As filed with the Securities and Exchange Commission on March 23, 2004
Registration No. 333-104213
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 5
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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BHC, INC.
(Exact name of registrant as specified in its charter)
Delaware 4700 42-1557347
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation Classification Code Number) Identification
or Organization) Number)
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14001 63rd Way North
Clearwater, Florida 33760
(727) 533-8730
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business
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Scott G. Roix, President and CEO
BHC, Inc.
14001 63rd Way North
Clearwater, Florida 33760
(727) 533-8730
(Name, Address and Telephone Number of Agent for Service)
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Copies of all communications, including all communications sent to the agent for
service, should be sent to:
Adam S. Gottbetter, Esq.
Gottbetter & Partners, LLP
488 Madison Avenue
New York, New York 10022
(212) 400-6900
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this registration statement.
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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 1,253,750 $.10 $125,375 $81
TOTAL 1,253,750 $.10 $125,375 $81
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(1) Estimated solely for purposes of computing the registration fee.
The registrant hereby amends the 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 the registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED ___________, 2004
PROSPECTUS
BHC, INC.
1,253,750 SHARES OF COMMON STOCK
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This prospectus relates to the sale of 1,253,750 shares of our common stock
by the selling stockholders named on page 33. The selling stockholders will
sell the shares from time to time at $.10 per share until our shares are quoted
on the Over-the-Counter Bulletin Board ("OTCBB") and thereafter at prevailing
market prices or privately negotiated prices. There is no set minimum or
maximum number of shares that can be purchased by an investor. There is no
assurance that our common stock will be included on the OTCBB. We will not
receive any proceeds from any sales made by the selling stockholders but will
pay the expenses of this offering. This is the initial registration of any of
our shares.
No public market currently exists for our shares of common stock.
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INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS __________, 2004
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TABLE OF CONTENTS
Page
----
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risks Concerning Our Business. . . . . . . . . . . . . 3
Risks Concerning This Offering. . . . . . . . . . . . 10
Cautionary Note Regarding Forward-Looking Statements . . . . . 12
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 12
Determination of Offering Price. . . . . . . . . . . . . . . . 12
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 13
Description of Business. . . . . . . . . . . . . . . . . . . . 13
Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . 23
Directors, Executive Officers, Promoters and Control Persons . 25
Executive Compensation . . . . . . . . . . . . . . . . . . . . 26
Security Ownership of Certain Beneficial Owners and Management 27
Certain Relationships and Related Transactions . . . . . . . . 28
Market for Common Equity and Related Stockholder Matters . . . 29
Description of Securities. . . . . . . . . . . . . . . . . . . 30
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . 32
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 36
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 38
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . 38
Where You Can Find Additional Information. . . . . . . . . . . 38
Index to Consolidated Financial Statements . . . . . . . . . . 40
DEALER PROSPECTUS DELIVERY OBLIGATION
Until __________, 2004 (90 days from the date of this prospectus), all
dealers that effect transactions in these securities, whether or not
participants in this offering, may be required to deliver a prospectus.
SUMMARY
This summary highlights the key information contained in this prospectus.
Because it is a summary, it does not contain all of the information you should
consider before making an investment decision. You should read the entire
prospectus carefully, including the section titled "Risk Factors".
BUSINESS
We are a development stage company that, through our wholly owned
subsidiary, BookFloridaHotels.com, Inc., plan to provide branded online
marketing and distribution of travel products and services to leisure and small
business travelers. We commenced operations in August 2003. Our principal
executive offices are located at 14001 63rd Way North, Clearwater, Florida 33760
and our phone number there is (727) 533-8730.
THE OFFERING
Shares offered by the selling stockholders 1,253,750
Common stock outstanding 3,253,750
Use of proceeds The selling stockholders will
receive the net proceeds from
the sale of shares. We will
not receive any of the proceeds
from the sale of shares offered
by this prospectus.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
carefully consider the risks and uncertainties described below before you
purchase any of our common stock.
If any of these risks or uncertainties actually occurs, our business, financial
condition or results of operations could be materially adversely affected. In
this event you could lose all or part of your investment.
RISKS CONCERNING OUR BUSINESS
WE ARE A DEVELOPMENT STAGE COMPANY. WE HAVE NO OPERATING HISTORY FOR YOU TO USE
TO EVALUATE OUR BUSINESS. WE MAY NEVER ATTAIN PROFITABILITY.
We are a development stage company and have no operating history upon which
may make an evaluation of our business prospects by you difficult. Our
operations are therefore subject to all of the risks inherent in light of the
expenses, difficulties, complications and delays frequently encountered in
connection with the formation of any new business. Investors should evaluate us
in light of the delays, expenses, problems and uncertainties frequently
encountered by companies developing markets for new products and technologies.
We may never overcome these obstacles.
Because we began operations in August 2003 and have a limited operating
history, it is difficult to evaluate our proposed business and prospects. Our
revenue and income potential is unproven. We cannot assure investors that we
will attract travel suppliers and consumers, establish a sizable market share or
achieve significant revenues or operating margins in future periods. We cannot
guarantee that we will ever achieve commercial success and therefore may never
generate a profit.
Our business is speculative and dependent upon the implementation of our
business plan, the acceptance of our website and the effectiveness of our
marketing programs and relationships with our suppliers. There can be no
assurance that our efforts will be successful or result in revenue or profit.
There is no assurance that we will earn significant revenues or that investors
will not lose their entire investment.
WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS INDICATING THERE IS
SUBSTANTIAL DOUBT AS TO WHETHER WE CAN REMAIN IN BUSINESS.
Our auditors indicated, in their report dated March 2, 2004, that there was
substantial doubt as to out ability to continue as a going concern due to our
lack of revenue and insufficient funds to execute our business plan, such that
our ability to continue as a going concern is dependent upon our obtaining
additional financing for our operations or reaching profitability. We cannot
assure you that we will be able to do either and if we are unable to do so we
will not be able to remain in business.
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WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS, UPON WHICH WE ARE
LIKELY TO BE HIGHLY DEPENDENT. WE MAY RUN OUT OF CASH TO OPERATE AND GROW OUR
REVENUES.
Our business requires and our current business plan contemplates the need
for significant levels of capital resources. We anticipate that we will need
approximately $60,000 to $70,000 in additional capital over the next 12 months.
No assurance can be given that our current capital resources will be sufficient
for our operations or that any unforeseen circumstances or change in our planned
operations would not consume available resources more rapidly than anticipated.
We may run out of cash to meet our operational needs. Should such additional
finances be necessary, we plan to raise funds through equity or debt financings
and/or traditional bank financing, or a combination of both, which may have the
effect of diluting the holdings of existing stockholders. Financing may not be
available when needed or such financing may not be available on commercially
reasonable terms. If adequate funds are not available, we may be required to
delay or terminate expenditures to develop and commercialize our objectives,
which would not allow us to maintain and grow our revenues.
WITHOUT THE CONTINUED SERVICE OF OUR EXECUTIVE OFFICER AND KEY EMPLOYEE, AND OUR
ABILITY TO ATTRACT AND RETAIN SKILLED PERSONNEL, OUR BUSINESS MAY FAIL.
Our future success depends, in significant part, on the continued service
and performance of Scott G.Roix, our Chief Executive Officer and President, who
possesses extensive expertise in various aspects of our business. We cannot
assure you that Mr. Roix will be able to fulfill his responsibilities adequately
or, if he chooses to leave us, that we would be able to find an appropriate
replacement for him. Any loss or interruption of Mr. Roix's services could cause
our business to fail. It could also result in our failure to create and maintain
relationships with strategic partners that are critical to our success. We do
not presently maintain key-man life insurance policies on Mr. Roix. Our success
also depends on our ability to hire, train, retain and manage highly skilled
employees. We cannot assure you that we will be able to attract and retain a
sufficient number of qualified employees or that we will successfully train and
manage the employees we hire.
WITHOUT THE ATTRACTION OF NEW CUSTOMERS WE CANNOT DEVELOP RELATIONSHIPS WITH
TRAVEL SUPPLIERS AND OUR BUSINESS MAY FAIL.
Our business depends on travel suppliers to enable us to offer travel
services and products on our website. We will not attract customers without
travel services and products on our website. Our inability to establish or
maintain such relationships or increase the number or variety of travel
suppliers could adversely affect the inventory of travel products we plan to
make available on our website. A lack of inventory of travel products may limit
our ability to find customers and impede our ability to generate revenue. Our
business will fail without revenue.
A DECLINE IN COMMISSION RATES AND FEES OR THE ELIMINATION OF COMMISSIONS BY
TRAVEL SUPPLIERS COULD REDUCE POTENTIAL REVENUES AND MARGINS.
A substantial majority of our online revenues will depend on the
commissions and fees paid by travel suppliers for bookings made through our
online travel services. We have few written commission agreements with
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suppliers and accordingly most travel suppliers are not obligated to pay any
specified commission rates for bookings made through our website or to pay
revenues at all. As is standard practice in the travel industry, we will rely
on informal arrangements for the payment of commissions. If airlines, hotel
chains or other travel suppliers with whom we will not have guaranteed
compensation agreements reduce current industry commission rates or eliminate
commissions entirely and we were not able to enter into agreements with these
travel suppliers, or successfully charge a compensating service fee to
consumers, our revenues would be significantly reduced. We cannot provide
assurances that such airlines, hotel chains or other travel suppliers will not
reduce current industry commission rates, refuse to enter into agreements with
us or eliminate commissions entirely, any of which could reduce potential
revenues and margins, and adversely affect our business, financial condition and
results of operations.
CONSUMERS, TRAVEL SUPPLIERS AND ADVERTISERS MAY NOT ACCEPT OUR WEBSITE AS A
VALUABLE COMMERCIAL TOOL, WHICH WOULD NOT ALLOW US TO GENERATE SALES AND
REVENUES.
We currently generate no sales and revenue. We will not have sales and
revenues if consumers do not accept and use our website. Consumers who have
historically purchased travel products using traditional commercial channels,
such as local travel agents and calling airlines directly, must instead purchase
these products online through a link on our website to an affiliate travel
supplier's website or by calling a toll free number to be listed on our website.
Consumers frequently use websites to compare pricing and other travel
information and then choose to purchase airline tickets or make other
reservations directly from travel suppliers or other travel agencies. If this
practice increases, our sales and revenues will not develop.
Similarly, we will not generate sales and revenues if travel suppliers and
advertisers do not accept our website as a valuable commercial tool and use our
website. Travel suppliers will need to view our website as an efficient and
profitable channel of distribution of their travel products. Advertisers will
need to view our website as an effective way to reach their potential customers.
INTENSE COMPETITION IN OUR INDUSTRY COULD LIMIT OUR MARKET SHARE AND NOT ALLOW
US TO GENERATE REVENUES AND PROFITS.
We have not sold any of our products or services. The markets for the
products and services offered by us are intensely competitive. As a result, we
may never obtain any significant market share in the industry. We face
competition from a variety of companies with respect to each product or service
we plan to offer. These competitors include:
- Internet travel agents such as Travelocity.com and Expedia.com
- local, regional, national and international traditional travel
agencies
- consolidators and wholesalers of airline tickets, hotels and other
travel products, including online consolidators such as
Cheaptickets.com, Priceline.com and online wholesalers such as Hotel
Reservations Network, Inc.
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- airlines, hotels, rental car companies, cruise operators and other
travel service providers, whether working individually or
collectively, some of which could be suppliers to our website
- operators of travel industry reservation databases
In addition to the traditional travel agency channel, many travel suppliers
also offer their travel services as well as third-party travel services directly
through their own websites. As the market for online travel services grows, we
believe that travel suppliers, traditional travel agencies, travel industry
information providers and other companies will increase their efforts to develop
services that will compete with our planned services by selling inventory from a
wide variety of suppliers. If our online operations cannot compete successfully
with any current or future competitors, we will not start to generate revenues
and profits. We currently have no revenue and profits.
Many of our competitors are larger, more established and better-financed
companies that are able to devote greater resources to marketing and promotional
campaigns and can commit more resources to website and systems development than
we will be able to devote, which may make it difficult for us to succeed. Some
of our competitors may be able to secure services and products from travel
suppliers on more favorable terms than us. In addition, the introduction of new
technologies and the expansion of existing technologies may increase competitive
pressures. Increased competition may result in reduced operating margins, as
well as loss of any market share and brand recognition we may obtain. We may
not be able to compete successfully against current and future competitors.
Competitive pressures faced by us could inhibit our ability to generate our
revenues and profits.
IF WE FAIL TO ESTABLISH AND INCREASE OUR BRAND RECOGNITION AMONG CONSUMERS, WE
MAY NOT BE ABLE TO ATTRACT AND EXPAND OUR ONLINE TRAFFIC.
We believe that establishing, maintaining and enhancing our brand is a
critical aspect of our efforts to attract online traffic. The number of Internet
sites that offer competing services increases the importance of establishing and
maintaining brand recognition. Many of these Internet sites already have
well-established brands in online services or the travel industry generally.
Promotion of our brand will depend largely on our success in providing a
high-quality online experience. In addition, we intend to invest in marketing
and advertising with the intention of establishing and expanding our brand
recognition to attract and retain online users and to respond to competitive
pressures. However, we cannot provide any assurance that these expenditures will
be effective to promote our brand or that our marketing efforts generally will
achieve our goals. Our inability to effectively promote our brand could have a
material adverse effect on our business, financial condition and results of
operations. Even if we are successful in promoting our brand, the increased
brand recognition may not economically justify the cost of brand promotion
needed to achieve that recognition.
