As filed with the Securities and Exchange Commission, July 17, 2002
File No. 333-57946
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ORGANIC SOILS.COM, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0448626
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
300 East 54th Avenue, Suite 200
Anchorage, Alaska 99518
Telephone: 907-770-3709
(Address and telephone number of registrant's principal offices)
Ray L. Smith, President
Organic Soils.com, Inc.
300 East 54th Avenue, Suite 200
Anchorage, Alaska 99518
Telephone: 907- 770-3709
(Name, address and telephone number of agent for service)
Copies to:
Peter R. Chernik, Esq.
28 Fifteenth Avenue
San Francisco, CA 94118
Telephone: (415) 387-7500
Facsimile: (415) 387-7200
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each class Amount to be Proposed offering Proposed maximum Amount of
of securities to registered price per share aggregate offering registration
be registered price fee
Common Stock 160,000 shares $1.50 per share $240,000 $60
The number of shares to be registered is estimated solely for the purpose
of calculating the registration fee.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
i
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS
Subject to completion ____________, 2002
No Minimum / $240,000 Maximum
ORGANIC SOILS.COM, INC.
COMMON STOCK
This is Organic.Soils.Com, Inc.'s (Organic Soils) initial public
offering. We are offering a maximum of 160,000 shares of its common stock. There
is no minimum. The public offering price is $1.50 per share. No public market
currently exists for our shares.
See "Risk Factors" beginning on page 2 for certain information you
should consider before you purchase the shares.
(boldface)
Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
(end boldface)
This is a best efforts offering, with no minimum amount, to be made by
the officers and directors of Organic Soils. No commission or other compensation
related to the sale of the shares will be paid to any of our officers or
directors. No arrangements have been made to place funds in escrow, trust or any
similar account. Funds will be immediately available to Organic Soils. The
offering will be held open for 120 days following the effective date of the
prospectus.
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PRICE $1.50 PER SHARE
------------
Price to Public Commissions Proceeds to Company
Per Share $1.50 $-0- $1.50
Minimum -0- $-0- -0-
Maximum $240,000 $-0- $240,000
The date of this Prospectus is _____________, 2002.
ii
TABLE OF CONTENTS
Page
----
Prospectus Summary....................................... 1
Summary of Financial Information......................... 1
Risk Factors............................................. 2
Offering Involves a High Degree of Risk.............2
Management's Past Experience........................2
Funding.............................................2
Independent Auditor's Concerns......................2
Conflicts of Interest With APC Export, Inc..........3
Directors and Management Control of Common Stock....3
Relationship With APC Export, Inc...................3
Penny Stock Restrictions............................3
Shares Sold May Decrease Price of Stock.............4
No Public Market for Securities.....................4
No Dividends Paid...................................4
Forward-Looking Statements............................... 5
Use of Proceeds...........................................5
Determination of Offering Price.......................... 5
Dilution................................................. 6
Legal Proceedings.........................................7
Directors, Executive Officers, Promoters and
Control Persons..........................................7
Security Ownership of Certain Beneficial
Owners and Management....................................8
Description of Securities...............................8
Interest of Named Experts and Counsel..................8
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..........9
Description of Business.................................9
Management's Discussion and Analysis of
Results of Operations and Financial Condition............14
Description of Property...................................15
Certain Relationships and Related Transactions............15
Market for Common Stock and Related
Stockholder Matters......................................16
Executive Compensation....................................17
Executive Compensation Summary Compensation Table.........18
Plan of Distribution......................................18
Description of the Securities.............................19
Shares Available for Future Sale..........................20
Experts...................................................20
Available Information.................................... 21
Financial Statements......................................F-1
iii
PROSPECTUS SUMMARY
About our company
We were formed as a Nevada corporation on January 19, 2000 and operate
under the name of Organic.Soils.Com, Inc. (Organic Soils). Organic Soils was
organized to engage in the business of packaging, promoting and marketing of
Alaskan organic humus soil. Organic Soils' principal executive offices are
located at 300 East 54th Avenue, Suite 200, Anchorage, Alaska and its telephone
number is 907-770-3709.
We have commenced only limited operations and are considered a
development stage company. As of March 31, 2002 we have realized $272,813 net
losses and have not yet established profitable operations. These factors raise
substantial doubts about our ability to continue as a going concern. The
proceeds from this offering are needed so we can continue operations and
implement our growth and marketing plan.
The Offering
This is a best efforts offering to be made by the officers and
directors of Organic Soils. We are offering a maximum of 160,000 shares of our
common stock. There is no minimum. No commission or other compensation related
to the sale of the shares will be paid to any of our officers or directors. No
arrangements have been made to place funds in escrow, trust or any similar
account. Funds will be immediately available to Organic Soils. The offering will
be held open for 120 days following the effective date of the prospectus.
SUMMARY OF FINANCIAL INFORMATION
A summary of our financial condition, from inception to March 31,
2002, is set forth below.
MARCH 31, 2002
Revenues 1,768
Expenses
General and Administrative 273,023
-------
Operating Loss 271,255
Other income and expenses
Interest income 69
Interest expense (1,627)
Net Loss (272,813)
Net Loss Available to
common shareholders (272,813)
Net Loss per share of
common shareholders (0.12)
Balance Sheet Data
Assets 5,234
Liabilities 25,997
Stockholders Equity (Deficit) (20,763)
Page 1
RISK FACTORS
This offering involves a high degree of risk. You should carefully
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consider the risks and uncertainties described below and the other information
in this prospectus before deciding whether to invest in shares of our common
stock. If any of the following risks actually occur, our business, operating
results or financial condition could be materially adversely affected. This
could cause the market price of our common stock to decline, and could cause you
to lose all or part of your investment.
Although our management has past experience in the soil industry, we
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are a new business and investment in our company is risky. We have an extremely
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limited operating history so it will be difficult for you to evaluate an
investment in our stock. We have limited experience and a short history of
operations with respect to marketing and selling our soil. To date, we have had
revenue of approximately $1,768 and net losses of $272,813 and do not expect to
be profitable for at least six months following this offering and no assurances
can be given that we will ever be profitable. As a young company, we are
especially vulnerable to the problems, delays, expenses and difficulties
encountered by any company in the development stage. Since we have not proven
the essential elements of profitable operations, you will be furnishing venture
capital to us and will bear the risk of complete loss of your investment in the
event we are not successful.
If we do not raise money through this offering, it is unlikely we can
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continue operations. We have limited assets and need the proceeds from this
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offering to continue our business, identify new markets and sell our products.
This is a best efforts offering with no minimum. If less than 25% of the
offering is sold we will have to seek other sources of financing or we will be
severely limited in achieving our plan of operation. There is no assurance that
additional sources of funding will be available or at a reasonable cost.
Our independent auditor has expressed doubts about our ability to
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continue as a going concern. We are a development stage company as defined in
- -----------------------------
Financial Accounting Standards Board Statement No. 7. We are devoting
substantially all of our present efforts in establishing a new business.
Although we have started our planned operation, we have generated only $1,768 in
revenue as of March 31, 2002 had net losses of $272,811. These factors raise
substantial doubt about our ability to continue as a going concern.
Page 2
We may have conflicts of interest with APC Export, Inc. Our management
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consists of the same management that controls APC Export, Inc., a supplier of
our humus soil. In the context of negotiating commercial arrangements with APC
Export, Inc., conflicts of interest may arise in this and other contexts. We
cannot give any assurances that the conflicts of interest will be resolved in
our favor.
Our directors and management will collectively control over 82% of our
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outstanding common stock. After this offering, assuming the maximum amount of
- --------------------------
shares offered are sold, our directors and officers will collectively control
approximately 82.76% of our outstanding common stock. Ray L. Smith personally
will control 80.89%. If only 25% of this offering is sold, our officers and
directors will own 86.7% of our outstanding common stock. As a result, these
stockholders, if they act together, will be able to influence our management and
affairs and all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control of our company and might adversely affect the market price of
our common stock.
We are solely dependent on APC Export, Inc. for its revenues at this
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time. Organic Soils is highly dependent on its relationship with APC Export,
- -----
Inc. Organic Soils has entered into a certain distribution and marketing
agreement with APC Export, Inc. from which Organic Soils has derived its only
revenue to date. Any termination, adverse adjustment of purchase price or any
other material change in terms under this agreement, APC Export, Inc.'s
inability to deliver product to Organic Soils, change in APC Export, Inc.'s
relationship with APC Export, Inc. could have a material adverse effect on
Organic Soils' business, financial condition and results of operations as we
will lose our only source of revenue to date. If our agreement with APC Export,
Inc. is terminated, we may not be able to secure another distribution and
marketing agreement from another company in which case we may not be able to
continue as an ongoing business.
It is likely our stock will become subject to the penny stock rules
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which impose significant restrictions on the broker-dealers and may affect the
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resale of our stock. A penny stock is generally a stock that
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- is not listed on a national securities exchange or Nasdaq,
- is listed in "pink sheets" or on the NASD OTC Bulletin Board,
- has a price per share of less than $5.00 and
- is issued by a company with net tangible assets less than $5 million.
