Background
Blink
Couture, Inc. (the “Company”) was incorporated in Delaware on October 23, 2003
as Fashionfreakz International, Inc. and changed its name to Blink Couture, Inc.
On December 2, 2005. The Company does not have any
subsidiaries. The Company’s business plan was to create and conduct
an online fashion business, however, the Company never generated any meaningful
revenues, On March 4, 2008, the Company discontinued its prior business and
changed its business plan.
The
Company’s current business plan is to seek, investigate, and, if warranted,
acquire one or more properties or 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 limited 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.
The
Company’s principal shareholders are in contact with 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 limited funds 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 is 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 and other requirements in order to qualify shares for trading on NASDAQ
SmallCap Market or a stock exchange (See “Investigation and Selection of
Business Opportunities”). The Company anticipates that the business
opportunities presented to it may (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 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.
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.
It is
anticipated that business opportunities will come to the Company’s attention
from various sources, including its principal shareholders, 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, directors or principal
shareholders 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 Delaware 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 the principal shareholders’ 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 access capital, 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 financial
resources. 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 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 and board of directors to complete acquisitions
without submitting any proposal to the stockholders for their consideration.
Holders of the Company’s securities should not anticipate that the Company will
necessarily 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 principal shareholders, who are not professional
business analysts. Although there are no current plans to do so, the Company
might hire outside consultants to assist in the investigation and selection of
business opportunities, and might pay a finder’s fee. Since the Company 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 fees
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 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;
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
the NASDAQ SmallCap Market, the current standards include the requirements that
the issuer of the securities satisfy, among other requirements, certain minimum
levels of shareholder equity, market value or net income. Many of the business
opportunities that might be potential candidates for a combination with the
Company would not satisfy the NASDAQ SmallCap Market listing
criteria.
Not one
of the factors described above will be controlling in the selection of a
business opportunity, and the Company 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 difficult and complex. Potential
investors must recognize that, because of the Company’s limited capital
available for investigation, 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.
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
following completion of a merger transaction; and other information deemed
relevant.
As part
of the Company’s investigation, the Company’s principal shareholders 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.
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.”
The
Company 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 currently available.
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, board of
directors 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 management
and directors may resign and new management and 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
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 principal shareholders.
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 normally found in an
agreement of that type.
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 letter of intent will set forth the terms of the
proposed acquisition but will generally 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 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 might
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 such goods and services.
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 the
principal shareholders may offer to sell a controlling interest at a price not
relative to or reflective of a price which could 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 U. S. 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.
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.
Employees
As of
July 31, 2009, the Company had no employees.
ITEM
1A. RISK FACTORS
Risk
Factors
There
are several material risks associated with the Company. You should
carefully consider the risks and uncertainties described below, which constitute
all of the material risks relating to the Company. If any of the
following risks are realized, our business, operating results and financial
condition could be harmed. This means investors could lose all or a
part of their investment.
(a)
CONFLICTS OF INTEREST. Certain conflicts of interest may exist between the
Company and its officers, directors and principal shareholders. They have other
business interests to which they devote their attention, and they will devote
little time 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.”
(b) 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.
(c)
REGULATION OF PENNY STOCKS. The Company’s securities may 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.
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.
(d) LACK
OF OPERATING HISTORY. The majority interest in the Company was purchased in
Octoberl 2007 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.
(e) 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.
(f)
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 of investment to the
Company and its stockholders if the business or opportunity proves to be
unsuccessful. See Item 1 “Description of Business.”
(g) 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.
(h)
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. Decisions
will therefore 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.
(i) 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.
(j)
RELIANCE UPON FINANCIAL STATEMENTS. The Company generally will require audited
financial statements from companies that it proposes to acquire. In cases where
no 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 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.
(k) 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.
(l)
LIMITED PARTICIPATION OF MANAGEMENT. The Company currently has only one
individual who is serving as its sole officer and director on a very
limited-time basis. The Company is therefore heavily dependent upon the skills,
talents, and abilities of the principal shareholders to implement its business
plan. See “Management.”
