------------------------------------------
Cash paid for interest - on borrowing from bank 7,561 11,205 114,826
Interest on Long - Term Loan (Imputed) 24,298 22,923 126,651
Cash paid for check discounting fee 8,793 4,590 35,619
Non cash investing and financing activities
Trucks acquired by assumption of debt 305,117
Stock Based Compensation 18,750 27,719
Stock issued in merger 82,368
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------
NOTE 1 --- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Royal Capital Management, Inc. (the "Company"), a development stage company, was
established on January 11, 1994 under the laws of the State of New Jersey, a USA
company. The Company is the parent company of a development stage business in
the "ready mix cement industry" and "English as a second Language Education
Software". The Company has established its intended operations in the Abu Dhabi,
United Arab Emirates (UAE). For accounting purposes, the subsidiary corporation
(City Mix) is considered the accounting acquirer of the Company.
The Company also holds certain computer program technology, English as a second
Language Education Software that is being developed into Educational Software
application "English as a second Language this is intended to be a separate
business from City Mix, the subsidiary.
All inter-company account balances and transactions have been eliminated in the
accounting consolidation of these companies as guided by the US Generally
Accepted Accounting Principle under Financial Accounting Standard No. 94
"Consolidation of All Majority-Owned Subsidiaries".
Basis of Presentation
- ---------------------
On December 17, 2003, the Company issued 32,000,000 shares and acquired 49% of
the outstanding securities of City Mix LLC (City Mix), a private development
stage enterprise (the Merger). Although Royal Capital Management Inc. (RMC) is
the legal survivor in the Merger and will be the registrant with Securities and
Exchange Commission, the owners and management of City Mix have operating
control of the Company as a result of the exchange of stock. Therefore this
transaction is a capital transaction in substance, other than a business
combination. That is the transaction is the equivalent to the issuance of stock
by a private company for the net monetary assets, accompanied by the
recapitalization of City Mix. Under accounting principles generally accepted in
the United States, the acquisition was accounted for as a reverse acquisition,
no goodwill or other intangible assets are recorded, whereby City Mix is
considered the "Acquirer" of RMC for financial reporting purposes as its
shareholders controlled more than 50% of the post transaction combined company.
This requires RMC to present the financial statements and other public
information filings, after completion of the merger prior historical information
of City Mix and requires retroactive restatement of City Mix historical
shareholders investment for the equivalent number of shares received in the
Merger. Accordingly, the accompanying consolidated financial statements present
the results of operations of City Mix (a development stage company) from
December 11, 2000 (date of inception) to December 31, 2005 and for the years
ended December 31, 2005 and 2004 and reflect the acquisition of RMC on December
17, 2003. The operations reflect the combined operations of RMC and City Mix
since that date.
Results of Operations, Liquidity, Capital Resources and Going Concern
- ---------------------------------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company, a development stage company, is considered to be an ongoing entity. The
F-6
Company's shareholders may fund, at their discretion, any shortfalls in the
Company's cash flow on a day to day basis during the time period that the
Company is in the development stage. The Company may also seek both private and
public debt and/or equity funding during this time period. There are no
guarantees that the Company will be successful in raising debt or equity in the
public or private market.
While in the development stage, City Mix is making use of its 16 cement mixer
trucks by renting them to a single company.
Basis of Accounting
- -------------------
The Company's financial statements are prepared in accordance with the US
Generally Accepted Accounting Principles.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates --- Management uses estimates and assumptions in preparing
these financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from those
estimates.
Cash and Cash Equivalents --- Cash and cash and equivalent includes cash on
hand, demand deposits and short term investments with initial maturities of
three months or less.
Trade Receivable --- Trade receivables are carried at anticipated realizable
value. A provision is made for doubtful receivables based on a review of all
outstanding amounts at the year-end. Bad debts are written off during the year
in which they are identified.
Property and Equipment --- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for repairs and maintenance are charged
to expense as incurred, as are any items purchased which are below the Company's
capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any related gain or loss is
reflected in income for the period. Repairs and maintenance costs are expenses
as incurred.
Impairment of Long Lived Assets--In accordance with the provisions of SFAS --
121 "Accounting for the impairment of long--lived assets and for long-lived
assets to be disposed of" , company reviews long-lived assets, such as property
and equipment, for impairment whenever event or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable.
Under SFAS 121, an impairment loss would be recognized for assets to be held and
used when estimated undiscounted future cash flows expected to result from the
use of the asset and its eventual disposition is less than its carrying amount.
Impairment, if any, is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less cost to sell.
There have been no impairment losses through December 31, 2005.
Revenue and Cost Recognition --- Revenue from rental of truck mixer is
recognized monthly in accordance with terms of rental agreement.
Historical Net Income Per Share --The Company computes net income per common
share in accordance with SFAS No. 128, "Earnings per Share" and SEC Staff
Accounting Bulletin No. 98 ("SAB/ 98"). Under the provisions of SFAS No. 128 and
SAB 98, basic and diluted net income per common share is computed by dividing
F-7
the net income available to common shareholders for the period by the weighted
average number of shares of common stock outstanding during the period.