The penny stock trading rules impose additional duties and
responsibilities upon broker-dealers and salespersons effecting purchase and
Page 3
sale transactions in common stock and other equity securities, including
- determination of the purchaser's investment suitability,
- delivery of certain information and disclosures to the purchaser, and
- receipt of a specific purchase agreement from the purchaser prior to
effecting the purchase transaction.
Many broker-dealers will not effect transactions in penny stocks,
except on an unsolicited basis, in order to avoid compliance with the penny
stock trading rules. In the event our common stock becomes subject to the penny
stock trading rules,
- such rules may materially limit or restrict the ability to resell
our common stock, and
- the liquidity typically associated with other publicly traded equity
securities may not exist.
Shares of stock that are eligible for sale by our stockholders may
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decrease the price of our stock. We have issued 2,300,000 shares of common stock
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at an average price of approximately $0.06 per share. These shares were issued
in reliance on exemptions from registration and will be freely tradable at
various times. As these shares are sold into the market, the price of the common
stock will be depressed. Persons who have acquired share for $0.06 will be able
to profitably sell their shares at much less than the $1.50 offering price of
the shares under this offering. This tendency may drive the market price of the
shares less than the $1.50 offering price.
We have no public market for our securities. At this time no market
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exists for the sale or purchase of the common stock. After this registration is
effective, we will apply to list our common stock on the NASD bulletin board
exchange. Even when listed, the number of shares outstanding will not be enough
to provide the large volume of trading that will enable the share price to be
stable. This means that you may not be able to buy or sell shares at will or may
be able to sell only at a price substantially lower than the offering price.
We do not intend to pay dividends. Our board of directors intends to
----------------------------------
follow a policy of retaining earnings, if any, for the purpose of increasing our
net worth and reserves. As a result, there can be no assurance that any holder
of common stock will receive any cash, stock or other dividends on his shares of
common stock. Future dividends on common stock, if any, will depend on future
earnings, financing requirements and other factors. Since the time of inception
we have paid no dividends to shareholders. It is highly unlikely, therefore,
that you will receive any dividend on the shares of stock you purchase in this
offering.
Page 4
FORWARD-LOOKING STATEMENTS
You should carefully consider the risk factors set forth above, as well
as the other information contained in this prospectus. This prospectus contains
forward-looking statements regarding events, conditions, and financial trends
that may affect our plan of operation, business strategy, operating results, and
financial position. You are cautioned that any forward-looking statements are
not guarantees of future performance and are subject to risks and uncertainties.
Actual results may differ materially from those included within the
forward-looking statements as a result of various factors. Cautionary statements
in this "Risk Factors" section and elsewhere in this prospectus identify
important risks and uncertainties affecting our future, which could cause actual
results to differ materially from the forward-looking statements made in this
prospectus.
USE OF PROCEEDS
Organic Soils will rely on the proceeds from this offering to develop
its products, advertise, built a web site, and pay legal and accounting fees.
This is a best-efforts offering with no minimum. The principal purposes and
priorities in which proceeds are to be used, are as follows:
100% 50% 25%
---- --- ---
Offering Expenses $ 20,000 $ 20,000 $20,000
Packaging $ 70,000 $ 70,000 $40,000
Marketing and Advertising $100,000 $ 30,000 $ 0
Working Capital $ 50,000 $ 0 $ 0
-------- -------- -------
Total $240,000 $120,000 $60,000
Any funds not used for the purposes indicated will be used for general
working capital. If less than the entire offering is received, funds will be
applied according to the priorities outlined above. If 50% of the offering is
sold, $20,000 will be applied for expenses, $70,000 to packaging and $30,000 to
marketing. If 25% of the offering is sold, $20,000 will be applied to expenses
and $40,000 to packaging. If no proceeds are received from this offering,
Organic Soils will plan on meeting its obligations from future revenue. If no
proceeds are received, Organic Soils will not incur any additional legal and
accounting expenses.
DETERMINATION OF OFFERING PRICE
Because there has been no prior public trading market for our common
stock, the initial public offering price of the common stock has been
arbitrarily determined by management and is not necessarily related to our asset
value, net worth or other criteria of value. The factors considered in
determining the offering price include an evaluation by management of the
history of and prospects for the industry in which we compete and our earnings
prospects. Factors such as our financial results, announcements of developments
related to our business, and the introduction of products and product
enhancements by ourselves or our competitors may have a significant impact on
the market price of our securities.
Page 5
DILUTION
As of the date of this prospectus, Organic Soils had issued 2,300,000
shares of common stock and the net tangible book value per share of the common
stock (Organic Soils' net tangible assets less its liabilities divided by the
number of shares of common stock then outstanding) was a defecit of $0.009 per
share of common stock. After giving effect to the receipt of the estimated net
proceeds from the sale of all of the shares, and assuming that the offering
price of the shares is $1.50 per share, the purchasers will have paid a total of
$240,000 for 160,000 shares of common stock and the net tangible book value of
Organic Soils' presently outstanding shares will increase to $0.095 per share.
The investors will experience a corresponding dilution of $1.40 per share from
the offering price. If a smaller number of shares is sold, the dilution to the
investors will be greater than that indicated above as indicated in the table
below.
"Dilution" is normally defined as the difference between the offering
price per share of common stock and the net tangible book value per share of
common stock immediately after the offering. The following table illustrates the
per share dilution to new investors:
Offering Price per share .............................................$1.50
Net tangible book value per share before offering ................($0.009)
Increase in net tangible book value per share attributable
to investors purchasing in this offering .......................$0.104
Pro forma net tangible book value per share after offering ...........$0.095
Dilution per share ...................................................$(1.41)
=======
The following table summarizes the differences between Existing
Shareholders, as of the date of this prospectus, and New Investors with respect
to the number of common shares purchased from Organic Soils, the total
consideration paid and the average price per share:
Shares Purchased Total Consideration Paid
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Average Price
Number Percent Amount Percent Per Share
Existing Shareholders 2,300,000 93.5% $219,350 47% $0.095
New Investors 160,000 6.5% $240,000 53% $1.50
Total 2,460,000 100%
The numbers used for Existing Shareholders assumes that none of the
Existing Shareholders purchases additional shares in this offering.
Page 6
The above table illustrates that as an investor in this offering, you
will pay a price per share that substantially exceeds the price per share paid
by current shareholders and that you will contribute a high percentage of the
total amount to fund Organic Soils, but will own only a small percentage of our
shares. Investors will have contributed $240,000 if the maximum of this offering
is raised, compared to $219,350 contributed by Existing Shareholders, but the
Existing Shareholders will retain approximately 93.5% stock ownership of Organic
Soils, while the New Investors will own 6.5% of the stock ownership of Organic
Soils.
In the event Organic Soils is able to sell only one-half or 50% of the
shares offered hereby, the New Investors will have contributed $120,000,
compared to $219,350 contributed by Existing Shareholders, but the Existing
Shareholders will retain approximately 96.6% of the stock ownership of Organic
Soils, while the New Investors will own 3.4% of the stock ownership. The New
Invesotrs will experience a corresponding dilution of $1.45 per share from the
offering price of $1.50.
LEGAL PROCEEDINGS
Organic Soils is not a party to any pending legal proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Ray L. Smith, President, Director, CEO (Age 53). Mr. Smith has been in
the civil engineering field since 1970. Primarily working in the highway
construction industry, he has been project superintendent and division manager
with Summit Paving and Construction in Anchorage, Alaska from June 1982 to
present. He has served as Vice-President of APC Export, Inc. since 1998 to the
present. It is anticipated that Mr. Smith will devote at least 25% of his time
as President of Organic Soils. Mr. Smith intends to devote the balance of his
time as Vice President of APC Export, Inc. Mr. Smith was elected for a one year
term until December 31, 2002.
Richard L. Strahl, COO, Director (Age 57). Mr. Strahl has worked
throughout Alaska on major construction projects and has administered more than
$140,000,000 of construction contracts for the Alaska Department of
Transportation and the City of Anchorage. Mr. Strahl has owned R & L Trucking
from May 1989 to present. In this capacity, he has performed large analysis of
back haul rates, which are an important cost factor in the business of Organic
Soils. He has also served as President of APC Export, Inc. since 1998 to the
present. It is anticipated that Mr. Strahl will devote only as much time as
needed in his capacity as director and COO of Organic Soils. Mr. Strahl intends
to devote most of his time as President of APC Export, Inc. Mr. Strahl was
elected for a one year term until December 31, 2002
William S. Seidel, may be deemed a promoter within the meaning of the
Securities Act. He is a former officer and director of Organic Soils. He
resigned both positions, effective February 1, 2002.
Page 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the beneficial
ownership of our outstanding common stock as of the date of this prospectus of
each person or entity who is known to us to own beneficially more than five
percent of our common stock, each of the named officers, each of our directors
and all our officers and directors as a group.
Before Offering After Offering
--------------- --------------
Name of Beneficial Owner Number of Percentage Number of Percentage
Shares Shares
Ray L. Smith 1,990,000 86.52% 1,990,000 80.89%
Richard L. Strahl 20,000 0.87% 20,000 0.81%
Officers and Directors 2,010,000 87.39% 2,010,000 81.71%
as a group (2 people) --------- ------ --------- ------
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue up to 50,000,000 shares of common stock with
a par value of $.001. As of the date of this prospectus, there are 2,300,000
shares of common stock issued and outstanding.
