Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Registration Statement 92 426K
2: EX-3.(I) Certificate of Incorporation 2± 7K
3: EX-3.(I)B Amended Certificate of Incorporation 1 6K
4: EX-3.(II) Bylaws 4 19K
6: EX-5 Legal Opinion of Anslow & Jaclin, LLP 2± 9K
5: EX-10 License Agreement 11 53K
7: EX-23 Accountant Consent 1 5K
As filed with the Securities and Exchange Commission on
October 26, 2004
REGISTRATION NO.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ROYAL CAPITAL MANAGEMENT, INC.
(Name of Small Business Issuer in its Charter)
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New Jersey 3272 22-3276909
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
325 Flower Lane
Morganville, New Jersey 07751
(201) 697-7887
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
YAN JACOB RUSANOV
PRESIDENT
ROYAL CAPITAL MANAGEMENT, INC.
325 FLOWER LANE
MORGANVILLE, NEW JERSEY 07751
(201) 697-7887
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of communications to:
RICHARD I. ANSLOW, ESQ.
ANSLOW & JACLIN, LLP
195 ROUTE 9 SOUTH, SUITE 204
MANALAPAN, NEW JERSEY 07726
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PER SHARE OFFERING PRICE FEE
---------------------------- ----------------------- ---------------- ---------------- ------------
Common Stock, par value 2,331,410 $.25 $ 582,853 $ 73.85
$.0001 per share (1)
Common Stock, par value
$.0001 per share (2) 16,000,000 $.25 $4,000,000 $506.80
----------- --------
Total 18,331,410 $4,582,853 $580.65
(1) Represents Selling Security Holders shares being sold to the public. The
price of $.25 per share is being estimated solely for the purpose of computing
the registration fee pursuant to Rule 457(c) of the Securities Act.
(2) Represents shares being sold to the public. The price of $.25 per share is
being estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED , 2004
ROYAL CAPITAL MANAGEMENT, INC.
16,000,000 SHARES OF COMMON STOCK
2,331,410 SELLING SECURITY HOLDER SHARES OF COMMON STOCK
We are offering 16,000,000 shares of our common stock at $0.25 per share. In
addition, our selling security holders are offering to sell 2,331,410 shares of
our common stock.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is ________________, 2004
Currently, we have not established an underwriting arrangement for the sale of
these shares. Our officers and directors will be the only persons that will
conduct the direct public offering. They intend to offer and sell the shares in
the primary offering through their business and personal contacts. All funds
that are received by us in the offering are available for immediate use. There
is no minimum number of shares that must be sold before we can utilize the
proceeds of the offering; therefore, funds will not be placed in an escrow or
similar account. There is a possibility that no proceeds will be raised or that
if any proceeds are raised, they may not be sufficient to cover the cost of the
offering.
This prospectus also relates to the resale by the selling stockholders of up to
2,331,410 shares of common stock. The selling stockholders may sell the stock
from time to time at the prevailing market price or in negotiable transactions.
We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds from the sale of the 16,000,000
shares.
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TABLE OF CONTENTS
ABOUT US............................................................4
RISK FACTORS........................................................5
USE OF PROCEEDS.....................................................8
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............9
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION...........10
BUSINESS............................................................18
LEGAL PROCEEDINGS...................................................27
MANAGEMENT..........................................................28
PRINCIPAL STOCKHOLDERS..............................................30
DILUTION............................................................31
SELLING STOCKHOLDERS................................................32
PLAN OF DISTRIBUTION................................................33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................35
DESCRIPTION OF SECURITIES...........................................35
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................................35
TRANSFER AGENT......................................................36
EXPERTS.............................................................36
LEGAL MATTERS.......................................................36
FINANCIALS..........................................................36
RECENT SALES OF UNREGISTERED SECURITIES...........................II-2
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ABOUT US
HOW WE ARE ORGANIZED AND OUR OPERATIONS
We were originally incorporated under the laws of the State of New Jersey on
January 11, 1994. We are a multi-project management company. Through our
wholly-owned subsidiary, City Mix LLC, in Abu Dhabi, the United Arab Emirates,
we own a ready-mix concrete plant. We expect that this will be one of the
biggest ready-mix plants in terms of physical capacity, production technology
and product quality in the United Arab Emirates.
In addition, we plan to develop, operate and distribute the following: (1)
development, marketing and distribution, on a worldwide basis, of a program for
teaching American English as a second language with the aid of a personal
computer; and (2) production, marketing and distribution of gourmet bread
products in the East Coast of the United States of America.
WHERE YOU CAN FIND US
We are located at 325 Flower Lane, Morganville, New Jersey 07751. Our telephone
number is (201) 697-7887 and our facsimile number is (732) 617-8658.
SECURITIES OFFERED BY US
We are offering a maximum amount of 16,000,000 shares of common stock, $.0001
par value, at $0.25 per share. Currently, we have not established an
underwriting arrangement for the sale of these shares. All funds that are
received by us in the offering are available for immediate use. There is no
minimum number of shares that must be sold before we can utilize the proceeds of
the offering. Funds will not be placed in an escrow or similar account until a
minimum amount has been raised. You will be purchasing our shares from us and
not our selling security holders.
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RISK FACTORS
An investment in our common stock is highly speculative and involves a high
degree of risk. Therefore, you should consider all of the risk factors discussed
below, as well as the other information contained in this document. You should
not invest in our common stock unless you can afford to lose your entire
investment and you are not dependent on the funds you are investing.
Please note that throughout this prospectus, the words "we", "our" or "us" refer
to Royal Capital Management, Inc. and not to the selling shareholders.