Accordingly, the numbers of weighted average shares outstanding as well as the
amount of net income per share are the same for basic and diluted per share
calculations for all periods reflected in the accompanying financial statements.
Stock-based compensation --- The Company accounts for stock based compensation
in accordance with SFAS 123, "Accounting for Stock-Based Compensation".
Under the provision of SFAS 123, employee stock awards under the company's
compensation plan can be either expense based on the fair value of stock options
or to use intrinsic value method set forth in Accounting Principles Board
Opinion 25, "Accounting for Stock issued to Employees" (APB 25), and related
interpretations. The company has elected to measures compensation expense for
cost of services received from employees in a share-based payment transaction
using fair market value of the underlying stock awarded on the date of grant net
of any amount employees pay (or obligated to pay) for the stock granted.
The Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in conjunction with
Selling, Goods or Services". The fair value of the stock awarded is used to
measure the transaction, as this is more reliable than the fair value of
services received. Fair value is measured as the value of the Company's common
stock on the date that the commitment for performance by the counterparty has
been reached or the counterparty's performance is complete. The fair value of
the stock award is charged directly to compensation expense and additional
paid-in-capital.
Income Taxes --- The Company utilizes the asset and liability method to measure
and record deferred income tax assets and liabilities for USA taxes. Deferred
tax assets and liabilities reflect the future income tax effects of temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and are measured using enacted
tax rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
Foreign Currencies --- The Company's subsidiary operates with its functional
currency in UAE Dirhams at rates ruling when entered. The translation of the
financial statements is done at USD 1 = AED 3.675. The exchange rate between US
dollars and UAE Dirhams are fixed, hence there are no translation adjustments.
The Company uses Financial Accounting Standard No. 52 "Foreign Currency
Translation" to account for foreign currencies.
Fair Value of Financial Instruments --- The carrying amounts of the Company's
financial instruments, which include cash equivalents, accounts receivable,
deferred offering cost, accounts payable, accrued expenses, long term-loan
payable and installment bank loan payables approximate to their fair values at
December 31, 2005.
New Authoritative Accounting Pronouncements --- The Company does not anticipate
the adoption of recently issued accounting pronouncements will have a
significant impact on its results of operations, financial position or cash
flows.
NOTE 2 --- RECEIVABLE IN A CLOSED BANK
The Company has a receivable in the amount of $551,848 from a closed bank, the
Anglo American Bank, a Grenada Corporation. On July 23, 2002, the government
appointed controllers to take over the affairs of the bank. At that time, the
Company was notified by the Ministry of Finance that return of the funds to the
F-8
account holders was being supervised by the Ministry. During 2004, the Company
made a provision for doubtful recovery of $275,924 due to the uncertainty
involved. Since then all attempted communication by the Company and the Ministry
has had no response. Due to the age of this matter and the lack of response by
the Ministry of Finance, the Company has reserve the remaining balance due and
reduced the carrying value of their asset to zero.
NOTE 3 --- ACCOUNTS RECEIVABLE
The customary trade terms in the UAE are 90 days. When we bill our customer they
give us a post dated check, due in 90 days. These checks may be deposited by us
at the end of the 90 day period or discounted at a bank with recourse, similar
to a factoring arrangement. The balance in accounts receivable represents
billings for which the post dated checks have not been discounted. Management
has determined that an allowance for uncollectible accounts is not required.
NOTE 4 --- DEPOSITS, ADVANCES AND PREPAYMENTS
2005
Deposits $ 1,497
Advances to contractor & others 8,669
Prepaid insurance, rent, insurance and license fees 7,022
-------
$ 17,188
NOTE 5 --- PROPERTY, PLANT AND EQUIPMENT
City Mix Management Co., Inc. (the Management Company) acquired the assets and
liabilities (the majority of assets held) of City Mix L.L.C. (City Mix) in a
private auction on November 18, 2000. The Management Company took over the
factory being setup as the previous owners could not invest further to complete
the project and commence commercial production. The cost of property acquired in
the auction is the purchase cost together with any incidental expenses of
acquisition. Subsequent costs are included in the asset's carrying amount or
recognized as separate assets. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Depreciation on property, plant and equipment has been computed using the
straight-line method at the annual rates estimated to write off the assets over
its expected useful lives. Depreciation has not been charged on assets which
have not been put to use except for vehicles (truck mixers) that are being
rented, office furniture and office equipment in use from the date of
acquisition.
Assets (Assets Life) 2005
Vehicles (7 years) $ 781,551
Furniture and office equipment (4 years) 26,352
-----------
807,903
Less : Accumulated depreciation (577,422)
---------
$ 230,481
NOTE 6 --- PATENT COST
These amounts of $ 13,834 are incurred for registration of world wide patent of
our English as a second Language Educational software. The patent cost is not
being amortized as of December 31, 2005.
F-9
NOTE 7 --- DEFERRED OFFERING COST
In connection with a proposed IPO, the company has recorded $ 72,730 at December
31, 2005 of deferred offering costs, principally accounting and legal.