(m) LACK
OF CONTINUITY IN MANAGEMENT. The Company does not have any employment agreements
with its officers and directors, and as a result, there is no assurance they
will continue to be associated with 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.
(n) NO
INDEPENDENT AUDIT COMMITTEE OF BOARD OF DIRECTORS. The Company does not have an
independent Audit Committee of its Board of Directors. The entire Board of
Directors functions as the Company’s Audit Committee. The Sarbanes-Oxley Act of
2002 (“Sarbanes-Oxley Act”) and rules and regulations adopted by the U.S.
Securities and Exchange Commission Rules to implement the Sarbanes-Oxley Act
impose certain standards on listed companies relative to the maintenance and
operations of Board of Directors Audit Committees, including but not limited to
the requirement that Audit Committees be appointed, that membership of such
committees comprise only independent directors, that a financial professional be
among the membership of such committee and that such committee be afforded an
adequate operating budget and be able to employ independent professional
advisors. The Sarbanes-Oxley Act also requires that the Audit Committee oversee
the work of a company’s outside auditors and that the outside auditors be
responsible to the Audit Committee. At this time, the Company is not in
compliance with the requirements of the Sarbanes-Oxley Act as they relate to
independent Board of Directors Audit Committees. The Company believes that under
rules and regulations adopted by the U.S. Securities and Exchange Commission to
implement these provisions of the Sarbanes-Oxley Act it is not required to
comply with its requirements relating to the appointment of an Audit Committee
of its Board of Directors and conforming with the enumerated standards and
guidelines because the Company is not a “Listed Company” as defined therein.
Notwithstanding, the Company may ultimately be determined not to be incompliance
therewith and may therefore face penalties and restrictions on its operations
until it comes into full compliance. Additionally, the Company’s failure to
comply with the provisions of the Sarbanes-Oxley Act could preclude it from
being listed on NASDAQ or any other stock exchanges until it can show that it is
in compliance. The Company’s failure to be in compliance with the Sarbanes-Oxley
Act could also present an impediment to a potential business combination where
the target company intends that the Company apply for listing on NASDAQ or any
other applicable stock exchanges.
(o)
INDEMNIFICATION OF OFFICERS AND DIRECTORS. Delaware 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 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.
(p)
DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the Company’s officers,
directors and principal shareholders, 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 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 Company considers it necessary to
hire outside advisors, such persons may be affiliates of the Company, if they
are able to provide the required services.
(q)
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.
(r)
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.
(s) NO
FORESEEABLE DIVIDENDS. The Company has not paid dividends on its Common Stock
and does not anticipate paying such dividends in the foreseeable
future.
(t) 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 would control the
Company, and the Company’s board of directors and 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.
(u) RULE
144 SALES. The majority of the outstanding shares of Common Stock held by
present 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 who have held their shares under Rule 144 for two years 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. All shares become available for resale (subject to volume limitations
for affiliates) under Rule 144, one year after date of purchase subject to
applicable volume restrictions under the Rule.
Going
Concern Qualification
Our
auditors have prepared their report on the auditied financial statements
contained in this Annual Report on a going concern basis which contemplates the
realization of assets and liquidation of liabilities in the ordinary course of
business; however, currently such realization of assets and liquidation of
liabilities are subject to significant uncertainties.
As shown
in the accompanying audited financial statements, as of July 31, 2009 our
current liabilities exceed our current assets by $81,491 and our total
liabilities exceed our total assets by $81,491. These factors, among
others, indicate that we may be unable to continue existence. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the we be unable to
continue in existence.
The
appropriateness by the Company of continuing to use the aforementioned basis of
accounting is dependent upon, among other things, the ability to maintain and
increase existing credit facilities or raise additional capital.
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 Delaware law vests authority in the
Board of Directors to decide and approve matters involving acquisitions within
certain restrictions. Any transaction would 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.