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WE MAY BE FOUND TO HAVE INFRINGED ON INTELLECTUAL PROPERTY RIGHTS OF OTHERS THAT
COULD EXPOSE US TO SUBSTANTIAL DAMAGES AND RESTRICT OUR OPERATIONS.
We could face claims that we have infringed the patents, copyrights or
other intellectual property rights of others. In addition, we may be required
to indemnify travel suppliers for claims that may be made against them by our
customers. Any such claims could require us to spend significant time and money
in litigation, delay the release of new products or services, pay damages,
develop new intellectual property or acquire licenses to intellectual property
that is the subject of the infringement claims. These licenses, if required,
may not be available on acceptable terms or at all. As a result, intellectual
property claims against us or against travel suppliers that we are required to
indemnify could have a material adverse effect on our business, operating
results and financial condition.
WITHOUT THE CONTINUED USE AND GROWTH OF THE INTERNET AND THE EXTENT OF
ACCEPTANCE AND PROFITABILITY OF ONLINE COMMERCE, WE WILL NOT BEGIN TO GENERATE
REVENUES AND PROFIT.
We currently have no revenues or profit. We will not begin to earn
revenues and profits if there is not continued widespread acceptance and use of
the Internet and online services as a medium for commerce. Rapid growth in the
use of the Internet and online services is a recent phenomenon. This growth may
not continue. A sufficiently broad base of consumers may not accept or continue
to use the Internet as a medium of commerce. Demand for and market acceptance
of recently introduced products and services over the Internet involve a high
level of uncertainty. If the growth of the Internet does not continue or if
consumers cease to accept the Internet as a medium of commerce, we will not
begin to have revenues and profit.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security and the
timely development of complementary products for providing reliable Internet
access and services. Major online service providers and the Internet itself have
experienced outages and other delays as a result of software and hardware
failures and could face such outages and delays in the future. Outages and
delays are likely to adversely affect the level of Internet usage and the
processing of online transactions. In addition, the Internet could lose its
viability because of delays in the development or adoption of new standards to
handle increased levels of activity or increased government regulation. The
adoption of new standards or government regulation may require us to incur
substantial compliance costs. Such costs may adversely affect our ability to
generate revenues and profits.
RAPID TECHNOLOGICAL CHANGES MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE
ATTRACTIVENESS OF OUR INTENDED SERVICES TO CUSTOMERS.
We currently have no market share in the online travel industry. In order
to become competitive in the online travel industry, we will have to continually
enhance and improve the functionality and features of our website. If we fail
to continually improve our website's speed, personalization and customer
service, we could lag behind competitors or our website could become obsolete.
As a result, we could lose market share and our revenues would decline, which
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could have a material adverse effect on our business, financial condition and
results of operations. In order to become competitive, we may have to incur
substantial costs and expenses to respond to the increasingly sophisticated
requirements of online consumers and suppliers. Such costs and expenses may
have a material adverse effect on our business, financial condition and results
of operations.
SECURITY BREACHES IN OUR SYSTEMS OR CREDIT CARD FRAUD COULD DAMAGE OUR
REPUTATION AND CAUSE US TO LOSE CUSTOMERS.
Consumer concerns over the security of transactions conducted on the
Internet and over privacy issues may inhibit the growth of the Internet and
online commerce. The security of customers' confidential transaction data could
be jeopardized as a result of the accidental or intentional acts of Internet
users, our employees or others, or computer viruses. If we experience
significant credit card fraud or if there is a breach in the security of our
systems, we could lose consumers' confidence and consequently, their business.
In addition, we may be liable for damages caused by security breaches. Such
liability could increase our expenses and exhaust our resources, which could
have a material adverse effect on our business, financial condition and results
of operations.
Security breaches experienced by other electronic commerce companies could
reduce consumers' confidence in our website. Although we plan to use encryption
and authentication technology, these measures can be circumvented. The costs
required to continually upgrade our security measures could be prohibitively
expensive and could result in delays or interruption of service that could
result in a loss of consumers.
OUR COMPUTER SYSTEMS MAY SUFFER SYSTEM FAILURES, CAPACITY CONSTRAINTS AND
BUSINESS INTERRUPTIONS WHICH COULD INCREASE OUR OPERATING COSTS AND PREVENT US
FROM ATTRACTING CUSTOMERS AND IMPEDE OUR ABILITY TO INITIALLY GENERATE SALES AND
REVENUES.
We currently have no sales or revenues. The interruption, impaired
performance or insufficient capacity of our systems could lead to interruptions
or delays in our service, loss of data or our inability to process reservations,
which could cause us to lose customers and impede our ability to initially
generate sales and revenue. We will also rely on third-party computer systems
and third-party service providers, including the computerized central
reservation systems of the airline, hotel and car rental industries to make
airline ticket, hotel room and car rental reservations and credit card
verifications and confirmations.
Any discontinuance in the services provided to us by third parties or our
system and operations or any deterioration or interruption of these services,
systems or operation would prevent consumers from accessing or purchasing
particular travel services through our website, which would cause us to lose
customers and impede our ability to initially generate sales and revenue. If
our arrangement with any of these third parties is terminated, we may not find
an alternate source of systems support on a timely basis or on commercially
reasonable terms. If our systems and operations are damaged, our redundant
systems or disaster recovery plans may not be adequate.
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We have a hosting contract with 51st State Systems Inc., a provider of
Internet services, pursuant to which 51st State Systems operates and maintains a
significant portion of our web servers in their Vancouver data center. Our
operations depend on 51st State Systems' ability to protect its and our systems
in its data center against any such unexpected adverse events. Although 51st
State Systems provides comprehensive facilities management services, including
human and technical monitoring of all production servers 24 hours-per-day, seven
days-per-week, 51st State Systems does not guarantee that our Internet access
will be uninterrupted, error-free or secure. Any such interruption, error or
security breach would cause us to lose customers and impede our ability to
initially generate sales and revenue.
Our hosting contract with 51st State Systems expired in December 2003. We
executed an amendment to the hosting contract extending the term until December
2005. After December 2005, the hosting contract has one-year automatic
extensions. 51st State Systems would be unable to perform its contractual
obligations under the hosting contract if it became bankrupt or otherwise
insolvent, it exits the Internet Provider business or its web servers become
inoperable due to a technical failure or act of god. 51st State Systems may be
unwilling to perform its obligations under the hosting contract if we fail to
pay our bills promptly or the Internet Provider business becomes unprofitable.
If 51st State Systems were unable or unwilling to provide these services, we
would have to find a suitable replacement. Our operations could be disrupted
while we were in the process of finding a replacement for 51st State Systems and
the failure to find a suitable replacement or to reach an agreement with an
alternate provider on terms acceptable to us could materially adversely affect
our ability to adequately service our customers.
Our insurance policies may not adequately compensate us for any losses that
we may incur because of any failures in our system or interruptions in the
delivery of our services. Our ability to service our existing customers and
attract new customers could be materially adversely affected by any event,
damage or failure that interrupts or delays our operations. We will be required
to continually devote substantial financial, technical and operational resources
to expand and upgrade our systems and infrastructure. See below risk factor
"Conflicts of interest with 51st State Systems could impede our business
strategy and hurt our business" and also see "Certain Relationships and Related
Transactions" below.
EVOLVING GOVERNMENT REGULATION COULD IMPOSE TAXES OR OTHER BURDENS ON OUR
BUSINESS WHICH COULD INCREASE OUR COSTS OR DECREASE DEMAND FOR OUR PRODUCTS.
Increased regulation of the Internet or different applications of existing
laws might slow the growth of the use of the Internet and commercial online
services, which could decrease any then existing demand for our services,
increase the cost of doing business or otherwise reduce our sales and revenues.
Federal legislation imposing limitations on the ability of states to tax
Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, which
was extended by the Internet Nondiscrimination Act, exempts specific types of
sales transactions conducted over the Internet from multiple or discriminatory
state and local taxation through November 1, 2003. Congress is currently
considering an extension. If this legislation is not renewed when it terminates,
state and local governments could impose taxes on Internet-based sales. These
taxes could decrease any demand for our products and services or increase our
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costs of operations, which would have a material adverse effect on our business,
financial condition and results of operations.
Data collection, protection and privacy issues are a growing concern in the
U.S., and many countries around the world in which we may do business in the
future. Evolving government regulation in these areas could limit or restrict
our ability to market our products and services to consumers, increase our costs
of operation and lead to a decrease in any demand for our products and services,
which would have a material adverse effect on our business, financial condition
and results of operation.
OUR REVENUES WILL BE HIGHLY DEPENDENT ON THE TRAVEL AND TRANSPORTATION
INDUSTRIES AND A PROLONGED SUBSTANTIAL DECREASE IN TRAVEL BOOKINGS VOLUMES COULD
CAUSE OUR BUSINESS TO FAIL.
Most of our revenues will be derived from airlines, hotel operators, car
rental companies and other suppliers in the travel and transportation
industries. We have generated no sales but if we do attract customers, our
revenues will increase and decrease with the level of travel and transportation
activity and therefore will be highly subject to declines in or disruptions to
travel and transportation. The travel industry is seasonal, and our revenue
will vary significantly from quarter to quarter. Factors that may adversely
affect travel and transportation activity include price escalation in
travel-related industries, airline or other travel-related labor action,
political instability, hostilities and war, inclement weather, fuel price
escalation, increased occurrence of travel-related accidents, acts of terrorism,
the financial condition of travel suppliers and economic downturns and
recessions. A prolonged substantial decrease in travel bookings volumes could
have an adverse impact on our ability to attract customers and generate sales
and revenue causing our business to fail.
The September 11, 2001 terrorist attacks on New York and Washington, and
the economic downturn that preceded and was worsened by the attacks, may
continue to adversely affect the travel industry and therefore our business
prospects. Additionally, the possibility of terrorist attacks, hostilities and
war, the financial instability of many of the air carriers, and delays resulting
from added security measures at airports may continue to adversely affect the
travel industry. Airlines may reduce the number of their flights, making less
inventory available to us. Several major airlines are experiencing liquidity
problems and some have sought bankruptcy protection. Travelers' perceptions of
passenger security or airlines' financial stability may have an adverse effect
on demand from our customers. A prolonged substantial decrease in travel
bookings volumes could cause our business to fail.
CONFLICTS OF INTEREST WITH 51ST STATE SYSTEMS COULD IMPEDE OUR BUSINESS STRATEGY
AND OUR ABILITY TO INITIALLY EARN SALES AND REVENUE.
Matthew Sebal, one of our directors, owns 50% of the outstanding capital
stock of 51st State Systems and 51st State Systems owns 30,000 shares of our
common stock (less than 1%). We have a hosting contract with 51st State Systems
Inc., a provider of Internet services, pursuant to which 51st State Systems
operates and maintains a significant portion of our web servers in their
Vancouver data center. We believe that our agreement with 51st State Systems is
on terms reasonable and made in our best interests. There is a risk that Mr.
Sebal will not act in the best interests of our company causing our business
10
strategy and our ability to initially generate sales and revenue to be impeded.
See the above risk factor "Interruptions in service from third parties could
impair the quality of our service" and "Certain Relationships and Related
Transactions" below.
CONFLICTS OF INTEREST WITH SCOTT G. ROIX AND VICI MARKETING COULD IMPEDE OUR
BUSINESS STRATEGY AND OUR ABILITY TO INITIALLY GENERATE SALES AND REVENUE.
Scott G. Roix, our executive officer and a director, is the Chief Executive
Officer of Vici Marketing, a multi dimensional marketing and distribution
company he founded that specializes in mass marketing appeal products,
discounted travel packages and travel clubs and various aspects of direct
response television, database mining, telemarketing and direct mail. Mr. Roix
and his wife own 90% and 10%, respectively, of the outstanding capital stock of
Vici Marketing. We have an agreement with Vici Marketing pursuant to which we
will be able to provide Vici's travel inventory to our customers. We believe
that our agreement with Vici Marketing is on terms reasonable and made in our
best interests. There is a risk that Mr. Roix will not act in the best interest
of our company causing our business strategy to be impeded and the reduction in
our sales and revenue. See the above risk factors relating to travel suppliers
under "Risks Affecting Our Business" and "Certain Relationships and Related
Transactions" below. In addition, due to other business commitments, Mr. Roix
will only devote 20 hours per week of his time towards our business. This may
negatively affect our ability to develop operations and harm our ability to
initially earn revenues. See Mr. Roix's biographical information below under
"Directors, Executive Officers, Promoters and Control Persons."
RISKS CONCERNING THIS OFFERING
SCOTT G. ROIX, OUR PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR,
BENEFICIALLY OWNS APPROXIMATELY 61% OF OUR OUTSTANDING COMMON STOCK; HIS
INTERESTS COULD CONFLICT WITH YOURS; SIGNIFICANT SALES OF STOCK HELD BY HIM
COULD HAVE A NEGATIVE EFFECT ON OUR STOCK PRICE; STOCKHOLDERS MAY BE UNABLE TO
EXERCISE CONTROL.
As of March 9, 2004, our president, chief executive officer and a director,
Scott G. Roix, was the beneficial owner of approximately 61% of our common
stock. As a result, he has significant ability to:
- elect or defeat the election of our directors;
- amend or prevent amendment of our certificate of incorporation or
by-laws;
- effect or prevent a merger, sale of assets or other corporate
transaction; and
- control the outcome of any other matter submitted to the stockholders
for vote.