NOTE 8 --- LONG TERM DEBT
When the Company purchased the assets of the ready mix cement plant, including
16 transit cement mixer trucks, it assumed a loan payable to Ramoil Engineering
S.R.L (an Italian company) for the purchase of the trucks in the amount of
$652,071. The loan is payable in installments of operating income once the plant
is operational and has profits. Based on our projections repayments will not
begin until the year 2007. This loan does not include a stated interest rate and
accordingly interest has been imputed at 6% or $349,454 over the life of the
loan. Therefore, the original loan after imputed interest was $302,617. At
December 31, 2005 the discounted balance due was $429,268. There are no loan
covenants or collateral.
The Company is liable on a loan payable to the First Gulf Bank that was also
assumed as part of the auction purchase. The loan as renegotiated calls for
interest at 5% per annum and is repayable in monthly installments of $6,803,
including interest and is collateralized by 16 transit cement mixer trucks.
Based on the repayment terms the loan the final payment will be made in May,
2007.
Based on our estimates of required payments, long-term debt will mature over the
next five years as follows:
Year ended
December 31
-----------
2006 $74,169
2007 139,018
2008 100,000
2009 100,000
2010 100,000
NOTE 9--- EQUITY
Common Stock
- ------------
In October, 2004 the shares of the company were split 10 for 1. The accompanying
financial statements have been retroactively adjusted to reflect the split in
all periods presented.
The Company has authorized 60,000,000 of common stock with a par value of
$0.0001 per share. As of December 31, 2005, the Company had issued and
outstanding 42,675,000 common shares and 42,600,000 as of December 31, 2004
which are as follows :
a.) In December 17, 2003, the Company has issued 32,000,000 shares of
restricted common stock in consideration for acquisition of Citymix
Management's assets. Accordingly, above shares were exchanged with the
Citymix Management's shareholders having par value of $0.0001 per share at
agreed price of $0.1287 per share or $4,118,400.
"City Mix" shall be considered the name of the collective subsidiary
relationships of the City Mix Management Co. Inc. and City Mix L.L.C.,
related companies whereby the board of directors have dissolved City Mix
Management simultaneously with the share and asset exchange with the parent
company.
F-10
The Company acquired an effective 100% interest in City Mix L.L.C. (City
Mix), a development stage company through the acquisition of assets of City
Mix Management Co. Inc. (the Management Company), a Grenada West Indies
corporation incorporated on December 11, 2000 by the Commonwealth of
London. The Management Company was created to first acquire the development
stage company, City Mix, in a private auction, to raise capital for this
transaction, and to make certain contractual agreements with the UAE
national. On November 18, 2000 the Management Company acquired a 49%
ownership of City Mix with a contractual right to exercise 100% beneficial
ownership and control in City Mix pursuant to the Power of Attorney granted
by agreement of the 51% owner, a UAE national. In essence the agreement
states that the Management Company shall exercise 100% beneficial ownership
of City Mix by virtue of a power of attorney granted to it by Mubarak Al
Ahbabi, the 51% owner. Under United Arab Emerites (UAE) Commercial
Companies Law being Federal Law no. (8) Of 1984 as amended, the minimum
cumulative shareholding of UAE nationals in a limited liability company
must be a 51% owner of the paid in capital. On April 4, 2004 the Company
renewed this contract agreement with the UAE national for an additional
term. The Management Company was later dissolved simultaneously with the
parent Company's exchange of common shares for the assets of City Mix. The
shareholders of the Management Company also became shareholders in the
parent Company.
b.) On similar footage, initial issuance of 991,410 shares of restricted common
stock to the founding shareholder, Ms. Anna Ginzburg's with par value of
$0.0001 were assigned per share value of $0.1287 or $127,863.
c.) In December 2003, the Company has issued 640,000 shares of restricted
common stock in consideration for services rendered to us for assistance
with the City Mix transaction for exchange of stock and assets. The
issuance was valued at $0.1287 per share or $82,368.
d.) Between May 2002 to November 2002, Company has issued 8,968,590 shares of
restricted common stock in consideration for services rendered with
analysis of company's English language software. The issuance was valued at
$0.001 per share or $8,969.
e.) On March 11, 2005, the Company issued 50,000 shares of restricted common
stock to Mr. Andrei Petrov in consideration for his agreement to become
company's President and Principal Executive Officer. The issuance was
valued at $0.25 per share or $12,500.
The share value assigned to the above various issues was determined arbitrarily
by the Company based on reasonable estimate of fair market value in absence of
present market value of their shares.
NOTE 10 --- REVENUE CONTRACT
The Company has an operating lease agreement, including amendments with RMC
Super Mix (RMC), whereby all 16 of its Astra, Italy Concrete Transit Mixer
Trucks are rented by RMC. The agreement as amended is for various six month
periods with a 30 day termination clause. Rentals range from $1,986 to $2,290 a
truck per month. During the term of the leases, RMC will engage drivers and
other technical personnel. In addition, RMC will install their own tires before
the agreement and at the end of each lease reinstall the Company's tires.