WE LACK AN OPERATING HISTORY AND HAVE LOSSES WHICH WE EXPECT TO CONTINUE
INTO THE FUTURE
We were incorporated in January 11, 1994, in the State of New Jersey. Our future
success or failure of our three diverse operations can not be determined. Our
ability to achieve and maintain profitability and positive cash flow is
dependent upon the following:
- our ability to receive and maintain new buyers and orders for our
concrete produced in Abu Dhabi, United Arab Emirates.
- our ability to develop software for teaching American English as a
second language and receiving buy orders for this software.
- our ability to find and maintain new customers for gourmet bread on
the East Coast of the United States.
- our ability to raise the capital necessary to meet the costs of
salary, production, and marketing required and anticipated for the
three (concrete plant, software for teaching American English, and
gourmet bread) projects.
- our ability to anticipate and manage any regulatory developments,
social or economic changes, and terrorist threats in the United Arab
Emirates and the United States.
Based upon current plans, we expect to incur operating losses in the immediate
future. This will happen because there are expenses associated with the expected
addition of more employees, office space, and production facilities. We cannot
guarantee that we will be successful in generating revenues in the future.
Failure to generate revenues will cause us to go out of business.
OUR THREE VENTURES ARE NEW, AND THUS WE DO NOT HAVE SIGNIFICANT CAPITAL;
THEREFORE, WE MAY GIVE PREFERENCE TO ONE PROJECT BEFORE THE OTHER TWO PROJECTS
AND AS A RESULT MAY NOT BE ABLE TO PURSUE OUR ENTIRE BUSINESS PLAN.
Our three ventures are new and thus we do not have significant capital for these
projects. In addition, since this offering is a "best efforts" offering, we may
decide to use the funds received to aid one project over the other, and thus
negatively impact the growth of one or all of the projects.
SINCE THERE IS NO MINIMUM PURCHASE REQUIREMENT IN THIS OFFERING, WE MAY RECEIVE
ONLY PARTIAL PROCEEDS FROM THIS OFFERING, WHICH WILL NOT ALLOW US TO ATTAIN OUR
INTENDED USE OF PROCEEDS AND CAUSE AN INVESTOR TO POSSIBLY LOSE SOME OR ALL OF
HIS INVESTMENT
There is no minimum purchase requirement in this offering. Therefore, we may
only receive a partial amount of the intended offering. If we do not receive the
full amount of proceeds from this offering, we may not be able to attain our
intended use of proceeds, specifically, monies needed for commissioning and
start up of the Ready-mix plant in Abu Dhabi, product development and marketing
of the English Software Teaching Program, and start up of the Gourmet Bread
operation on the Eastern Coast of the United States. In addition, we may not
even be able to pay the costs of this registration statement. This would affect
our ability to grow our business. Any investor may lose some or all of his or
her investment in the event that insufficient funds are raised and we are unable
to grow our business.
WE ARE ONE OF THE READY-MIX CONCRETE PRODUCERS AMONGST MANY IN ABU DHABI
AND WE MAY LOSE BUSINESS TO OUR COMPETITORS, HAVE LOWER REVENUES, GROSS
MARGINS AND OPERATING INCOME
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There are a number of producers of ready-mix concrete presently in Au Dhabi. In
the future, it is possible that their quality and production might improve and
be superior to ours. Their improvements may cause us to lose our existing client
base and also reduce our ability to get new clients We continue to experience
intense competition across all markets for our products and services. These
competitive pressures may result in decreased sales volumes, price reductions,
and/or increased operating costs, such as for marketing and sales incentives,
resulting in lower revenues, gross margins and operating income.
CERTAIN STATES MAY NOT ALLOW SALES OF OUR COMMON SHARES AND INVESTORS MAY
BE REQUIRED TO HOLD THEIR COMMON SHARES INDEFINITELY
The common shares offered are intended to be qualified or exempt for sale only
in a limited number of states. Purchasers of the common shares may move to
jurisdictions in which the common shares are not qualified or exempt. No
assurances can be given that we will be able to effect any required
qualification or that any exemption will be available permitting a purchaser to
sell his common shares, and, as a result, such common shares may be required to
be held indefinitely.
SALES BY SELLING SECURITY HOLDERS BELOW THE $.25 OFFERING PRICE MAY CAUSE
OUR STOCK PRICE TO FALL AND DECREASE DEMAND IN THE PRIMARY OFFERING WHICH
MAY DECREASE THE VALUE OF YOUR INVESTMENT
The selling security holder offering will run concurrently with the primary
offering. All of the stock owned by the selling security holders will be
registered by the registration statement of which this prospectus is a part. The
selling security holders may sell some or all of their shares immediately after
they are registered. There is no restriction on the selling security holders to
address the negative effect on the price of your shares due to the concurrent
primary and secondary offering. In the event that the selling security holders
sell some or all of their shares, which could occur while we are still selling
shares directly to investors in this offering, trading prices for the shares
could fall below the offering price of the shares. In such event, it may be
difficult to sell all of the shares to investors, which would negatively impact
the offering. As a result, our planned operations may suffer from inadequate
working capital.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker- dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit the market
price and liquidity of our securities. Broker- dealers who sell penny stocks to
certain types of investors are required to comply with the Commission's
regulations concerning the transfer of penny stocks. These regulations require
broker- dealers to:
- Make a suitability determination prior to selling a penny stock to the
purchaser;
- Receive the purchaser's written consent to the transaction; and
- Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
6
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY BASED ON THE NUMBER OF
SHARES WE ARE REGISTERING FOR SELLING SECURITY HOLDERS AND YOU MAY FIND IT
DIFFICULT TO SELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID FOR THEM
We do not know the extent to which the market for our shares of common stock
will expand or contract upon the resale of the shares registered under this
prospectus. Therefore, your ability to resell your shares may be limited.