As a result of his ownership and position, Mr. Roix is able to
significantly influence all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
If you purchase shares of our common stock in this offering, you may have no
effective voice in our management. In addition, sales of significant amounts of
shares held by Mr. Roix, or the prospect of these sales, could adversely affect
the market price of our common stock. Mr. Roix's stock ownership may discourage
a potential acquirer from making a tender offer or otherwise attempting to
11
obtain control of us, which in turn could reduce our stock price or prevent our
shareholders from realizing a premium over our stock price. See "Security
Ownership of Certain Beneficial Owners and Management."
UNLESS A PUBLIC MARKET DEVELOPS FOR OUR COMMON STOCK, YOU MAY NOT BE ABLE TO
SELL YOUR SHARES, THEREFORE YOUR INVESTMENT WOULD BE A COMPLETE LOSS.
There is no public market for our common stock. An active trading market
may never develop or, if developed, it may not be maintained. Failure to
develop or maintain an active trading market could negatively affect the price
of our common stock, and you may be unable to sell your shares, and therefore
your investment would be a complete loss.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Memorandum contains certain financial information and statements
regarding our operations and financial prospects of a forward-looking nature.
Although these statements accurately reflect management's current understanding
and beliefs, we caution you that certain important factors may affect our actual
results and could cause such results to differ materially from any
forward-looking statements which may be deemed to be made in this Memorandum.
For this purpose, any statements contained in this Memorandum which are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as, "may",
"intend", "expect", "believe", "anticipate", "could", "estimate", "plan" or
"continue" or the negative variations of those words or comparable terminology
are intended to identify forward-looking statements. There can be no assurance
of any kind that such forward-looking information and statements will be
reflective in any way of our actual future operations and/or financial results,
and any of such information and statements should not be relied upon either in
whole or in part in connection with any decision to invest in the shares.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the stockholders' shares
offered by this prospectus. All proceeds from the sale of the stockholders'
shares will be for the account of the selling stockholders.
DETERMINATION OF OFFERING PRICE
As there is no public market for the shares, the offering price we used is
the price that the selling stockholders paid for their shares and bears no
relationship to our assets, book value or prospective earnings or any other
recognized criteria of value.
12
DILUTION
The shares of our common stock issued and outstanding as of the date of
this prospectus, on a fully diluted basis, were acquired by the holders thereof
at an average cost of $0.038 per share. Accordingly, you will bear a
disproportionate share of the risk of loss in the event of a material adverse
change in our financial condition.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2003.
Stockholders' equity
Common stock, $.001 par value;
100,000,000 shares authorized,
3,253,750 shares outstanding $ 3,254
Preferred Stock, $.0001 par value;
5,000,000 shares authorized,
0 shares outstanding $ 0
Additional paid-in capital $ 120,111
Accumulated Deficit $ (160,367)
Total stockholders' equity $ (37,002)
DESCRIPTION OF BUSINESS
GENERAL
We were incorporated in Delaware on September 12, 2002 and will conduct
operations through our wholly-owned subsidiary, BookFloridaHotels.com, Inc.,
which was incorporated in Florida on September 13, 2002. Where the context
requires, references to "we" or "us" throughout this document include reference
to BookFloridaHotels.com, Inc.
We are a development stage company whose principal business objective is to
provide branded online marketing and distribution of travel products and
services for leisure and small business travelers through the operation of our
website in the United States -www.BookFloridaHotels.com. Our initial products
and services center on offerings in Southeast Florida. We plan to concentrate
our business efforts on our initial website for the next year. After that year,
we may expand the destinations of our products and services, through development
of additional websites to reflect those destination offerings.
Our website is intended to enable consumers and travel suppliers to
research, buy and sell travel-related products and services online and to browse
through our website in a reliable, scalable environment. Our website offers
consumers a convenient, comprehensive and personalized source of travel
13
information, products and services. At the same time, our website enables travel
suppliers to reach a large, global audience of consumers engaged in planning and
purchasing travel products and services. Through our website, suppliers can
pursue a range of targeted merchandising and advertising strategies designed to
increase revenues, while reducing overall transaction and customer service
costs.
Our website offers discounted and charter airfares and discounted hotel
rooms. Travel products and services expected to be marketed by us in the next
six to twelve months include:
- "all-inclusive" vacation packages
- discounted car rentals
- discounted cruises
We have not negotiated or discussed in detail the addition of these
additional travel products and services with any third parties. We plan to
commence this process in the second or third quarter of 2004.
OUR BUSINESS STRATEGY
Our business strategy, as set for below, is to implement the following
initiatives and become a material provider of online products and services. Our
initial activities will be regional in nature concentrating on Southeast
Florida.
FURTHER DEVELOP CONCEPT AND BUSINESS MODEL; CHOOSE GEOGRAPHICAL TEST SITES
Our initial business is to provide online marketing and distribution of
travel products and services for Southeast Florida businesses and national
businesses servicing the Southeast Florida region. We expect this business to
serve as a model for our intended future activities involving other markets and
other products and services. We will assess the success of our current website
and therefore, we do not anticipate to enter any new markets in the next twelve
months.
ACQUIRE WEBSITE ADDRESSES, INCREASE BRAND AWARENESS
We intend to acquire website addresses necessary for the operation of our
business and to invest in expanding consumer awareness of our brand names
through an advertising program. Our initial website which we intend to use for
our Southeast Florida travel business is www.bookfloridahotels.com. Website
-------------------------
addresses are available for $35 each from domain registration service bureaus
such as Network Solutions and Register.com. These websites will be acquired to
service other regions of the country and will bear appropriate region specific
names similar to www.bookfloridahotels.com.
-------------------------
IDENTITY AND DEVELOP RELATIONSHIPS WITH PRODUCT AND SERVICE SUPPLIERS
14
We intend to develop strategic relationships with product and service
suppliers similar to the agreements we have executed with Hospitality Group,
Inc. and Vici Marketing. Our goal is to increase customer awareness of our
product and service offerings and develop new ways to effectively market and
distribute these products and services to our customers. We intend to seek out
strategic relationships in the second or third quarter of 2004.
IDENTIFY AND ENGAGE THE SERVICES OF NEEDED STAFF
We intend to hire employees on an as needed basis. All employees will have
specific roles and responsibilities and will receive appropriate training.
DESIGN, DEVELOP AND IMPLEMENT WEBSITE
We will strive to continually increase the efficiency and effectiveness of
our website, including content, through enhancement of the underlying
infrastructure and investment in improved technology. We have entered into
agreements with 51st State Systems to build our initial website and to provide
the server hardware, software and network connectivity necessary to run the
website. We have purchased two servers; related equipment including
Uninterrupted power supply, hubs, and cables, and 12 months of Class A
co-location and have spent approximately $10,000 to develop our initial website.
A Class A co-location is a physical place where servers are located next to each
other and the area has redundant power systems, proper ventilation and air
conditioning and is earthquake proof. In the next year, we expect to purchase
another server, additional related equipment and spend approximately $20,000
more to further develop the initial website.
DEVELOP AND IMPLEMENT MARKETING PLANS
We intend to attract consumers and suppliers to our websites and create
brand awareness through direct marketing; television, print, radio, and online
advertising; and joint promotions. In this regard, in the next nine months we
intend to engage in test marketing for the purpose of identifying and
implementing the sales channels with the highest return on marketing investment.
SALES AND MARKETING
Our revenues are expected to come from commissions, fees, and direct
merchant sales related to transactions made through a toll free number listed on
our website and through links to other websites, as well as from sales of
advertisements on our website. For each sale or referral we make to a travel
supplier, we expect to receive a commission and charge a fee to our customers of
between 1% and 2% of the net sale price received by the travel supplier or
affiliate online travel provider. We expect to attract consumers and travel
suppliers to our website and create awareness of our brand through a variety of
direct market channels such as e-mail advertising campaigns, print advertising
campaigns, and banner advertising campaigns. We plan to invest in an
advertising program of off-line and online media, including television, print,
15
radio, and the Internet and joint promotions with travel service suppliers in
the next nine to twelve months. We anticipate the cost of implementing these
initiatives to be $12,000. We also expect to rely on word-of-mouth to attract
new customers and will therefore strive to ensure that our customers have a
positive experience by providing a convenient, user friendly website, which
features many time-saving tools.
PRODUCTS AND SERVICES
Initially, our travel offerings will consist of discounted hotel rooms,
vacation packages and discounted and charter airfares in southeast Florida. To
provide more travel options to our customers, we plan to expand our initial
travel offerings in the second or third quarter of 2004 by including, discounted
car rentals, discounted cruises and "all-inclusive" vacation packages. We plan
to add on another product to our website every month or two commencing in
approximately six to nine months. We will expand first with discounted car
rentals and then follow that with discounted cruises and "all-inclusive"
vacation packages. The cost of adding these offerings is approximately $5,000.
We may also expand the scope of our destination offerings, and in order to
accomplish that we must purchase new websites. In contemplation of this
possible expansion, we have purchased several domain names but have no plan to
develop these websites in the next twelve months. The cost of purchasing a new
web address for our expanded travel destinations is $35 per domain address.
We also expect to enhance customers' experiences on our website by
incorporating community aspects such as bulletin boards and chat rooms after we
have all of our travel offerings available on our website.
DEVELOPMENT OF OUR WEBSITE
Our website became operational in August, 2003. To achieve this, we
entered into two contracts with 51st State Systems. One is a site development
contract to build our web site and the other is a hosting contract to provide
the server hardware, software and network connection needed to run our website.
The site development contract was entered into on December 6, 2002. 51st
State Systems agreed to build our website environment in return for a $30,000
fixed fee. Under this contract 51st State Systems performs numerous functions
for our company until the website is operational, including
- strategy development,
- domain registration,
- project management,
- copywriting and integration of other electronic content
- basic online site traffic statistics
- intensive testing against multiple browsers/platforms,
- registration within all leading search engines,
- development of site structure and navigation, and
16
- overall site design and creation of graphic elements.
The $30,000 fee includes all charges for project management, art direction and
graphic design, copywriting, page design and coding and database and
programming. In addition, 51st State Systems will be reimbursed for all
out-of-pocket expenses, which shall not exceed $4,500. A down payment of
$10,000 was due to 51st State Systems from us upon execution of the site
development contract. In lieu of such down payment, 51st State Systems accepted
30,000 of our shares. The site development contract expired on August 15, 2003
and we orally agreed to an extension until May 15, 2004 with the same terms as
the original contract.
The hosting contract was entered into on December 6, 2002. 51st State
Systems agreed to provide a web hosting environment for us. For the first year
of the hosting contract there is no charge for this service except for emergency
calls to our maintenance department which are billed to us at $150 per hour.
The fees for hosting contracts are typically waived when entered into in
conjunction with site development contracts. After the first year, 51st State
Systems will charge us $200 per month.
Under the hosting contract, 51st State Systems will implement the server
hardware, software and network connectivity. Once our web hosting service is
operational and accessible from the internet, 51st State Systems will perform
such functions as:
- support our web servicer,
- provide bandwidth to the open Internet,
- maintain domain name services, if required,
- obtain and coordinate the installation of new versions, releases, and
fixes to the operating system and system software,
- provide around-the-clock monitoring of the servers,
- provide server support to administer the server environment,
- use commercially reasonable efforts to assure that the servers are
operational and available on the network, and
- implement the security policy on firewalls and undertake the firewall
software upgrades as deemed necessary for data security and integrity.
The hosting contract expired on December 5, 2003. We executed an amendment to
hosting contract extending the term until December 2005. After December 2005,
the hosting contract has one-year automatic extensions.
Both contracts contain customary terms including 51st State Systems
retained ownership of intellectual property related to its work product, payment
terms and limitations on liability.
TRAVEL SUPPLIERS AND ONLINE TRAVEL AGENTS
We plan to continuously build relationships with travel suppliers in the
air, car, hotel and other sectors. We intend to pursue long-term strategic
relationships with travel suppliers and other online travel agents to gain
access to online consumers, promote and expand our travel products and services,
build brand recognition and expand our online presence. In some cases, our
website will be required to be prominently display a supplier's brand or
marketing message. We intend to continuously evaluate strategic opportunities as
they arise.
17
We have a Travel Services Promotion Agreement with Hospitality Group, Inc.,
a franchisee of several Hampton Inn properties in southeast Florida, to provide
our customers with discounted rates and vacation packages at these hotels. The
Travel Services Promotion Agreement was entered into with Hospitality Group on
November 30, 2002. We agreed to feature hotel rooms available in several
Hampton Inn hotels operated by Hospitality Group on our website. For each
reservation initiated through our website, Hospitality Group will pay us five
percent of the gross revenue received from such reservation. Hospitality Group
has the right to provide conceptual advice on the structure and design of the
portion of the website featuring Hospitality Group products and offerings. The
Travel Services Promotion Agreement will terminate on November 29, 2004 and has
automatic one year extensions. Hospitality Group has the right to terminate the
Travel Services Promotion Agreement if we fail to comply with the Agreement.
We also entered into a Promotion Agreement on December 20, 2002 with Vici
Marketing, a multi dimensional marketing and distribution company that
specializes in mass marketing appeal products, discounted travel packages and
travel clubs and various aspects of direct response television, database mining,
telemarketing and direct mail, where we will be able to provide Vici's travel
inventory to our customers. The Promotion Agreement provides that we will
market and offer Vici's travel goods and travel related services and programs on
our website. For every purchase made on our website we will receive twenty five
percent of the package selling price. Vici has the right to provide conceptual
advice on the structure and design of the portion of the website featuring
Vici's offered goods, services and programs. The Promotion Agreement will
terminate on December 19, 2004 and has automatic one year extensions. Vici has
the right to terminate the Promotion Agreement if we fail to comply with the
Agreement.
