-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhElI5IxFw20fHLBFNUZH9BVTdqTp/1dpT4pxSAu0gonhnjF6pcvX4HNL2bAy/5L 8OagkpiDI9digal/bV5R6g== 0001072588-99-000155.txt : 19991228 0001072588-99-000155.hdr.sgml : 19991228 ACCESSION NUMBER: 0001072588-99-000155 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19991227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED CEILING SUPPLIES INC CENTRAL INDEX KEY: 0001098332 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841516192 STATE OF INCORPORATION: CO FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-28663 FILM NUMBER: 99780698 BUSINESS ADDRESS: STREET 1: 345 W 62ND AVE STREET 2: UNIT B CITY: DENVER STATE: CO ZIP: 80216 BUSINESS PHONE: 3034405356 MAIL ADDRESS: STREET 1: 345 W 62ND AVE STREET 2: UNIT B CITY: DENVER STATE: CO ZIP: 80216 10SB12G 1 FORM 10-SB U. S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-SB File No.: __________________ CIK: 0001098332 GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS Under Section 12(b) or (g) of the Securities Exchange Act of 1934 ADVANCED CEILING SUPPLIES, INC. ------------------- (Name of Small Business Issuer in its charter) COLORADO 84-1516192 State or other jurisdiction of IRS Employer ID Number incorporation or organization 2338 BROADWAY, #100, BOULDER, CO 80304 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (303) 440-5356 Securities to be registered under Section 12(b) of the Act: Title of each class Name of each exchange on which to be so registered each class is to be registered Not Applicable Securities to be registered under Section 12(g) of the Act: Common Stock (Title of class)
TABLE OF CONTENTS PART I Page Item 1. Business..................................................... 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 18 Item 3. Properties.................................................. 20 Item 4. Security Ownership of Certain Beneficial Owners and Management........................................ 21 Item 5. Directors and Executive Officers of the Registrant.......... 21 Item 6. Executive Compensation...................................... 25 Item 7. Certain Relationships and Related Transactions.............. 26 Item 8. Description of Securities................................... 27 PART II Item 1. Market for Registrant's Common Stock and Security Holder Matters............................... 28 Item 2. Legal Proceedings........................................... 28 Item 3. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................ 28 Item 4. Recent Sales of Unregistered Securities..................... 29 Item 5. Indemnification of Directors and Officers................... 31 PART F/S Signature Page................................................................ 32 Financial Statements and Supplementary Data.................................. F-1 Index to Exhibits............................................................................. 33
PART I ITEM 1. DESCRIPTION OF BUSINESS. GENERAL The Company was incorporated under the laws of the State of Colorado on August 9, 1995, and is in the early developmental and promotional stages. To date the Company's activities have been organizational ones, directed at developing its business plan and raising its initial capital. The Company was formed to seek business opportunities and is currently a "shell" with no business. The Company has no commercial operations as of date hereof. The Company has no full-time employees and owns no real estate. The Company is a "shell" company and its only current business plan is to seek, investigate, and, if warranted, acquire one or more businesses, and to pursue other related activities intended to enhance shareholder value. The acquisition of a business opportunity may be made by purchase, merger, exchange of stock, or otherwise, and may encompass assets or a business entity, such as a corporation, joint venture, or partnership. The Company has no capital, and it is unlikely that the Company will be able to take advantage of more than one such business opportunity. The Company intends to seek opportunities demonstrating the potential of long-term growth as opposed to short-term earnings. At the present time the Company has not identified any business opportunity that it plans to pursue, nor has the Company reached any agreement or definitive understanding with any person concerning an acquisition. The Company is filing Form 10-SB on a voluntary basis in order to become a 12(g) registered company under the Securities Exchange Act of 1934. As a "reporting company," the Company may be more attractive to a private acquisition target because it may be listed to trade its shares on the OTCBB. It is anticipated that the Company's officers and directors will contact broker-dealers and other persons with whom they are acquainted who are involved in corporate finance matters to advise them of the Company's existence and to determine if any companies or businesses they represent have an interest in considering a merger or acquisition with the Company. No assurance can be given that the Company will be successful in finding or acquiring a desirable business opportunity, given that no funds that are available for acquisitions, or that any acquisition that occurs will be on terms that are favorable to the Company or its stockholders. The Company's search will be directed toward small and medium-sized enterprises which have a desire to become public corporations and which are able to satisfy, or anticipate in the reasonably near future being able to satisfy, the minimum asset requirements in order to qualify shares for trading on NASDAQ or a stock exchange (See "Investigation and Selection of Business Opportunities"). The Company anticipates that the business opportunities presented to it will (i) be recently organized with no operating history, or a history of losses attributable to under-capitalization or other factors; (ii) be experiencing financial or operating difficulties; (iii) be in need of funds to develop a new product or service or to expand into a new market; (iv) be 3 relying upon an untested product or marketing concept; or (v) have a combination of the characteristics mentioned in (i) through (iv). The Company intends to concentrate its acquisition efforts on properties or businesses that it believes to be undervalued. Given the above factors, investors should expect that any acquisition candidate may have a history of losses or low profitability. The Company does not propose to restrict its search for investment opportunities to any particular geographical area or industry, and may, therefore, engage in essentially any business, to the extent of its limited resources. This includes industries such as service, finance, natural resources, manufacturing, high technology, product development, medical, communications and others. The Company's discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions, and other factors. As a consequence of this registration of its securities, any entity which has an interest in being acquired by, or merging into the Company, is expected to be an entity that desires to become a public company and establish a public trading market for its securities. In connection with such a merger or acquisition, it is highly likely that an amount of stock constituting control of the Company would be issued by the Company or purchased from the current principal shareholders of the Company by the acquiring entity or its affiliates. If stock is purchased from the current shareholders, the transaction is very likely to result in substantial gains to them relative to their purchase price for such stock. In the Company's judgment, none of its officers and directors would thereby become an "underwriter" within the meaning of the Section 2(11) of the Securities Act of 1933, as amended. The sale of a controlling interest by certain principal shareholders of the Company could occur at a time when the other shareholders of the Company remain subject to restrictions on the transfer of their shares. Depending upon the nature of the transaction, the current officers and directors of the Company may resign management positions with the Company in connection with the Company's acquisition of a business opportunity. See "Form of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in Management." In the event of such a resignation, the Company's current management would not have any control over the conduct of the Company's business following the Company's combination with a business opportunity. It is anticipated that business opportunities will come to the Company's attention from various sources, including its officers and director, its other stockholders, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. The Company has no plans, understandings, agreements, or commitments with any individual for such person to act as a finder of opportunities for the Company. The Company does not foresee that it would enter into a merger or acquisition transaction with any business with which its officers or directors 4 are currently affiliated. Should the Company determine in the future, contrary to foregoing expectations, that a transaction with an affiliate would be in the best interests of the Company and its stockholders, the Company is in general permitted by Colorado law to enter into such a transaction if: 1. The material facts as to the relationship or interest of the affiliate and as to the contract or transaction are disclosed or are known to the Board of Directors, and the Board in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors constitute less than a quorum; or 2. The material facts as to the relationship or interest of the affiliate and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or 3. The contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board of Directors or the stockholders. INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES To a large extent, a decision to participate in a specific business opportunity may be made upon management's analysis of the quality of the other company's management and personnel, the anticipated acceptability of new products or marketing concepts, the merit of technological changes, the perceived benefit the company will derive from becoming a publicly held entity, and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria. In many instances, it is anticipated that the historical operations of a specific business opportunity may not necessarily be indicative of the potential for the future because of the possible need to shift marketing approaches substantially, expand significantly, change product emphasis, change or substantially augment management, or make other changes. The Company will be dependent upon the owners of a business opportunity to identify any such problems which may exist and to implement, or be primarily responsible for the implementation of, required changes. Because the Company may participate in a business opportunity with a newly organized firm or with a firm which is entering a new phase of growth, it should be emphasized that the Company will incur further risks, because management in many instances will not have proved its abilities or effectiveness, the eventual market for such company's products or services will likely not be established, and such company may not be profitable when acquired. It is anticipated that the Company will not be able to diversify, but will essentially be limited to one such venture because of the Company's limited financing. This lack of diversification will not permit the Company to offset potential losses from one business opportunity against profits from another, and should be considered an adverse factor affecting any decision to purchase the Company's securities. It is emphasized that management of the Company may effect transactions having a potentially adverse impact upon the Company's shareholders pursuant to the authority and discretion of the Company's management to complete 5 acquisitions without submitting any proposal to the stockholders for their consideration. Holders of the Company's securities should not anticipate that the Company necessarily will furnish such holders, prior to any merger or acquisition, with financial statements, or any other documentation, concerning a target company or its business. In some instances, however, the proposed participation in a business opportunity may be submitted to the stockholders for their consideration, either voluntarily by such directors to seek the stockholders' advice and consent or because state law so requires. The analysis of business opportunities will be undertaken by or under the supervision of the Company's President, who is not a professional business analyst. See "Management." Although there are no current plans to do so, Company management might hire an outside consultant to assist in the investigation and selection of business opportunities, and might pay a finder's fee. Since Company management has no current plans to use any outside consultants or advisors to assist in the investigation and selection of business opportunities, no policies have been adopted regarding use of such consultants or advisors, the criteria to be used in selecting such consultants or advisors, the services to be provided, the term of service, or regarding the total amount of fees that may be paid. However, because of the limited resources of the Company, it is likely that any such fee the Company agrees to pay would be paid in stock and not in cash. Otherwise, the Company anticipates that it will consider, among other things, the following factors: 1. Potential for growth and profitability, indicated by new technology anticipated market expansion, or new products; 2. The Company's perception of how any particular business opportunity will be received by the investment community and by the Company's stockholders; 3. Whether, following the business combination, the financial condition of the business opportunity would be, or would have a significant prospect in the foreseeable future of becoming sufficient to enable the securities of the Company to qualify for listing on an exchange or on a national automated securities quotation system, such as NASDAQ, so as to permit the trading of such securities to be exempt from the requirements of Rule 15c2-6 recently adopted by the Securities and Exchange Commission. See "Risk Factors-The Company-Regulation of Penny Stocks." 4. Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources; 5. The extent to which the business opportunity can be advanced; 6. Competitive position as compared to other companies of similar size and experience within the industry segment as well as within the industry as a whole; 7. Strength and diversity of existing management, or management prospects that are scheduled for recruitment; 6 8. The cost of participation by the Company as compared to the perceived tangible and intangible values and potential; and 9. The accessibility of required management expertise, personnel, raw materials, services, professional assistance, and other required items. In regard to the possibility that the shares of the Company would qualify for listing on NASDAQ, the current standards include the requirements that the issuer of the securities that are sought to be listed have total net tangible assets of at least $4,000,000. Many, and perhaps most, of the business opportunities that might be potential candidates for a combination with the Company would not satisfy the NASDAQ listing criteria. No one of the factors described above will be controlling in the selection of a business opportunity, and management will attempt to analyze all factors appropriate to each opportunity and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Potential investors must recognize that, because of the Company's limited capital available for investigation and management's limited experience in business analysis, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired. The Company is unable to predict when it may participate in a business opportunity. It expects, however, that the analysis of specific proposals and the selection of a business opportunity may take several months or more. Prior to making a decision to participate in a business opportunity, the Company will generally request that it be provided with written materials regarding the business opportunity containing such items as a description of products, services and company history; management resumes; financial information; available projections, with related assumptions upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or services marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such company and its affiliates during relevant periods; a description of present and required facilities; an analysis of risks and competitive conditions; a financial plan of operation and estimated capital requirements; audited financial statements, or if they are not available, unaudited financial statements, together with reasonable assurances that audited financial statements would be able to be produced within a reasonable period of time not to exceed 60 days following completion of a merger transaction; and other information deemed relevant. As part of the Company's investigation, the Company's executive officers and directors may meet personally with management and key personnel, may visit and inspect material facilities, obtain independent analysis or verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of the Company's limited financial resources and management expertise. 