Actions or announcements by our competitors, regulatory developments and
economic conditions, as well as period-to-period fluctuations in our financial
results, may have significant effects on the price of our common stock and
prevent you from selling your shares at or above the price you paid for them.
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL, THE LOSS OF
WHOM COULD NEGATIVELY AFFECT US
Yan Jacob Rusanov , our President, Yevsey D. Zilman, Vice President Yuli
Ginzburg, our Vice President and Andrey Kharlanov, the general manager of our
City Mix plant in Abu Dhabi, are important to our success. If they become unable
or unwilling to continue in their present positions, our business and financial
results could be materially negatively affected.
IF WE FAIL TO ADEQUATELY MANAGE OUR GROWTH, WE MAY NOT BE SUCCESSFUL IN
GROWING OUR BUSINESS AND BECOMING PROFITABLE
We expect our business and number of employees to grow over the next 12 months.
In particular, we intend to increase personnel to handle our anticipated growth
resulting from future sales. We expect that our growth will place significant
stress on our operation, management, employee base and ability to meet capital
requirements sufficient to support our growth. Any failure to address the needs
of our growing business successfully could have a negative impact on our chance
of success.
NO DIVIDENDS AND NONE ANTICIPATED
To date, we have paid no cash dividends on our common shares. For the
foreseeable future, earnings generated from our operations will be retained for
use in our business and not to pay dividends.
SELLING SHAREHOLDERS MAY IMPACT OUR STOCK VALUE THROUGH THE EXECUTION OF
SHORT SALES WHICH MAY DECREASE THE VALUE OF OUR COMMON STOCK
Short sales are transactions in which a selling shareholder sells a security it
does not own. To complete the transaction, a selling shareholder must borrow the
security to make delivery to the buyer. The selling shareholder is then
obligated to replace the security borrowed by purchasing the security at the
market price at the time of replacement. The price at such time may be higher or
lower than the price at which the security was sold by the selling shareholder.
If the underlying security goes down in price between the time the selling
shareholder sells our security and buys it back, the selling shareholder will
realize a gain on the transaction. Conversely, if the underlying security goes
up in price during the period, the selling shareholder will realize a loss on
the transaction. The risk of such price increases is the principal risk of
engaging in short sales. Such short selling could impact the value of our stock
in an extreme and volatile manner to the detriment of other shareholders.
SHARES ELIGIBLE FOR PUBLIC SALE IN THE FUTURE COULD DECREASE THE PRICE OF
OUR COMMON SHARES AND REDUCE OUR FUTURE ABILITY TO RAISE CAPITAL
Sales of substantial amounts of our common stock in the public market could
decrease the prevailing market price of our common stock and our ability to
raise equity capital in the future.
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USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. The gross proceeds to us from the sale of up to the
additional 16,000,000 shares of our common stock at a price of $0.25 per share
are estimated to be $4,000,000 The proceeds, if any, may be significantly less
than $4,000,000, and there is the possibility that the proceeds may not be
sufficient to cover the costs associated with this offering. We expect to use
the net proceeds from this offering for the purposes described in the table
below. Any gross proceeds will be used first to pay the offering expenses of
$102,500.00. Any gross proceeds after the offering expenses will be prorated
equally among the other items listed in the table below. We have agreed to bear
the expenses relating to the registration of our own shares as well as the
shares for the selling security holders.
[Download Table]
Gross Proceeds $4,000,000
Offering Expenses $ 102,500
USE OF PROCEEDS
Commissioning and start-up of the ready-mix concrete plant
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Stage 1
1. Purchase of two concrete pumps $ 700,000
2. Purchase of raw materials $ 330,000
3. Settlement with First Gulf Bank $ 230,000
4. General and administrative expenses, including
employment of plant personnel $ 200,000
5. Computer control systems $ 89,000
6. Testing and commissioning $ 70,000
7. Connection of permanent water and electricity $ 58,000
8. Aggregate silos modification $ 48,000
9. Purchase of pick-up vehicles $ 30,000
10. Workshop equipment, tools, furniture $ 30,000
11. Telephones, network, miscellaneous $ 15,000
Sub-Total $1,800,000
Stage 2
1. Purchase of seven transit mixers $ 560,000
2. Purchase of one concrete pump $ 350,000
3. Purchase of raw materials $ 150,000
4. General and administrative expenses, including
employment of plant personnel $ 110,000
5. Purchase of pick-up vehicles $ 30,000
Sub-Total $1,200,000
Total for Stage 1 and Stage 2 $3,000,000
Program for teaching American English as a second language
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1. Product development $ 55,000
2. Legal support $ 40,000
3. Contractual support $ 25,000
4. Professional fees $ 20,000
5. Administrative costs $ 10,000
Total $ 150,000
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Production of gourmet bread products
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Freezer $ 15,000
Refrigerator $ 10,000
Proof Box (Steam Generation) $ 10,000
Ovens (2) $ 60,000
Dough Dividers $ 6,000
Delivery Vans (2) (used) (3) $ 20,000
Dough Sheeter/ Roller $ 7,000
Racks, Bins, Tables, Trays, Etc $ 15,000
Ingredients (2 Months forward) $ 25,000
Packaging Supplies (2 Months forward) $ 5,000
Salary Workers (2 Months forward) $ 20,000
Salary Drivers (2 Months forward) $ 10,000
Salary Salespeople (3 Months forward) $ 15,000
Rent (6 Months forward) $ 30,000
Legal, Zoning, etc $ 1,500
Moving, delivery, setup $ 3,000
Purchase of trademark, artwork, recipes, clientele, supply $ 95,000
Total $ 347,500
Working Capital and General Corporate Purposes $ 400,000
Gross Proceeds $4,000,000
Less Offering Expenses $ 102,500
Net Proceeds $3,897,500
DETERMINATION OF OFFERING PRICE
The price of $0.25 per share for the offering of 16,000,000 shares has been
determined at random and with the likelihood of acceptance by investors.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not traded on any recognized securities exchanges. Thus
there is no available market to sell our shares. Upon this registration
statement being declared effective, we intend to have a registered broker-dealer
file a Form 211 with the NASD for the purpose of obtaining a quote on the OTC
Bulletin Board. As of October 20, 2004, based on our records, we had 57
shareholders holding 42,600,000 shares of our common stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of October 20, 2004 , with
respect to compensation plans under which our equity securities are authorized
for issuance:
[Enlarge/Download Table]
(a) (b) (c)
-------------------- -------------------- -------------------
Number of securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
-------------------- -------------------- -------------------
Equity compensation
plans approved by
security holders None
Equity compensation
plans not approved
by security holders None
Total None
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DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy
to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends. There can be
no assurance that we can achieve such earnings.