We participate in Expedia.ca's affiliate program which provides visitors to
our website with a direct link to Expedia.ca's online travel and booking system
and allows us to earn transaction fees when the visitor purchases travel
services or products on Expedia.ca's website. There is no cost to us for
joining Expedia.ca's affiliate program. We may also consider other means of
purchasing travel services, such as purchasing through consolidators, purchasing
wholesale inventory at special prices, or by using an auction model.
RESEARCH AND DEVELOPMENT
To ensure and increase the efficiency and effectiveness of our website, we
will continuously improve the technology and enhance the underlying
infrastructure for our website. We will continuously develop the functionality,
features and content of our website and seek new distribution opportunities for
our product and services as technology evolves.
Drawing on our management's experience in technology development, we plan to
create new tools to integrate suppliers' products and services into our website
to market and distribute their products to our customers, including:
- - S.O.A.P. (simple object access protocol) which involves designing the
"back end" of our web platform to enable vendors and suppliers to access data we
collect easily and securely eliminating the need for clients to re-type several
of the same forms;
- - the ability of customers to save their profile and search for discounts by
activity or "lifestyle" (i.e. over 50, hunter, single); and
- - the ability of customers to put in a "call-back" request through to
vendors offering certain services allowing waiting time to be drastically
reduced thus improving customer satisfaction.
As we expand the scope of our destination offerings, we expect to develop
new websites for the destination products and services we add.
INDUSTRY BACKGROUND
Growth of the Internet and Online Commerce
- ------------------------------------------------
The Internet and commercial online services have emerged as significant
global communications media enabling millions of people to share information and
conduct business electronically. A number of factors have contributed to the
18
growth of the Internet and commercial online services usage, including:
- the large and growing number of advanced personal computers in the
home and workplace;
- improvements in network infrastructure, making access to the Internet
and commercial online services, easier, faster and cheaper;
- increased acceptance of the Internet and commercial online services by
consumer and business users; and
- consumers' growing confidence in credit card transactions conducted
online.
Jupiter Communications, a New York provider of research on Internet
Commerce, estimates that the number of persons in the United States who use the
Internet or other online services will grow to approximately 157 million in
2003. In addition, Forrester Research, an independent technology research
company, estimates that the total value of online purchases by U.S. consumers
will be approximately $184 billion by 2004.
The Travel Industry
- ---------------------
Travel and tourism is the nation's largest services export industry, and
the third largest retail sales industry, according to Travel Industry
Association of America ("TIA"). According to TIA, travelers in the United
States spent approximately $464.1 billion on travel in 2001. The travel market
outside of the United States represented another $73.1 billion in 2001.
Currently, travel suppliers pay no or a de-minimis, commissions to
traditional travel agents for airline tickets. Commission rates from travel
suppliers vary for hotel reservation, car rentals and cruise and vacation
packages. Travel agents typically charge service fees to their customers.
However, travel agencies can earn performance based incentive compensation
(known as override commissions) from travel suppliers, which can substantially
impact financial performance. These override commissions are determined by
travel suppliers. Travel suppliers also pay booking fees to providers of global
distribution systems to compensate them for their services. The global
distribution systems may pay travel agents booking incentives based on
negotiated terms.
The Online Travel Market
- ---------------------------
The Internet is dramatically changing the way that consumers and businesses
communicate, share information and buy and sell goods and services. This has
had a dramatic effect on the travel market. According to Credit Suisse First
Boston Corporation Equity Research ("CSFB"), despite the recent drop in the
overall sale of travel services and products in the United States after the
September 11, 2001 terrorist attacks, online travel sales grew by more that 40%
in 2001. Nonetheless, online travel sales account for only 11% of the total
U.S. travel market. It is estimated that online transactions will reach $16.6
billion in 2003, according to Jupiter Communications, and $56 billion by 2005,
according to CSFB.
19
COMPETITION
The online travel services market is rapidly evolving and intensely
competitive. We will compete with a variety of companies with respect to the
products and services we plan to offer, technological innovation and customer
service, including:
- online travel agents such as Expedia, a subsidiary of USA Networks,
Inc. and Travelocity, a subsidiary of Sabre Holdings Corporation;
- consolidators and wholesalers of airline tickets and other travel
products and services, including shopping clubs and online
consolidators such as Cheaptickets.com, and Priceline.com;
- individual airlines, hotels, rental car companies, cruise operators
and other travel service providers, some of which will be suppliers to
our website and many of whom offer travel products and services
directly through their own website, or, increasingly, in combination
with other suppliers;
- alliances and joint sales agencies formed by travel suppliers, such as
Orbitz, Hotwire and Hotel Distribution Systems, which may obtain
favorable or exclusive access to certain inventory of those suppliers;
and
- local, regional, national and international traditional travel
agencies.
Various major airlines have recently launched or announced their intention
to launch Internet websites in the United States, Europe and Asia to provide
booking services for airline travel, hotel accommodations and other travel
services offered by multiple vendors. Several hotels have announced plans for
similar multi-vendor websites. Certain owners of these sites do (or appear to
have the intention to) make certain discounted fares and prices available
exclusively on their proprietary or multi-vendor websites. To that end, Orbitz
has included "most favored distributor" and exclusivity provisions in its
airline participation contracts.
As the market for online travel services grows, we believe that the range
of companies involved in the online travel services industry, including travel
suppliers, traditional travel agencies, travel industry information providers,
online portals and e-commerce providers, will increase their efforts to develop
products and services that will compete with our products and services.
We believe that our online marketing and distribution of travel products
and services is unique and can compete successfully against other online travel
services. Our focus will be on one local region, southeast Florida. Customers
looking for information on this region will prefer a website that deals entirely
with that region. The customer will be able to book a flight and hotel in
southeast Florida, learn about the history of the region and find a local
restaurant, all on the same site.
We will also target direct marketing companies, such as Vici Marketing, as
partners. Direct marketing companies have very little exposure to the internet.
We plan to offer certain travel deals and packages on our website that can only
utilized if you belong to a travel club. Once our website generates interest in
20
the product, the user will be instructed to call a phone number at Vici
Marketing in order to join the travel club. We will receive a portion of the
commission that Vici Marketing receives from the travel club. We will also
perform mass e-mail address distributions utilizing lists provided by Vici
Marketing in order to promote our travel offerings and web site.
CUSTOMERS
We do not expect any single customer to account for a significant portion
of our revenues. Accordingly we will not be dependent upon any single customer
to achieve our business goals.
EMPLOYEES
Our only employees at the present time are our two executive officers who
are employed on a part-time basis. We plan to add employees as needed to
maintain and expand our business.
SEASONAL ASPECTS
The travel industry is seasonal in nature. The planning and purchase of
travel products and services decrease significantly each year in the fourth
quarter, primarily in December, due to early bookings by customers for travel
during the holiday season and a decline in business travel during the holiday
season.
INTELLECTUAL PROPERTY
We do not expect to be dependent upon patents, trademarks, licenses, or
proprietary technology or software with regard to the operation of our business.
PRIVACY
We will post our privacy policy and practices concerning the use and
disclosure of user data. Our privacy policy will not allow the sale of our
customers information to third parties.
GOVERNMENT REGULATION AND APPROVAL
The laws and regulations applicable to the travel industry affect us and
our travel suppliers. We must comply with laws and regulations relating to the
sale of travel services, including those prohibiting unfair and deceptive
practices and those requiring us to register as a seller of travel products and
services, and with disclosure requirements and participate in state restitution
funds. In addition, many travel suppliers and computer reservation systems
providers are heavily regulated by the United States and other governments and
we will be indirectly affected by such regulation.
We plan to initially offer to sell travel related services in Florida and,
as required by Florida law, we are licensed as a Seller of Travel with the
Florida Department of Agriculture and Consumer Services ("Florida DACS").
Florida law requires that we annually register with the Florida Department of
Agriculture and Consumer Services as a seller of travel related services. As
21
part of the application for the license as a Seller of Travel we were required
to provide proof of insurance in the form of a certificate of deposit, surety
bond or irrevocable bank letter of credit in the amount of $10,000. This amount
could increase to a maximum limit of $25,000 as our gross annual sales increase.
The amount required is determined every year. In addition, we must pay a yearly
registration fee of $300 to the Florida DACS in order to renew our license.
Under Florida law we are required to include the following phrase in all of
our contracts: "BookFloridaHotels.com is registered with the State of Florida as
a Seller of Travel, Registration No" In addition, all of our advertisements
must contain the following phrase: "A Florida Seller of Travel Registration No"
The sale and distribution of online travel services are currently subject
to regulations in Canada (Canadian Computer Reservations Systems Regulations)
and the European Commission (EC CRS Code of Conduct). The U.S. Department of
Transportation ("DOT") is currently considering whether to extend existing
regulations to online travel services. The U.S. regulations currently apply to
global distribution systems that are owned by, marketed by or affiliated with
airlines and that are marketed to travel agencies. We expect the DOT to issue
guidance on these regulations. If the U.S. regulations are extended to online
travel services, and the current Canadian and EC regulations are modified, such
regulations could affect how we obtain, market, display and distribute our
airline inventory, and, depending on the particular regulations adopted,
increase our costs of doing business, decrease our opportunity to obtain airline
inventory from airline carriers, and reduce our sales and revenues.
Data collection, protection, security and privacy issues are a growing
concern in the U.S. and in many other countries around the world. Government
regulation is evolving in these areas and could limit or restrict our ability to
market our products and services to consumers, increase our costs of operation
and lead to a decrease in demand for our products and services. Federal, state
and local governmental organizations, as well as foreign governments and
regulatory agencies, are also considering legislative and regulatory proposals
that directly govern Internet commerce, and will likely consider additional
proposals in the future. We do not know how courts will interpret laws governing
Internet commerce or the extent to which they will apply existing laws
regulating issues such as property ownership, sales and other taxes, libel and
personal privacy to the Internet. The growth and development of the market for
online commerce has prompted calls for more stringent consumer protection laws
that may impose additional burdens on companies that conduct business online.
Federal legislation imposing limits on the ability of states to tax
Internet-based sales was enacted in 1998 and will exempt some sales transactions
conducted over the internet from multiple or discriminatory state and local
taxation through November 1, 2003. It is possible that this legislation will not
be renewed when it terminates. Failure to renew this legislation could allow
state and local governments to impose taxes on Internet-based sales, and these
taxes could adversely affect our business, financial condition and results of
operations.
FACILITIES
Our executive offices are currently located at 14001 63rd Way North,
Clearwater, Florida 33760. We occupy approximately 500 square feet of space
provided to us by Scott G. Roix, our CEO and president, on a rent-free basis.
22
The facilities constitute a business office, in good condition and adequate for
our business purposes. We expect to utilize these office facilities rent-free
for the next Nine Months to two years, depending on the growth of our sales and
revenue.
PLAN OF OPERATION
Since we are a new business and have not generated revenues to date, our
independent auditors have included an explanatory paragraph in their auditors'
report about our ability to continue as a going concern in connection with our
audited financial statements for the period beginning from our incorporation on
September 12, 2002 and ending on December 31, 2003. Our deficit is $160,367 as
at the end of that period. The discussion below provides an overview of our
operations and discusses our plan of operation.
The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this prospectus. The
following discussion contains forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below and elsewhere in this prospectus, particularly in the section
entitled "Risk Factors" beginning on page 3 of this prospectus.
GENERAL
From the date of our incorporation on September 12, 2002, we have been a
start-up company with no revenues. Our operation activities during this period
consist primarily of developing our business plan, marketing our proposed
business to and establishing our presence with our Internet website. Our
website became operational in August 2003 and we anticipate to generate revenue
in the next few months.
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS
In our management's opinion, to effectuate our business plan in the next
twelve months, the following events need to occur or we should strive to reach
the following milestones in order for us to become profitable:
- - We must continue to implement our sales and marketing initiatives within
the next three to twelve months. We anticipate the cost of this
implementation to be approximately $12,000.
- - We must continue to establish relationships with additional travel
suppliers within the next three to twelve months.
- - We must expand our products and services within the next six to twelve
months. During the next six to nine months, we will concentrate our efforts
on providing hotel rooms that are located in or relate to Southeast Florida
and offer discounted or charter air fares with national airlines and
regional airlines who service Southeast Florida, local airlines in the
Southeast Florida region and/or charter carriers. Within the next six to
twelve months, we must offer discounted car rentals with national and local
automobile rental companies with operations in Southeast Florida. Within
23
the next six to twelve months, we must offer discounted cruises with local
and national cruise lines and cruise package wholesalers. We believe that
despite our lack of operating history, national and local companies will be
attracted to our business model. For these companies, we will be an
additional outlet to reach their customers with no additional marketing
costs.
- - We must continue to develop our technology. In the next six to nine months,
we will gauge what technological developments are needed and decide who
will develop them.
- - We have cash in the amount of $8,258 as of December 31, 2003. In the
opinion of our management, available funds will probably not satisfy our
working capital requirements for the next 12 months. We anticipate that we
will need approximately $60,000 to $70,000 in additional capital over the
next 12 months to continue our operations. Such additional capital may be
raised through public or private financing as well as borrowing and other
sources. We cannot guarantee that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, it will
adversely affect our ability to implement our sales and marketing
initiatives, establish new relationships with new travel suppliers, expand
our products and services and update our technology. (See "Risk Factors -
We may be unable to meet our future capital requirements, upon which we are
likely to be highly dependent. We may run out of cash to operate and grow
our revenues").
PURCHASE OR SALE OF EQUIPMENT
We do not anticipate that we will expend any significant amount on
equipment for our present or future operations. We may purchase computer
hardware and software for our ongoing operations as well as a minimal amount of
office furniture and office equipment from our cash reserves.