The holders of common stock are entitled to one vote per share on each
matter submitted to a vote of stockholders. In the event of liquidation, holders
of common stock are entitled to share ratably in the distribution of assets
remaining after payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a majority of the
outstanding shares have the ability to elect all of the directors. Holders of
common stock have no preemptive or other rights to subscribe for shares. Holders
of common stock are entitled to such dividends as may be declared by the board
of directors out of funds legally available therefor. The outstanding common
stock is, and the common stock to be outstanding upon completion of this
offering will be, validly issued, fully paid and non-assessable.
We anticipate that we will retain all of our future earnings, if any,
for use in the operation and expansion of our business. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
INTEREST OF NAMED EXPERTS AND COUNSEL
Organic Soils' securities counsel, Peter R. Chernik, of San Francisco,
CA currently holds 10,000 shares of our common stock.
Page 8
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Organic Soils' charter provides that, to the fullest extent that
limitations on the liability of directors and officers are permitted by the
Nevada Revised Statutes, no director or officer of Organic Soils shall have any
liability to Organic Soils or its stockholders for monetary damages. The Nevada
Revised Statutes provide that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except: (1) to the extent that
it is provided that the person actually received an improper benefit or profit
in money, property or services, for the amount of the benefit or profit in
money, property or services actually received, or (2) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. Organic Soils'
charter and bylaws provide that Organic Soils shall indemnify and advance
expenses to its currently acting and its former directors to the fullest extent
permitted by the Nevada Revised Business Corporations Act and that Organic Soils
shall indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.
The charter and bylaws provide that we will indemnify our directors and
officers and may indemnify our employees or agents to the fullest extent
permitted by law against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with Alaska
Freightways. However, nothing in our charter or bylaws of Organic Soils protects
or indemnifies a director, officer, employee or agent against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. To the extent that a director has been successful in defense of any
proceeding, the Nevada Revised Statutes provide that he shall be indemnified
against reasonable expenses incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Organic
Soils pursuant to the foregoing provisions, or otherwise, Organic Soils has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
Background Information
The corporate existence of Organic Soils is due to APC Export, Inc.'s
need for a marketing research, marketing implementation and sales organization
to sell APC Export, Inc.'s products, although Organic Soils may sell products
from sources other than APC Export, Inc. The management of APC Export, Inc.
determined that a separate marketing organization would be easier to manage
fiscally.
Page 9
Initially, Organic Soils intends to coordinate the marketing of APC
Export, Inc.'s product in the United States and internationally to develop a
marketing strategy for APC Export, Inc. products. Organic Soils plans to then
organize a sales force to sell the products in various markets. After
establishing a base revenue from APC Export, Inc., Organic Soils would then work
to position itself to co-market other organic products.
APC Export, Inc., incorporated under the laws of the State of Nevada on
September 3, 1998, produces, processes and distributes fertilizer products that
influence all aspects of the agricultural industry. The key to APC Export,
Inc.'s products is the use of "humus" which is a rich black nutrient source
found in certain soils. These products contain approximately a 40% organic
content, which provides a solution to depleting soil conditions since the
microbiology of the organic content actually creates an inoculating effect in
which the soils nutritional make-up regrows and is restored rather than
depleted. APC Export, Inc. has three product categories: bulk, packaged and
specialty products. The bulk products have a minimum of one container or truck
trailer and sell for $80 per cubic yard FOB Seattle, Washington, i.e., the price
quoted by Organic Soils includes the freight on board costs to Seattle,
Washington. The packaged products are bagged and available on pallets for resale
to the customer and sell for $135 to $450 per cubic yard FOB Seattle. The
specialty products are for specialized applications which are sold in smaller
volumes but of greater concentrations and sell for $500 to $1,500 per cubic
yard. As of December 31, 2001, APC Export, Inc. had assets of $2,266,461,
liabilities of $1,133,912, retained earnings of $346,186 and shareholders'
equity of $1,132,549. As of December 31, 2001, APC Export, Inc. had revenues
from the sale of humus in the amount of $23,791. APC Export, Inc.'s total
revenues for the 12 months ending December 31, 2001 were $572,600.
General Plan of Operations
Organic Soils has entered into the Distribution/Marketing Agreement
("Agreement") with APC Export, Inc., a soil developer in Alaska. To date, APC
Export, Inc. is the only client with whom we have signed a distribution and
marketing agreement. Under the terms of this agreement both parties are to use
their best efforts to fulfill the following responsibilities:
Responsibilities of Organic Soils under Agreement. According to the
----------------------------------------------------
terms of this agreement, Organic Soils markets the soil provided by APC Export,
Inc. to households and the local greenhouse industry, as well as on the national
market. As production expands, Organic Soils will also export organic humus soil
(wholesale) to various international markets. Organic Soils' responsibilities
include, without limitation, the development of demand for and selling APC
Export, Inc.'s products, to determine which products should be developed, to
determine what research will be required to validate any product, to submit its
budget to APC Export, Inc. for any proposal, to organize, supervise and
consolidate research approved by APC Export, Inc., to supervise the research, to
analyze such research and to submit its recommendation to APC Export, Inc.
Responsibilities of APC Export, Inc. under Agreement. APC Export,
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Inc.'s responsibility includes its best efforts to fill all accepted orders for
Page 10
its products and to pay Organic Soils its 5% commission on gross sales. Organic
Soils is the exclusive distributor of APC Export, Inc. products in the United
States and receives a five percent (5%) commission on the gross sales of APC
Export, Inc.'s products. APC Export, Inc. retains the right to sell to the
United States, or its agencies and to any foreign government, or its agencies.
Either party to this Agreement may terminate the Agreement upon 120 days notice
to the other party. To date, Organic Soils' only source of revenue has been from
APC Export, Inc. under the Agreement.
Organic Soils believes there are three distinct markets for the soil
products: the retail consumer, retail stores and agricultural customers.
Initially Organic Soils intends to market its soil products to large retailers
and to large agricultural companies.
Retail Consumer and Retail Store Markets. Any retail store that offers
----------------------------------------
home and garden products is a potential market for Organic Soils' products as
well as our clients' products and we intend to implement a marketing campaign to
these stores. Organic Soils plans to deliver its brochures and its clients'
detailed brochures to these targeted markets in order to introduce the soil
products. Organic Soils anticipates that once these two markets become familiar
with the products and their advantages, Organic Soils will be able to capture a
greater market share. Organic Soils intends to advertise its products in home
and garden magazines and various agricultural journals. Many retail stores rent
their shelf space for qualified products. Organic Soils may rent shelf space and
market its products directly to the retail consumer.
Agricultural Markets. Organic food production and organic farming is
--------------------
growing and the demand for organic products has created a groundswell of
interest from farmers to grow organic products for greater income. Organic Soils
intends to penetrate the Agricultural Markets through key trade shows, trade
advertising and direct marketing programs.
Alaska is rich with both sphagnum moss and humus soil. APC develops
both types as part of its business. The growth strategy that has been developed
will embrace a competitive strategy that allows for market penetration. Organic
Soils has received various foreign inquiries about the export of humus. Organic
Soils believes it will have the opportunity to penetrate humus overseas markets.
We have pursued and received inquiries form foreign companies located in the
United Arab Emirates, Canada and Australia, among others. While these inquiries
have not resulted in the securing of any contracts or purchase orders, we
nevertheless maintain contact with these companies for future utilization. All
these inquiries remain in the preliminary phase, although sample APC Export,
Inc.'s products have been delivered for testing.
No acquisitions or mergers are contemplated by Organic Soils at this
time.
Page 11
Employees
Organic Soils does not presently have any full-time employees.
Marketing Strategy and Pricing
Organic Soils intends to derive revenues from providing consulting
services in the areas of packaging, organic product development and distribution
from marketing fees form various soil and soil enhancement developers, as well
as from the mark up on the products distributed by Organic Soils. Currently,
Organic Soils has only one distribution and marketing agreement in place. The
agreement is with APC Export, Inc.
Organic Soils complete marketing solution will allow companies which
are currently selling or planning to sell bulk soil products to increase their
profit margins. Our services would include assistance with package design,
package design with in-store trials, as well as an introduction to various
packaged soil distributors. We also intend to provide consulting services in the
area of market analysis, including determining potential profitability,
potential volume, and ease of entry into specified markets. These services would
be required for customers with distribution and marketing agreements.
Alaska is rich with both sphagnum moss and humus soil. APC Export,
Inc. develops both types as part of its business. The growth strategy that has
been developed will embrace a competitive strategy that allows for market
penetration. Organic Soils has received various foreign inquiries from
international distributors and soil brokers about the export of humus. The
growth of plants consumes humus and must be replaced with new humus to prevent
soil exhaustion. Loss of fertility in soil is caused by loss of humus. Countries
with large desert areas with limited supplies of water are in need of organic
content to improve soil fertility. Organic Soils believes it will have the
opportunity to penetrate humus overseas markets. We have pursued and received
inquiries form foreign companies located in the United Arab Emirates, Canada and
Australia, among others. While these inquiries have not resulted in the securing
of any contracts, purchase orders, plans, proposals, arrangements, or
understandings with any companies regarding the possibility of exporting humus,
we nevertheless maintain contact with these companies for future utilization.