PENNY STOCK CONSIDERATIONS
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker- dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit their
market price and liquidity of our securities. Broker- dealers who sell penny
stocks to certain types of investors are required to comply with the
Commission's regulations concerning the transfer of penny stocks. These
regulations require broker- dealers to:
- Make a suitability determination prior to selling a penny stock to the
purchaser;
- Receive the purchaser's written consent to the transaction; and
- Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our financial statements and notes thereto appearing in this prospectus.
The following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. Our actual results may differ significantly
from the results, expectations and plans discussed in these forward- looking
statements.
OVERVIEW
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our financial statements and notes thereto appearing in this prospectus.
The following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. Our actual results may differ significantly
from the results, expectations and plans discussed in these forward- looking
statements.
COMPANY'S OVERVIEW
------------------
We commenced our activities on January 11, 1994. We are currently specializing
in multi-project management. As a result of the merger with City Mix Management,
Inc. in December 2003, we acquired City Mix LLC, a company incorporated in Abu
Dhabi, the United Arab Emirates, which owns a ready-mix concrete plant. In City
Mix LLC, we own 49% (which is the maximum shareholding ownership allowed for
non-residents by the United Arab Emirate laws) and have full and exclusive
rights to exercise 100% beneficial ownership of the company and to operate,
manage and control all the assets and business of City Mix LLC. Total assets of
City Mix LLC as of December 31, 2003 were $4,018,404.
10
In the years to follow, we are planning to develop our activities in three major
business segments:
(1) commissioning, start up and operation of our ready-mix concrete plant
in Abu Dhabi, the United Arab Emirates;
(2) development, marketing and distribution, on a worldwide basis, of a
program for teaching American English as a second language with the aid
of a personal computer; and
(3) production, marketing and distribution of gourmet bread products in the
East Coast of the United States of America.
Commissioning, start up and operation of our ready-mix concrete plant in Abu
----------------------------------------------------------------------------
Dhabi, the United Arab Emirates
-------------------------------
We are planning to develop this project through our subsidiary City Mix LLC. The
United Arab Emirates and the Emirate of Abu Dhabi, in particular, have attracted
multi-billion dollar investments, including foreign capital investments, for the
development of major construction projects. The construction and industrial
sector is the second largest industry in the UAE after oil and gas. In the next
few years, Abu Dhabi expects local and foreign investments to invest at least
$10 billion into emerging industrial zones (`Abu Dhabi Economy', Issue 381,
March 2004). The ready-mix concrete share in Abu Dhabi is expected to consume
about 25% of the investments. All Abu Dhabi construction projects are based on
concrete structures. Concrete is the only locally available, and thus widely
used, construction material.
Our ready-mix concrete plant comprising two batching plants is a brand new
state-of-the-art technology and set of machineries capable of producing fresh
concrete of any type in strict accordance with the highest international quality
standards. As of today, the project is in its very final stage. We believe that,
based on a number of technological advantages incorporated in our plant and a
balanced market entry strategy, we will be able, once the plant operation
commences, to offer more competitive prices to customers maintaining the highest
standards of quality, production capacity and delivery.
Our management is responsible for the overall executive management and control
of the project. In Abu Dhabi, the day-to-day management of the operations will
be carried out by City Mix LLC. The project will be realized in two stages.
Stage 1 is commissioning and operation of the first batching plant; and Stage 2
is commissioning and operation of the second batching plant. To facilitate the
start-up of the plant, we are planning to spend about $3,000,000, which will be
used mostly to finance the commissioning of the plant, purchase of initial
quantities of raw materials, employment of production and administrative
personnel and acquisition of additional technological and transportation
equipment.
Development, marketing and distribution, on a worldwide basis, of a program for
-------------------------------------------------------------------------------
teaching American English as a second language with the aid of a personal
-------------------------------------------------------------------------
computer.
---------
With this project, we are planning to develop our activities internationally
within the educational sector. Our purpose is to establish long-term commercial
presence in this international market and to develop a number of educational
projects and activities in various parts of the world.
For this purpose we will start with developing, marketing and distribution of a
computer software product designed for teaching foreign languages, based on the
technology, which we acquired in 2002 under a contract with YZ Business
Consulting. This technology is the latest development in modern teaching
techniques for self-studying of foreign languages with the aid of a personal
computer. For this technology, Provisional Patent Application of 07/03/2003 has
been filed with the United States Patent and Trademark Office and it is now
being registered with the US and international patent authorities pursuant to a
contract dated February 15, 2003 between us and Edward D. Pergament, Registered
Patent Attorney, Reg. # 43,346.