RESEARCH AND DEVELOPMENT
We are not currently conducting any research and development activities,
other than the development of our website. (See "Description of Business -
Research and Development"). We will not know what technological developments
will be required until after we have become operational for at least three to
Nine Months and have adequate time to assess the functionality of our website.
PERSONNEL
We currently employ two people, our president and CEO, Scott G. Roix and
our secretary, Cathy Davenport, and expect employee levels to increase as we
expand our operations (See "Description of Business - Employees").
24
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to our
directors and executive officers as of March 9, 2004.
Directors serve until the next annual meeting of the stockholders; until
their successors are elected or appointed and qualified, or until their prior
resignation or removal. Officers serve for such terms as determined by our board
of directors. Each officer holds office until such officer's successor is
elected or appointed and qualified or until such officer's earlier resignation
or removal.
Name Age Position Date of Election
or Appointment
- --------------- --- ------------------------------- ------------------
Scott G. Roix 36 President, Chief Executive September 12, 2002
Officer and Director
Matthew Sebal 32 Director September 12, 2002
Cathy Davenport 51 Secretary September 12, 2002
SCOTT G. ROIX has served as our President, Chief Executive Officer and a
director since September 2002. Since September 2001 he has been the Chief
Executive Officer of Vici Marketing, a multi dimensional marketing and
distribution company he founded that specializes in mass marketing appeal
products, discounted travel packages and travel clubs and various aspects of
direct response television, database mining, telemarketing and direct mail.
Direct response television involves selling products with an extended commercial
spot. Mr. Roix and his wife own 90% and 10%, respectively, of the outstanding
capital stock of Vici Marketing. From January 2000 to September 2001, Mr. Roix
was Chief Executive Officer of The Affinity Group, a company he founded that
created and developed continuity programs sold through several direct response
mediums. Affinity's sales exceeded 35 million in 2000 and employed over 300
people. From July 1997 to August 1999, he was Chief Executive Officer and
President of SGR Marketing, Inc., a database marketing company he founded that
also specialized in international travel packages. From 1997 to January 2000, he
was Executive Vice President and Chief Operating Officer of Florida Travel
Network ("FTN"), a company engaged in the business of discount travel
certificates and from 1995 to 1997 he was Chief Executive Officer and President
of a subsidiary of FTN, FTN Promotions, Inc., an inbound call marketing center.
Mr. Roix received his B.S. degree in Economics/Political Science from Florida
State University in 1989. Mr. Roix is employed by us on a part-time basis and
devote eighty hours per month to our company.
MATTHEW SEBAL has served as a Director since September 2002. Since June
2000, Mr. Sebal has been an officer and director of Return Assured Incorporated,
a company previously engaged in providing a variety of internet related services
25
as well as providing private and corporate aviation services. There is no
affiliation between Return Assured Incorporated and our company. He has also
been a director of Mindfuleye Systems, Inc., a U.S. public company, that is in
the business of sentiment analysis, since 2001. From 1999 to 2000, Mr. Sebal
was a principal in IBM's e-business Services Group for British Columbia, Canada.
From 1997 to 1998, he was Director of Business Development for Communicate.com,
a company engaged in the business of e-commerce consulting and web site design,
and from 1995 to 1997, he was Senior Strategist for Emerge Online, Inc., a
company also engaged in the business of e-commerce consulting and web site
design. Mr. Sebal was also President of Sebal Enterprises, an import-export
business from 1990 to 1995. He holds a baccalaureate degree in Political
Science from the University of Western Ontario. Mr. Sebal devotes about twenty
hours per month to our company.
CATHY DAVENPORT has served as our Secretary since September 2002 and has
over 25 years of management/administrative and fundraising experience. Since
September 2001 she has been Executive Assistant to the Chief Executive Officer
of Vici Marketing, a multi dimensional marketing and distribution company that
specializes in mass marketing appeal products, discounted travel packages and
travel clubs and various aspects of direct response television, database mining,
telemarketing and direct mail. From January 2000 to September 2001, Ms.
Davenport was Executive Assistant to the Chief Executive Officer of The Affinity
Group, a company that created and developed continuity programs sold through
several direct response mediums. From March 1999 to January 2000 she was
Executive Assistant to the Chief Operating Officer of Florida Travel Network
("FTN"), a company engaged in the business of discount travel certificates and
from 1995 to March 1999 she was the office manger and business development
manager for various dental establishments. Ms. Davenport is employed by us on a
part-time basis and devotes about sixty hours per month to our company.
EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS
We have not paid our officers any compensation since our inception in
September 2002 and have not entered into any employment agreement with our
officers.
STOCK OPTION GRANTS
We have not made any individual grants of stock options since we adopted
our stock option plan in October 2002.
2002 STOCK OPTION PLAN
We adopted our 2002 Stock Option Plan on October 12, 2002. The plan
provides for the grant of options intended to qualify as "incentive stock
options", options that are not intended to so qualify or "nonstatutory stock
options" and stock appreciation rights. The total number of shares of common
stock reserved for issuance under the plan is 500,000, subject to adjustment in
the event of a stock split, stock dividend, recapitalization or similar capital
change, plus an indeterminate number of shares of common stock issuable upon the
exercise of "reload options" described below. We have not yet granted any
options or stock appreciation rights under the plan.
26
The plan is presently administered by our board of directors, which selects
the eligible persons to whom options shall be granted, determines the number of
common shares subject to each option, the exercise price therefore and the
periods during which options are exercisable, interprets the provisions of the
plan and, subject to certain limitations, may amend the plan. Each option
granted under the plan shall be evidenced by a written agreement between us and
the optionee.
Options may be granted to our employees (including officers) and directors
and certain of our consultants and advisors.
The exercise price for incentive stock options granted under the plan may
not be less than the fair market value of the common stock on the date the
option is granted, except for options granted to 10% stockholders which must
have an exercise price of not less than 110% of the fair market value of the
common stock on the date the option is granted. The exercise price for
nonstatutory stock options is determined by our board of directors. Incentive
stock options granted under the plan have a maximum term of ten years, except
for 10% stockholders who are subject to a maximum term of five years. The term
of nonstatutory stock options is determined by our board of directors. Options
granted under the plan are not transferable, except by will and the laws of
descent and distribution.
The board of directors may grant options with a reload feature. Optionees
granted a reload feature shall receive, contemporaneously with the payment of
the option price in common stock, a right to purchase that number of common
shares equal to the sum of (i) the number of shares of common stock used to
exercise the option, and (ii) with respect to nonstatutory stock options, the
number of shares of common stock used to satisfy any tax withholding requirement
incident to the exercise of such nonstatutory stock option.
Also, the plan allows the board of directors to award to an optionee for
each share of common stock covered by an option, a related alternate stock
appreciation right, permitting the optionee to be paid the appreciation on the
option in lieu of exercising the option. The amount of payment to which an
optionee shall be entitled upon the exercise of each stock appreciation right
shall be the amount, if any, by which the fair market value of a share of common
stock on the exercise date exceeds the exercise price per share of the option.
COMPENSATION OF DIRECTORS
We have not paid and do not presently plan to pay compensation to any of
our directors for serving as such.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 9, 2004. The information in this
table provides the ownership information for:
27
- each person known by us to be the beneficial owner of more than 5% of
our common stock;
- each of our directors;
- each of our executive officers; and
- our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with respect to
the shares. Unless otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them. Common stock beneficially owned and
percentage ownership are based on 3,253,750 shares outstanding. There are
currently no outstanding options or warrants to purchase any common stock.
Name and Address Amount of Common Stock Percent of
of Beneficial Owner Position Held Beneficially Owned Class
- ----------------------- --------------------------------- -------------------------- ------------
Scott G. Roix
BHC, Inc.
14001 63rd Way North
Clearwater, Florida 33760 President, CEO and Director 2,000,000 61.47%
Matthew Sebal (1)
51st State Systems Inc.
938 Howe Street, Suite 402
Vancouver BC V6Z 1N9
Canada Director 0 0%
Cathy Davenport
BHC, Inc.
14001 63rd Way North
Clearwater, Florida 33760 Secretary 1,000 .04%
All Executive Officers and
Directors as a Group
(three persons) 2,001,000 61.50%
- -----------------------
(1) Matthew Sebal owns 50% of the outstanding capital stock of 51st State Systems, Inc. and 51st State
Systems owns 30,000 shares of our common stock. See "Certain Relationships and Related Transactions" below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Scott G. Roix, our Chief Executive Officer, President and a Director, is
the Chief Executive Officer of Vici Marketing, a multi dimensional marketing and
distribution company he founded that specializes in mass marketing appeal
products and discounted travel packages and travel clubs and various aspects of
28
direct response television, database mining, telemarketing and direct mail. Mr.
Roix and his wife own 90% and 10%, respectively, of the outstanding capital
stock of Vici Marketing. We have an agreement with Vici Marketing pursuant to
which we will be able to provide Vici's travel inventory to our customers. See
risk factors relating to travel suppliers under "Risk Factors - Risks Affecting
Our Business" above.
On September 12, 2002 we issued 2,000,000 shares of our common stock to
Scott G. Roix, our Chief Executive Officer, President and a Director, in
exchange for $2,000 worth of services rendered by Scott G. Roix to us in
connection with our corporate organization.
On October 12, 2002 we issued 30,000 shares of our common stock to 51st
State Systems, Inc., 50% of which is owned by Matthew Sebal, one of our
directors, in exchange for $30,000 worth of services provided to us by 51st
State Systems, Inc. in connection with our corporate organization. The interests
of 51st State Systems, Inc. and our company may conflict. If a conflict of
interest develops, Mr. Sebal may have divergent interests from that of our
company. At this time, we have taken no steps to alleviate this potential
conflict of interest. See "Conflicts of Interest with 51st State Systems could
impede our business strategy and reduce our sales and revenue" under "Risk
Factors - Risks Concerning Our Business" above. See "Conflicts of Interest with
51st State Systems could impede our business strategy and hurt our business"
under "Risk Factors - Risks Concerning Our Business" above.
We believe that the terms of the above transactions are commercially
reasonable and no less favorable to us than we could have obtained from an
unaffiliated third party on an arm's length basis. To the extent we may enter
into any agreements with related parties in the future, the board of directors
has determined that such agreements be on similar terms.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no public trading market on which our common stock is traded. We
have engaged a broker/dealer to file a Form 211 with the National Association of
Securities Dealers in order to allow the quotation of our common stock on the
Over-the-Counter Bulletin Board ("OTCBB"). Our broker/dealer is V Finance
Investments located at 349 Wall Street, Princeton, New Jersey. At this time, V
Finance will perform no other services for us. There is no assurance that our
common stock will be included on the OTCBB.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common stock. There are no outstanding shares of our
common stock that can be sold pursuant to Rule 144.
We can offer no assurance that an active public market in our shares will
develop. Future sales of substantial amounts of our shares in the public market
could adversely affect market prices prevailing from time to time and could
impair our ability to raise capital through the sale of our equity securities.
29
HOLDERS
As of March 9, 2004, there were 41 record holders of our common stock.
DIVIDENDS
We have never declared or paid any cash dividends on our common stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the
foreseeable future. Our board of directors has sole discretion to pay cash
dividends based on our financial condition, results of operations, capital
requirements, contractual obligations and other relevant factors.
DESCRIPTION OF SECURITIES
Our authorized capital stock currently consists of 100,000,000 shares of
common stock, par value $0.001 per share, and 5,000,000 shares of preferred
stock, par value $0.0001 per share, the rights and preferences of which may be
established from time to time by our board of directors.
The description of our securities contained herein is a summary only and
may be exclusive of certain information that may be important to you. For more
complete information, you should read our Certificate of Incorporation, together
with our corporate bylaws.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of our common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any shares of preferred stock outstanding at the time, holders of our common
stock are entitled to receive dividends ratably, if any, as may be declared from
time to time by our board of directors out of funds legally available therefor.
Upon our liquidation, dissolution or winding up, the holders of our common
stock are entitled to receive ratably, our net assets available after the
payment of:
- all secured liabilities, including any then outstanding secured debt
securities which we may have issued as of such time;
- all unsecured liabilities, including any then unsecured outstanding
secured debt securities which we may have issued as of such time; and
- all liquidation preferences on any then outstanding preferred stock.
Holders of our common stock have no preemptive, subscription, redemption or
conversion rights, and there are no redemption or sinking fund provisions
applicable to the common stock. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
30
rights of the holders of shares of any series of preferred stock which we may
designate and issue in the future.
PREFERRED STOCK
Our board of directors is authorized, without further stockholder approval,
to issue up to 5,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of these shares,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, and to fix the number of shares constituting any
series and the designations of these series. These shares may have rights
senior to our common stock. The issuance of preferred stock may have the effect
of delaying or preventing a change in control of us. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock or could adversely affect the rights
and powers, including voting rights, of the holders of our common stock. At
present, we have no plans to issue any shares of our preferred stock.
DELAWARE ANTI-TAKEOVER LAW
If we close an initial public offering of our securities, and become listed
on a national stock exchange or have a class of voting stock held by more than
2,000 record holders, we will be governed by the provisions of Section 203 of
the General Corporation Law of Delaware. In general, such law prohibits a
Delaware public corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless it is
approved in a prescribed manner.