Payment is to be made on the first of the month with a 90 day post dated check
issued in the name of the Company. Failure to issue the check on a timely basis
will result in a penalty of 1/30th of the total monthly payment for each day of
delay.
NOTE 11 --- LITIGATION
From time to time in the normal course of business the Company has been involved
in litigation. The Company's management has determined that past and current
litigation will not have a material effect on the financial statements. City Mix
LLC vs. Armitage Engineering LLC:
F-11
The basis for the dispute of City Mix LLC ("City Mix") and their main contractor
Armitage Engineering Co. LLC ("Armitage") is the fact that Armitage failed to
complete its work in time as was specified by Contract dated March 28, 1999 and
Annex A-1 dated September 11, 2001. Armitage disputed this fact and has taken a
series of illegal actions to thrust its unfair position upon City Mix, which has
caused substantial damage to City Mix.
The court of first instance of Abu Dhabi, United Arab Emirates considered two
actions related to the dispute between City Mix and Armitage.
Currently there are two court actions related to the dispute between City Mix
and Armitage.
1. Urgent Case 73/02, filed by City Mix to stop Armitage's illegal actions of
locking the City Mix's factory site, preventing City Mix's subcontractors,
engineers and technical staff from accessing the site and preventing City Mix
from completing installation and commissioning work. The court rendered its
judgment in this case in favor of City Mix on December 23, 2003 and the
Armitage's actions were found illegal.
2. Main Action 422/02, which was initiated as Armitage had failed to complete
the construction works on due time and rejected penalties for that stipulated by
the contract. Armitage demanded that the final payment under the contract in the
amount of $158,514 should be paid in full; however the consultant, who
supervised execution of the contract as required by the UAE law, concluded that
this payment should account for penalties for a period of delays in completion.
Therefore in response to the claim filed by Armitage to recover from City Mix
above amount of the final payment under the contract, City Mix filed a counter
claim claiming penalties from Armitage for failing to complete the project on
due time.
City Mix additionally claimed compensation in the amount of $739,048 plus a
daily compensation of $4,942 for loss of daily profits resulting from City Mix
being deprived from utilizing its factory from February 26, 2002 until a final
judgment is rendered and $2,449 daily as fees for the consultant until a final
judgment is rendered. Armitage additionally claimed moral damages from City Mix
in the amount of $816,326.
On February 27, 2006 the court issued its judgment on main action 422/02,
whereby it satisfied the City Mix's claim for penalties partially in the amount
of $25,404 and therefore reduced the final payment under the contract to
$133,110. The additional compensation claimed by City Mix was not accounted for.
Al Tamimi & Company, an Abu Dhabi law firm and the City Mix's lawyers analyzed
the situation and the court's decision and concluded and recommended that City
Mix should seek compensation for damages in a court of a higher instance. For
this purpose City Mix filed an appeal with the Abu Dhabi Court of Appeal on
March 27, 2006. The appeal was accepted and the court proceedings are underway.
NOTE 12 --- OPERATING LEASE
The Company has entered into an annual renewable sub-lease agreement with the
UAE national partner/sponsor for sub-lease of land on which the plant is
constructed as per the side agreement dated November 26, 2000. The sub-lease
amount is $13,000 per year.
On July 13, 2004 the Company entered into an annual renewable lease for office
space for an amount of approximately $10,500 that would be payable at the
beginning of the tenancy period.
F-12
NOTE 13 --- RELATED PARTY TRANSACTIONS
As per the Share Transfer and Amendment to the Memorandum of Association of City
Mix LLC dated January 5, 2005 the UAE national partner is entitled to
distribution of profits and losses at 20% as this is a standard form used in
memoranda of associations of limited liability companies in the UAE. However,
this is overridden by the provisions of the Agreement with the national partner
dated November 26, 2000, whereby it is provided that the national partner will
share profits at a rate of 12% of annual profits of City Mix LLC after the
setoff of accumulated losses and will not share in losses. This is common
practice in the UAE and it is fully allowed and enforceable pursuant to Article
126 of the UAE Civil Transactions Law being Federal Law No.8 of 1985. The
national partner is the 51% owner as required in the UAE of City Mix who has
given, under this contract, power of attorney to the Company for 100% effective
ownership and control per this contract. The national partner will not be liable
for any liabilities of the Company. An annual fee of approximately $41,000 for
services and annual rent of approximately $13,000 for the land leased.
The Company in year 2005, agreed to pay their UAE national partner in addition
to the above annual service fee and lease rent a sum equivalent to 2% of their
truck rental revenues effective from the date the truck rent commenced in
September 2002 until to date. Accordingly, an amount of $17,329 was paid for the
period prior to December 31, 2004 and another $7,198 was paid for the year ended
December 31, 2005.
The Company paid consulting fees to YZ Business Consulting Inc., a company owned
by a shareholder/officer for the years ended December 31, 2005 and 2004 were
$54,000 and $49,500, respectively.