11
We are planning to develop a software product designed to teach American English
as a second/foreign language to non-English speakers, as well as to expand the
vocabulary and improve general knowledge of the language of those who command
American English in one degree or another. The product is used for self-studying
and ensures reliable memorization, correct pronunciation, spelling and practical
utilization of the spoken English material of about 4,000 most frequently used
words and word expressions. It will be followed by creation of other products,
which will ensure development of good command of American English allowing
students to pass the entrance examinations at US educational institutions.
To ensure high performance of the program we have cooperated with major
international companies such as AT&T and Clipart to complete the program with
high quality components. In order to develop specialist teaching materials for
the program in special format to meet the method requirements, a number of
highly qualified language experts have been involved including the leader of one
of the organizations affiliated with TESOL. This organization is known as TESOL
Ukraine (Teachers of English to Speakers of Other Languages in Ukraine), an
affiliate of the International Association. TESOL, Inc. (Teachers of English to
Speakers of Other Languages) has its headquarters in Alexandria, Virginia. As of
today, a demonstration version of the program has been developed.
The initial stage of the project will be carried out in a number of regions of
the world carefully selected by us based on our cooperation and relationship
with key market players, as well as our own business presence in such areas. We
will require $150,000 in financing in order to develop and commence commercial
production, marketing and distribution of the software product of the program.
Production, marketing and distribution of gourmet bread products in the East
----------------------------------------------------------------------------
Coast of the United States of America.
--------------------------------------
We are planning to create a new baking enterprise in cooperation with Jake's
Bakes Challah Works ("Jake's"), a bakery currently owned and operated by the
Rusanov Corp., which in turn is owned by our President, Y. Jacob Rusanov. Today
Jake's produces, markets and distributes gourmet bread products made with a
"Challah" dough base. During the last thirty months that Jake's has been
conducting its operations, it has a clientele based in New York City and its
suburbs. Our management wants to expand production and distribution to allow
consumers in NYC, Long Island, Philadelphia, Boston and other parts of the
country to have an opportunity to purchase Jake's products.
Currently Jake's produces twelve items and our plan is to introduce an
additional five products. All Jake's products contain the O.K. kosher
supervision symbol, which is recognized throughout the US and the world as the
strictest and most reliable such service. Jake's products not only stand up to
the strictest levels of Kashruth they are also appropriate for vegetarian, vegan
and Muslim diets. Our target audience will be the kosher and non-kosher
consumers. Currently Jake's products are sold in large supermarkets such as Shop
Rite and Acme/Albertsons. They are also sold in smaller privately managed stores
in various New Jersey communities such as Teaneck, Englewood, and Fair Lawn.
Negotiations are already underway to introduce Jake's products to Pathmark
supermarkets as well as expand the number of Shop Rite stores that carry Jake's.
Since Jake's products have a shelf life of 10 to 14 days, they can be marketed
to stores in communities as far as two days driving time from the NYC area. This
can give Jake's a reach into such areas as New England, Toronto, Chicago and
Florida. Based on assumptions that 80% of the purchasers of Jake's are kosher
consumers and 20% are vegan, vegetarian, Muslim or simply enjoy the taste, the
target audience is in the millions of consumers. Additionally the kosher
consumer is weight conscious, as are all other consumers. Jake's will offer
traditional kosher favorites in "Low Carb" varieties.
We are planning to allocate $350,000 to this project, which will be spent mostly
to purchase necessary equipment and ingredients, employ the staff and to finance
establishment costs.
12
OPERATING RESULTS for the half yearly period ended on June 30, 2004 and 2003 are
-----------------
as follows:
(All figures are expressed in U.S. Dollars)
[Enlarge/Download Table]
Increase / (Decrease) in
6/2004 6/2003 2004
------ ------ ----
Revenue 0 0 0
Cost of Revenue 0 0 0
Gross Profit /(Loss) 0 0 0
==========================================================================================================================
General and Administrative Expenses (135,859) (127,614) (8,245)
Operating Loss before Other Income (135,859) (127,614) (8,245)
==========================================================================================================================
Other Income /(Loss)
- Truck rental income net of
depreciation and other costs 89,846 140,369 (50,523)
- Finance Cost (10,056) (19,895) 9,839
- Non Operating Income 4,223 61 4,162
Total Other Income / (Loss) 84,013 120,535 (36,522)
==========================================================================================================================
Net Loss (51,846) (7,079) (44,767)
==========================================================================================================================
We are a development stage company that has yet to commence operations of ready
mix cement. However, our subsidiary in the United Arab Emirates, City Mix
L.L.C., is making use of its 16 cement mixer trucks by renting them to generate
additional cash flow. There is a decrease of $50,523 in truck rental income
after deducting depreciation on such trucks and other related direct costs in
the quarter ending June 30, 2004 from $89,846 compared to $140,369 for the
quarter ending June 30, 2003 or a decrease of 36%. The reduction was due to the
fact that at the beginning of 2003, our trucks were rented to three different
parties at different rental prices. In approximately April 2003, there was only
one party left to whom City Mix LLC was renting all 16 trucks at slightly lower
rent per truck. The other reason is that in May 2004, management decided not to
discount future post dated checks to avoid additional losses on the discounting
interest, hence our June 2004 check was not deposited in our bank account but
was kept to be cashed on maturity in September 2004.
General and Administrative Expenses: General and Administrative Expenses
-----------------------------------
marginally increased from $127,614 for the quarter ending June 30, 2003 to
$135,859 for the quarter ending June 30, 2004 or an increase of $8,245 or 6.46%.
This was in line with normal day-to-day operational costs.
Non Operating Income: Non operating income for the quarter ending June 30, 2004
--------------------
was $4,223 comprised mainly of consulting income.