As a result of Section 203 of the General Corporation Law of Delaware,
potential acquirers may be discouraged from attempting to effect acquisition
transactions with us, thereby possibly depriving holders of our securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
LIMITATION ON LIABILITY OF DIRECTORS; INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation and by-laws allow us to eliminate the
personal liability of our directors and to indemnify directors and officers to
the fullest extent permitted by the Delaware General Corporation Law, or DGCL.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the DGCL, which
provides for liability of directors for unlawful payments of dividends or
unlawful stock purchases or redemptions, or (4) for any transaction from which a
director derived an improper personal benefit.
Under Section 145 of the DGCL, a corporation may indemnify its directors,
officers, employees and agents and its former directors, officers, employees and
agents and those who serve, at the corporation's request, in such capacity with
31
another enterprise, against expenses (including attorney's fees), as well as
judgments, fines and settlements in nonderivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. The DGCL provides, however, that such person must have acted in
good faith and in a manner such person reasonably believed to be in (or not
opposed to) the best interests of the corporation and, in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of ours 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 our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New
York 10004 is our transfer agent and the registrar for our common stock. Its
telephone number is (212) 509-4000.
SELLING STOCKHOLDERS
All of the shares of our common stock offered under this prospectus may be
sold by the selling stockholders. We will not receive any of the proceeds from
such sales of shares offered under this prospectus.
All costs, expenses and fees in connection with the registration of the
selling stockholders' shares will be borne by us. All brokerage commissions, if
any, attributable to the sale of shares by selling stockholders will be borne by
such holders. Except as noted below, there is no affiliation between the
selling stockholders and the officers, directors and principal shareholders of
the Company.
The selling stockholders are offering a total of 1,253,750 shares of our
common stock. The following table sets forth:
- the name of each person who is a selling stockholder;
32
- the number of securities owned by each such person at the time of this
offering; and
- the number of shares of common stock such person will own after the
completion of this offering.
The column "Shares Owned After the Offering" gives effect to the sale of
all the shares of common stock being offered by this prospectus.
SHARES OWNED PRIOR TO SHARES OWNED AFTER
THE OFFERING THE OFFERING
--------------------- -------------------
SELLING STOCKHOLDER NUMBER OF SHARES OFFERED NUMBER PERCENT* NUMBER PERCENT
- ------------------------------------- ------------------------ ---------- --------- -------- ---------
Bamby Investments S.A. (1). . . . . . 90,000 90,000 2.77% 0 0%
Thomas Christen . . . . . . . . . . . 90,000 90,000 2.77% 0 0%
Crystal Overseas Trading Inc. (2) . . 90,000 90,000 2.77% 0 0%
Roger Curchod . . . . . . . . . . . . 10,000 10,000 ** 0 0%
Kurt Handschin. . . . . . . . . . . . 10,000 10,000 ** 0 0%
Winfried Kaussen. . . . . . . . . . . 50,000 50,000 1.54% 0 0%
Jackson Steinem, Inc. (3) . . . . . . 50,000 50,000 1.54% 0 0%
Ming Capital Enterprises Inc. (4) . . 90,000 90,000 2.77% 0 0%
Partner Marketing AG (5). . . . . . . 90,000 90,000 2.77% 0 0%
Private Investment Company Ltd. (6) . 90,000 90,000 2.77% 0 0%
Christian Russenberger. . . . . . . . 10,000 10,000 ** 0 0%
Hans Schopper . . . . . . . . . . . . 90,000 90,000 2.77% 0 0%
Seloz Gestion & Finance SA (7). . . . 90,000 90,000 2.77% 0 0%
Syrah Investment Corporation (8). . . 90,000 90,000 2.77% 0 0%
Terraco Holding SA (9). . . . . . . . 90,000 90,000 2.77% 0 0%
Turf Holding Inc. (10). . . . . . . . 90,000 90,000 2.77% 0 0%
51st State Systems, Inc. (11) . . . . 30,000 30,000 ** 0 0%
Paul B. Gottbetter. . . . . . . . . . 10,000 10,000 ** 0 0%
Joanne Fichera. . . . . . . . . . . . 20,000 20,000 ** 0 0%
Robert Fichera. . . . . . . . . . . . 20,000 20,000 ** 0 0%
Scott Rapfogel. . . . . . . . . . . . 10,000 10,000 ** 0 0%
Adam S. Gottbetter. . . . . . . . . . 10,000 10,000 ** 0 0%
Soydan Nihat(12). . . . . . . . . . . 1,000 1,000 ** 0 0%
Joseph Porrellor(13). . . . . . . . . 1,000 1,000 ** 0 0%
33
SHARES OWNED PRIOR TO SHARES OWNED AFTER
THE OFFERING THE OFFERING
--------------------- -------------------
SELLING STOCKHOLDER NUMBER OF SHARES OFFERED NUMBER PERCENT* NUMBER PERCENT
- ------------------------------------- ------------------------ ---------- --------- -------- ---------
Neil Williams(14) . . . . . . . . . . 1,000 1,000 ** 0 0%
Lawrence H. Levner. . . . . . . . . . 2,000 2,000 ** 0 0%
Data Marketing Inc. (15). . . . . . . 1,000 1,000 ** 0 0%
Juan Perez, Jr. . . . . . . . . . . . 1,000 1,000 ** 0 0%
Vincent N. Del Corso(16). . . . . . . 1,000 1,000 ** 0 0%
Cathy L. Davenport. . . . . . . . . . 1,000 1,000 ** 0 0%
Robert Poitras(17). . . . . . . . . . 1,000 1,000 ** 0 0%
Matt L. Florell(18) . . . . . . . . . 1,000 1,000 ** 0 0%
Barton C. Lime. . . . . . . . . . . . 1,000 1,000 ** 0 0%
Theresa Russo . . . . . . . . . . . . 5,000 5,000 ** 0 0%
Peter L. Coker, Jr. . . . . . . . . . 10,000 10,000 ** 0 0%
Fran Sebal(19). . . . . . . . . . . . 250 250 ** 0 0%
Dana Sebal(20). . . . . . . . . . . . 250 250 ** 0 0%
Mal Sebal(21) . . . . . . . . . . . . 250 250 ** 0 0%
Christopher Brown . . . . . . . . . . 1,000 1,000 ** 0 0%
Samson Consulting Corp. (22). . . . . 5,000 5,000 ** 0 0%
Total . . . . . . . . . . . . . . . . 1,253,750 1,253,750 38.54% 0 0%
- ----------------------
* The percentages computed in this column of the table are based upon
3,253,750 shares of common stock outstanding on March 9, 2004.
** Indicates less than one percent of the total outstanding common stock.
- ----------------------
(1) The beneficial owner of Bamby Investments S.A. is Camille Escher.
Bamby Investments S.A. is a private investment company.
(2) The beneficial owner of Crystal Overseas Trading Inc. is Daniele Cimmino.
Crystal Overseas Trading Inc. is a private investment company.
(3) The beneficial owner of Jackson Steinem, Inc. is Adam S. Gottbetter
(Adam S. Gottbetter is a partner of Gottbetter & Partners, LLP,
our legal counsel).
(4) The beneficial owner of Ming Capital Enterprises Inc. is U.K. Menon.
(5) The beneficial owner of Partner Marketing AG is Karl Vogler.
(6) The beneficial owner of Private Investment Company Ltd. is Martin Christen.
(7) The beneficial owner of Seloz Gestion & Finance SA is Rene Belser.
(8) The beneficial owner of Syrah Investment Corporation is Engelbert Schreiber
jun.
(9) The beneficial owner of Terraco Holding SA is Dagmar Papenberg.
34
(10) The beneficial owner of Turf Holding Inc. is Vijendran Poniah.
(11) The beneficial owners of 51st State Systems, Inc. are Matthew Sebal, one of
our directors, and Todd Cusolle.
(12) Mr. Nihat is a business associate of Mr. Roix.
(13) Mr. Porrellor is a business associate of Mr. Roix.
(14) Mr. Williams is a business associate of Mr. Roix.
(15) The beneficial owner of Data Marketing Inc. is George Lutich. Mr.
Lutich is a business associate of Mr. Roix.
(16) Mr. Del Corso is a business associate of Mr. Roix.
(17) Mr. Poitras is a relative of Mr. Roix's mother.
(18) Mr. Florell is a business associate of Mr. Roix.
(19) Ms. Sebal is the sister of Matt Sebal.
(20) Ms. Sebal is the mother of Matt Sebal.
(21) Mr. Sebal is Matt Sebal's father.
(22) The beneficial owner of Samson Consulting Corp. is Avi Mirman.
35
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of their
shares of common stock covered by this prospectus on any stock exchange, market
or trading facility on which the shares are then traded or in private
transactions at a fixed price of $.10 per share until our shares are quoted on
the OTCBB and thereafter at prevailing market prices or privately negotiated
prices. We will pay the expense incurred toregister the shares being offered by
the selling stockholders for sale, but the selling stockholders will pay any
underwriting discounts and brokerage commissions associated with these sales.
The commission or discount which may be received by any member of the National
Association of Securities Dealers, Inc. in connection with these sales will not
be greater than 8%. The selling stockholders may use any one or more of the
following methods when selling shares:
a. ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
b. block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
c. purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
d. privately negotiated transactions; and
e. a combination of any such methods of sale.
In addition, any shares that qualify for sale under Rule 144 may be sold
under Rule 144 rather that through this prospectus. In general, under Rule 144
as currently in effect, a person who has beneficially owned shares of a
company's common stock for at least one year is entitled to sell within any
three month period a number of shares that does not exceed the greater of:
1. 1% of the number of shares of the company's common stock then
outstanding; or
2. the average weekly trading volume of the company's common stock during
the four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
the company.
Under Rule 144(k), a person who is not one of the company's affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
The selling shareholders will sell our shares at $0.10 per share until our
shares are quoted on the OTCBB, and thereafter at prevailing market prices or
privately negotiated prices.
36
In offering the shares covered by this prospectus, the selling stockholders
and any broker-dealers who execute sales for the selling stockholders may be
deemed to be an "underwriter" within the meaning of the Securities Act in
connection with such sales. Any profits realized by the selling stockholders and
the compensation of any broker-dealer may be deemed to be underwriting discounts
and commissions. None of the selling stockholders are broker-dealers or
affiliates of broker dealers. There are no standby arrangements or agreements
with any broker-dealers or underwriting firms to resell on behalf of the selling
stockholders.
Selling stockholders may sell their shares in all 50 states in the U.S.
Further, we will be profiled in the Standard & Poor's publications or "manuals".
The Standard & Poor's manuals are widely subscribed to by broker/dealers, market
makers, institutional investors, university libraries and public libraries. A
company that is profiled in the Standard & Poor's manuals obtains a "manual"
exemption from state securities regulations for secondary trading purposes in
the thirty-five states where there is a provision for manual exemption.
We have advised the selling stockholders that while they are engaged in a
distribution of the shares included in this prospectus they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934,
as amended. With certain exceptions, Regulation M precludes the selling
stockholders, any affiliated purchasers, and any broker-dealer or other person
who participates in the distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered in this
prospectus.
This offering will terminate on the earlier of (i) the date that all shares
offered by this prospectus have been sold by the selling stockholders, (ii) two
years from the effective date of the registration statement of which this
prospectus is a part or (iii) the date all of the selling stockholders may sell
all of the shares described herein without restriction pursuant to Rule 144 of
the Securities Act.
THE SELLING STOCKHOLDERS' GRANT OF REGISTRATION RIGHTS
We granted to the selling stockholders registration rights to enable them
to sell the 1,253,750 shares of common stock. We agreed to register such shares
until the earlier of (i) the date that all shares offered by this prospectus
have been sold by the selling stockholders, (ii) two years from the effective
date of the registration statement of which this prospectus is a part or (iii)
the date the selling stockholders may sell all of the shares described herein
without restriction pursuant to Rule 144 of the Securities Act. In connection
with such registration, we will have no obligation to (i) assist or cooperate
with the selling stockholders in the offering or disposition of such shares;
(ii) indemnify or hold harmless the holders of any such shares, other than the
selling stockholders or any underwriter designated by such holders; (iii) obtain
a commitment from an underwriter relative to the sale of any such shares; or
(iv) include such shares within any underwritten offering we may engage in.
37
We will assume no obligation or responsibility whatsoever to determine a
method of disposition for such shares or to otherwise include such shares within
the confines of any registered offering other than the registration statement of
which this prospectus is a part.
We will file, during any period during which we are required to do so under
our registration rights agreement with the selling stockholders one or more
post-effective amendments to the registration statement of which this prospectus
is a part to describe any material information with respect to the plan of
distribution not previously disclosed in this prospectus or any material change
to such information in this prospectus. This obligation may include, to the
extent required under the Securities Act, that a supplemental prospectus be
filed, disclosing: the name of any broker-dealers; the number of common shares
involved; the price at which the common shares are to be sold; the commissions
paid or discounts or concessions allowed to broker-dealers, where applicable;
that broker-dealers did not conduct any investigation to verify the information
set out or incorporated by reference in this prospectus, as supplemented; and
any other facts material to the transaction.
LEGAL PROCEEDINGS
No legal proceedings are pending to which we or any of our property are
subject, nor to our knowledge are any such legal proceedings threatened.
EXPERTS
Singer Lewak Greenbaum & Goldstein LLP, independent accountants, audited
our financial statements as of December 31, 2003, for the period from September
12, 2002 (inception) to December 31, 2002 and for the period from September 12,
2002 (inception) to December 31, 2003, as set forth in their report which
includes an explanatory paragraph relating to our ability to continue as a going
concern. In including those financial statements in this prospectus, we have
relied on the authority of Singer Lewak Greenbaum & Goldstein LLP, as experts in
accounting and auditing.