7 It is possible that the range of business opportunities that might be available for consideration by the Company could be limited by the impact of Securities and Exchange Commission regulations regarding purchase and sale of "penny stocks." The regulations would affect, and possibly impair, any market that might develop in the Company's securities until such time as they qualify for listing on NASDAQ or on another exchange which would make them exempt from applicability of the "penny stock" regulations. See "Risk Factors -- Regulation of Penny Stocks." Company management believes that various types of potential merger or acquisition candidates might find a business combination with the Company to be attractive. These include acquisition candidates desiring to create a public market for their shares in order to enhance liquidity for current shareholders, acquisition candidates which have long-term plans for raising capital through the public sale of securities and believe that the possible prior existence of a public market for their securities would be beneficial, and acquisition candidates which plan to acquire additional assets through issuance of securities rather than for cash, and believe that the possibility of development of a public market for their securities will be of assistance in that process. Acquisition candidates which have a need for an immediate cash infusion are not likely to find a potential business combination with the Company to be an attractive alternative. There are no loan arrangements or arrangements for any financing whatsoever relating to any business opportunities. FORM OF ACQUISITION It is impossible to predict the manner in which the Company may participate in a business opportunity. Specific business opportunities will be reviewed as well as the respective needs and desires of the Company and the promoters of the opportunity and, upon the basis of that review and the relative negotiating strength of the Company and such promoters, the legal structure or method deemed by management to be suitable will be selected. Such structure may include, but is not limited to leases, purchase and sale agreements, licenses, joint ventures and other contractual arrangements. The Company may act directly or indirectly through an interest in a partnership, corporation or other form of organization. Implementing such structure may require the merger, consolidation or reorganization of the Company with other corporations or forms of business organization, and although it is likely, there is no assurance that the Company would be the surviving entity. In addition, the present management and stockholders of the Company most likely will not have control of a majority of the voting shares of the Company following a reorganization transaction. As part of such a transaction, the Company's existing directors may resign and new directors may be appointed without any vote by stockholders. It is likely that the Company will acquire its participation in a business opportunity through the issuance of Common Stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under the Internal Revenue Code of 1986, depends upon the issuance to the stockholders of the acquired company of a controlling interest (i.e. 80% or more) of the common 8 stock of the combined entities immediately following the reorganization. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Internal Revenue Code, the Company's current stockholders would retain in the aggregate 20% or less of the total issued and outstanding shares. This could result in substantial additional dilution in the equity of those who were stockholders of the Company prior to such reorganization. Any such issuance of additional shares might also be done simultaneously with a sale or transfer of shares representing a controlling interest in the Company by the current officers, directors and principal shareholders. (See "Description of Business - General"). It is anticipated that any new securities issued in any reorganization would be issued in reliance upon exemptions, if any are available, from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of the transaction, the Company may agree to register such securities either at the time the transaction is consummated, or under certain conditions or at specified times thereafter. The issuance of substantial additional securities and their potential sale into any trading market that might develop in the Company's securities may have a depressive effect upon such market. The Company will participate in a business opportunity only after the negotiation and execution of a written agreement. Although the terms of such agreement cannot be predicted, generally such an agreement would require specific representations and warranties by all of the parties thereto, specify certain events of default, detail the terms of closing and the conditions which must be satisfied by each of the parties thereto prior to such closing, outline the manner of bearing costs if the transaction is not closed, set forth remedies upon default, and include miscellaneous other terms. As a general matter, the Company anticipates that it, and/or its officers and principal shareholders will enter into a letter of intent with the management, principals or owners of a prospective business opportunity prior to signing a binding agreement. Such a letter of intent will set forth the terms of the proposed acquisition but will not bind any of the parties to consummate the transaction. Execution of a letter of intent will by no means indicate that consummation of an acquisition is probable. Neither the Company nor any of the other parties to the letter of intent will be bound to consummate the acquisition unless and until a definitive agreement concerning the acquisition as described in the preceding paragraph is executed. Even after a definitive agreement is executed, it is possible that the acquisition would not be consummated should any party elect to exercise any right provided in the agreement to terminate it on specified grounds. It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Moreover, because many providers of goods and services require compensation at the time or soon after the goods and services are provided, the inability of the Company to pay until an indeterminate future time may make it impossible to procure goods and services. 9 In all probability, upon completion of an acquisition or merger, there will be a change in control through issuance of substantially more shares of common stock. Further, in conjunction with an acquisition or merger, it is likely that management may offer to sell a controlling interest at a price not relative to or reflective of any value of the shares sold by management, and at a price which could not be achieved by individual shareholders at the time. INVESTMENT COMPANY ACT AND OTHER REGULATION The Company may participate in a business opportunity by purchasing, trading or selling the securities of such business. The Company does not, however, intend to engage primarily in such activities. Specifically, the Company intends to conduct its activities so as to avoid being classified as an "investment company" under the Investment Company Act of 1940 (the "Investment Act"), and therefore to avoid application of the costly and restrictive registration and other provisions of the Investment Act, and the regulations promulgated thereunder. Section 3(a) of the Investment Act contains the definition of an "investment company," and it excludes any entity that does not engage primarily in the business of investing, reinvesting or trading in securities, or that does not engage in the business of investing, owning, holding or trading "investment securities" (defined as "all securities other than government securities or securities of majority-owned subsidiaries") the value of which exceeds 40% of the value of its total assets (excluding government securities, cash or cash items). The Company intends to implement its business plan in a manner which will result in the availability of this exception from the definition of "investment company." Consequently, the Company's participation in a business or opportunity through the purchase and sale of investment securities will be limited. The Company's plan of business may involve changes in its capital structure, management, control and business, especially if it consummates a reorganization as discussed above. Each of these areas is regulated by the Investment Act, in order to protect purchasers of investment company securities. Since the Company will not register as an investment company, stockholders will not be afforded these protections. Any securities which the Company might acquire in exchange for its Common Stock are expected to be "restricted securities" within the meaning of the Securities Act of 1933, as amended (the "Act"). If the Company elects to resell such securities, such sale cannot proceed unless a registration statement has been declared effective by the Securities and Exchange Commission or an exemption from registration is available. Section 4(1) of the Act, which exempts sales of securities not involving a distribution, would in all likelihood be available to permit a private sale. Although the plan of operation does not contemplate resale of securities acquired, if such a sale were to be necessary, the Company would be required to comply with the provisions of the Act to effect such resale. An acquisition made by the Company may be in an industry which is regulated or licensed by federal, state or local authorities. Compliance with such regulations can be expected to be a time-consuming and expensive process. 10 COMPETITION The Company expects to encounter substantial competition in its efforts to locate attractive opportunities, primarily from business development companies, venture capital partnerships and corporations, venture capital affiliates of large industrial and financial companies, small investment companies, and wealthy individuals. Many of these entities will have significantly greater experience, resources and managerial capabilities than the Company and will therefore be in a better position than the Company to obtain access to attractive business opportunities. The Company also will possibly experience competition from other public "blank check" companies, some of which may have more funds available than does the Company. NO RIGHTS OF DISSENTING SHAREHOLDERS The Company does not intend to provide Company shareholders with complete disclosure documentation including audited financial statements, concerning a possible target company prior to acquisition, because the Colorado Business Corporation Act vests authority in the Board of Directors to decide and approve matters involving acquisitions within certain restrictions. A transaction could be structured as an acquisition, not a merger, with the Registrant being the parent company and the acquiree being merged into a wholly owned subsidiary, and if so structured, a shareholder will have no right of dissent under Colorado law. NO TARGET CANDIDATES FOR ACQUISITION None of the Company's Officers, Directors, promoters, affiliates, or associates have had any preliminary contact or discussion with any specific candidate for acquisition. There are no present plans, proposals, arrangements, or understandings with any representatives of the owners of any business or company regarding the possibility of an acquisition transaction. ADMINISTRATIVE OFFICES The Company currently maintains a mailing address at 2338 Broadway, #100, Boulder, Colorado 80304 which is the office address of its President, Scott A. Deitler. Other than this mailing address, the Company does not currently maintain any other office facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable future. The Company pays no rent or other fees for the use of this mailing address. EMPLOYEES The Company is a development stage company and currently has no employees. Management of the Company expects to use consultants, attorneys and accountants as necessary, and does not anticipate a need to engage any full-time employees so long as it is seeking and evaluating business opportunities. The need for employees and their availability will be addressed in connection with the decision whether or not to acquire or participate in specific business opportunities. Although there is no current plan with respect to its nature or amount, remuneration may be paid to or accrued for the benefit of, the Company's 11 officers prior to, or in conjunction with, the completion of a business acquisition for services actually rendered, if for. See "Executive Compensation" and under "Certain Relationships and Related Transactions." RISK FACTORS 1. Conflicts of Interest. Certain conflicts of interest may exist between the Company and its officers and directors. They have other business interests to which they devote their attention, and may be expected to continue to do so although management time should be devoted to the business of the Company. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to the Company. See "Management," and "Conflicts of Interest." It is anticipated that Company's officers and directors may actively negotiate or otherwise consent to the purchase of a portion of his common stock as a condition to, or in connection with, a proposed merger or acquisition transaction. In this process, the Company's officers may consider his own personal pecuniary benefit rather than the best interests of other Company shareholders, and the other Company shareholders are not expected to be afforded the opportunity to approve or consent to any particular stock buy-out transaction. See "Conflicts of Interest." 2. Need For Additional Financing. The Company has very limited funds, and such funds may not be adequate to take advantage of any available business opportunities. Even if the Company's funds prove to be sufficient to acquire an interest in, or complete a transaction with, a business opportunity, the Company may not have enough capital to exploit the opportunity. The ultimate success of the Company may depend upon its ability to raise additional capital. The Company has not investigated the availability, source, or terms that might govern the acquisition of additional capital and will not do so until it determines a need for additional financing. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to the Company. If not available, the Company's operations will be limited to those that can be financed with its modest capital. 