OFF BALANCE SHEET ARRANGEMENTS
------------------------------
We have operating lease commitments for a sublease of land (300 ft x 300 ft) on
which the construction plant will be built. In accordance with the laws of the
Emirate of Abu Dhabi, the United Arab Emirates, the land on which the
construction plant will be built is owned by the Abu Dhabi Municipality and is
leased to Mr. Mubarak Al Ahbabi, a UAE national and the partner of City Mix LLC.
It is a legal requirement in the UAE for a non-resident entity to have a UAE
national in a limited liability company as a partner, otherwise no business is
allowed. Subject to an agreement dated November 26, 2000, this land is subleased
by Mr. Mubarak Al Ahbabi to City Mix LLC for the duration of the agreement,
which is 20 years and renewed upon expiration. The Abu Dhabi Municipality issues
one certificate for both lease and sublease of the land. The certificate is
automatically renewed by the Abu Dhabi Municipality on an annual basis provided
the annual fee is paid. The sublease amount is $13,605 per annum.
13
We have capital commitment for commissioning of the plant and machinery in the
amount of approximately $ 145,000 as of June 30, 2004.
ISSUES AND UNCERTAINTIES
------------------------
Challenges to Business Plan
In the next twelve months, we will concentrate on achieving our goals in
implementing our plans to commission and start up our ready-mix concrete plant
in Abu Dhabi, United Arab Emirates, to commence the development, marketing and
distribution, on a worldwide basis, of the American English teaching software
program, and to commence production, marketing and distribution of gourmet bread
products in the East Coast of the United States of America.
Each of the three activities is of equal importance to us, but our main efforts
will be focused primarily on the ready-mix plant operation. Once the funds are
allocated, we intend to start production and sales of concrete within 2-3
months. In this preparatory period we will need to commission the plant, employ
necessary personnel, purchase additional equipment and raw materials and
establish the operation to match the production and delivery requirements of our
potential customers. We are positive that our start-up plan is feasible and will
ensure the successful entry into the market.
The American English teaching software and gourmet bread production are
relatively new areas of business for us. Nevertheless, we have put substantial
effort into developing these two projects and are confident that with further
concentration and necessary financial and work input we will be able to
implement both projects as planned.
Restricted Cash
Our cash balance as of June 30, 2004 was $695,129. Of this balance, $551,848 was
restricted by the Anglo American Bank, a Grenada Corporation (Bank). The Anglo
American Bank is undergoing liquidation, which is supervised by the Ministry of
Finance of Grenada. In our letters to the Ministry of May 30, 2004 and April 5,
2004, we requested the latest development of the situation, but have not yet
received a response. Nevertheless, by telephone we were notified by Ms. Roth,
Secretary of the Ministry of Finance, that the Ministry was supervising the
process of liquidation of the bank and the issue of the return of the funds to
the depositors.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents as at June 30, 2004 totaled $695,129. This represented
a reduction of $ 22,360 from the beginning of the year 2004 and an increase of
$225,884 as compared to the period ended June 30, 2003. There was a reduction of
$111,741 compared to the six month period ended June 30, 2003. We believe that
increased revenues in coming years will generate much improved cash flows
allowing us to meet our on-going expenses from our revenue.
Except for our normal day-to-day functioning, there were no changes in cash and
cash equivalents for the period. A reduction of the above occurred due to loss
for the period. Since negative cash generated from the operating activities of
$20,455, a lower amount of $7,532 was invested in acquisition of additional
plant and equipment with additional source of funding from bank amounts to $
5,627.
Management anticipates that our primary uses of capital in the future periods
will be allocated to continue to satisfy borrowing obligations and for working
capital purposes. Our business strategy is to increase working capital by
internal growth through continued hosting of our existing customers, sale of our
products, and externally through the sale of potentially dilutive securities. We
may also continue to incur debt as needed to meet our operating needs.
14
As at June 30, 2004, the balance of the loan with the First Gulf Bank was
$218,869 and the outstanding balance of the post dated checks discounting
arrangement with HSBC Bank of Middle East in the United Arab Emirates was $
74,741. The current account balance with Anglo American Bank, a Grenada
Corporation (Bank) was $ 551,847. The Bank is undergoing liquidation and were
notified by the Ministry of Finance by telephone that the Ministry was
supervising the process of liquidation of the Bank and the issue of the return
of the funds to the depositors. We are hopeful about a positive outcome in this
situation.
We do not currently have material commitments for capital expenditures but
anticipate entering into such commitments for approximately $1,900,000 to ensure
the start-up and the operation of our ready-mix concrete plant and the
establishment of production of gourmet bread products in the East Coast of the
United States of America provided the necessary funding is raised from public
investors.
In the ordinary course of business, we enter into contracts that specify that we
will purchase all or a portion of our requirements of a specific product,
commodity, or service from a supplier or vendor. These contracts are generally
entered into in order to secure pricing or other negotiated terms. They do not
specify fixed or minimum quantities to be purchased and, therefore, we do not
consider them to be purchase obligations.
Management anticipates that the capital requirements for operations and
development for the next twelve months for the three major projects will be
$3,600,000, based on cash flow projections.