LEGAL MATTERS
Our counsel, Gottbetter & Partners, LLP, New York, New York, will pass on
the validity of the issuance of the shares to be sold by the selling
stockholders. The partners of Gottbetter & Partners, LLP, own 50,000 shares of
our common stock, all of which are included for sale in this prospectus.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. However, once this registration
statement becomes effective we will be required to file quarterly and annual
reports and other information with the Securities and Exchange Commission.
We have filed with the SEC a registration statement on Form SB-2 to
register the securities offered by this prospectus. The prospectus is part of
the registration statement, and, as permitted by the SEC's rules, does not
38
contain all of the information in the registration statement. For future
information about us and the securities offered under this prospectus, you may
refer to the registration statement and to the exhibits and schedules filed as a
part of the registration statement. You can review the registration statement
and its exhibits at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The registration statement is also available electronically on
the World Wide Web at http://www.sec.gov.
39
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
DECEMBER 31, 2002
Page
----
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Shareholders' Deficit . . . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-6 - F-13
40
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
BHC, Inc. and subsidiary
We have audited the accompanying consolidated balance sheet of BHC, Inc. and
subsidiary development stage companies) as of December 31, 2003, and the
related statements of operations, shareholders' deficit, and cash flows for the
year then ended, the period from September 12, 2002 (inception) to December 31,
2002, and the period from September 12, 2002 (inception) to December 31, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BHC, Inc. and subsidiary as of
December 31, 2003, and the results of its operations and its cash flows for the
year then ended, the period from September 12, 2002 (inception) to December 31,
2002, and the period from September 12, 2002 (inception) to December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, during the year ended December 31, 2003, the Company
incurred a net loss of $103,912, and it had negative cash flows from operations
of $66,138. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 2, 2003
F-1
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 8,258
Restricted cash. . . . . . . . . . . . . . . . . . . 10,000
-----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . $ 18,258
-----------
PROPERTY AND EQUIPMENT, net . . . . . . . . . . . . 17,222
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . $ 35,480
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . $ 72,482
-----------
Total current liabilities. . . . . . . . . . . . . 72,482
-----------
SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value
5,000,000 shares authorized
0 shares issued and outstanding. . . . . . . . . . -
Common stock, $0.001 par value
100,000,000 shares authorized
3,253,750 Issued and outstanding . . . . . . . . . 3,254
Additional paid-in capital . . . . . . . . . . . . . 120,111
Deficit accumulated during the development stage . . (160,367)
-----------
Total shareholders' deficit. . . . . . . . . . (37,002)
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT. $ 35,480
===========
The accompanying notes are an integral part of these financial statements.
F-2
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003,
FOR THE PERIOD FROM SEPTEMBER 12, 2002 (INCEPTION) TO DECEMBER 31, 2002,
AND FOR THE PERIOD FROM SEPTEMBER 12, 2002 (INCEPTION) TO DECEMBER 31, 2003
For the For the
Period from Period from
For the September 12, September 12,
Year 2002 2002
Ended (Inception) to (Inception) to
December 31, December 31, December 31,
2003 2002 2003
---------------- ---------------- ---------------
GENERAL AND ADMINISTRATIVE EXPENSES . $ 103,112 $ 55,655 $ 158,767
---------------- ---------------- ---------------
LOSS FROM OPERATIONS BEFORE PROVISION (103,112) (55,655) (158,767)
FOR INCOME TAXES
PROVISION FOR INCOME TAXES. . . . . . 800 800 1,600
---------------- ---------------- ---------------
NET LOSS. . . . . . . . . . . . . . . $ (103,912) $ (56,455) $ (160,367)
================ ================ ===============
BASIC AND DILUTED LOSS PER SHARE. . . $ (0.03) $ (0.02) $ (0.05)
================ ================ ===============
WEIGHTED-AVERAGE SHARES OUTSTANDING . 3,240,996 2,521,818 3,074,153
================ ================ ===============
The accompanying notes are an integral part of these financial statements.
F-3
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE PERIOD FROM SEPTEMBER 12, 2002 (INCEPTION) TO DECEMBER 31, 2003
Deficit
Accumulated
Additional during the
Common Stock Paid-In Development
-------------------------
Shares Amount Capital Stage Total
------------ ----------- ------------ ----------- ----------
BALANCE, SEPTEMBER
12, 2002
(INCEPTION). . . . . - $ - $ - $ - $ -
ISSUANCE OF
COMMON STOCK
FOR SERVICES
RENDERED . . . . . . 2,080,000 2,080 3,920 6,000
ISSUANCE OF
COMMON STOCK
IN PRIVATE
PLACEMENT. . . . . . 1,020,000 1,020 100,980 102,000
NET LOSS . . . . . . . (56,455) (56,455)
------------ ----------- ------------ ----------- ----------
BALANCE, DECEMBER
31, 2002 3,100,000 3,100 104,900 (56,455) 51,545
ISSUANCE OF
COMMON STOCK
IN PRIVATE
PLACEMENT 153,750 154 15,211 15,365
NET LOSS . . . . . . . (103,912) (103,912)
------------ ----------- ------------ ----------- ----------
BALANCE, DECEMBER 31,
2003 3,253,750 $ 3,254 $ 120,111 $(160,367) $ (37,002)
============ =========== ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2003,
FOR THE PERIOD FROM SEPTEMBER 12, 2002 (INCEPTION) TO DECEMBER 31, 2002,
AND FOR THE PERIOD FROM SEPTEMBER 12, 2002 (INCEPTION) TO DECEMBER 31, 2003
For the For the For the
Year Period from Period from
Ended December September 12, September 12,
31, 2002 2002
2003 (Inception) to (inception) to
December 31, December 31,
2002 2003
---------------- ---------------- ----------------
Cash flow from operating activities
Net loss . . . . . . . . . . . . . . . . . $ (103,912) $ (56,455) $ (160,367)
Adjustments to reconcile net loss to net
Cash used in operating activities
Issuances of common stock for services
rendered. . . . . . . . . . . . . . - 6,000 6,000
Depreciation expense. . . . . . . . . . 2,778 - 2,778
Increase in restricted cash . . . . . . (10,000) - (10,000)
Increase (decrease) in accounts payable 44,996 7,486 52,482
---------------- ---------------- ----------------
Net cash used in operating activities. . . (66,138) (42,969) (109,107)
---------------- ---------------- ----------------
Cash flows from financing activities
Issuance of common stock in private
placement . . . . . . . . . . . . . 15,365 102,000 117,365
---------------- ---------------- ----------------
Net cash provided by financing activities. 15,365 102,000 117,365
---------------- ---------------- ----------------
Net increase (decrease) in cash. . . . . . (50,773) 59,031 8,258
Cash, beginning of period. . . . . . . . . 59,031 - -
---------------- ---------------- ----------------
Cash, end of period. . . . . . . . . . . . $ 8,258 $ 59,031 $ 8,258
================ ================ ================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
During the year ended December 31, 2003, the Company recorded property and
equipment and accounts payable in the amount of $20,000 each in connection with
a Web site development contract.
The accompanying notes are an integral part of these financial statements.
F-5
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
BHC, Inc. ("BHC") was incorporated on September 12, 2002 in the State of
Delaware. On September 13, 2002, BHC acquired 100% of the outstanding common
stock of BookFIoridaHotels.com, Inc. ("BookFlorida"), a Florida corporation,
which plans to be a provider of branded online marketing and distribution of
travel products and services for leisure and small business travelers. BHC's
operations are going to be conducted through BookFlorida.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company (as defined in Note 3) as a going
concern. During the year ended December 31, 2003, the Company incurred a net
loss of $103,912 and it had negative cash flows from operations of $66,138.
Since inception, the Company has set aside its capital need by issuing equity
securities. These factors raise substantial doubt about the Company's ability
to continue as a going concern.
Recovery of the Company's assets is dependent upon future events, the outcome of
which is indeterminable. Management plans to continue to provide for its
capital needs during the year ended December 31, 2004 by the continued
development of its products and services with minimal borrowings. In addition,
the Company's capital requirements during the year ended December 31, 2004 are
expected to be supplemented by issuing equity securities. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of BHC and its wholly
owned subsidiary, BookFlorida (collectively, the "Company"). All significant
inter-company accounts and transactions are eliminated in consolidation.
Development Stage Enterprise
- ------------------------------
The Company is a development stage company as defined in Statement of Financial
Accounting Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises." The Company is devoting substantially all of its present efforts
to establish a new business, and its planned principal operations have not yet
commenced. All losses accumulated since inception have been considered as part
of the Company's development stage activities.
F-6
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
- ------------------------
Property and equipment are stated at cost, less accumulated
depreciation. The Company provides for depreciation using the
straight-line method over an estimated useful life of three years.
Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized. Gains or
losses on the sale of property and equipment are reflected in the
statements of operations.
Start-Up Costs
- ---------------
Start-up costs include legal and professional fees. In accordance with
Statement of Position 98-5, "Costs of Start-Up Activities," these costs have
been expensed as incurred.
Income Taxes
- -------------
The Company uses the asset and liability method of accounting for income taxes.
The asset and liability method accounts for deferred income taxes by applying
enacted statutory rates in effect for periods in which the difference between
the book value and the tax bases of assets and liabilities are scheduled to
reverse. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws or rates. Because the Company is in the development stage
and has incurred losses from operations, a benefit has not been realized for the
tax effect of the net operating loss carryforwards due to the uncertainty of
their realization.
Net Loss Per Share
- ---------------------
The Company reports loss per share in accordance with SFAS No. 128, "Earnings
per Share." Basic loss per share is computed by dividing loss available to
common shareholders by the weighted-average number of common shares available.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive.
Estimates
- ---------
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
- --------------------------------------------
In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies,
and simplifies existing accounting pronouncements. This statement rescinds SFAS
No. 4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. As a result, the criteria in Accounting Principles Board No.
30 will now be used to classify those gains and losses. SFAS No. 64 amended
SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS
No. 44 has been rescinded as it is no longer necessary. SFAS No. 145 amends
SFAS No. 13 to require that certain lease modifications that have economic
effects similar to sale-leaseback transactions be accounted for in the same
manner as sale-lease transactions. This statement also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
Management does not expect adoption of SFAS No. 145 to have a material impact,
if any, on the Company's financial position or results of operations.
F-7
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost, as defined, was recognized at the date of an
entity's commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002 with earlier application encouraged. Management does not expect adoption
of SFAS No. 146 to have a material impact, if any, on the Company's financial
position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," an amendment of SFAS No. 123. SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require more prominent and more frequent disclosures in financial statements
about the effects of stock-based compensation. This statement is effective for
financial statements for fiscal years ending after December 15, 2002. SFAS No.
148 will not have any impact on the Company's financial statements as management
does not have any intention to change to the fair value method.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting and reporting for derivative instruments and hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 149 is effective for derivative instruments and
hedging activities entered into or modified after June 30, 2003, except for
certain forward purchase and sale securities. For these forward purchase and
sale securities, SFAS No. 149 is effective for both new and existing securities
after June 30, 2003. Management does not expect adoption of SFAS No. 149 to
have a material impact on the Company's statements of earnings, financial
position, or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. In accordance with the standard, financial instruments
that embody obligations for the issuer are required to be classified as
liabilities. SFAS No. 150 will be effective for financial instruments entered
into or modified after May 31, 2003 and otherwise will be effective at the
beginning of the first interim period beginning after June 15, 2003. Management
does not expect adoption of SFAS No. 150 to have a material impact on the
Company's statements of earnings, financial position, or cash flows.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." In the course of business the Company
has contractual guarantees in the form of warranties. However, these warranties
are limited and do not represent significant commitments or contingent
liabilities of the indebtedness of others. This pronouncement is effective for
financial statements issued after December 15, 2002 and is not expected to have
a material impact on the Company's financial statements.
In December 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," an interpretation of Accounting Research Bulletin
No. 51, "Consolidated Financial Statements." This pronouncement requires the
consolidation of variable interest entities, as defined, and is effective
immediately for variable interest entities created after January 31, 2003, and
for variable interest entities in which an enterprise obtains an interest after
that date. The Company does not have any variable interest entities, and
therefore, this interpretation is not expected to have a material impact on the
Company's financial statements.
F-8
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2003 consisted of the following:
Website development costs $ 20,000
Less accumulated depreciation 2,778
------------
TOTAL $ 17,222
============
Depreciation expense for the year ended December 31, 2003 was $2,778.
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 5 - COMMITMENTS
The Company has entered into a marketing agreement with Hospitality Group,
Inc. ("Hospitality Group"), a franchisee of several Hampton Inn properties in
southeast Florida, to provide the Company's customers with discounted rates and
vacation packages at Hospitality Group's hotels. Hospitality Group will pay the
Company a five percent commission for booking its travel services through the
Company's Web site. The Agreement expires on November 29, 2004 and has
automatic one-year extensions. To date, commissions have not been earned.
The Company has entered into a marketing agreement with Vici Marketing, a
related party, to provide the Company's customers with discounted travel
packages and related merchandise. Vici Marketing will pay the Company a twenty
five percent commission for booking its travel services and travel related
products through the Company's Web site. The Agreement expires on December 19,
2004 and has automatic one-year extensions. To date, commissions have not been
earned.
NOTE 6 - SHAREHOLDERS' DEFICIT
Preferred Stock
- ----------------
The Company has authorized the issuance of 5,000,000 shares of preferred stock,
which may be issued from time to time in one or more series by the Board of
Directors. In addition, the Board is authorized to set the rights, preference,
privileges, and restrictions of these shares, including dividends rights,
conversion rights, voting rights, and liquidation preferences. These shares may
have rights senior to those of the Company's common stock holders. As of
December 31, 2003, the Company did not have any preferred shares outstanding.