All these inquiries remain in the preliminary phase, although sample APC Export,
Inc.'s products have been delivered for testing.
Organic Soils believes that it will be able to sell organic soil in
bulk to several international customers. Some of the countries that have markets
for such soil include Saudi Arabia, China, Japan, Thailand, Korea, and Israel.
Some of the United States potential bulk customers include US Golf Industry, S.
CA Flower Industry, California Wine Industry, New Mexico Agriculture, Washington
Agriculture, Idaho Agriculture, Texas Agriculture, Arizona Agriculture, Nevada
Agriculture, Texas Golf Industry, Arizona Golf Industry, Nevada Golf Industry,
Texas Landscape Industry, Arizona Landscape Industry, Nevada Landscape Industry
and Oregon Agriculture.
Page 12
No assurances can be given that Organic Soils will be economically
successful in its attempts to enter any of these markets.
Industry
The fertilizer, soil, and pesticide markets are multi-billion dollar
markets both within the United States and abroad. Organic Soils intends to
expand these markets because its products will be used to create agricultural
areas from regions that are not currently in the agricultural market.
According to an article by Anita Manning in USA TODAY dated May 22,
2000, although healthy crops depend on healthy soil, nearly 40% of the world's
land used for agriculture is seriously degraded. Evidence shows that soil
degradation has already reduced food production on about 16% of the world's
cropland.
Transportation Costs
The cost of hauling freight from Alaska to the 48 contiguous states is
between five to ten times less expensive than freight traveling to Alaska. This
anomaly is created by the nearly non-existent freight from Alaska, which
requires the freight traveling to Alaska to bear almost the entire cost of the
round trip. Any backhaul from Alaska is treated as a windfall and is typically
negotiated for as little as the cost of fuel to Seattle, Washington. Due to APC
Export, Inc.'s relationships with shippers since 1998, Organic Soils is able to
take only partial advantage of this anomaly. For Organic Soils, the shipping of
products from Alaska to the 48 contiguous states is the largest single cost
incurred by Organic Soils. Because of the initial small scale of business,
Organic Soils cannot significantly benefit from the potential of backhaul
savings generated by the lack of freight back to the contiguous states. The
windfall, if any, would mostly benefit the freight companies and would not
necessarily benefit Organic Soils. Should Organic Soils increase its volume of
business to the contiguous states, it could better control its presence in the
backhaul market from Alaska, which, in turn, would reduce its freight costs.
Until such time, however, the impact of the freight costs prohibits Organic
Soils from reducing the price of its products from current levels.
Once the market reaches a volume of 120,000 cubic yards annually, APC
Export, Inc. intends to barge raw product to the continguous states. This would
reduce the shipping costs by 30% to 50%. Presently all shipping costs are
absorbed by APC Export, Inc., which calculates the end destination shipping
costs as part of its production cost and passes this cost onto the purchaser of
the product. Organic Soils, in turn, receives a five percent (5%) commission
from APC Export, Inc., once it receives payment from the purchaser of the
product.
Competition
Organic Soils will face competition from many other soil and soil
products distributors, some of which have longer operating histories and
substantially greater resources. The management believes that by offering highly
effective foliar and soil foodweb products that provide a consistent and
predictable result, and by solving agriculture problems naturally, Organic Soils
intends to penetrate this competitive market. However, no assurances can be
given that Organic Soils will be economically successful in its attempts to
enter these markets.
Page 13
Organic Soils will not only compete in a local market, but will face
competition from foreign soil distributors, including Canadian distributors,
which have penetrated these markets for several years. Canada has, however, been
unable to provide the large bulk quantities demanded by international soil
enhancement markets. This market has been available to those that can produce
massive quantities. By establishing strategic alliance with APC Export, Inc.,
Organic Soils may become one of the first distributors of the rich Alaskan soil.
In markets for traditional soil and soil products, Organic Soils
competes against well-established distributors of such products. Many of these
competitors have substantially greater financial, technical and personnel
resources than Organic Soils and include such companies as T & J Enterprises,
Supersoil, Western Organics, and WetSoil. Organic Soils competes on the basis of
price, name recognition, convenience and customer service with distributors of
traditional soil products. There can be no assurance that we will be able to
compete successfully or that the competitive pressures faced by us, including
those described, will not have a material adverse effect on our business,
results of operations and financial condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
When used in this discussion, the words "believes", "anticipates",
"expects" and similar expressions are intended to identify forward-looking
statements. Actual results could be substantially different from those projected
due to risks and uncertainties. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. As of March 31, 2002, Organic Soils had revenues of $1,768.
Results of Operations
We have commenced only limited operations and are considered a
development stage company. As of March 31, 2002 we have realized $272,813 net
losses and have not yet established profitable operations. To date Organic Soils
has not relied on any revenues for funding its activities. These factors raise
substantial doubts about our ability to continue as a going concern. The
proceeds from this offering are needed so we can continue operations and
implement our growth and marketing plan.
Liquidity and Capital Resources
Receiving the maximum amount of the offering will enable us to
implement one of two operating strategies: (1) our general plan of operations,
pursue a more aggressive marketing plan, an operate with sufficient capital for
twelve months; or (2) our general plan of operations and operate with sufficient
capital for eighteen months. We believe that either strategy will allow us to
generate enough revenues to hire up to 10 additional employees by the end of our
first twelve months (after receipt of proceeds of this offering) of operations.
These additional employees may serve in any of the following capacities:
marketing, promotion or administration. We do not intend to use the proceeds
from this offering for salaries for existing officers and directors.
Page 14
If 50% or more of the offering is sold, we believe it will enable us to
implement our general plan or operations and we will be able to generate enough
revenues for working capital and to hire up to 5 additional employees by the end
of our first twelve months (after receipt of the proceeds of this offering) of
operations. Whether we can hire additional employees and their number will
depend on the amount of revenues and on the amount of proceeds raised in this
offering.
If 25% of the offering is sold, we believe it will enable us to pay our
offering expenses and develop packaging. We will be limited in achieving our
planned operations and may have to seek additional financing. There is no
assurance that additional sources of financing will be available at all or at a
reasonable cost. We may not able to hire any additional employees.
If less than 25% of the offering is sold, we will have to seek other
sources of financing or we will be severely limited in achieving our planned
operations. There is no assurance that additional sources of financing will be
available at all or at a reasonable cost. We may not able to hire any additional
employees.
We do not contemplate conducting any product research and development
within the twelve-month period following the effective date of this prospectus.
Accounts Receivable
Organic Soils received $2,500 of the $5,768 more than 90 days past due
invoice from Consentino Winery on February 8, 2002. Its stated policy is to
charge 12% interest per annum on 30 day past due accounts. Organic Soils has
been in close communication with the customer who has agreed it to use the
inventory in lieu of interest. The inventory is used as samples for other
parties in the area that have any interest in registrant's products. Organic
Soils' policy is to charge interest, continue to communicate with the customer
and re-invoice quarterly. As long as registrant maintains reasonable contact and
is assured that non-payment is a result of temporary inability to provide funds,
the account will not be turned over to a collection agency. If any such customer
does not respond, Organic Soils will turn out the account to a collection agency
after 8 months. To date Organic Soils has continued to work satisfactorily with
Consentino to collect this receivable, and anticipates to collect it full by
July 30, 2002.
DESCRIPTION OF PROPERTY
Presently, Organic Soils does not own any equipment or properties.
Currently, Organic Soils rents its office located at 300 West 54th Avenue, Suite
200, Anchorage, AK 99518 and pays approximately $3,000 a year in rent. Organic
Soils will expand its offices and potentially move into a larger space as
Organic Soils' business expands.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ending December 31, 2001 the Company borrowed from a
company controlled by our shareholder Robert Strahl, a total of 15,600 in short
term borrowings for working capital purposes. The terms of the borrowings are
for one year notes carrying an interest rate of 12%. Two thousand of the
borrowings were paid off during the year. We do not intend to use the proceeds
from this offering to pay off this debt.
Page 15
On January 20, 2000 Organic Soils entered into an agreement with
Melissa DeAnzo to provide consulting services to Organic Soils for a period of
12 months. The services included setting up corporation in the State of Nevada,
maintaining bookkeeping records of all payable and receivables for the company,
assisting with maintaining the shareholder list information and other
information needed, assisting in mailing out the newsletters to the
shareholder's, and any other secretarial services needed for the company. The
contract calls for a total amount of up to $20,000 to be paid to the founder. As
of the period of ending December 31, 2000 there was a total of $15,200 paid
against the contract. Also, the founder was paid an additional $1,680 for
certain copying and other costs incurred on behalf of Organic Soils.
On January 4, 2000, Organic Soils entered into a Distributor/Marketing
Agreement with APC Export, Inc., wherein Richard L. Strahl executed the
Agreement on behalf of APC Export, Inc., as its President, and William Seidel
executed the Agreement on behalf of Organic Soils, as its Vice President. Mr.
Strahl is also a director and officer of Organic Soils and Mr. Seidel was also a
former director and officer of APC Export, Inc. This Agreement provides that
Organic Soils, as a distributor of APC Export, Inc.'s products, will receive a
five percent (5%) commission on gross revenues received from a purchaser of APC
Export, Inc. products. As of the date of this prospectus the revenues related to
the agreement with APC Export, Inc. are $1,768.