OPERATING RESULTS for the three years/period ended on December 31, 2003, 2002
-----------------
and 2001 are as follows:
(All figures are expressed in U.S. Dollars)
[Enlarge/Download Table]
Increase /
Since Inception (Decrease) in Increase /
YE : 2003 YE : 2002 to Dec. 31, 2001 2003 (Decrease) in 2002
--------- --------- ---------------- -------------- ------------------
Revenue 0 0 0 0 0
Cost of Revenue 0 0 0 0 0
Gross Profit /(Loss) 0 0 0 0 0
================================================================================================================================
General and Administrative Expenses (293,347) (412,676) (489,321) 119,329 76,645
Operating Loss before Other Income (293,347) (412,676) (489,321) 119,329 76,645
================================================================================================================================
Other Income /(Loss)
================================================================================================================================
- Truck rental income net of 273,573 (93,741) (243,056) 367,314 149,315
depreciation and other costs
- Finance Cost (39,790) (44,251) (34,255) 4,461 (9,996)
- Gain of disposal of Equipment 0 22,055 0 (22,055) 22,055
- Non Operating Income 8,561 64,216 3,120 (55,655) 61,096
Total Other Income / (Loss) 242,344 (51,721) (274,191) 294,065 222,470
================================================================================================================================
Net Loss (51,003) (464,397) (763,512) 413,394 299,115
================================================================================================================================
We are a development stage company that has yet to commence operations of ready
mix cement. However, our subsidiary in the United Arab Emirates, City Mix
L.L.C., is making use of its 16 cement mixer trucks by renting them to generate
additional cash flow. There is an increase of $ 367,314 in truck rental income
after deducting depreciation on such trucks and other related direct costs in
the year ending 2003 over the year ending 2002 of $149,315 or an increase of
246%. Per management's view, this will not be a significant portion of our
future income. In the year ending 2002, the renting of truck mixers was begun at
the later part of the year while in the year ending 2003, such activity was
there for the full year.
15
General and Administrative Expenses: General and Administrative Expenses
-----------------------------------
decreased from $412,676 in the year ending 2002 to $293,347 for the year ending
2003 or a decrease of $119,329 or 28.92%. This was mainly due to a decrease in
salary and legal expenses.
Non Operating Income: Non operating income for the year ending 2002 was $64,216
--------------------
comprised mainly of the sale of vehicles and management and consultancy fees
received by Rally Partners U.S.A. Non operating income for the year ending 2003
was only $8,561.
OFF BALANCE SHEET ARRANGEMENTS
We have operating lease commitments for a sublease of land (300 ft x 300 ft) on
which the construction plant will be built. In accordance with the laws of the
Emirate of Abu Dhabi, the United Arab Emirates, the land on which the
construction plant will be built is owned by the Abu Dhabi Municipality and is
leased to Mr. Mubarak Al Ahbabi, a UAE national and the partner of City Mix LLC.
It is a legal requirement in the UAE for a non-resident entity to have a UAE
national in a limited liability company as a partner, otherwise no business is
allowed. Subject to an agreement dated November 26, 2000, this land is subleased
by Mr. Mubarak Al Ahbabi to City Mix LLC for the duration of the agreement,
which is 20 years and renewed upon expiration. The Abu Dhabi Municipality issues
one certificate for both lease and sublease of the land. The certificate is
automatically renewed by the Abu Dhabi Municipality on an annual basis provided
the annual fee is paid. The sublease amount is $13,605 per annum.
We have capital commitments for commissioning of the plant and machinery in the
amount of $145,633 as at December 31, 2003.
ISSUES AND UNCERTAINTIES
------------------------
Challenges to Business Plan
In the next twelve months we will concentrate on achieving our goals in
implementing our plans to commission and start up our ready-mix concrete plant
in Abu Dhabi, United Arab Emirates; to commence the development, marketing and
distribution, on a worldwide basis, of the American English teaching software
program, and to commence production, marketing and distribution of gourmet bread
products in the East Coast of the United States of America.
Each of the three activities is of equal importance to us, but our main efforts
will be focused primarily on the ready-mix plant operation. Once the funds are
allocated, we intend to start production and sales of concrete within 2-3
months. In this preparatory period, we will need to commission the plant, employ
necessary personnel, purchase additional equipment and raw materials and
establish the operation to match the production and delivery requirements of our
potential customers.
The American English teaching software and gourmet bread production are
relatively new areas of business for us. Nevertheless, we have put substantial
effort into developing these two projects and are confident that with further
concentration and necessary financial and work input we will be able to
implement both projects as planned.
Restricted Cash
Our cash balance at December 31, 2003 was $717,489. Of this balance, $551,848
has been restricted by the Anglo American Bank, a Grenada Corporation (Bank).
The Anglo American Bank is undergoing liquidation. In response to our enquiries
concerning the safety of our funds, we received a letter dated 10/03/02 from
Grenada International Financial Services Authority, a department of the Ministry
of Finance of Grenada, signed by Controllers Ulric Leung-Tat and Marlon Joseph
notifying us that as the controllers of the bank appointed by the Minister of
Finance effective from July 23, 2002, they had frozen all known accounts of
Anglo American Bank to safeguard depositors and creditors of the bank and that
the situation was treated with urgency and care. Though we are quite hopeful
that this issue will be successfully resolved, the actual outcome is yet
uncertain.
16
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents as at December 31, 2003 totaled $717,489, representing
a $145,123 increase from the beginning of the year. We believe that increased
revenues in coming years will generate much improved cash flows allowing us to
meet our on-going expenses from our revenue.
Cash generated from the operating activities has increased to $541,470 in the
year ending 2003 compared to $387,205 in the year ending 2002. This was an
increase of $154,265 or 39.8%. The increase was primarily attributable to the
growth in truck rental income and other changes in working capital. Cash used
for investing activities was $345,752 in the year ending 2003, an increase of
$43,529 from the year ending 2002. Financing activities has utilized cash of
$50,595 in the year ending 2003 compared to $203,399 in the year ending 2002. In
2002, our shareholders introduced additional capital over and above the bank's
funding for our operation.
Management anticipates that our primary uses of capital in the future periods
will be allocated to continue to satisfy borrowing obligations and for working
capital purposes. Our business strategy is to increase working capital by
internal growth through continued hosting of our existing customers, sale of our
products, and externally through the sale of potentially dilutive securities. We
may also continue to incur debt as needed to meet our operating needs.