3. Regulation of Penny Stocks. The Company's securities, when available for trading, will be subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company's securities and also may affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore. 12 In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended. Because the securities of the Company may constitute "penny stocks" within the meaning of the rules, the rules would apply to the Company and to its securities. The rules may further affect the ability of owners of Shares to sell the securities of the Company in any market that might develop for them. Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The Company's management is aware of the abuses that have occurred historically in the penny stock market. Although the Company does not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to the Company's securities. 4. Lack of Operating History. The Company was formed in August 1995 for the purpose of seeking a business opportunity. Due to the special risks inherent in the investigation, acquisition, or involvement in a new business opportunity, the Company must be regarded as a new or start-up venture with all of the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject. 5. No Assurance of Success or Profitability. There is no assurance that the Company will acquire a favorable business opportunity. Even if the Company should become involved in a business opportunity, there is no assurance that it will generate revenues or profits, or that the market price of the Company's Common Stock will be increased thereby. 6. Possible Business - Not Identified and Highly Risky. The Company has not identified and has no commitments to enter into or acquire a specific business opportunity and therefore can disclose the risks and hazards of a business or opportunity that it may enter into in only a general manner, and cannot disclose the risks and hazards of any specific business or opportunity that it may enter into. An investor can expect a potential business opportunity to be quite risky. The Company's acquisition of or participation in a business opportunity will likely be highly illiquid and could result in a total loss to the Company and its stockholders if the business or opportunity proves to be unsuccessful. See Item 1 "Description of Business." 13 7. Type of Business Acquired. The type of business to be acquired may be one that desires to avoid effecting its own public offering and the accompanying expense, delays, uncertainties, and federal and state requirements which purport to protect investors. Because of the Company's limited capital, it is more likely than not that any acquisition by the Company will involve other parties whose primary interest is the acquisition of control of a publicly traded company. Moreover, any business opportunity acquired may be currently unprofitable or present other negative factors. 8. Impracticability of Exhaustive Investigation. The Company's limited funds and the lack of full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a business opportunity before the Company commits its capital or other resources thereto. Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if the Company had more funds available to it, would be desirable. The Company will be particularly dependent in making decisions upon information provided by the promoter, owner, sponsor, or others associated with the business opportunity seeking the Company's participation. A significant portion of the Company's available funds may be expended for investigative expenses and other expenses related to preliminary aspects of completing an acquisition transaction, whether or not any business opportunity investigated is eventually acquired. 9. Lack of Diversification. Because of the limited financial resources that the Company has, it is unlikely that the Company will be able to diversify its acquisitions or operations. The Company's probable inability to diversify its activities into more than one area will subject the Company to economic fluctuations within a particular business or industry and therefore increase the risks associated with the Company's operations. 10. Reliance upon Financial Statements. The Company generally will require audited financial statements from companies that it proposes to acquire. Given cases where audited financials are available, the Company will have to rely upon interim period unaudited information received from target companies' management that has not been verified by outside auditors. The lack of the type of independent verification which audited financial statements would provide, increases the risk that the Company, in evaluating an acquisition with such a target company, will not have the benefit of full and accurate information about the financial condition and recent interim operating history of the target company. This risk increases the prospect that the acquisition of such a company might prove to be an unfavorable one for the Company or the holders of the Company's securities. Moreover, the Company will be subject to the reporting provisions of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus will be required to furnish certain information about significant acquisitions, including audited financial statements for any business that it acquires. Consequently, acquisition prospects that do not have, or are unable to provide reasonable assurances that they will be able to obtain, the required audited statements would not be considered by the Company to be appropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable. Should the Company, during the time it remains subject to the 14 reporting provisions of the Exchange Act, complete an acquisition of an entity for which audited financial statements prove to be unobtainable, the Company would be exposed to enforcement actions by the Securities and Exchange Commission (the "Commission") and to corresponding administrative sanctions, including permanent injunctions against the Company and its management. The legal and other costs of defending a Commission enforcement action would have material, adverse consequences for the Company and its business. The imposition of administrative sanctions would subject the Company to further adverse consequences. In addition, the lack of audited financial statements would prevent the securities of the Company from becoming eligible for listing on NASDAQ, or on any existing stock exchange. Moreover, the lack of such financial statements is likely to discourage broker-dealers from becoming or continuing to serve as market makers in the securities of the Company. Without audited financial statements, the Company would almost certainly be unable to offer securities under a registration statement pursuant to the Securities Act of 1933, and the ability of the Company to raise capital would be significantly limited until such financial statements were to become available. 11. Other Regulation. An acquisition made by the Company may be of a business that is subject to regulation or licensing by federal, state, or local authorities. Compliance with such regulations and licensing can be expected to be a time-consuming, expensive process and may limit other investment opportunities of the Company. 12. Dependence upon Management; Limited Participation of Management. The Company currently has only three individuals who are serving as its officers and directors on a part time basis. The Company will be heavily dependent upon their skills, talents, and abilities to implement its business plan, and may, from time to time, find that the inability of the officers and directors to devote their full time attention to the business of the Company results in a delay in progress toward implementing its business plan. See "Management." Because investors will not be able to evaluate the merits of possible business acquisitions by the Company, they should critically assess the information concerning the Company's officers and directors. 13. Lack of Continuity in Management. The Company does not have an employment agreement with its officers and directors, and as a result, there is no assurance they will continue to manage the Company in the future. In connection with acquisition of a business opportunity, it is likely the current officers and directors of the Company may resign subject to compliance with Section 14f of the Securities Exchange Act of 1934. A decision to resign will be based upon the identity of the business opportunity and the nature of the transaction, and is likely to occur without the vote or consent of the stockholders of the Company. 14. Indemnification of Officers and Directors. Colorado Statutes provide for the indemnification of its directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of the Company. The Company will also bear the expenses of such litigation for any of its directors, officers, employees, or agents, upon such person's promise to repay the Company therefor 15 if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by the Company which it will be unable to recoup. 15. Director's Liability Limited Colorado Statutes exclude personal liability of its directors to the Company and its stockholders for monetary damages for breach of fiduciary duty except in certain specified circumstances. Accordingly, the Company will have a much more limited right of action against its directors than otherwise would be the case. This provision does not affect the liability of any director under federal or applicable state securities laws. 16. Dependence upon Outside Advisors. To supplement the business experience of its officers and directors, the Company may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. The selection of any such advisors will be made by the Company's President without any input from stockholders. Furthermore, it is anticipated that such persons may be engaged on an "as needed" basis without a continuing fiduciary or other obligation to the Company. In the event the President of the Company considers it necessary to hire outside advisors, he may elect to hire persons who are affiliates, if they are able to provide the required services. 17. Leveraged Transactions. There is a possibility that any acquisition of a business opportunity by the Company may be leveraged, i.e., the Company may finance the acquisition of the business opportunity by borrowing against the assets of the business opportunity to be acquired, or against the projected future revenues or profits of the business opportunity. This could increase the Company's exposure to larger losses. A business opportunity acquired through a leveraged transaction is profitable only if it generates enough revenues to cover the related debt and expenses. Failure to make payments on the debt incurred to purchase the business opportunity could result in the loss of a portion or all of the assets acquired. There is no assurance that any business opportunity acquired through a leveraged transaction will generate sufficient revenues to cover the related debt and expenses. 18. Competition. The search for potentially profitable business opportunities is intensely competitive. The Company expects to be at a disadvantage when competing with many firms that have substantially greater financial and management resources and capabilities than the Company. These competitive conditions will exist in any industry in which the Company may become interested. 19. No Foreseeable Dividends. The Company has not paid dividends on its Common Stock and does not anticipate paying such dividends in the foreseeable future. 20. Loss of Control by Present Management and Stockholders. The Company may consider an acquisition in which the Company would issue as consideration for the business opportunity to be acquired, an amount of the Company's authorized but unissued Common Stock that would, upon issuance, represent the great majority of the voting power and equity of the Company. The result of such an acquisition would be that the acquired company's stockholders and management 16 would control the Company, and the Company's management could be replaced by persons unknown at this time. Such a merger would result in a greatly reduced percentage of ownership of the Company by its current shareholders. In addition, the Company's major shareholders could sell control blocks of stock at a premium price to the acquired company's stockholders. 21. No Public Market Exists. There is no public market for the Company's common stock, and no assurance can be given that a market will develop or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as those discussed in this "Risk Factors" section may have a significant impact upon the market price of the securities offered hereby. Owing to the low price of the securities, many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker willing to effect a transaction in these securities, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such securities as collateral for any loans. 22. Rule 144 Sales. All of the outstanding shares of Common Stock held by present officers, directors, and stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for one year may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a nonaffiliate after the restricted securities have been held by the owner for a period of two years. Nonaffiliate shareholders holding 360,000 common shares of the Company have held their shares for two years and under Rule 144(K) are eligible to have freely tradable shares. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of Common Stock of present stockholders, may have a depressive effect upon the price of the Common Stock in any market that may develop. Of the total shares outstanding, 300,000 shares become available for resale (subject to volume limitations for affiliates) under Rule 144 when the Company's 12(g) Registration Statement becomes effective subject to other applicable requirements under the Rule. 23. Blue Sky Considerations. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue-sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. Some jurisdictions may not under any circumstances allow the trading or resale of blind-pool or "blank-check" securities. Accordingly, investors should consider the secondary market for the Company's securities to be a limited one. 17 24. Blue Sky Restrictions. Many states have enacted statutes or rules which restrict or prohibit the sale of securities of "blank check" companies to residents so long as they remain without specific business companies. To the extent any current shareholders or subsequent purchaser from a shareholder may reside in a state which restricts or prohibits resale of shares in a "blank check" company, warning is hereby given that the shares may be "restricted" from resale as long as the company is a shell company. At the date of this registration statement, the Company has no intention of offering further shares in a private offering to anyone. Further, the policy of the Board of Directors is that any future offering of shares will only be made after an acquisition has been made and can be disclosed in appropriate 8-K filings. In the event of a violation of state laws regarding resale of "blank check" shares the Company could be liable for civil and criminal penalties which would be a substantial impairment to the Company. At date of this registration statement, all shareholders' shares bear a "restrictive legend," and the Company will examine each shareholders' resident state laws at the time of any proposed resale of shares now outstanding to attempt to avoid any inadvertent breach of state laws. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES The Company remains in the development stage and, since inception, has experienced significant liquidity problems and has no significant capital resources and has stockholder's equity of only $205. The Company has current assets in the form of cash of $205 and total assets of $205. The Company will carry out its plan of business as discussed above. The Company cannot predict to what extent its lack of liquidity and capital resources will impair the consummation of a business combination or whether it will incur further operating losses through any business entity which the Company may eventually acquire. During the period from August 9, 1995 (inception) through date of this registration statement the Company has engaged in no significant operations other than organizational activities, acquisition of capital and preparation for registration of its securities under the Securities Exchange Act of 1934, as amended. No revenues were received by the Company during this period. The company has incurred operating expenses since inception to August 31, 1999 of $95. The net loss on operations was $0 through August 31, 1999. Such losses will continue unless revenues and business can be acquired by the company. There is no assurance that revenues or profitability will ever be achieved by the company. 