We entered into an agreement with our founders, Natalie Shahvaran, Ray
L. Smith and Richard L. Strahl to provide certain consulting services in regard
to the organization and formation of Organic Soils, for which they were paid
$18,808. Ms. Shahvaran's services included providing research materials for the
business plan, providing research materials for Organic Soils' Private Placement
Memorandum, as well as preparing a draft copy of the marketing plan. Mr. Smith
and Mr. Strahl were providing general secretarial and bookkeeping services, as
well as completing Organic Soils' business and marketing Plans. No formal
agreement was executed and no additional services are anticipated to be
performed for Organic Soils in this regard as of the date of this prospectus.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
We have approximately 70 shareholders. Currently, there is no public
trading market for our securities and there can be no assurance that any market
will develop. If a market develops for our securities, it will likely be
limited, sporadic and highly volatile.
Presently, we are privately owned. This is our initial public offering.
Most initial public offerings are underwritten by a registered broker-dealer
firm or an underwriting group. These underwriters generally will act as market
makers in the stock of a company they underwrite to help insure a public market
for the stock. This offering is to be sold by our officers and directors. We
have no commitment from any brokers to sell shares in this offering. As a
result, we will not have the typical broker public market interest normally
generated with an initial public offering. Lack of a market for shares of our
stock could adversely affect a shareholder in the event a shareholder desires to
sell his shares. Organic Soils does anticipate a market maker filing for listing
on the Over the Counter Bulletin Board should the offering succeed.
Currently the Shares are subject to Rule 15g-1 through Rule 15g-9,
which provides, generally, that for as long as the bid price for the Shares is
less than $5.00, they will be considered low priced securities under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
Page 16
participating in transactions in low priced securities must first deliver a risk
disclosure document which describes the risks associated with such stocks, the
broker-dealer's duties, the customer's rights and remedies, and certain market
and other information, and make a suitability determination approving the
customer for low priced stock transactions based on the customer's financial
situation, investment experience and objectives. Broker-dealers must also
disclose these restrictions in writing to the customer and obtain specific
written consent of the customer, and provide monthly account statements to the
customer. Under certain circumstances, the purchaser may enjoy the right to
rescind the transaction within a certain period of time. Consequently, so long
as the common stock is a designated security under the Rule, the ability of
broker-dealers to effect certain trades may be affected adversely, thereby
impeding the development of a meaningful market in the common stock. The likely
effect of these restrictions will be a decrease in the willingness of
broker-dealers to make a market in the stock, decreased liquidity of the stock
and increased transaction costs for sales and purchases of the stock as compared
to other securities.
Dividend Policy
Organic Soils has never paid a dividend and does not anticipate paying
any dividends in the foreseeable future. It is the present policy of the Board
of Directors to retain Organic Soils' earnings, if any, for the development of
Organic Soils' business.
EXECUTIVE COMPENSATION
Organic Soils does not currently have any employment agreements with
its directors, officers, employees or key personnel. Boad members do not receive
any compensation or any reimbursement of expenses incurred in connection with
attending board meetings. However, Organic Soils reserves the right to pay
consulting fees to its board members and its officers for the time and services
they provide to Organic Soils.
Page 17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
As of the December 31, 2001, the executive compensation is as follows:
Annual Compensation Long-term Compensation
------------------- ----------------------
Restricted All
Other Stock Other
Name and Principal Fiscal Salary Bonus Compenation Awards Compensation
Position Year $ $ $ $ $
--------------------------------------------------------------------------------------
Ray L. Smith
President & Director 2001 0 0 $2,000(1) 0 0
Richard L. Strahl
COO & Director 2001 0 0 0 0 0
(1) paid to Mr. Smith in his capacity as a consultant.
The officers will not receive a salary until such time as we generate
sufficient revenue, determined by the board of directors, to justify payment of
salaries. We currently do not have any employment agreements in place for
officers or directors. We do not intend to compensate our directors for services
other than for incidental expenses.
PLAN OF DISTRIBUTION
We are offering the securities for sale through Ray Smith and Richard
Strahl, our officers and directors. We intend to engage the services of a
registered broker or dealer in each state that requires that a registered broker
or dealer act on behalf of a company selling its own securities in that state.
The offering is a "best-efforts" offering and will be held open for 120 days
following the effective date of the prospectus. No underwriter has been engaged
and no commitment to provide the funds has been made. A subscription agreement
will be required to be submitted by all purchasers of the shares. The offering
is for up to $240,000 at a price of $1.50 per share. We may receive $240,000 or
$0 depending on the amount of shares offered hereby have been sold to investors.
Page 18
Solicitation for purchase of our shares will be made only by means of
this prospectus and communications with our officers and directors who are
employed to perform substantial duties unrelated to this offering, who will not
receive any commission or compensation for their efforts, and who are not
associated with a broker or dealer. Our officers and directors will not register
as a broker-dealer pursuant to Section 15 of the Securities Exchange Act of
1934, in reliance upon Rule 3a4-1, which sets forth those conditions under which
a person associated with an issuer may participate in the offering of the
issuer's securities and not be deemed to be a broker-dealer. None of the
officers or directors of Organic Soils will purchase the securities offered
hereby.
We do not currently have any sales arrangements with broker/dealers and
when we enter into such an arrangement, we will file and post effective
amendment to disclose such an arrangement. In addition, such broker/dealer would
be required to obtain a 'no objection' position from NASD on the terms of
compensation.
Investing in our stock is very risky and you should be able to bear a
complete loss of your investment.
DESCRIPTION OF THE SECURITIES
Common Stock
We are authorized to issue up to 50,000,000 shares of common stock with
a par value of $.001. As of the date of this prospectus, there are 2,300,000
shares of common stock issued and outstanding.
The holders of common stock are entitled to one vote per share on each
matter submitted to a vote of stockholders. In the event of liquidation, holders
of common stock are entitled to share ratably in the distribution of assets
remaining after payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a majority of the
outstanding shares have the ability to elect all of the directors. Holders of
common stock have no preemptive or other rights to subscribe for shares. Holders
of common stock are entitled to such dividends as may be declared by the board
of directors out of funds legally available therefor. The outstanding common
stock is, and the common stock to be outstanding upon completion of this
offering will be, validly issued, fully paid and non-assessable.
We anticipate that we will retain all of our future earnings, if any,
for use in the operation and expansion of our business. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
Page 19
Transfer Agent
First American Stock Transfer, 17717 E. Bell Road, Suite 2, Phoenix,
Arizona 85022, (602) 485-1346, is our transfer agent.
SHARES AVAILABLE FOR FUTURE SALE
As of the date of this prospectus, there are 2,300,000 shares of our
common stock issued and outstanding. Upon the effectiveness of this registration
statement, 160,000 shares will be freely tradable if the maximum number of
shares is sold. The remaining 2,300,000 shares of common stock will be subject
to the resale provisions of Rule 144. Sales of shares of common stock in the
public markets may have an adverse effect on prevailing market prices for the
common stock.
Rule 144 governs resale of "restricted securities" for the account of
any person (other than an issuer), and restricted and unrestricted securities
for the account of an "affiliate of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates which were not issued or sold in connection with a public offering
registered under the Securities Act. An affiliate of the issuer is any person
who directly or indirectly controls, is controlled by, or is under common
control with the issuer. Affiliates of the company may include its directors,
executive officers, and person directly or indirectly owning 10% or more of the
outstanding common stock. Under Rule 144 unregistered resales of restricted
common stock cannot be made until it has been held for one year from the later
of its acquisition from the company or an affiliate of the company. Thereafter,
shares of common stock may be resold without registration subject to Rule 144's
volume limitation, aggregation, broker transaction, notice filing requirements,
and requirements concerning publicly available information about the company
("Applicable Requirements"). Resales by the company's affiliates of restricted
and unrestricted common stock are subject to the Applicable Requirements. The
volume limitations provide that a person (or persons who must aggregate their
sales) cannot, within any three-month period, sell more that the greater of one
percent of the then outstanding shares, or the average weekly reported trading
volume during the four calendar weeks preceding each such sale. A non-affiliate
may resell restricted common stock which has been held for two years free of the
Applicable Requirements.
EXPERTS
The financial statements of Organic Soils appearing in this Prospectus
and Registration Statement were audited as of December 31, 2000 and December 31,
2001 by Hawkins Accounting as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of said firm as experts in accounting and auditing. Hawkins Accounting also
reviewed the financial statement for the period ended March 31, 2002.
Page 20
AVAILABLE INFORMATION
Organic Soils has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933 for the
common stock offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. The Registration Statement, including the attached
exhibits and schedules, as well as all future reports and other information
filed by Organic Soils with the Securities and Exchange Commission ("SEC"), may
be inspected without charge at the Public Reference Room of the SEC's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of these materials can also be obtained at prescribed rates from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Electronic filings made through the Electronic Data
Gathering Analysis and Retrieval System are also publicly available through the
SEC's Web site.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. Such information will be available for
inspection and copying at the SEC's public reference rooms and the Web site of
the SEC referred to above.