The Company also has license agreement with YZ Consultants (YZ). Mr. Zilman is
the owner of YZ has patent applications pending for the technology for English
as a second Language Educational Software (ESL). The license grants the Company
an exclusive license to further develop and utilize the technology and market
the product. When the product is commercially developed and there are sales the
Company will pay royalties to YZ of 40% of sales. YZ shall repay the Company
initial operation costs, which include costs for legal protection, advertising
and production. This one time costs shall not exceed $150,000. To date there
have been no sales and accordingly no royalties have been paid nor have any
costs been reimbursed.
In March 2005, we issued 50,000 shares of common stock to our then president,
Andrei Petrov for compensation valued at $0.25 a share or $12,500. In September
2005, we issued 25,000 shares of common stock to our new president, Edward
Klebanov for compensation at $0.25 a share or $6,250. The Company has further
commitment to issue another 75,000 shares to Mr. Klebanov in 2006, as long as
her stays the employment of the Company. The shares vest at the rate of $25.00
shares a quarter.
NOTE 14 --- INCOME TAXES
The Company is not subject to income taxes in the UAE. Accordingly, no provision
for income taxes or tax benefits has been provided. In addition, the parent's
taxable losses in the United States are minimal. Also, No provision for the tax
benefits for those losses has been provided.
NOTE 15 --- CONTINGENT LIABILITY
The company was contingently liable for discounted checks with a bank for an
amount of $78,367 as of December 31, 2005.
NOTE 16 --- COMPARATIVE FIGURES
Previous year's figures have been regrouped or rearranged wherever necessary so
as to conform to the current year's presentation.
F-13
ROYAL CAPITAL MANAGEMENT, INC.
16,000,000 Shares of Common Stock
2,331,410 Selling Security Holder Shares of Common Stock
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER
TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until __________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The General Corporation Law of the State of New Jersey expressly authorizes a
New Jersey corporation to indemnify its officers, directors, employees, and
agents against claims or liabilities arising out of such persons' conduct as
officers, directors, employees, or agents for the corporation if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the Company. Neither the articles of incorporation nor the
Bylaws of the Company provide for indemnification of the directors, officers,
employees, or agents of the Company. The Company has not adopted a policy about
indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
The eighth article of our Certificate of Incorporation includes provisions to
eliminate, to the fullest extent permitted by New Jersey General Corporation Law
as in effect from time to time, the personal liability of our directors for
monetary damages arising from a breach of their fiduciary duties as directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
52
SEC registration fee $ 581
Legal fees and expenses (1) $ 50,000
Accounting fees and expenses (1) $ 25,000
Miscellaneous and Printing fees(1) $ 26,919
Total (1) $ 102,500
(1) Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On May 9, 2002, we issued 50,000 shares of our restricted common stock to Julia
Parsons in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.001 per share or $50.00. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Parsons
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Parsons had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On May 9, 2002, we issued 30,000 shares of our restricted common stock to Alla
Shor in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.001per share or $30.00. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Shor
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Shor had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
53
On May 9, 2002, we issued 10,000 shares of our restricted common stock to Boris
Zavlin in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.001per share or $10.00. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Zavlin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Zavlin had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On May 9, 2002, we issued 10,000 shares of our restricted common stock to
Mikhail Khrakovsky in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $.001per share or
$10.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Mr.Khrakovsky was a sophisticated investor and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Mr. Khrakovsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On May 9, 2002, we issued 30,000 shares of our restricted common stock to Marina
Terletsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $30.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering.
Ms.Terletsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
53
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Terletsky had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On May 9, 2002, we issued 70,000 shares of our restricted common stock to
Leonard Khodorovsky in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $.001per share or
$70.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Mr.Khodorovsky was a sophisticated investor and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Mr. Khodorovsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 2,429,000 shares of our restricted common stock to
Yuli Ginzburg in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.001per share or
$2,429.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Mr.Ginzburg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Ginzburg had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
54
On July 26, 2002, we issued 1,493,790 shares of our restricted common stock to
Yevsey Zilman in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.001 per share or
$1,493.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Mr. Zilman was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Zilman had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 1,400,000 shares of our restricted common stock to
Olga Savanova in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.001per share or
$1,400.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Ms.Safanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Safanova had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 1,686,530 shares of our restricted common stock to
Eugene Gurevich in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $.001per share or
$1,686.53. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Mr.Gurevich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high 54 number of investors. In addition, Mr. Gurevich had the
55
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 609,270 shares of our restricted common stock to
Vera Shatokhina in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $.001 per share or
$609.27. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Ms.Shatokhina was a sophisticated investor and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Ms. Shatokhina had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 220,000 shares of our restricted common stock
toTeresa Bergstrom in consideration for the license agreement entered into
between us and YZ Business Consulting. The issuance was valued at $.001per share
or $220.00. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. The above issuance of
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933since the issuance of such shares by us did not involve a
public offering. Ms.Bergstrom was a sophisticated investor and had access to
information normally provided in a prospectus regarding us. The offering was not
a "public offering" as defined in Section 4(2) due to the insubstantial number
of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. We did not undertake an offering in which we sold
a high number of shares to a high number of investors. In addition, Ms.
Bergstrom had the necessary investment intent as required by Section 4(2) since
she agreed to and received a share certificate bearing a legend stating that
such shares are restricted pursuant to Rule 144 of the 1933 Securities Act.