18 RESULTS OF OPERATIONS YEAR ENDED AUGUST 31, 1999 COMPARED TO 1998 The Company had no revenues in 1998 or 1999. The Company incurred $0 in expenses in 1999 as compared to $45 in expenses in 1998. The net operating loss in 1999 was $0 as compared to ($45) in 1998. The losses in 1999 were as a result of miscellaneous out-of-pocket expenses. In 1998 the company incurred no expenses. The net loss per share each year was less than ($.01) per share. For the current fiscal year, the Company anticipates incurring a loss as a result of legal and accounting expenses, expenses associated with registration under the Securities Exchange Act of 1934, and expenses associated with locating and evaluating acquisition candidates. The Company anticipates that until a business combination is completed with an acquisition candidate, it will not generate revenues other than interest income, and may continue to operate at a loss after completing a business combination, depending upon the performance of the acquired business. RESULTS OF OPERATIONS FOR QUARTER ENDED NOVEMBER 30, 1999 The Company incurred $1,750 in audit expenses in the quarter ended November 30, 1999. The Company had no expenses in the same quarter period in 1998. The Company had no revenues in the quarter in either 1998 or 1999. The Company had losses of ($1,750) on operations in the quarter in 1999 as compared to none in 1998. At quarter end, the Company had approximately $5,955 in cash on hand, which is insufficient for any operation. It will need loans or cash infusions from shareholders in order to continue any efforts requiring cash. NEED FOR ADDITIONAL FINANCING The Company does not have capital sufficient to meet the Company's cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934. The Company will have to seek loans or equity placements to cover such cash needs. In the event the Company is able to complete a business combination during this period, lack of its existing capital may be a sufficient impediment to prevent it from accomplishing the goal of completing a business combination. There is no assurance, however, that without funds it will ultimately allow registrant to complete a business combination. Once a business combination is completed, the Company's needs for additional financing are likely to increase substantially. No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover its expenses as they may be incurred. 19 Irrespective of whether the Company's cash assets prove to be inadequate to meet the Company's operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash. YEAR 2000 ISSUES Year 2000 problems result primarily from the inability of some computer software to property store, recall, or use data after December 31, 1999. These problems may affect many computers and other devices that contain embedded computer chips. The Company's operations, however, do not rely on information technology (IT) systems. Accordingly, the Company does not believe it will be material affected by Year 2000 problems. The Company could be improved by non-IT systems that may suffer from Year 2000 problems, including telephone systems and facsimile and other office machines. Moreover, third-parties suppliers may suffer from Year 2000 problems that could affect the Company's operations, including banks, oil field operators, and utilities. In light of the Company's minimal operations, the Company does not believe that such non-IT systems or third-party Year 2000 problems will affect the Company in a manner that is different or more substantial than such problems affect other similarly situated companies or industry generally. Consequently, the Company does not currently intend to conduct a readiness assessment of Year 2000 problems or to develop a detailed contingency plan with respect to Year 2000 problems that may affect the Company. ITEM 3. DESCRIPTION OF PROPERTY. The Company has no property. The Company does not currently maintain an office or any other facilities. It does currently maintain a mailing address at 2338 Broadway, #100, Boulder, CO 80304, which is the office address of its President, Scott A. Deitler. The Company pays no rent for the use of this mailing address. The Company does not believe that it will need to maintain an office at any time in the foreseeable future in order to carry out its plan of operations described herein. 20 ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of the date of this Registration Statement, the number of shares of Common Stock owned of record and beneficially by executive officers, directors and persons who hold 5.0% or more of the outstanding Common Stock of the Company. Also included are the shares held by all executive officers and directors as a group. SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP BENEFICIAL OWNERS PERCENTAGE Scott A. Deitler President & Director 130 13% James W. Toot Secretary & Director 224 22.4% James M. Hult Treasurer & Director 224 22.4% All directors and executive 578 57.8% officers as a group (3 persons) Each principal shareholder has sole investment power and sole voting power over the shares. ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. The directors and executive officers currently serving the Company are as follows: NAME POSITION HELD TENURE Scott A. Deitler President and Director Annual since 1999 James W. Toot Secretary and Director Annual since 1999 James M. Hult Treasurer and Director Annual since 1999 The directors named above will serve until the next annual meeting of the Company's stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no 21 arrangement or understanding between the directors and officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer. The directors and officers of the Company will devote such time to the Company's affairs on an "as needed" basis, but less than 20 hours per month. As a result, the actual amount of time which they will devote to the Company's affairs is unknown and is likely to vary substantially from month to month. BIOGRAPHICAL INFORMATION SCOTT A. DEITLER, age 43, President and director since 1999, received a B.A. in Business and Conservation from the University of Colorado in 1978. From 1987 to 1995, he was President and a director of Colorado Coin Co. in Boulder, Colorado. From 1993 to 1998, he was President of Ulta Travel, Inc., a travel agency. He is President and Director of J.S.J. Capital Corp. (1999), J.S.J. Capital II, Inc. (1999), J.S.J. Capital III, Inc. (1999), Investra Enterprises, Inc. (1999), Marathon Marketing Corp. (1997), Cross Check Corp. (1997), all of which are shell companies without specific business, but which are seeking an acquisition or merger. JAMES W. TOOT, age 44, Secretary and director since 1997. Mr. Toot was a licensed securities representative from 1981 to 1996. From 1986 to 1990, he was a Vice President at Rocky Mountain Securities, Inc. From 1990 to 1994, he was a vice president of Cohig & Associates, Inc., a broker/dealer. From 1994 to 1996, he was vice president of Rocky Mountain Securities, Inc. Since 1997, he has been a Secretary and director of J.S.J. Capital Corp. (1999), J.S.J. Capital II, Inc. (1999), J.S.J. Capital III, Inc. (1999), Investra Enterprises, Inc. (1999), Marathon Marketing Corp. (1997), Cross Check Corp. (1997), all of which are shell companies without specific business, but which are seeking an acquisition or merger. JAMES W. HULT, age 48, Treasurer and director since 1995. Mr. Hult has a B.S. in Finance from the University of Colorado, and a J.D. from the University of Colorado in 1978. Mr. Hult is a trial lawyer in the firm of Hult, Garlin, Driscoll & Murray of Denver, Colorado since 1978. He also has acted as a partner in several real estate development projects. He is on the Board of the Colorado Trial Lawyers Association. Management will devote minimal time to the operations of the Company, and any time spent will be devoted to screening and assessing and, if warranted, negotiating to acquire business opportunities. None of the Company's officers and/or directors receives any compensation for their respective services rendered to the Company, nor have they received such compensation in the past. They all have agreed to act without compensation until authorized by the Board of Directors, which is not expected to occur until the Company has generated revenues from operations after consummation of a merger or acquisition. As of the date of filing this report, the Company has no funds available to pay officers or directors. Further, none 22 of the officers or directors is accruing any compensation pursuant to any agreement with the Company. No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees. It is possible that, after the Company successfully consummates a merger or acquisition with an unaffiliated entity, that entity may desire to employ or retain one or a number of members of the Company's management for the purposes of providing services to the surviving entity, or otherwise provide other compensation to such persons. However, the Company has adopted a policy whereby the offer of any post-transaction remuneration to members of management will not be a consideration in the Company's decision to undertake any proposed transaction. Each member of management has agreed to disclose to the Company's Board of Directors any discussions concerning possible compensation to be paid to them by any entity which proposes to undertake a transaction with the Company and further, to abstain from voting on such transaction. Therefore, as a practical matter, if each member of the Company's Board of Directors were offered compensation in any form from any prospective merger or acquisition candidate, the proposed transaction would not be approved by the Company's Board of Directors as a result of the inability of the Board to affirmatively approve such a transaction. It is possible that persons associated with management may refer a prospective merger or acquisition candidate to the Company. In the event the Company consummates a transaction with any entity referred by associates of management, it is possible that such an associate will be compensated for their referral in the form of a finder's fee. It is anticipated that this fee will be either in the form of restricted Common Stock issued by the Company as part of the terms of the proposed transaction, or will be in the form of cash consideration. However, if such compensation is in the form of cash, such payment will be tendered by the acquisition or merger candidate, because the Company has insufficient cash available. The amount of such finder's fee cannot be determined as of the date of filing this report, but is expected to be comparable to consideration normally paid in like transactions. No member of management of the Company will receive any finders fee, either directly or indirectly, as a result of their respective efforts to implement the Company's business plan outlined herein. The Company has adopted a policy that its affiliates and management shall not be issued further common shares of the Company, except in the event discussed in the preceding paragraphs. PREVIOUS "BLANK CHECK" OR "SHELL" COMPANY INVOLVEMENT Management of the Company has been involved in prior private "blank check" or "shell" companies as follows: Scott A. Deitler and James W. Toot are also officers and Directors of certain other "shell" companies, as follows: J.S.J. Capital Corp., J.S.J. Capital II, Inc., J.S.J. Capital III, Inc., Marathon Marketing Corp. and Investra Enterprises, Inc. James Toot and Scott Deitler are President and Secretary, respectively, and Directors of Cross Check Corp. None of the companies have completed an acquisition or merger and all of the companies are in the development stage. 23 INDEMNIFICATION OF OFFICERS AND DIRECTORS As permitted by Colorado Statutes, the Company may indemnify its directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil or criminal action brought against them on account of their being or having been Company directors or officers unless, in any such action, they are adjudged to have acted with gross negligence or willful misconduct. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. EXCLUSION OF LIABILITY The Colorado Corporation Act excludes personal liability for its directors for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, acts in violation of the Colorado Corporation Act, or any transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director's liability under federal or applicable state securities laws. CONFLICTS OF INTEREST The officers and directors of the Company will not devote more than a portion of their time to the affairs of the Company. There will be occasions when the time requirements of the Company's business conflict with the demands of their other business and investment activities. Such conflicts may require that the Company attempt to employ additional personnel. There is no assurance that the services of such persons will be available or that they can be obtained upon terms favorable to the Company. Conflicts of Interest - General. Certain of the officers and directors of the Company may be directors and/or principal shareholders of other companies and, therefore, could face conflicts of interest with respect to potential acquisitions. In addition, officers and directors of the Company may in the future participate in business ventures which could be deemed to compete directly with the Company. Additional conflicts of interest and non-arms length transactions may also arise in the future in the event the Company's officers or directors are involved in the management of any firm with which the Company transacts business. The Company's Board of Directors has adopted a policy that the Company will not seek a merger with, or acquisition of, any entity in which management serve as officers or directors, or in which they or their family members own or hold a controlling ownership interest. Although the Board of Directors could elect to change this policy, the Board of Directors has no present intention to do so. In addition, if the Company and other companies with which the Company's officers and directors are affiliated both desire to take advantage of a potential business opportunity, then the Board of Directors has 24 agreed that said opportunity should be available to each such company in the order in which such companies registered or became current in the filing of annual reports under the Exchange Act subsequent to January 1, 1999. The Company's officers and directors may actively negotiate or otherwise consent to the purchase of a portion of their common stock as a condition to, or in connection with, a proposed merger or acquisition transaction. It is anticipated that a substantial premium over the initial cost of such shares may be paid by the purchaser in conjunction with any sale of shares by the Company's officers and directors which is made as a condition to, or in connection with, a proposed merger or acquisition transaction. The fact that a substantial premium may be paid to the Company's officers and directors to acquire their shares creates a potential conflict of interest for them in satisfying their fiduciary duties to the Company and its other shareholders. Even though such a sale could result in a substantial profit to them, they would be legally required to make the decision based upon the best interests of the Company and the Company's other shareholders, rather than their own personal pecuniary benefit.