Page 21
Hawkins Accounting
17415 Monterey St. Ste 200
Morgan Hill, CA 95037
To the Board of Directors and Shareholders
Organic Soils.com, Inc.
Monterey, California
Independent Accountant's Report
I have reviewed the accompanying consolidated balance sheets of Organic
Soils.com, Inc. as of March 31, 2002 and 2001 and the related statement of
operations stockholders' equity and the statement of cash flows for the three
months then ended. All information included in these financial statements is the
representation of the management of Organic Soils.com, Inc.
I conducted my review in accordance with standards established by the American
Institute of Public Accountants. A review of interim financial information
consists principally of applying analytical procedures applied to financial data
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
I do not express such as opinion.
The accumulated deficit during development stage is $272,813.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements and the cumulative results of
operations and cash flows in order for them to be in conformity with generally
accepted accounting principles of the Unites States of America.
June 27, 2002
F-1
ORGANIC SOILS.COM, INC
(A Development Stage Company)
BALANCE SHEET
March 31, 2002 AND 2001
ASSETS
- ------
Current assets
Cash in bank $ 1,876 $ 10,222
Accounts Receivable 3,358
------------- -----------
Total current assets
Total assets $ 5,234 $ 10,222
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
Accounts payable $ 7,080 $ 9,433
Accrued interest 1,317
Notes payable 17,600 1,000
------------- -----------
Total liabilities 25,997 10,433
SHAREHOLDERS' EQUITY
- --------------------
Common stock, 50,000,000 shares authorized
at $.001 par 2,300,000 issued and outstanding 2,300 2,300
Paid in capital 249,750 249,750
Deficit accumulated during development stage (272,813) (252,261)
------------- -----------
Total shareholders' equity (20,763) (211)
------------- -----------
Total liabilities and shareholders' equity $ 5,234 $ 10,222
============= ===========
The accompanying notes are an integral part of the financial statements
F-2
ORGANIC SOILS.COM
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the three Months Ended March 31, 2002 and 2001
Deficit
Accumulated
During
Development
2002 2001 Stage
------------ ------------ -------------
Revenue 0 0 $ 1,768
Expenses
Bank charges 14 9 344
Consulting fees 3,766 17,113 120,358
Travel and entertainment 1,778 8,511
Office Expenses 20 2,177 5,945
Start up costs 0 1,655
Promotion 0 864
License and permits 286 0 400
Miscellaneous 211 211
Rent 1,200 5,116
Options granted for services 0 99,000
Stock issued for legal services 0 10,000
Money raising costs 0 17,950
Telephone 788 2,669
------------ ------------ -------------
Total expenses 4,086 23,276 273,023
------------ ------------ -------------
Loss from operations (4,086) (23,276) (271,255)
Other income and (expense)
Interest income 12 0 69
Interest expense (528) 0 (1,627)
------------ ------------ -------------
Total other income and (expense) (516) 0 (1,558)
------------ ------------ -------------
Net loss $ (4,602) $ (23,276) $ (272,813)
============ ============ =============
Loss per share
of common stock $ (0.001) $ (0.01) $ (0.12)
============ ============ =============
Weighted average of
shares outstanding 2,300,000 2,300,000 2,300,000
============ ============ =============
The accompanying notes are an integral part of the financial statements
F-3
ORGANIC SOILS.COM, INC
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
For the three Months Ended March 31, 2002 and 2001
Deficit
Accumulated
During
Paid in Development
Shares Amount Capital Stage Total
-------------- -------------- --------------- ------------- -------------
December 31, 2000 2,267,300 $ 2,267 $ 217,083 $ (228,985) $ (9,635)
January, 2001 32,700 33 32,667 32,700
Net (loss) (23,276) (23,276)
-------------- -------------- --------------- ------------- -------------
2,300,000 $ 2,300 $ 249,750 $ (252,261) $ -211
============== ============== =============== ============= =============
December 31, 2001 2,300,000 $ 2,300 $ 249,750 $ (268,211) $ (16,161)
Net (loss) (4,602) (4,602)
-------------- -------------- --------------- ------------- -------------
2,300,000 $ 2,300 $ 249,750 $ (272,813) $ (20,763)
============== ============== =============== ============== =============
The accompanying notes are an integral part of the financial statements
F-4
ORGANIC SOILS.COM, INC
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
Deficit
Accumulated
During
Development
2002 2001 Stage
------------ ------------ -------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (4,602) $ (23,276) (272,813)
Adjustment to reconcile net
income to net cash
provided by operating activities
Decrease if accounts receivable
Options for legal expenses 0 10,000
Options for granted services 0 99,000
(Increase)Decrease in accounts receivable 5,130 (3,358)
Increase (Decrease) in current liabilities (3,456) (828) 8,397
------------ ------------ -------------
NET CASH PROVIDED
BY OPERATING ACTIVITIES (2,928) (24,104) (158,774)
FINANCING ACTIVITIES
Short term borrowings 4,000 1,000 17,600
Payment of loans
Sale of common stock 32,700 143,050
------------ ------------ -------------
NET CASH REALIZED
FROM FINANCING ACTIVITIES 4,000 33,700 160,650
------------ ------------ -------------
INCREASE IN CASH
AND CASH EQUIVALENTS
1,072 9,596 1,876
Cash and Equivalents
at the beginning of period 804 626 0
------------ ------------ -------------
Cash and Equivalents
at the end of period $ 1,876 $ 10,222 $ 1,876
============ ============ =============
Supplemental disclosures to the
statement of cash flows:
Interest paid during the year $ 0 $ 0 $ 300
============ ============ =============
The accompanying notes are an integral part of the financial statements
F-5
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2002 and 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the business - Organic Soils.Com, Inc. was formed to perform
------------------------------------------
marketing and distribution services. The Company was incorporated
under the laws of the State of Nevada on January 19, 2000.
Development Stage Company - Although the Company had sales during the
--------------------------
year, it is a development stage company, as defined in the Financial
Accounting Standards Board No. 7. The Company is devoting
substantially all of its present efforts in funding the company and
attracting investors for major expansion. The only material sale was
to one customer as more of a promotion sale.
Pervasiveness of estimates - 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 and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents - For financial statement presentation
---------------------------
purposes, the Company considers all short-term investments with a
maturity date of three months or less to be cash equivalents.
Equipment - Equipment is recorded at cost. Maintenance and repairs are
---------
expensed as incurred; major renewals and betterments are capitalized.
Income taxes - Income taxes are provided for the tax effects of
-------------
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the recorded book basis and tax basis of assets and
liabilities for financial and income tax reporting. The deferred tax
assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset
future taxable income and tax credits that are available to offset
future federal income taxes.
F-6
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2002 and 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't)
Stock Options - Stock that is issued for services rendered are
--------------
recorded at the fair value of the stock in the year that the stock is
given and recorded as an expense in the same year.
Intangible Assets - Are recorded at cost and amortized over 5 years
------------------
beginning in fiscal year 2001.
Revenue Recognition - The Company receives a 5% commission from an
--------------------
affiliated company for the sale of the affiliated company's soil.
Revenue is recognized at the net commission rate.
Material adjustments - Management is not aware of any adjustments that
--------------------
need to be made in order for these financial statements to be in
conformity with generally accepted accounting principles.
Earnings per share - Basic earnings per share amounts are computed by
------------------
dividing the net income by the weighted average number of common
shares outstanding.
NOTE 2 COMMON STOCK
Common stock - During the period ended April 30, 2001 pursuant to an
------------
exemption under Rule 504 of Regulation D of the Securities Act of
1933, as amended (the Act), the Company sold solely to accredited
and/or sophisticated investors, its common stock. Each share has a par
value of $.001 and offered to the potential investors for $1.00 per
share. There were ten different transactions to different investors
raising a total of $32,700 during the year period ended March 31,
2001. The Company intends to sell 108,300 more shares under this
offering.
Founder's stock - At it's organizational meeting, the Company voted to
---------------
offer to the founders of the Company the opportunity to buy stock at
the par value. As of March 31, 2001 2,050,000 shares were issued for
the total amount of $2,050. One founder has yet to exercise the
founder's shares as of March 31, 2002.
F-7
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2002 and 2001
NOTE 3 RELATED PARTY TRANSACTIONS
On January 20, 2000 the Company entered into an agreement with one of
the founders to provide services in locating investors for the
Company. The contract calls for a total amount of $20,000 to be paid
to the founder. As of the period ending March 31 2002 and, 2001there
were no monies paid for this service but there was a total of $15,200
paid against the contract during the development stage. Also, the
founder was paid an additional amount of $520 for the three months
ended March 31, 2001 and a total of $2,200 for certain coping and
other costs incurred on behalf of the Company from date of inception.
Various founders of the Company have performed consulting services for
which the Company has paid them consulting fees as voted on during the
organization meeting. For the period ending March 30, 2001 this amount
paid to the founders amounted to $7,725 and a total of $26,535 for the
development stage. Services include clerical support, rent; office
supplies legal services, etc. No monies were paid for the period
ending March 31, 2002.
Two of the founders of the Company are the majority shareholders of
the company's current major customer.