These restrictions ensure that these shares would not be immediately
redistributed into the market and therefore not be part of a "public offering."
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for the
above transaction.
56
On July 26, 2002, we issued 500,000 shares of our restricted common stock to
Sonia Bromberg in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $.001per share or
$500.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Ms.Bromberg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Bromberg had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 20,000 shares of our restricted common stock to
Nikita Sukhin in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.001 per share or
$20.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Sukhin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Sukhin had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 10,000 shares of our restricted common stock to
Margarita Ginzburg in consideration for the license agreement entered into
between us and YZ Business Consulting. The issuance was valued at $.001pershare
or $10.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Ginzburg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Ginzburg had the
necessary investment intent as required by Section 4(2) since she agreed to and
57
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 20,000 shares of our restricted common stock to Anna
Kanevsky in consideration for the license agreement entered into between us and
YZ Business Consulting. The issuance was valued at $.001per share or $20.00. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.Kanevsky
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Kanevsky had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On October 10, 2002, we issued 30,000 shares of our restricted common stock to
Ashley Goodman in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$30.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Goodman was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Goodman had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
58
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Walter Eizenberg in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Eizenberg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Eizenberg had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Zhana Kvetnaya in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.Kvetnaya
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Kvetnaya had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Galina Polina in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Polina
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Polina had the necessary investment intent
59
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to
Araz Khachatrian in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $20.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering.
Mr.Khachatrian was a sophisticated investor and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Mr. Khachatrian had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to
Mark Filstein in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$20.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Mr.Filstein was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Filstein had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
60
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Marina Ivanova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Ivanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Ivanova had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Vadim Nebuchin in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Ms.Nebuchin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Nebuchin had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to
Ilya Bykov in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001per share or
$20.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Bykov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Bykov had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
61
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to
Tatiana Klatz in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$20.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Klatz was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Klatz had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to
Tigran Makarian in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.Makarian
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Makarian had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
62
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Natalia Sarafanova in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $.001 per share or
$10.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Ms.Sarafanova was a sophisticated investor and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Ms. Sarafanova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Dilbar Sultanova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Ms.Sultanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Sultanova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Oksana Tkachenko in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Ms.Tkachenko was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Tkachenko had the
necessary investment intent as required by Section 4(2) since she agreed to and
63
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Julia Parsons in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Parsons was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Parsons had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Elena Marcucci in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Marcucci was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Marcucci had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
64
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Julie Litvinova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Ltvinova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Litvinova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Ekaterina Gavin in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Gavin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Gavin had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Elena Smirnova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Smirnova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Smirnova had the
65
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Larisa Garcia in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Garcia was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Garcia had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 20,000 shares of our restricted common stock to
Lana Koifman in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$20.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Koifmanwas a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Koifman had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
66
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Victoria Reznik in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Reznik was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Reznik had the necessary
investment intent as required by Section 4(2) since she agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Berci Cherpician in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$10.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Cherpician was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Cherpician had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Yury Ribinovich in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Ribinovich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Ribinovich had the
67
necessary investment intent asrequired by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Mikhail Kupsis in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Kupsis
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Kupsis had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to
Mikhail Shor in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or $10.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Shor
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Shor had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 14, 2002, we issued 20,000 shares of our restricted common stock to
Alexander Terletsky in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $.001 per share or
$20.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
68
stock qualified for exemption under Section 4(2) of the Securities Act of
1933since the issuance of such shares by us did not involve a public offering.
Mr.Terletsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Terletsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 20,000 shares of our restricted common stock to
Igor Sluzhevsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.001 per share or
$20.00.Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Sluzhevsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Sluzhevsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 100,000 shares of our restricted common stock to
Mikhail Safanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or
$12,870. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Safanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Safanov had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
69
4(2) of the Securities Act of 1933 for the above transaction. On December 17,
2003, we issued 20,000shares of our restricted common stock to Souren Sombatov
in consideration for services rendered to us for assistance with the City Mix
transaction. The issuance was valued at $.1287 per share or $2,574. Our shares
were issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933. No commissions were paid for the issuance of
such shares. The above issuance of shares of our common stock qualified for
exemption under Section 4(2) of the Securities Act of 1933 since the issuance of
such shares by us did not involve a public offering. Mr.Sombatov was a
sophisticated investor and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Sombatov had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 20,000 shares of our restricted common stock to
Jacob Fortun in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or $2,574.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Fortun
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Fortun had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On December 17, 2003, we issued 30,000 shares of our restricted common stock to
Tatyana Rusanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or $3,861.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Rusanov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
70
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Rusanov had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 150,000 shares of our restricted common stock to
Eduard Klebanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or
$19,305. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering.
Mr.Klebanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Klebanov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 300,000 shares of our restricted common stock to
Y. Jacob Rusanov in consideration for services rendered to us assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or
$38,610. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Rusanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Rusanov had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
71
On December 17, 2003, we issued 20,000 shares of our restricted common stock to
Boris Magidenko in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.1287 per share or $2,574.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering.