Common Stock
- -------------
On September 12, 2002, the Company issued 2,000,000 shares of common stock to
the Company's Chief Executive Officer in exchange for services rendered valued
at $2,000.
On October 12, 2002, the Company issued 30,000 shares of common stock to a
consultant firm in exchange for services provided in connection with the
Company's corporate organization. The Company valued the services rendered at
the fair value of the stock issued of $1,500. The President of the consulting
firm is also a director of the Company.
On October 12, 2002, the Company issued 50,000 shares of common stock to KGL
Investments, Ltd., the beneficial owner of which is Gottbetter & Partners, LLP,
the Company's legal counsel, for non-legal services rendered. The Company
valued the services rendered at the fair value of the stock issued of $2,500.
During the period from September 12, 2002 (inception) to December 31, 2002, the
Company issued 1,020,000 shares of common stock in exchange for cash of
$102,000.
F-9
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 6 - SHAREHOLDERS' DEFICIT (CONTINUED)
During the year ended December 31, 2003, the Company issued 153,750 shares
of common stock in exchange for cash of $15,365.
2002 Stock Option Plan
- -------------------------
The Company adopted the 2002 Stock Option Plan (the 'Plan") during October 2002.
The Plan provides for the granting of incentive stock options, non-statutory
stock options, and stock appreciation rights. The incentive stock options can
be granted to employees, or any subsidiary of the Company. The non-statutory
stock options can be granted to all employees, including officers, non-employee
directors, consultants or any subsidiary of the Company. The number of shares
of common stock reserved for issuance under the Plan is 500,000, subject to
adjustment in the event of a stock split, stock dividend, recapitalization, or
similar change in the Company's capital structure.
Incentive stock options must be granted prior to 10 years from the date the Plan
was initially adopted by the Board of Directors. The option price for shares
issued as incentive stock options
must not be less than the fair market value of the Company's common stock at the
date of grant, unless the option is granted to an individual who, at the date of
the grant, owns more than 10% of the total combined voting power of all classes
of the Company's stock (the "Principal Shareholder"). The option price granted
to a Principal Shareholder must be at least 110% of the fair market value at the
date the option was granted. Incentive stock options granted under the Plan
must not be exercisable after 10 years from their grant dates. If an incentive
stock option is granted to a Principal Shareholder, the exercise period is five
years from the date of grant.
The option price for shares issued under the non-statutory stock options will be
determined at the sole discretion of the Board of Directors, but may not be less
than 85% of the fair market value of the Company's common stock at the date of
grant. A non-statutory stock option granted under the Plan may be of such
duration as will be determined by the Board of Directors.
The Board of Directors may grant options with a reload feature ("Reload
Options"). Option holders granted a Reload Option will receive
contemporaneously with the payment of the option price in shares of common stock
a right to purchase that number of shares of the Company's common stock equal to
the sum of (i) the number of shares of the Company's common stock used to
exercise the option and (ii) with respect to non-statutory stock options the
number of shares of the Company's common stock used to satisfy any tax
withholding requirement incident to the exercise of such non-statutory stock
options.
The option price for a Reload Option relating to incentive stock options or
non-statutory stock options granted to a person other than a Principal
Shareholder must be the fair market value of a share of the Company's common
stock at the date of grant of the Reload Option. For Principal Shareholders, the
option price for Reload Options must be 110% of the fair market value of a share
of the Company's common stock at the date of grant.
Stock appreciation rights granted under the Plan must be evidenced by an
agreement and may be exercised only if and to the extent that the related
F-10
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 6 - SHAREHOLDERS' DEFICIT (CONTINUED)
option is eligible to be exercised on the date of exercise of the stock
appreciation right. Stock appreciation rights will terminate or expire upon the
same conditions as the related option. The Company has not issued any options
under this plan.
NOTE 7 - INCOME TAXES
The tax effects of temporary differences which give rise to the deferred tax
provision at December 31, 2003 consisted of the following:
Deferred tax assets
Net operating loss carryforward $ 59,435
Less valuation allowance 59,435
----------------
NET DEFERRED TAX ASSET $ -
================
The deferred income tax benefit of the loss carryforward is the only significant
deferred income tax asset of the Company and has been offset by a valuation
allowance since management does not believe the recoverability of this deferred
tax asset during the next fiscal year is more likely than not. Accordingly, a
deferred income tax benefit for the year ended December 31, 2003 and the period
from September 12, 2002 (inception) to December 31, 2002 have not been
recognized in these financial statements.
The following table presents the current and deferred income tax provision for
federal and state income taxes for the year ended December 31, 2003 and the
period from September 12, 2002 (inception) to December 31, 2002:
F-11
BHC, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
NOTE 7 - INCOME TAXES (CONTINUED)
For the
Period from
September 12,
For the 2002
Year Ended (Inception) to
December 31, December 31,
2003 2002
--------------- --------------
Current
Federal. . . . . . . . . . . $ - -
State. . . . . . . . . . . . 800 800
--------------- --------------
800 800
--------------- --------------
Deferred
Federal. . . . . . . . . . . - -
State. . . . . . . . . . . . - -
--------------- --------------
- -
--------------- --------------
PROVISION FOR INCOME TAXES $ 800 $ 800
=============== ==============
The provision for income taxes differs from the amount that would result from
applying the federal statutory rate for the year ended December 31, 2003 and the
period from September 12, 2002 (inception) to December 31, 2002 as follows:
For the
Period from
September 12,
For the 2002
Year Ended (Inception) to
December 31, December 31,
2003 2002
--------------- --------------
Statutory regular federal income benefit rate 34.0% 34.0%
State taxes . . . . . . . . . . . . . . . . . 5.8 5.8
Change in valuation allowance . . . . . . . . (40.3) (40.3)
Other . . . . . . . . . . . . . . . . . . . . (1.0) (1.0)
--------------- --------------
TOTAL . . . . . . . . . . . . . . . . . . . (1.5)% (1.5)%
=============== ==============
F-12
NOTE 8 - RELATED PARTY TRANSACTIONS
During the period from September 12, 2002 (inception) to December 31,
2002, the Company entered into a consulting agreement with a related
party for services provided in connection with the design,
implementation, and hosting of the Company's Web site. The president of
the consulting firm is also a director of the Company. The agreement
required the Company to pay $30,000 and issue 30,000 shares of common
stock for such services. As of December 31, 2003, the Company issued
30,000 shares of common stock (see Note 6) and accrued $20,000 in
accounts payable for the remaining services rendered in connection with
the project.
The Company has been provided office space from a related party on a rent-free
basis. Management estimates the fair value of the rental space to be
approximately 1,000 per month. Once the Company generates revenues, it will
record as an expense the fair value of the rental space.
F-13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation and by-laws permit it to
eliminate the personal liability of its directors and to indemnify directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law, or DGCL.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the DGCL, which
provides for liability of directors for unlawful payments of dividends or
unlawful stock purchases or redemptions, or (4) for any transaction from which a
director derived an improper personal benefit.
Under Section 145 of the DGCL, a corporation may indemnify its directors,
officers, employees and agents and its former directors, officers, employees and
agents and those who serve, at the corporation's request, in such capacity with
another enterprise, against expenses (including attorney's fees), as well as
judgments, fines and settlements in nonderivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. The DGCL provides, however, that such person must have acted in
good faith and in a manner such person reasonably believed to be in (or not
opposed to) the best interests of the corporation and, in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered are as follows:
SEC Registration Fee $ 81.00
Blue Sky Fees and Expenses 5,910.00
Legal Fees and Expenses 20,000.00
Accounting Fees and Expenses 5,000.00
Printing and Engraving 2,000.00
Miscellaneous 0.00
------------
TOTAL $ 32,991.00
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On September 12, 2002 the Registrant issued 2,000,000 shares of its common
stock to its founder, chief executive officer, president and a director, Scott
G. Roix, in exchange for services rendered by Scott G. Roix in connection with
the Registrant's corporate organization. These shares were valued at par value,
$.001 per share.
On October 12, 2002 the Registrant issued 30,000 shares of its common stock
to 51st State Systems, Inc. in exchange for services provided in connection with
the Registrant's corporate organization. These shares were valued at $.05 per
share. The president of 51st State Systems, Inc., Matt Sebal, is also a director
of the Registrant.
On October 12, 2002 the Registrant issued 50,000 shares of its common stock
to KGL Investments, Ltd., the beneficial owners of which are the partners of
Gottbetter & Partners, LLP, counsel to the Registrant. The shares were issued
for non-legal services and were valued at $.05 per share.
From November 2002 to March 2003, the Registrant sold 1,173,750 shares of
its common stock at $.10 per share for a total of $117,375. The shares were sold
to 11 accredited investors, 8 non-accredited investors and 19 foreign investors
who had access to all material information pertaining to the Registrant. These
investors were personal business acquaintances of the Registrant's officers. The
sales were a private transaction without registration in reliance on the
exemption provided by Section 4(2), Rule 506 of Regulation D and Regulation S of
the Securities Act of 1933, as amended. A private placement memorandum was
provided to the non-accredited and accredited investors.
The issuances of securities described above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering. The
Company made the determination that each investor had enough knowledge and
experience in finance and business matters to evaluate the risks and merits of
the investment. There was no general solicitation or general advertising used to
market the securities. Also, the non-accredited and accredited investors were
given a private placement memorandum containing the kind of information normally
provided in a prospectus. All purchasers represented in writing that they
acquired the securities for their own accounts. A legend was placed on the stock
certificates stating that the securities have not been registered under the
Securities Act and cannot be sold or otherwise transferred without an effective
registration or an exemption therefrom.
II-2
ITEM 27. EXHIBITS.
Exhibit Number Description
- --------------- -----------
3.1 Certificate of Incorporation*
3.2 By-Laws*
4.1 Specimen Certificate of Common Stock*
5.1 Opinion of Counsel ***
10.1 Stock Option Plan of 2002*
10.2 Promotion Agreement between Vici Marketing, LLC and the
Company, dated December 20, 2002.**
10.3 Site Development Agreement between 51st State Systems, Inc.
and the Company, dated as of December 6, 2002**
10.4 Hosting Agreement between 51st State Systems, Inc. and
the Company, dated as of December 6, 2002.**
10.5 Travel Services Promotion Agreement between Hospitality
Group, Inc. and the Company dated as of November 30, 2002.**
10.6 License issued to the Company from the Florida Department of
Agriculture and Consumer Services.**
10.7 Associate Program Agreement by and between Expedia, Inc. and
the Company ***
10.8 Amendment to Hosting Agreement between 51st State Systems,
Inc. and the Company, dated March 3, 2004. (1)
21.1 List of Subsidiaries*
23.1 Accountant's Consent (1)
23.2 Counsel's Consent to Use Opinion (included in Exhibit 5.1)
* Incorporated by reference to Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission, Registration Statement No.
333-104213, on April 1, 2003.
** Incorporated by reference to Amendment No. 1 to the Registration
Statement on Form SB-2 filed with the Securities and Exchanged Commission,
Registration Statement No. 333-104213, on June 16, 2003.
*** Incorporated by reference to Amendment No. 2 to the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission,
Registration Statement No. 333-104213, on September 5, 2003.
(1) Filed herewith.
II-3
ITEM 28. UNDERTAKINGS.
The Registrant undertakes to:
(1) File, during any period in which it offers or sales 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. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424
(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) Include any 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 then end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the Registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Clearwater, Florida
on March 23, 2004.
BHC, Inc.
By: /s/Scott G. Roix
--------------------------------
Scott G. Roix, President and CEO
(principal financial officer)
In accordance with the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Dated
--------- ----- -----
/s/Scott G. Roix President, CEO, and Director
- ------------------- (principal financial officer) March 23, 2004
Scott G. Roix
/s/Matt Sebal
- ------------------- Director March 23, 2004
Matt Sebal
/s/Cathy Davenport Secretary
- ------------------- (principal accounting officer) March 23, 2004
Cathy Davenport
BHC, INC.
EXHIBIT INDEX
Exhibit Number Description
- --------------- -----------
3.1 Certificate of Incorporation*
3.2 By-Laws*
4.1 Specimen Certificate of Common Stock*
5.1 Opinion of Counsel ***
10.1 Stock Option Plan of 2002*
10.2 Promotion Agreement between Vici Marketing, LLC and the
Company, dated December 20, 2002.**
10.3 Site Development Agreement between 51st State Systems, Inc.
and the Company, dated as of December 6, 2002**
10.4 Hosting Agreement between 51st State Systems, Inc. and
the Company, dated as of December 6, 2002.**
10.5 Travel Services Promotion Agreement between Hospitality
Group, Inc. and the Company dated as of November 30, 2002.**
10.6 License issued to the Company from the Florida Department of
Agriculture and Consumer Services.**
10.7 Associate Program Agreement by and between Expedia, Inc. and
the Company ***
10.8 Amendment to Hosting Agreement between 51st State Systems,
Inc. and the Company, dated March 3, 2004. (1)
21.1 List of Subsidiaries*
23.1 Accountant's Consent (1)
23.2 Counsel's Consent to Use Opinion (included in Exhibit 5.1)
* Incorporated by reference to Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission, Registration Statement No.
333-104213, on April 1, 2003. Filed herewith
** Incorporated by reference to Amendment No. 1 to the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission,
Registration Statement No. 333-104213, on June 16, 2003.
*** Incorporated by reference to Amendment No. 2 to the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission,
Registration Statement No. 333-104213, on September 5, 2003.
(1) Filed herewith.