NOTE 4 INCOME TAXES
The benefit for income taxes from operations consisted of the
following components. Current tax benefit of $45,000 resulting from a
net loss before income taxes, and deferred tax expense $45,000
resulting from the valuation allowance recorded against the deferred
tax asset resulting from the net operating loss. The change in the
valuation allowance for the period ending March 31, 2002 was $45,000
carryforward will expire 2021.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset
will be realized. At the time the allowance will either be increased
or reduced; Reduction could result in the complete elimination of the
allowance if positive evidence indicates that the value of the
deferred tax asset is no longer required. It is management's position
that the deferred tax asset be recorded when there is positive
evidence it will be realized.
F-8
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2002 and 2001
NOTE 5 STOCK OPTIONS
On January 20, 2000 the Board of Directors voted to issue stock
options to one individual. The options are to be exercised at a price
of $.01 per share. There were a total of 100,000 options to be
exercised. All options were exercised on April 4, 2000. The options
were granted for services rendered. The financial statements request a
compensation expense of $99,000 for the difference between the
exercise price and the fair value of the options.
NOTE 6 GOING CONCERN
As of March 31, 2002 the Company had a net loss since inception, which
raises substantial doubt about its ability to continue as a going
concern. Management entered into an agreement with a company that is
controlled by some of the founders of the Company to provide marketing
and distribution services for the company's product, which is humus
soil.
The Company's ability to continue as a going concern is dependent upon
successful public offering and ultimately achieving profitable
operations. There is no assurance that the Company will be successful
in its efforts to raise additional proceeds or achieve profitable
operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
F-9
To the Board of Directors and Shareholders
Organic Soils.Com, Inc.
Monterey, California
Independent Auditor's Report
I have audited the balance sheet of Organic Soils.Com, Inc. (a development stage
company) as of December 31, 2001 and 2000 and the related statements of
operations, stockholders' equity and cash flows for the years ending December
31, 2001 and 2000. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides reasonable basis for my
opinion.
In my opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Organic
Soils.Com, Inc as of December 31, 2001 and 2000, the results of operations the
cash flows and the cumulative results of operations and cumulative cash flows
for the years ended December 31, 2001 and 2000 in conformity with generally
accepted accounting principles.
The deficit accumulated during the development stage of the Company is $268,211.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 6 to the financial
statements, the Company has incurred net losses since inception, which raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
"Hawkins Accounting"
January 25, 2001
F-10
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 2001 AND 2000
ASSETS
- ------
Current assets
Cash in bank $ 804 626
Accounts receivable 8,488 0
-------------------------
Total assets $ 9,292 626
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
- -----------
Accounts payable $ 11,064 10,261
Accrued interest 789 0
Notes payable 13,600 0
-------------------------
Total liabilities 25,453 10,261
SHAREHOLDERS' EQUITY
- --------------------
Common stock, 50,000,000 shares authorized
at $.001 par 2,300,000 issued and outstanding. 2,300 2,267
Paid in capital 249,750 217,083
Deficit accumulated during development stage (268,211) (228,985)
-------------------------
Total shareholders' equity (16,161) (9,635)
-------------------------
Total liabilities and shareholders' equity $ 9,292 626
=========================
The accompanying notes are an integral part of these financial statements
F-11
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Deficit
Accumulated
During
Development
2001 2000 Stage
----------- ----------- -----------
Revenue $ 621 $ 1,147 $ 1,768
Expenses
Bank charges 218 112 330
Consulting fees 27,415 89,177 116,592
Travel and entertainment 4,414 4,097 8,511
Office expenses 2,539 3,386 5,925
Start up costs 0 1,655 1,655
Promotion 487 377 864
License and permits 0 114 114
Miscellaneous 122 89 211
Rent 2,077 3,039 5,116
Options granted for services 0 99,000 99,000
Stock issued for legal services 0 10,000 10,000
Money raising costs 0 17,950 17,950
Telephone 1,787 882 2,669
----------- ----------- -----------
Total expenses 39,059 229,877 268,936
----------- ----------- -----------
Loss from operations (38,438) (228,730) (267,168)
Other income and (expense)
Interest income 11 45 56
Interest expense (799) (300) (1,099)
----------- ----------- -----------
Total other income and (expense) (788) (255) (1,043)
----------- ----------- -----------
Net loss $ (39,226) $ (228,985) $ (268,211)
=========== =========== ===========
Loss per share
of common stock $ (0.02) $ (0.51) $ (0.11)
=========== =========== ===========
Weighted average of shares
outstanding 2,300,000 449,900 2,347,275
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
F-12
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Deficit
Accumulated
During
Paid in Development
Shares Amount Capital Stage Total
--------------- ------------ ------------- ------------------ -------------
February 104,700 $ 105 $ 24,675 $ $ 24,780
March 9,500 10 9,490 9,500
April 103,000 103 102,897 103,000
May 3,500 3 3,497 3,500
June 5,100 5 5,095 5,100
July 5,500 5 5,495 5,500
August 5,000 5 4,995 5,000
September 30,000 30 29,970 30,000
October 0 0
November 12,500 12 12,488 12,500
December 1,988,500 1,989 18,481 20,470
Net loss (228,985) (228,985)
--------------- ------------ ------------- ------------------ -------------
December, 2000 2,267,300 2,267 217,083 (228,985) (9,635)
January, 2001 32,700 33 32,667 32,700
Net loss (39,226) (39,226)
------------------ -------------
2,300,000 $ 2,300 $ 249,750 $ (268,211) $ (16,161)
=============== ============ ============= ================== =============
The accompanying notes are an integral part of these financial statements
F-13
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Deficit
Accumulated
During
Development
2001 2000 Stage
---------------- ---------------- ----------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (39,226) $ (228,985) $ (268,211)
Adjustments to reconcile net
income to net cash
provided by operating activities
Options for legal expenses 0 10,000 10,000
Options granted for services 0 99,000 99,000
Increase in accounts receivable (8,488) 0 (8,488)
Increase in accrued interest 789 0 789
Increase in current liabilities 803 10,261 11,064
---------------- ---------------- ----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (46,122) (109,724) (155,846)
INVESTING ACTIVITIES
FINANCING ACTIVITIES
Sale of common stock 32,700 110,350 143,050
Short term borrowings 15,600 0 15,600
Payments on short term borrowings (2,000) 0 (2,000)
---------------- ---------------- ----------------
NET CASH REALIZED FROM
FINANCING ACTIVITIES 46,300 110,350 156,650
---------------- ---------------- ----------------
INCREASE ON CASH AND CASH
EQUIVALENTS 178 626 804
Cash at the beginning of the period 626 0 0
---------------- ---------------- ----------------
CASH AT THE END OF THE PERIOD $ 804 $ 626 $ 804
================ ================ ================
Supplemental disclosures to the
statement of cash flows:
Interest paid during the year $ 10 $ 300 300
================ ================ ================
The accompanying notes are an integral part of these financial statements
F-14
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2001 AND 2000
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the business - Organic Soils.Com, Inc. was formed to perform
-----------------------------------------
marketing and distribution services. The Company was incorporated
under the laws of the State of Nevada on January 19, 2000.
Development Stage Company - Although the Company had sales during the
--------------------------
year, it is a development stage company, as defined in the Financial
Accounting Standards Board No. 7. The Company is devoting
substantially all of its present efforts in funding the company and
attracting investors for major expansion. The only material sale was
to one customer as more of a promotion sale.
Pervasiveness of estimates - 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 and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents - For financial statement presentation
---------------------------
purposes, the Company considers all short term investments with a
maturity date of three months or less to be cash equivalents.
Equipment - Equipment is recorded at cost. Maintenance and repairs
---------
are expensed as incurred; major renewals and betterments are
capitalized.
Income taxes - Income taxes are provided for the tax effects of
-------------
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the recorded book basis and tax basis of assets and
liabilities for financial and income tax reporting. The deferred tax
assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset
future taxable income and tax credits that are available to offset
future federal income taxes.
Stock Options -Stock that is issued for services rendered are recorded
-------------
at the fair value of the stock in the year that the stock is given and
recorded as an expense in the same year.
F-15
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2001 AND 2000
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't)
Intangible Assets - Are recorded at cost and amortized over 5 years
------------------
beginning in fiscal year 2001.
Revenue Recognition - Revenue is recognized with the marketing and the
-------------------
distribution of soil of the Company's customers. Currently the
commission rate is 5% of the gross sales of the Company's customers.
NOTE 2 COMMON STOCK
Common stock - During the period ended December 31, 2000, pursuant to
------------
an exemption under Rule 504 of Regulation D of the Securities Act of
1933, as amended (the Act), the Company sold solely to accredited
and/or sophisticated investors, its common stock. Each share has a par
value of $.001 and offered to the potential investors for $1.00 per
share. During the year ended December 31, 2001, the company sold to 12
different investors 32,700 shares of stock raising $32,700. There were
fifty-nine different transactions to different investors raising a
total of $107,300 during the year period ended December 31, 2000.
Founder's stock - At it's organizational meeting, the Company voted to
---------------
offer to the founders of the Company the opportunity to buy stock at
the par value. As of December 31, 2000 2,050,000 shares were issued
for the total amount of $2,050. One founder has yet to exercise the
founder's shares as of December 31, 2000.