ITEM 6. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE OF EXECUTIVES Annual Compensation Awards Name & Principal Year Salary Bonus Other Annual Restricted Securities Position ($) ($) Comp- Stock Underlying ensation ($) Award(s) Options ($) /SARS (#) - ------------------------------------------------------------------------------------------------------------------- Scott A. Deitler, 1997 0 0 0 0 0 President 1998 0 0 0 0 0 1999 0 0 0 0 0 James W. Toot, 1997 0 0 0 0 0 Secretary 1998 0 0 0 0 0 1999 0 0 0 0 0 James M. Hult, 1997 0 0 0 0 0 Treasurer 1998 0 0 0 0 0 1999 0 0 0 0 0
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Directors Compensation Name Annual Meeting Consulting Number Number of Retainer Fees ($) Fees/Other of Shares Securities Fee($) Fees ($) (#) Underlying Options SARS (#) - -------------------------------------------------------------------------------------------------------------------- A. Director, Scott A. Deitler 0 0 0 0 0 B. Director, James W. Toot 0 0 0 0 0 C. Director, James M. Hult 0 0 0 0 0
Option/SAR Grants Table (None) Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value (None) Long Term Incentive Plans - Awards in Last Fiscal Year (None) No officer or director has received any other remuneration in the two year period prior to the filing of this registration statement. There is no current plan in existence, to pay or accrue compensation to its officers and directors for services related to seeking business opportunities and completing a merger or acquisition transaction. See "Certain Relationships and Related Transactions." The Company has no stock option, retirement, pension, or profit-sharing programs for the benefit of directors, officers or other employees, but the Board of Directors may recommend adoption of one or more such programs in the future. ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In 1998, the Company issued to its founding directors a total of 578 shares of Common Stock for a total of $258. Also in 1998, 1 person purchased 94 shares at $.45 per share for a total of $42.00. In 1999, 12 persons purchased 12 shares at $10.00 per share for a total of $120. Certificates evidencing the Common Stock issued by the Company to these persons have all been stamped with a restrictive legend, and are subject to stop transfer orders by the Company. For additional information concerning restrictions that are imposed upon the securities held by current stockholders, and the responsibilities of such stockholders to comply with federal securities laws in the disposition of such Common Stock, see "Risk Factors - Rule 144 Sales." No officer, director, or affiliate of the Company has or proposes to have any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options, or otherwise. 26 The Company has adopted a policy under which any consulting or finder's fee that may be paid to a third party for consulting services to assist management in evaluating a prospective business opportunity would be paid in stock or in cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly, the Company is unable to predict whether or in what amount such a stock issuance might be made. Although management has no current plans to cause the Company to do so, it is possible that the Company may enter into an agreement with an acquisition candidate requiring the sale of all or a portion of the Common Stock held by the Company's current stockholders to the acquisition candidate or principals thereof, or to other individuals or business entities, or requiring some other form of payment to the Company's current stockholders, or requiring the future employment of specified officers and payment of salaries to them. It is more likely than not that any sale of securities by the Company's current stockholders to an acquisition candidate would be at a price substantially higher than that originally paid by such stockholders. Any payment to current stockholders in the context of an acquisition involving the Company would be determined entirely by the largely unforeseeable terms of a future agreement with an unidentified business entity. ITEM 8. DESCRIPTION OF SECURITIES. COMMON STOCK The Company's Articles of Incorporation authorize the issuance of 1,000 shares of Common Stock $.0001 par value. Each record holder of Common Stock is entitled to one vote for each share held on all matters properly submitted to the stockholders for their vote. Cumulative voting for the election of directors is not permitted by the Articles of Incorporation. Holders of outstanding shares of Common Stock are entitled to such dividends as may be declared from time to time by the Board of Directors out of legally available funds; and, in the event of liquidation, dissolution or winding up of the affairs of the Company, holders are entitled to receive, ratably, the net assets of the Company available to stockholders after distribution is made to the preferred stockholders, if any, who are given preferred rights upon liquidation. Holders of outstanding shares of Common Stock have no preemptive, conversion or redemptive rights. All of the issued and outstanding shares of Common Stock are, and all unissued shares when offered and sold will be, duly authorized, validly issued, fully paid, and nonassessable. To the extent that additional shares of the Company's Common Stock are issued, the relative interests of then existing stockholders may be diluted. SHAREHOLDERS Each shareholder has sole investment power and sole voting power over the shares owned by such shareholder. 27 No shareholder has entered into or delivered any lock up agreement or letter agreement regarding their shares or options thereon. Under Colorado laws, no lock up agreement is required regarding the Company's shares as it might relate to an acquisition. TRANSFER AGENT The Company has engaged Mountain Share Transfer, Inc., 1625 Abilene Drive, Broomfield, Colorado 80020 as its transfer agent. REPORTS TO STOCKHOLDERS The Company plans to furnish its stockholders with an annual report for each fiscal year containing financial statements audited by its independent certified public accountants. In the event the Company enters into a business combination with another company, it is the present intention of management to continue furnishing annual reports to stockholders. The Company intends to comply with the periodic reporting requirements of the Securities Exchange Act of 1934 for so long as it is subject to those requirements, and to file unaudited quarterly reports and annual reports with audited financial statements as required by the Securities Exchange Act of 1934. PART II ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS No public trading market exists for the Company's securities and all of its outstanding securities are restricted securities as defined in Rule 144. There were sixteen (16) holders of record of the Company's common stock on August 31, 1999. No dividends have been paid to date and the Company's Board of Directors does not anticipate paying dividends in the foreseeable future. ITEM 2. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to any litigation. ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. Not applicable. 28
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. Since August 9, 1995 (the date of the Company's formation), the Company has sold its Common Stock to the persons listed in the table below in transactions summarized as follows: PURCHASE DATE OF PURCHASER PER SHARE AMOUNT PURCHASE SHARES - ------------------------------------------------------------------------------------------------------------ Scott A. Deitler $.45 $58.00 1/1/98 130 President & Director 1529 Spruce Street, #2 Boulder, CO 80302 James W. Toot $.45 $100.00 1/1/98 224 Secretary & Director 7444 Singing Hills Court Boulder, CO 80301 James M. Hult $.45 $100.00 1/1/98 224 Treasurer & Director 345 W. 62ND Ave., Unit B Denver, CO 80216 Lawrence Deitler $.45 $42.00 1/1/98 94 2724 Irma Lake Drive West Palm Beach, FL 33411 John Evanoff $10.00 $10.00 9/1/99 1 7001 W. Charleston Blvd. #2093 Las Vegas, NV 89117 Pat Gidday $10.00 $10.00 9/1/99 1 7001 W. Charleston Blvd. #2093 Las Vegas, NV 89117 Jane VanDresser $10.00 $10.00 9/1/99 1 728 West Lincoln Birmingham, MI 48009 Rick VanDresser $10.00 $10.00 9/1/99 1 728 West Lincoln Birmingham, MI 48009
29
Deborah Meyer $10.00 $10.00 9/1/99 1 P.O. Box 18043 Boulder, CO 80308 Henry Cooper $10.00 $10.00 9/1/99 1 500 Manhattan Dr. Boulder, CO 80303 Dean Sessions $10.00 $10.00 9/1/99 1 P.O. Box 17881 Boulder, CO 80308 Barry Lindgren $10.00 $10.00 9/1/99 1 160 High View Dr. Boulder, CO 80304 Robin Hult $10.00 $10.00 9/1/99 1 3115 Kittrell Ct. Boulder, CO 80303 Aladeen Smith $10.00 $10.00 9/1/99 1 315 Hopi Boulder, CO 80303 Alex Garlin $10.00 $10.00 9/1/99 1 2338 Broadway Boulder, CO 80304 David Driscoll $10.00 $10.00 9/1/99 1 2338 Broadway Boulder, CO 80304
Each of the sales listed above was made for cash as listed. All of the listed sales were made in reliance upon the exemption from registration offered by Section 4(2) of the Securities Act of 1933, as amended. Based upon Subscription Agreements completed by each of the subscribers, the Company had reasonable grounds to believe immediately prior to making an offer to the private investors, and did in fact believe, when such subscriptions were accepted, that such purchasers (1) were purchasing for investment and not with a view to distribution, and (2) had such knowledge and experience in financial and business matters that they were capable of evaluating the merits and risks of their investment and were able to bear those risks. The purchasers had access to pertinent information enabling them to ask informed questions. The shares were issued without the benefit of registration. An appropriate restrictive legend is imprinted upon each of the certificates representing such shares, and stop-transfer instructions have been entered in the Company's transfer records. All such sales were effected without the aid of underwriters, and no sales commissions were paid. 30 ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Colorado Statutes provide that the Company may indemnify its officers and directors for costs and expenses incurred in connection with the defense of actions, suits, or proceedings where the officer or director acted in good faith and in a manner he reasonably believed to be in the Company's best interest and is a party by reason of his status as an officer or director, absent a finding of negligence or misconduct in the performance of duty. 31 SIGNATURES: Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED: December 15, 1999 ADVANCED CEILING SUPPLIES, INC. BY: /S/SCOTT A. DEITLER Scott A. Deitler, President BY: /S/JAMES W. TOOT James W. Toot, Secretary Directors: /S/SCOTT A. DEITLER Scott A. Deitler, Director /S/JAMES M. HULT James M. Hult, Director /S/JAMES W. TOOT James W. Toot, Director 32
INDEX TO FINANCIAL STATEMENTS PAGE Independent Auditors' Report F-2 Financial Statements: Balance Sheet F-3 Statements of Operations F-4 Statement of Changes in Stockholders' Equity F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7-F-8 Interim Financial Statements for Period ended November 30, 1999 F-9 Balance Sheet F-10 Statement of Operations F-11 Statement of Cash Flows F-12 Notes to Financial Statements F-13-F14 F-1
INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS ADVANCED CEILING SUPPLIES, INC. BOULDER, COLORADO We have audited the accompanying balance sheet of Advanced Ceiling Supplies, Inc. (a development stage company) as of August 31, 1999, and the related statements of operations, changes in stockholders' equity, and cash flows for each of the two years in the period ended August 31, 1999 and for the period from August 9, 1995 (inception) to August 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Ceiling Supplies, Inc. as of August 31, 1999, and the results of its operations and its cash flows for each of the two years in the period ended August 31, 1999 and for the period from August 9, 1995 (inception) to August 31, 1999, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in the development stage and has not commenced operations. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company and ultimately achieve profitable operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /S/A.J. ROBBINS DENVER, COLORADO OCTOBER 12, 1999 F-2
ADVANCED CEILING SUPPLIES, INC. (A Development Stage Company) BALANCE SHEET AUGUST 31, 1999 ASSETS CURRENT ASSETS, CASH ON HAND $ 205 ================== LIABILITIES AND STOCKHOLDERS' EQUITY TOTAL LIABILITIES $ - COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, no par value, 1,000 shares authorized, 672 shares issued and outstanding 300 (Deficit) accumulated during the development stage (95) TOTAL STOCKHOLDERS' EQUITY 205 $ 205
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-3
ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS Cumulative from August 9, 1995 (INCEPTION) FOR THE YEARS ENDED TO AUGUST 31, AUGUST 31, ------------------------------------ --------------- 1999 1998 1999 ----------------- ----------------- --------------- REVENUE $ - $ - $ - ----------------- ----------------- --------------- EXPENSES: GENERAL AND ADMINISTRATIVE - 45 95 ----------------- ----------------- --------------- TOTAL EXPENSES - 45 95 ----------------- ----------------- --------------- NET INCOME/(LOSS) $ - $ (45) $ (95) ================= ================= ================= NET INCOME/(LOSS) PER COMMON SHARE - BASIC $ - $ (.07) ================= ================= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 672 672 ================= =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-4
ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM AUGUST 9, 1995 (INCEPTION) TO AUGUST 31, 1999 (DEFICIT) ACCUMULATED DURING THE COMMON STOCK DEVELOPMENT SHARES AMOUNT STAGE TOTAL - ---------------------------------------------------------------------------------------------------------------------------- BALANCES, AUGUST 9, 1995 - $ - $ - $ - NET (LOSS) - - (50) (50) ---------------- ----------------- ----------------- ------------------- BALANCES, AUGUST 31, 1995 - - (50) (50) NET (LOSS) - - - - ---------------- ----------------- ----------------- ------------------- BALANCES, AUGUST 31, 1996 - - (50) (50) NET (LOSS) - - - - ---------------- ----------------- ----------------- ------------------- BALANCES, AUGUST 31, 1997 - - (50) (50) Issuance of common stock on January 1, 1998 for $.45 per share for cash 672 300 - 300 NET (LOSS) - - (45) (45) ---------------- ----------------- ----------------- ------------------- BALANCES, AUGUST 31, 1998 672 300 (95) 205 NET (LOSS) - - - - ---------------- ----------------- ----------------- ------------------- BALANCES, AUGUST 31, 1999 672 $ 300 $ (95) $ 205 ================ ================= ================= ===================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-5
ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) CASH FLOWS CUMULATIVE FROM AUGUST 9, 1995 FOR THE YEARS ENDED (INCEPTION) TO AUGUST 31, AUGUST 31, ---------------------------------------------------------- 1999 1998 1999 ------------------ ----------------- -------------- CASH FLOWS FROM (TO) OPERATING ACTIVITIES: NET (LOSS) FROM OPERATIONS $ - $ (45) $ (95) ----------------- ----------------- -------------- ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH (USED) BY OPERATING ACTIVITIES: CHANGES IN: ACCOUNTS PAYABLE - RELATED PARTY - (50) - ----------------- ----------------- -------------- NET CASH (USED) BY OPERATING ACTIVITIES - (95) (95) ----------------- ----------------- -------------- CASH FLOWS FROM (TO) FINANCING ACTIVITIES: COMMON STOCK ISSUED FOR CASH - 300 300 ----------------- ----------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES - 300 300 ----------------- ----------------- -------------- NET INCREASE IN CASH - 205 205 CASH, BEGINNING OF PERIOD 205 - - ----------------- ----------------- -------------- CASH, END OF PERIOD $ 205 $ 205 $ 205 ================= ================= ============== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-6
ADVANCED CEILING SUPPLIES, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY Advanced Ceiling Supplies, Inc. (the Company), a development stage company, was organized under the laws of the State of Colorado on August 9, 1995. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. The fiscal year end is August 31. GOING CONCERN The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not earned any revenues from operations to date. The Company is currently devoting its efforts to locating merger candidates. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. INCOME TAXES The Company uses the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year end. For federal income tax purposes, substantially all expenses must be deferred until the Company commences business and then they may be written off over a 60-month period. Therefore, $95 of net losses incurred in the period from August 9, 1995 (inception) to August 31, 1999 have not been deducted for tax purposes and represent a deferred tax asset. The Company is providing a valuation allowance in the full amount of the deferred tax asset since there is no assurance of future taxable income. Tax deductible losses can be carried forward for 20 years until utilized. EARNINGS (LOSS) PER COMMON SHARE During 1997 the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings (loss) per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. NOTE 2 - STOCKHOLDERS' EQUITY During January 1998, the Company issued for cash 672 shares of its no par value common stock at $.45 per share. NOTE 3 - SUBSEQUENT EVENT On October 5, 1999, the Company received loans from stockholders in the amount of $7,500. ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM FINANCIAL STATEMENTS (UNAUDITED) FOR PERIOD ENDED NOVEMBER 30, 1999 F-9
ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET NOVEMBER 30, 1999 (UNAUDITED) ASSETS CURRENT ASSETS, CASH ON HAND $ 5,750 ================== LIABILITIES AND STOCKHOLDERS' EQUITY TOTAL LIABILITIES (SHAREHOLDER LOAN) $ 5,955 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: COMMON STOCK, NO PAR VALUE, 1,000,000 SHARES AUTHORIZED, 672,000 SHARES ISSUED AND OUTSTANDING 300 ADDITIONAL PAID-IN CAPITAL - (DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (1,845) TOTAL STOCKHOLDERS' (Deficit) (1,545) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-10
ADVANCED CEILING SUPPLIES, INC. (A Development Stage Company) STATEMENT OF OPERATIONS (UNAUDITED) FOR THE PERIOD AUGUST 9, 1995 (INCEPTION OF THE FOR THE QUARTER DEVELOPMENT ENDED STAGE) TO NOVEMBER 30 NOVEMBER 30 1999 1999 ----------------- ---------------- REVENUE $ - $ - ----------------- ---------------- EXPENSES: General and administrative - - ACCOUNTING 1,750 1,750 -------------------- ---------------- TOTAL EXPENSES 1,750 1,845 ----------------- ---------------- NET INCOME/(LOSS) $ (1,750) $ (1,845) ================= ================ NET INCOME/(LOSS) PER COMMON SHARE - BASIC $ * $ * ================= ================ WEIGHTED AVERAGE NUMBER OF COMMON SHARES 672 672 ================ =============== OUTSTANDING *Less than $(.01) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-11
ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE PERIOD AUGUST 9,1995 (INCEPTION OF THE FOR THE QUARTER DEVELOPMENT ENDED STAGE) TO NOVEMBER 30 NOVEMBER 30, 1999 1999 ----------------- ----------------- CASH FLOWS FROM (TO) OPERATING ACTIVITIES: NET (LOSS) FROM OPERATIONS $ (1,750) $ (1,845) ----------------- ----------------- ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH USED BY OPERATING ACTIVITIES: COMMON STOCK ISSUED FOR SERVICES - - ----------------- ----------------- NET CASH (USED) BY OPERATING ACTIVITIES (1,750) (1,845) ----------------- ----------------- CASH FLOWS FROM (TO) FINANCING ACTIVITIES: COMMON STOCK ISSUED FOR CASH - 300 LOANS 7,500 7,500 ----------------- ----------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 7,500 7,800 ----------------- ----------------- NET INCREASE IN CASH 5,955 CASH, BEGINNING OF PERIOD 205 CASH, END OF PERIOD $ 6,160 =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS F-12 ADVANCED CEILING SUPPLIES, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY Advanced Ceiling Supplies, Inc. (the Company), a development stage company, was organized under the laws of the State of Colorado on August 9, 1995. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. The fiscal year end is August 31. GOING CONCERN The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not earned any revenues from operations to date. The Company is currently devoting its efforts to locating merger candidates. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. INCOME TAXES The Company uses the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year end. For federal income tax purposes, substantially all expenses must be deferred until the Company commences business and then they may be written off over a 60-month period. Therefore, $95 of net losses incurred in the period from August 9, 1995 (inception) to August 31, 1999 have not been deducted for tax purposes and represent a deferred tax asset. The Company is providing a valuation allowance in the full amount of the deferred tax asset since there is no assurance of future taxable income. Tax deductible losses can be carried forward for 20 years until utilized. EARNINGS (LOSS) PER COMMON SHARE During 1997 the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings (loss) per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. ADVANCED CEILING SUPPLIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. NOTE 2 - STOCKHOLDERS' EQUITY During January 1998, the Company issued for cash 672 shares of its no par value common stock at $.45 per share. NOTE 3 - SUBSEQUENT EVENT On October 5, 1999, the Company received loans from stockholders in the amount of $7,500. INDEX TO EXHIBITS SK# 3.1 Articles of Incorporation 3.2 Bylaws of Advanced Ceiling Supplies, Inc. 27.1 Financial Data Schedule 33 EX-3.(I) 2 ARTICLES OF INCORPORATION EXHIBIT 3.1 ARTICLES OF INCORPORATION OF ADVANCED CEILING SUPPLIES, INC. 951100633 C $50.00 SECRETARY OF STATE 08-09-95 13:19 The undersigned natural person, being more than twenty-one years of age, hereby establishes a corporation pursuant to the statutes of Colorado and adopts the following articles of incorporation: ARTICLE I - NAME The name of the corporation is Advanced Ceiling Supplies, Inc. ARTICLE II - AUTHORIZED CAPITAL The Corporation shall have authority to issue 1,000 shares of common stock. ARTICLE III - OFFICES A The street address of the initial registered office of the Corporation is 2338 Broadway, #100, Boulder, CO 80304, and the name of the initial registered agent at that address is James M. Hult. The written consent of the initial registered agent to the appointment as such is stated below. B. The address of the Corporation's initial principal office is 345 W. 62nd Avenue, Unit B, Denver, CO 80216. ARTICLE IV - INCORPORATOR The name and address of the incorporator is James A. Hult, 345 W. 62nd Avenue, Unit B, Denver, CO 80216. ARTICLE V - STOCK A VOTING. Each shareholder of record shall have one vote for each share of stock standing in his name on the books of the corporation and entitled to vote. Cumulative voting shall not be allowed in the election of directors or for any other purpose. B.QUORUM. At all meetings of shareholders, a majority of the shares entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum. C. PREEMPTIVE RIGHTS. No shareholder of the corporation shall have any preemptive or other right to subscribe for any additional shares of stock, or for other securities of any class, or for rights, warrants or options to purchase stock or for script, or for securities of any kind convertible into stock or carrying stock purchase warrants or privileges. D. PARTIAL LIQUIDATION. The board of directors may from time to time distribute to the shareholders in partial liquidation, out of stated capital or capital surplus of the corporation a portion of its assets, in cash or property, subject to the limitations contained in the statutes of Colorado. E. CONSIDERATION . Shares of the corporation shall be issued for such consideration expressed in dollars as may be fixed from time to time by the vote of the directors. ARTICLE VI - PURPOSES AND POWERS SECTION 1. PURPOSES. The nature of the business of the corporation, the purposes for which it is organized and its powers are as follows: A. To engage in the transaction of all lawful business or pursue any other lawful purpose or purposes for which a corporation may be organized under the laws of the State of Colorado. B. To have, enjoy and exercise all of the rights, powers and privileges conferred upon corporations organized under the laws of the State of Colorado, whether now or hereafter in effect, and whether or not herein specifically mentioned. SECTION 2. POWERS. Subject to any specific limitations imposed by these articles of incorporation, the powers the corporation shall have are as follows: A. All of those powers, rights, and privileges now or hereafter conferred upon corporations organized under the laws of Colorado. In addition, it may do everything necessary, suitable or proper for the accomplishment of any of its corporate powers. B. The power to indemnify any director, officer, or employee, or former director, officer or employee of the corporation, or any person who may have served at its request as a director, officer, or employee of another corporation in which it owns shares of capital stock, or of which it is a creditor, against expenses (including reasonable attorney fees) , judgment and amounts paid in settlement actually and reasonably incurred by him in connection with any action, suit, or proceeding in which he is made a party by reason of being or having been such director, officer, or employee, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of duty. In the event of settlement, reimbursement shall be made only if it be found by the board of directors that it was to the interest of the corporation that such settlement be made and such