Mr.Magidenko was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Magidenko had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 4,278400 shares of our restricted common stock
to Eugene Gurevich in consideration for the share exchange with City Mix, LLC,
our subsidiary. The issuance was valued at $.1287 per share or $550,630.Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Gurevich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Gurevich had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 1,545,600 shares of our restricted common stock
to Shatokhina Vera in consideration for the share exchange with City Mix, LLC,
our subsidiary. The issuance was valued at $.1287 per share or $198,919.Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Vera
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Vera had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
72
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On December 17, 2003, we issued 4,480,000 shares of our restricted common stock
to Yevsey Zilman in consideration for the share exchange with City Mix, LLC, our
subsidiary. The issuance was valued at $.1287 per share or $576,576. Our shares
were issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933. No commissions were paid for the issuance of
such shares. The above issuance of shares of our common stock qualified for
exemption under Section 4(2) of the Securities Act of 1933 since the issuance of
such shares by us did not involve a public offering. Mr. Zilman was a
sophisticated investor and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Zilman had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On December 17, 2003, we issued 4,524,800 shares of our restricted common stock
to Yuli Ginzburg in consideration for the share exchange with City Mix, LLC, our
subsidiary. The issuance was valued at $.1287 per share or $582,342. Our shares
were issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933. No commissions were paid for the issuance of
such shares. The above issuance of shares of our common stock qualified for
exemption under Section 4(2) of the Securities Act of 1933 since the issuance of
such shares by us did not involve a public offering. Mr. Ginzburg was a
sophisticated investor and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Ginzburg had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 5,040,000 shares of our restricted common stock
to Vladimir Davidov in consideration for the share exchange with City Mix, LLC,
our subsidiary. The issuance was valued at $.1287 per share or $648,648.Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Davidov
73
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Davidov had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 2,531,200 shares of our restricted common stock
to Anrew Kharlanov in consideration for the share exchange with City Mix, LLC,
our subsidiary. The issuance was valued at $.1287 per share or $325,765.Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Karlanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Karlanov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 6,400,000 shares of our restricted common stock
to Alexander Shishkin in consideration for the share exchange with City Mix,
LLC, our subsidiary. The issuance was valued at $.1287 per share or $823,680.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933since
the issuance of such shares by us did not involve a public offering. Mr.
Shishkin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Shishkin had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
74
On December 17, 2003, we issued 3,200,000 shares of our restricted common stock
to Eugene Koupsin in consideration for the share exchange with City Mix, LLC,
our subsidiary. The issuance was valued at $.1287 per share or $411,840.Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Kuopsin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Kuopsin had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On October 10, 2004, we undertook a 1 for 10 forward stock split of our shares
of common stock.
On March 11, 2005, we issued 50,000 shares of our restricted common stock to
Andrei Petrov in consideration for his agreement to become our President and
Principal Executive Officer. The issuance was valued at $.25 per share or
$12,500. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Petrov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Petrov had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On September 15, 2005, we issued 25,000 shares of our restricted common stock to
Eduard Klebanov, our officer and director for services rendered to us in his
capacity as an officer and director. The issuance was valued at $.25 per share
or $6,250. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Klebanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Klebanov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
All of the above issuances of shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance of such
shares by us did not involve a public offering. Each of these shareholders was a
sophisticated investor and had access to information regarding us. The offering
was not a "public offering" as defined in Section 4(2) due to the in substantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in which
we sold a high number of shares to a high number of investors. In addition,
these shareholders had the necessary investment intent as required by Section
75
4(2) since they agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transactions.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
EXHIBIT DESCRIPTION
3.1 Articles of Incorporation of Royal Capital Management, Inc. and Amendments
(1)
3.2 By-Laws (1)
5.1 Opinion and Consent of Anslow & Jaclin, LLP
10.1 License Agreement dated July 26, 2002 between us and YZ Business Consulting
(1)
10.2 Share Transfer and Memorandum of Association Agreement between City Mix
Management Company and Dhafir S. Jaber Al Ahbabi and Mubarak S. Jaber Al
Ahbabi (2)(4)
10.3 Wizzard OEM Software Agreement (2)
10.4 Edward D. Pergament, Registered Patent Attorney Consent Letter (3)
10.5 First Gulf Bank Loan Documentation (2)
10.6 Lease Contract for Land Plot to Build a Factory (2)
10.7 Intentionally Omitted
10.8 Intentionally Omitted
10.9 Intentionally Omitted
10.10 Intentionally Omitted
10.11 Intentionally Omitted
10.12 Rental Agreement between RMC Super Mix and City Mix, LLC (2)
10.13 Assets Management Agreement between City Mix L.L.C. and Royal Capital
Management, Inc. (2)
10.14 Share Transfer and Amendment of Articles of Association dated January 5,
2005 with Power of Attorney (3)
10.15 Andrei Kharlanov Employment Agreement (3)
10.16 First Gulf Bank Letter Extension (3)
10.17 Amended Rental Agreement dated June 26, 2005 between RMC Super Mix and
City Mix, LLC (3) 10.18 Legal Opinion from Al Tamimi & Company regarding
legal rights of ownership in the United Arab Emirates (3)
10.18 Letter of Al Tamimi and Company(4)
10.20 Arabian Engineer Trading Est Consent Letter(4)
10.21 Consultancy Agreement dated January 6, 2004 between us and YZ Business
Consulting, Inc.(4)
10.22 Amendment dated August 9, 2005 to License Agreement dated July 26, 2002
between us and YZ Business Consulting (see Exhibit 10.1)(4)
10.23 Agreement with Mubarak Al Ahbabi regarding truck rental revenue 21.1 List
of Subsidiaries (2) 23.1 Consent of Demetrius & Company, LLC, independent
auditors 23.2 Consent of Gately & Associates, LLC, independent auditors(4)
24.1 Power of Attorney (included on signature page of Registration Statement)
(1) Filed with original Form SB-2 on October 26, 2004 (SEC File No.