NOTE 3 RELATED PARTY TRANSACTIONS
During the year ending December 31, 2001 the Company borrowed from
related parties, a total of 15,600 in short term borrowings for
working capital purposes. The terms of the borrowings are for one year
notes carrying an interest rate of 12%. Two thousand of the borrowings
were paid off during the year.
On January 20, 2000 the Company entered into an agreement with one of
the founders to provide services in locating investors for the
Company. The contract calls for a total amount of $20,000 to be paid
to the founder. As of the period ending December 31, 2000 there was a
total of $15,200 was paid against the contract. Also, the founder was
paid an additional amount of $1,680 for certain coping and other costs
incurred on behalf of the Company. No monies were paid during the year
December 31, 2001.
F-16
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2001 AND 2000
NOTE 3 RELATED PARTY TRANSACTIONS (Con't)
Various founders of the Company have performed consulting services for
which the Company has paid them consulting fees as voted on during the
organization meeting. During the period ending December 31, 2001 the
amount was $15,425. For the period ending December 31, 2000 this
amount paid to the founders amounted to $18,808. Services include
clerical support, rent, office supplies legal services, etc.
Two of the founders of the Company are the majority shareholders of
the company's current major customer. The Company purchases the soil
from the Company controlled by these founders.
NOTE 4 INCOME TAXES
The benefit for income taxes from operations consisted of the
following components. Current tax benefit of $94,500 resulting from a
net loss before income taxes, and deferred tax expense $94,500
resulting from the valuation allowance recorded against the deferred
tax asset resulting from the net operating loss. The change in the
valuation allowance for the period ending December 31, 2000 was
$94,500 carryforward will expire 2020. The valuation allowance will be
evaluated at the end of each year, considering positive and negative
evidence about whether the asset will be realized. At the time the
allowance will either be increased or reduced; Reduction could result
in the complete elimination of the allowance if positive evidence
indicates that the value of the deferred tax asset is no longer
required. It is management's position that the deferred tax asset be
recorded when there is positive evidence it will be realized.
NOTE 5 STOCK OPTIONS
On January 20, 2000 the Board of Directors voted to issue stock
options to one individual. The options are to be exercised at a price
of $.01 per share. There were a total of 100,000 options to be
exercised. All options were exercised on April 4, 2000. The options
were granted for services rendered. The financial statements request a
compensation expense of $99,000 for the difference between the
exercise price and the fair value of the options.
F-17
ORGANIC SOILS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2001 AND 2000
NOTE 6 GOING CONCERN
As of December 31, 2001, the Company had a net loss since inception,
which raises substantial doubt about its ability to continue as a
going concern.
Management entered into an agreement with a company that is controlled
by some of the founders of the Company to provide marketing and
distribution services for the company's product which is humus soil.
The Company's ability to continue as a going concern is dependent upon
successful public offering and ultimately achieving profitable
operations. There is no assurance that the Company will be successful
in its efforts to raise additional proceeds or achieve profitable
operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
F-18
==================================== =========================
Until _____________, 2001, all dealers that
effect transactions in these securities, whether
or not participating in this offering, may be
required to deliver a prospectus. This is in No Minimum
addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and $240,000 Maximum
with respect to their unsold allotments or
subscriptions.
--------------------------------
Organic Soils.Com, Inc.
No Minimum Shares
160,000 Shares Maximum
Common Stock
$.001 Par Value
---------------------
PROSPECTUS
---------------------
No dealer, salesperson or other person has been
authorized to give any information or to make
any representations other than those contained
in this Prospectus and, if given or made, such
information or representations must not be
relied upon as having been authorized by Organic _________ 2001
Soils. This Prospectus does not constitute
an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby to
whom it is unlawful to make such offer in any
jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication
that information contained herein is correct as
of any time subsequent to the date hereof or that
there has been no change in the affairs of Organic
Soils since such date.
====================================
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our company's charter provides that, to the fullest extent that
limitations on the liability of directors and officers are permitted by the
Nevada Revised Statutes, no director or officer of the company shall have any
liability to the company or its stockholders for monetary damages. The Nevada
Revised Statutes provide that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except: (1) to the extent that
it is provided that the person actually received an improper benefit or profit
in money, property or services, for the amount of the benefit or profit in
money, property or services actually received, or (2) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The company's
charter and bylaws provide that the company shall indemnify and advance expenses
to its currently acting and its former directors to the fullest extent permitted
by the Nevada Revised Business Corporations Act and that the company shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.
The charter and bylaws provide that we will indemnify our directors and
officers and may indemnify our employees or agents to the fullest extent
permitted by law against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with DML.
However, nothing in our charter or bylaws of the company protects or indemnifies
a director, officer, employee or agent against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. To the extent that a director has been successful in defense of any
proceeding, the Nevada Revised Statutes provide that he shall be indemnified
against reasonable expenses incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Organic
Soils pursuant to the foregoing provisions, or otherwise, Organic Soils has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this
Registration Statement. We will pay all expenses of the offering. All of such
expenses are estimates, other than the filing fees payable to the Securities and
Exchange Commission.
Securities and Exchange Commission Filing Fee $ 100.00
Printing Fees and Expenses 500.00
Legal Fees and Expenses 11,000.00
Accounting Fees and Expenses 5,000.00
Blue Sky Fees and Expenses 2000.00
Trustee's and Registrar's Fees 1000.00
Miscellaneous 400.00
-----------
TOTAL $ 20,000.00
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Upon incorporation, a total of 2,160,000 shares of common stock were
issued to seven founders for $2,150. Ray L. Smith was issued 1,990,000 shares at
$0.001, Richard L. Strahl was issued 20,000 shares at $0.001, William Seidel was
issued 20,000 shares at $0.001, Robert Strahl was issued 100,000 shares at
$0.001, Natalie Shahvaran was issued 10,000 shares at $0.001, Melissa DeAnzo was
issued 10,000 shares at $0.001, and Peter R. Chernik was issued 10,000 shares at
$0.001 per share for services. The securities were sold in a private
transaction, without registration in reliance on the exemption provided by
Section 4(2) of the Securities Act. The investor had pre-existing relationships
with Organic Soils and had access to all material information pertaining to
Organic Soils and its financial condition. No broker was involved and no
commissions were paid in the transaction. The securities were sold to
sophisticated purchasers and bear a restrictive legend permitting the transfer
thereof only upon registration of the securities or an exemption under the
Securities Act.
On April 4, 2000, pursuant to the terms of an option, Robert A.
Strahl acquired 100,000 shares of Organic Soils' common stock for $0.001 per
share. The securities were sold in a private transaction, without registration
in reliance on the exemption provided by Section 4(2) of the Securities Act. The
investor had pre-existing relationships with Organic Soils and had access to all
material information pertaining to Organic Soils and its financial condition. No
broker was involved and no commissions were paid in the transaction. The
securities were sold to a sophisticated purchaser and bear a restrictive legend
permitting the transfer thereof only upon registration of the securities or an
exemption under the Securities Act.
Under the terms of a private placement effectuated by Organic Soils in
reliance on Regulation D, Rule 504, 140,000 shares of common stock of Organic
Soils were sold at $1.00 per share to approximately 65 investors, and resulted
in receipt by Organic Soils of $140,000. The private placement begun on February
8, 2000 and was completed on January 25, 2001. These shares were sold to a total
of sixty accredited and five unaccredited investors. The proceeds from this
offering were used for working capital, legal, accounting and consulting fees.
ITEM 27. EXHIBITS.
Exhibits.
SEC Ref. No. Title of Document Location
3(i) Articles of Incorporation Attached
3(ii) By-laws Attached
5 Legal Opinion included in Exhibit 23.1 Attached
10 Material Contract - Distribution/Marketing Agreement Attached
23.1 Consent of Peter R. Chernik Attached
23.2 Consent of Hawkins Accounting Attached
99 Subscription Agreement Attached
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in this Registration
Statement or otherwise, we have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the us of expenses incurred
or paid by a director, officer or controlling persons of DML in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information
in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Organic Soils.Com, Inc., certifies that it has reasonable ground to believe that
it meets all of the requirements of filing on Form SB-2 and authorizes this
Registration Statement to be signed on its behalf on ___________, 2001.
Organic Soils.Com, Inc.
By: /s/ Ray L. Smith
--------------------------
President
By: /s/ Richard L. Strahl
--------------------------
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacity
and on the dates indicated.
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Ray L. Smith and Richard L. Strahl (with
full power to each of them to act alone) as his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead in any and all capacities to sign any or all amendments or post-effective
amendments to this Registration Statement, including registration statements
filed or amendments made pursuant to Rule 462 under the Securities Act of 1933,
as amended, and to file the same with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, to sign
any and all applications, registration statements, notices or other document
necessary or advisable to comply with the applicable state securities laws, and
to file the same, together with all other documents in connection therewith,
with the appropriate state securities authorities, granting unto said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, thereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed below by the following
persons in the capacities and on the dates indicated.
Dated: October 25, 2001 /s/ Ray L. Smith
--------------------------
Ray L. Smith
Director and President
Dated: October 25, 2001 /s/ Richard L. Strahl
--------------------------
Richard L. Strahl
Director, Secretary & Treasurer
Dated: October 25, 2001 /s/ William S. Seidel
--------------------------
William S. Seidel
Director