director, officer, or employee was not found guilty of negligence or misconduct. Such rights of indemnification and reimbursement shall not be deemed exclusive of any other rights to which such director, officer, or employee may be entitled under any by law, agreement, vote of shareholders or otherwise. SECTION 3. DIRECTION OF PURPOSES AND EXERCISE OF POWERS BY DIRECTORS. The board of directors, subject to any specific written limitations or restrictions imposed by the laws of Colorado or by these Articles of Incorporation, shall direct the carrying out of the purposes and exercise the powers of the corporation without previous authorization or subsequent approval by the shareholders of the corporation. ARTICLE VII - REGULATION OF INTERNAL AFFAIRS SECTION A. BYLAWS. The initial Bylaws shall be adopted by the board of directors. The power to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in the board of directors. The Bylaws may contain any provision for the regulation and management of the affairs of the corporation not inconsistent with the laws of the State of Colorado or these articles of incorporation. SECTION B. TRANSACTION IN WHICH DIRECTORS HAVE AN INTEREST. No contract or other transaction of the corporation with any other person, firm or corporation, or in which this corporation is interested, shall be affected or invalidated by: (i) the fact that any one or more of the directors or officers of this corporation is interested in or is a director or officer of another corporation; or (ii) the fact that any director or officer, individually or jointly with others, may be a party to or may be interested in any such contract or transaction. Each person who may become a director of officer of this corporation is hereby relieved from any liability that might otherwise arise by reason of his contracting with the corporation for the benefit of himself or any firm or corporation in which he may be in any way interested. SECTION C. NEGATION OF EQUITABLE INTERESTS. The corporation shall be entitled to treat the registered holder of any shares of the corporation as the owner thereof for all purposes, including all rights deriving from such shares and shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving from such shares, on the part of any other person, including but without limiting the generality hereof, a purchaser, assignee or transferee of such shares or rights deriving from such shares, unless until such purchaser, assignee, transferee or other person becomes the registered holder of such shares, whether or not the corporation shall have either actual or constructive notice of the interest of such purchaser, assignee, transferee, or other person. The purchaser, assignee or transferee of any of the shares of the corporation shall not be entitled: to receive notice of the meeting of the shareholders; to vote at such meetings; to examine a list of the shareholders; to be paid dividends or other sums payable to shareholders, or to own, enjoy and exercise any other property or rights deriving f rom, such shares against the corporation, until such purchaser, assignee, or transferee has become the registered owner of such shares. ARTICLE VIII - QUORUM FOR SHAREHOLDERS' MEETINGS Except as bylaws adopted by the shareholders may provide f or a greater quorum requirement, a majority of the outstanding shares shall constitute a quorum at any meeting of shareholders. Except as bylaws adopted by the shareholders may provide for a greater voting requirement and except as is otherwise provided by the Colorado Business Corporation Act with respect to action on amendment to these Articles of Incorporation, on a plan of merger or share exchange, on the disposition of substantially all of the property of the Corporation, on the granting of consent to the disposition of property by an entity controlled by the Corporation, and on the dissolution of the Corporation, action on a matter other than the election of directors is approved if a quorum exists and if the votes cast favoring the action exceed the votes cast opposing the action. Any bylaw adding, changing, or deleting a greater quorum or voting requirement for shareholders shall meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever are greater. ARTICLE IX - BOARD OF DIRECTORS The corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, a board of directors. The names and addresses of the members of the initial board of directors are as follows: NAME ADDRESS James A. Hult 345 W. 62nd Avenue, Unit B, Denver, CO 80216 The directors shall be elected at each annual meeting of the shareholders, provided that vacancies may be filled by election by the remaining directors, though less than a quorum, or by the shareholders at a special meeting called for that purpose. Despite the expiration of his or her term, a director continues to serve until his or her successor is elected and qualifies. ARTICLE X - LIMITATION ON DIRECTOR LIABILITY A director of the Corporation shall not be personally liable to the Corporation or to its shareholders for monetary damages for breach of fiduciary duty as a director; except that this provision shall not eliminate or limit the liability of a director to the Corporation or to its shareholders for monetary damages otherwise existing for (i) any breach of the director's duty of loyalty to the Corporation or to its shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) acts specified in Section 7-108-403 of the Colorado Business Corporation Act; or (iv) any transaction from which the director directly or indirectly derived any improper personal benefit. If the Colorado Business Corporation Act is hereafter amended to eliminate or limit further the liability of a director, then, in addition to the elimination and limitation of liability provided by the preceding sentence, the liability of each director shall be eliminated or limited to the fullest extent permitted by the Colorado Business Corporation Act as so amended. Any repeal or modification of this Article X shall not adversely affect any right or protection of a director of the Corporation under this Article X, as in effect immediately prior to such repeal or modification, with respect to any liability that would have accrued , but for this Article X, prior to such repeal or modification. ARTICLE XI - INDEMNIFICATION The Corporation shall indemnify, to the fullest extent permitted by applicable law in effect from time to time, any person, and the estate and personal representative of any such person, against all liability and expense (including attorneys' fees) incurred by reason of the f act that he is or was a director (or officer of the corporation or, while serving as a director (or officer) of the Corporation, he is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, fiduciary, or agent of, or in any similar managerial or fiduciary position of, another domestic or foreign corporation or other individual or entity or of an employee benefit plan. The Corporation shall also indemnify any person who is serving or has served the Corporation as director, officer, employee, fiduciary, or agent, and that person's estate and personal representative, to the extent and in the manner provided in any bylaw, resolution of the shareholders or directors, contract, or otherwise, so long as such provision is legally permissable. ARTICLE XII - TERM OF EXISTENCE The corporation shall have perpetual existence. James A. Hult Incorporator /S/JAMES A. HULT The undersigned consents to the appointment as the initial registered agent of Advanced Ceiling Supplies, Inc. James M. Hult Registered Agent /S/JAMES M. HULT VERIFICATION STATE OF COLORADO ) )ss. COUNTY OF BOULDER ) I, KATHERINE E. WHITE, A NOTARY PUBLIC, HEREBY CERTIFY THAT ON THE 8TH day of August, 1995, James A. Hult personally appeared before me being by me first duly sworn, declared that he was the person that signed the foregoing document as incorporator and that the statements therein contained are true. Witness my hand and official seal. My commission expires: 1-31-99 /S/ KATHERINE E. WHITE Notary Public EX-3.(II) 3 BYLAWS EXHIBIT 3.2 BY-LAWS of ADVANCED CEILING SUPPLIES, INC. a Colorado Corporation ARTICLE I The initial principal office of the Corporation shall be in Boulder, Colorado. The Corporation may have offices at such other places within or without the State of Colorado as the Board of Directors may from time to time establish. ARTICLE II CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with corporate action, by any provisions of the statutes of the Certificate of Incorporation, the meeting and vote of stockholders may be dispensed with, if all the stockholders who should have been entitled to vote upon the action if such meeting were held, shall consent in writing to such corporate action being taken. ARTICLE III Board of Directors Section 1. GENERAL POWERS. The business of the Corporation shall be managed by the Board of Directors, except as otherwise provided by statute or by the Certificate of Incorporation. Section 2. NUMBER AND QUALIFICATIONS. The Board of Directors shall consist of up to three (3) members. Except as provided in the Certificate of Incorporation, this number can be increased only by the vote or written consent of the holders of ninety (90) percent of the stock of the Corporation outstanding and entitled to vote. The current number of Directors shall be determined by the Board of Directors at its annual meeting. No Director need be a stockholder. Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be elected annually by the stockholders, and shall hold office until their successors are respectively elected and qualified. Election of Directors need not be by ballot. Section 4. COMPENSATION. The members of the Board of Directors shall be paid a fee of $10.00 for attendance at all annual, regular, special and adjourned meetings of the Board. No such fee shall be paid any director if absent. Any director of the Corporation may also serve the Corporation in any other capacity, and receive compensation therefor in any form. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 5. REMOVAL AND RESIGNATIONS. The stockholders may, at any meeting called for the purpose, by vote of two-thirds of the capital stock issued and outstanding, remove any directors from office, with or without cause; provided however, that no director shall be removed in case the vote of a sufficient number of shares are cast against his removal, which if cumulatively voted at any election of directors would be sufficient to elect him, if cumulative voting is allowed by the Articles of Incorporation. The stockholders may, at any meeting, by vote of a majority of such stock represented at such meeting accept the resignation of any director. Section 6. VACANCIES. Any vacancy occurring in the office of director may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, unless sooner displaced. When one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have powers to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations become effective. ARTICLE IV Meetings of Board of Directors Section 1. REGULAR MEETINGS. A regular meeting of the Board of Directors may be held without call or formal notice immediately after and at the same place as the annual meeting of the stockholders or any special meeting of the stockholders at such places within or without the State of Colorado and at such times as the Board may by vote from time to time determine. Section 2. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any place whether within or without the State of Colorado at any time when called by the President, Treasurer, Secretary or two or more directors. Notice of the time and place thereof shall be given to each director at least three (3) days before the meeting if by mail or at least twenty-four hours if in person or by telephone or telegraph. A waiver of such notice in writing, signed by the person or persons entitled to said notice, either before or after the time stated therein, shall be deemed equivalent to such notice. Notice of any adjourned meeting of the Board of Directors need not be given. Section 3. QUORUM. The presence, at any meeting, of one-third of the total number of directors, but in no case less than two (2) directors, shall be necessary and sufficient to constitute a quorum for the transaction of business except as otherwise required by statute or by the Certificate of Incorporation, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present at the time and place of any meeting may adjourn such meeting from time to time until a quorum be present. Section 4.a. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or committee, and such written consent is filed within the minutes of the Corporation. b. The Board of Directors may hold regular or special meetings by telephone conference call, provided that any resolutions adopted shall be recorded in writing within 3 days of such telephone conference, and written ratification of such resolutions by the directors shall be provided within 10 days thereafter. ARTICLE V Committees of Board of Directors The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The committees of the Board of Directors shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. ARTICLE VI Officers Section 1. NUMBER. The Corporation shall have a President, one or more Vice Presidents, a Secretary and a Treasurer, and such other officers, agents and factors as may be deemed necessary. One person may hold any two offices except the offices of President and Vice President and the offices of President and Secretary. Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. The officers specifically designated in Section 1 of this Article VI shall be chosen annually by the Board of Directors and shall hold office until their successors are chosen and qualified. No officer need be a director. Section 3. SUBORDINATE OFFICERS. The Board of Directors from time to time may appoint other officers and agents, including one or more Assistant Secretaries and one or more Assistant Treasurers, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these By-Laws or as the Board of Directors from time to time may determine. The Board of Directors may delegate to any office the power to appoint any such subordinate officers, agents and factors and to prescribe their respective authorities and duties. Section 4. REMOVALS AND RESIGNATIONS. The Board of Directors may at any meeting called for the purpose, by vote of a majority of their entire number, remove from office any officer or agent of the Corporation, or any member of any committee appointed by the Board of Directors. The Board of Directors may at any meeting, by vote of a majority of the directors present at such meeting, accept the resignation of any officer of the Corporation. Section 5. VACANCIES. Any vacancy occurring in the office of President, Vice President, Secretary, Treasurer or any other office by death, resignation, removal or otherwise shall be filled for the expired portion of the term in the manner prescribed by these By-Laws for the regular election or appointment to such office. Section 6. THE PRESIDENT. The President shall be the chief executive officer of the Corporation and, subject to the direction and under the supervision of the Board of Directors, shall have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The President shall preside at all meetings of the stockholders and of the Board of Directors at which he is present. The President shall do and perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors. Section 7. THE VICE PRESIDENT. At the request of the President or in the event of his absence or disability, the Vice President, or in case there shall be more than one Vice President, the Vice President designated by the President, or in the absence of such designation, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. Any Vice President shall perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors, or the President. Section 8. THE SECRETARY. The Secretary shall: a. Record all the proceedings of the meetings of the Corporation and directors in a book to be kept for that purpose; b. Have charge of the stock ledger (which may, however, be kept by any transfer agent or agents of the Corporation under the direction of the Secretary), an original or duplicate of which shall be kept at the principal office or place of business of the Corporation in the State of Colorado; c. Prepare and make, at least ten (10) days before every election of directors, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order; d. See that all notices are duly given in accordance with the provisions of these By-Laws or as required by statute; e. Be custodian of the records of the Corporation and the Board of Directors, and of the seal of the Corporation, and see that the seal is affixed to all stock certificates prior to their issuance and to all documents, the execution of which on behalf of the Corporation under its seal have been duly authorized; f. See that all books, reports, statements, certificates and the other documents and records required by law to be kept or filed are properly kept or filed; and g. In general, perform all duties and have all powers incident to the office of Secretary and perform such other duties and have such powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors or the President. Section 9. THE TREASURER. The Treasurer shall: a. Have supervision over the funds, securities, receipts, and disbursements of the Corporation; b. Cause all monies and other valuable effects of the Corporation to be deposited in its name and to its credit, in such depositories as shall be selected by the Board of Directors or pursuant to authority conferred by the Board of Directors. c. Cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositories of the Corporation, when such disbursements shall have been duly authorized; d. Cause to be taken and preserved proper v ouchers for all monies disbursed; e. Cause to be kept at the principal office of the Corporation correct books of account of all its business and transactions; f. Render to the President or the Board of Directors, whenever requested, an account of the financial condition of the Corporation and of his transactions as Treasurer; g. Be empowered to require from the officers or agents of the Corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation; and h. In general, perform all duties and have all powers incident to the office of Treasurer and perform such other duties and have such power as from time to time may be assigned to him by these By-Laws or by the Board of Directors or President. Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant Secretaries and Assistant Treasurers shall have such duties as from time to time may be assigned to them by the Board of Directors or the President. Section 11. SALARIES. The salaries of the officers of the Corporation shall be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person the power to fix the salaries or other compensation of any officers or agents appointed in accordance with the provisions of Section 3 of this Article VI. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 12. SURETY BOND. The Board of Directors may secure the fidelity of any or all of the officers of the Corporation by bond or otherwise. ARTICLE VII Execution of Instruments Section 1. EXECUTION OF INSTRUMENTS GENERALLY. All documents or writings of any nature shall be signed, executed, verified, acknowledged and delivered by such officer or officers or such agent of the Corporation and in such manner as the Board of Directors from time to time may determine. Section 2. CHECKS, DRAFTS, ETC. All notes, drafts, acceptances, checks, endorsements, and all evidence of indebtedness of the corporation whatsoever, shall be signed by such officer or officers or such agent or agents of the Corporation and in such manner as the Board of Directors from time to time may determine. Endorsements for deposit to the credit of the Corporation in any of its duly authorized depositories shall be made in such manner as the Board of Directors from time to time may determine. Section 3. PROXIES. Proxies to vote with respect to shares of stock of other corporations owned by or standing in the name of the Corporation may be executed and delivered from time to time on behalf of the Corporation by the President or Vice President and the Secretary or Assistant Secretary of the Corporation or by any other person or persons duly authorized by the Board of Directors. ARTICLE VIII Section 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation shall be entitled to have a certificate, signed in the name of the Corporation by the Chairman or Vice President of the Board of Directors, the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation; provided, however, that where such certificate is signed by a transfer agent or an assistant transfer agent or by a transfer clerk acting on behalf of the Corporation and a registrar, the signature of any such Chairman of the Board of Directors, President, Vice President, Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary may be facsimile. In case any officer or officers who shall have signed, or whole facsimile signature or signatures shall have been used thereon, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be such officer or officers of the Corporation, and any such delivery shall be regarded as an adoption by the Corporation of such certificate or certificates. Certificates of stock shall be in such form as shall, in conformity to law, be prescribed from time to time by the Board of Directors. Section 2. TRANSFER OF STOCK. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by his attorney duly authorized in writing, upon surrender to the Corporation of the certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer tax stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction on its books. Section 3. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to the surrender to the Corporation of the certificates for shares of stock with a request to record the transfer of such shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 4. CLOSING STOCK TRANSFER BOOK. The Board of Directors may close the Stock Transfer Book of the Corporation for a period not exceeding fifty (50) days preceding the date of any meeting of the stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period of not exceeding (50) days in connection with obtaining the consent of stockholders for any purpose. However, in lieu of closing the Stock Transfer Book, the Board of Directors may fix in advance a date, not exceeding fifty (50) days preceding the date of any meeting of stockholders or the date for the payment of any dividend or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders, and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 5. LOST, DESTROYED AND STOLEN CERTIFICATES. Where the owner of a Certificate for shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate in place of the original certificate if the owner (a) so requests before the Corporation has notice that the shares have been acquired by a bona fide purchaser; (b) files with the Corporation a sufficient indemnity bond; and (c) satisfies such other reasonable requirements, including evidence of such loss, destruction, or wrongful taking, as may be imposed by the Corporation. ARTICLE IX Dividends Section 1. SOURCES OF DIVIDENDS. The directors of the Corporation, subject to any restrictions contained in the statutes and Certificate of Incorporation, may declare and pay dividends upon the shares of the capital stock of the Corporation either (a) out of its new assets in excess of its capital, or (b) in case there shall be no such excess, out of its net profits for the fiscal year then current or the current and preceding fiscal year. Section 2. RESERVES. Before the payment of any dividend, the directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose, and the directors may abolish any such reserve in the manner in which it was created. Section 3. RELIANCE ON CORPORATE RECORDS. A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid. Section 4. MANNER OF PAYMENT. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation at par. ARTICLE X Seal The Corporate seal, subject to alteration by the Board of Directors, shall be in the form of a circle and shall bear the name of the Corporation and shall indicate its formation under the laws of the State of Colorado. Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE XI Fiscal Year Except as from time to time otherwise provided by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XII Amendments Section 1. BY THE STOCKHOLDERS. Except as otherwise provided in the Certificate of Incorporation or in these By-Laws, these By-Laws may be amended or repealed, or new By-Laws may be made and adopted by a majority vote of all the stock of the Corporation issued and outstanding and entitled to vote at any annual or special meeting of the stockholders, provided that notice of intention to amend shall have been contained in the notice of meeting. Section 2. BY THE DIRECTORS. Except as otherwise provided in the Certificate of Incorporation or in these By-Laws, these By-Laws, including amendments adopted by the stockholders, may be amended or repealed by a majority vote of the whole Board of Directors at any regular or special meeting of the Board, provided that the stockholders may from time to time specify particular provisions of the By-Laws which shall not be amended by the Board of Directors. ARTICLE XIII Indemnification The Board of Directors hereby adopt the provision of C.R.S. 7-109-101 through 110 (as it may be amended from time to time) relating to Indemnification and in corporate such provisions by this reference as fully as if set forth herein. EX-27 4 FINANCIAL DATA SCHEDULE
5 12-MOS 3-MOS AUG-31-1999 AUG-31-2000 AUG-31-1999 NOV-30-1999 205 5,955 0 0 0 0 0 0 0 0 205 5,955 0 0 0 0 205 5,955 0 7,500 0 0 0 0 0 0 300 300 (95) (1,845) 205 (1,545) 0 0 0 0 0 0 0 0 95 1,750 0 0 0 0 (95) (1,750) 0 0 (95) (1,750) 0 0 0 0 0 0 (95) (1,750) 0 (.0) 0 (.0)
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