333-119959).
(2) Filed with Amendment No. 1 to Form SB-2 on July 1, 2005 (SEC File No.
333-119959).
(3) Filed with Amendment No. 2 to Form SB-2 on October 28, 2005 (SEC File No.
333-119959).
(4) Filed with Amendment No. 3 to Form SB-2 on February 14, 2006 (SEC File No.
333-119959). However, since this amendment was not timely filed, we are re-
Filing these exhibits with Amendment No. 4.
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
76
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) 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
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering 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.
(4) For determining liability of the undersigned small business issuer under
the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that in a
primary offering of securities of the undersigned small business issuer
pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to he purchaser, if the securities
are offered or sold to such purchaser by means of any of the following
communications, the undersigned small business issuer will be a seller
to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be
filed pursuant to Rule 424 (Sec. 230. 424);
(b) Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned small business issuer or used or
referred to by the undersigned small business issuer;
(c) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
small business issuer or its securities provided by or on behalf
of the undersigned small business issuer; and
(d) Any other communication that is an offer in the offering made by
the undersigned small business issuer to the purchaser.
(b) Request for Acceleration of Effective Date:
Undertaking pursuant to Item 512(e) of Regulation S-B
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling persons in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
(c) Reliance on Rule 430A under the Securities Act:
Undertaking pursuant to Item 512(f) of Regulation S-B
The undersigned registrant hereby undertakes:
1. For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule
424(b)(1), or (4) or 497(h) under the Securities Act (Sec. 230.
424(b)(1), (4) or 230. 497(h)) as part of this registration statement as
of the time the Commission declared it effective.
2. For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
(d) For Purposes of Determining Liability under the Securities Act:
Undertaking pursuant to Item 512(g) of Regulation S-B
The undersigned registrant hereby undertakes that, for the purpose of
determining liability under the Securities Act to any purchaser:
1. If the small business issuer is relying on Rule 430B (ss. 230. 430B of
this chapter):
(i) Each prospectus filed by the undersigned small business issuer
pursuant to Rule 424(b)(3) (ss. 230. 424(b)(3) of this chapter)
shall be deemed to be part of the registration statement as of
the date the filed prospectus was deemed part of and included in
the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) (ss. 230. 424(b)(2), (b)(5), or (b)(7) of this
chapter) as part of a registration statement in reliance on Rule
430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) (ss. 230. 415(a)(1)(i), (vii), or (x) of this
chapter) for the purpose of providing the information required
by section 10(a) of the Securities Act shall be deemed to be
part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and
any person that is at that date an underwriter, such date shall
be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date; or
2. If the small business issuer is subject to Rule 430C (ss. 230. 430C of
this chapter), include the following: Each prospectus filed pursuant to
Rule 424(b)(ss. 230. 424(b) of this chapter) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A (ss. 230. 430A of this chapter), shall be deemed to be part of
and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first use.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act
of1933 may be permitted to directors, officers or controlling persons pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934that
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Marlboro, State of
New Jersey, on the 10th day of May, 2006.
ROYAL CAPITAL MANAGEMENT, INC.
By: /S/ YEVSEY D. ZILMAN
--------------------
YEVSEY D. ZILMAN
President, Principal Executive Officer and Deputy
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned directors and officers of Royal Capital Management, Inc. hereby
constitute and appoint Yevsey D. Zilman, with full power to act without the
other and with full power of substitution and resubstitution, our true and
lawful attorneys-in-fact with full power to execute in our name and behalf in
the capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such
attorneys-in-fact, or any them, or their substitutes, shall lawfully do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/S/ YULI GINZBURG Vice President, Director May 10, 2006
- -------------------
YULI GINZBURG
/S/ YEVSEY D. ZILMAN President, Principal May 10, 2006
- ---------------------- Executive Officer and
YEVSEY D. ZILMAN Deputy Chairman of the
Board of Directors
/S/ EDUARD KLEBANOV Vice President, Principal May 10, 2006
- -------------------- Accounting Officer,
EDUARD KLEBANOV Principal Financial Officer
and Chairman of the Board of
Directors
/S/ LEONARD KHODOROVSKY Director May 10, 2006
- -----------------------
LEONARD KHODOROVSKY
78