As at December 31, 2003, the balance of our loan with the First Gulf Bank and
the post dated checks discounting arrangement with HSBC Bank of Middle East in
the United Arab Emirates was $287,983 as compared to $377,771 at the end of
2002. The current account balance with Anglo American Bank, a Grenada
Corporation (Bank) was $551,847. The bank went into liquidation in 2002,
appointed controllers and froze all the accounts of the bank to safeguard
depositors and creditors of the bank. We are hopeful about a positive outcome in
this situation.
We do not currently have material commitments for capital expenditures but
anticipate entering into such commitments for approximately $1,900,000 to ensure
the start-up and the operation of our ready-mix concrete plant and the
establishment of production of gourmet bread products in the East Coast of the
United States of America provided the necessary funding is raised from public
investors.
In the ordinary course of business, we enter into contracts that specify that we
will purchase all or a portion of our requirements of a specific product,
commodity, or service from a supplier or vendor. These contracts are generally
entered into in order to secure pricing or other negotiated terms. They do not
specify fixed or minimum quantities to be purchased and, therefore, we do not
consider them to be purchase obligations.
Management anticipates that the capital requirements for operations and
development for the next twelve months for the three major projects will be $
3,600,000, based on cash flow projections.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
-------------------------------------------
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe that
there are no critical accounting policies that would have a material impact on
our financial presentation.
17
BUSINESS - OUR COMPANY
A SUMMARY OF WHAT WE DO
About Us
We are a multi-project management company. Through our wholly-owned subsidiary,
City Mix LLC, in Abu Dhabi, the United Arab Emirates, we own a ready-mix
concrete plant. We expect that this will be one of the biggest ready-mix plants
in terms of physical capacity, production technology and product quality in the
United Arab Emirates.
In addition, we plan to develop, operate and distribute the following: (1)
development, marketing and distribution, on a worldwide basis, of a program for
teaching American English as a second language with the aid of a personal
computer; and (2) production, marketing and distribution of gourmet bread
products in the East Coast of the United States of America.
Commissioning and start-up of the ready-mix concrete plant in Abu Dhabi, the
United Arab Emirates
Industry and Market
The United Arab Emirates is rapidly becoming an economic role model for the
region with a business friendly environment, an open and liberal economic policy
and ten years of solid GDP growth, which has averaged 5.8 per cent annually and
8% for the non-oil sector. The gross domestic product of the emirate of Abu
Dhabi was $41 billion in 2002. The UAE maintained its high per capita income
standing at $20,602 last year (`Abu Dhabi Economy', Issues 374-376, 2003).
Direct foreign investments into the country reached $4.1 billion in the year
2000 (`Abu Dhabi Economy', Issues 359, 2002). The United Arab Emirates and the
Emirate of Abu Dhabi in particular have attracted multi-billion dollar
investments for the development of major construction projects. The construction
and industrial sector is the second largest industry in the UAE after oil and
gas. Abu Dhabi expects local and foreign investment to invest at least $10
billion into emerging industrial zones (`Abu Dhabi Economy', Issue 381, March
2004).
The ready-mix concrete share in Abu Dhabi is expected to consume about 25% of
the investment stated above. All Abu Dhabi construction projects are based on
concrete structures. Concrete is the only locally available, and thus widely
used construction material.
Marketing Strategy
------------------
Our marketing strategy will focus on a number of basic principles. These are
ranked in order of strategic importance for us as follows:
o Technology and Product Quality
o Selective Job Portfolio
o Price
o Promotion
Technology and Product Quality
We believe that our ready-mix plant in Abu Dhabi, once commissioned, will have
certain major advantages in comparison to other ready-mix producers in the area
in terms of production techniques, safety and environmental control. These
advantages are based on a number of principal design elements of the production
technology.
(A) Vertical Aggregate Automatic Feed System. The plant is equipped with a
----------------------------------------
feeding unit, which allows fully automatic unloading of aggregate directly
from supply trucks into storage silos by means of a fast automatic
vertical-type covered belt conveyors. All other ready-mix plants in Abu
Dhabi do not have such a system and have to store aggregate in the open
area at the site and to deliver it to silos by wheel loaders, which
increases production costs.
18
(B) Advanced Aggregate Storage System. The plant is equipped with a fully
isolated and protected aggregate storage silos, which allows for effective
protection of aggregate from direct sun and other environmental impacts
such as winds, rain and dust. This will provide saving energy and water
consumption of up to 32%, which in turn will drastically reduce production
costs.
(C) Extensive Cooling of Water. The plant incorporates an underground concrete
reservoir for technology water, which, together with the two powerful water
chillers, provides for a very effective temperature control at every stage
of production process even without the use of an icing plant, which further
reduces production costs.
(D) Concrete Recycling Unit. The plant is equipped with a special unit, which
provides almost 100% utilization of concrete residues.
(E) Truck Mixer Washing Unit. This is designed to give a thorough washing of
truck mixers before exiting the site and washing of truck drums before
loading with concrete. Waste water is recycled and used back in the
production process.
High quality of product (ready-mix concrete), which can satisfy the highest
international and local standards, is provided by certain elements of technology
and design. These are as follows:
o The technology equipment of the plant is designed to provide a fully
automatic and a very accurate feeding of ingredients (aggregate,
cement, water and additives) into the mixing units in strict
accordance with a mix design (formula), which allows us to produce
high quality concrete of any type.
o Strict temperature control at all stages of the production process and
cooling of the ready-mix concrete during transportation (by means of
adding ice into truck mixer drums).
o The plant is equipped with a modern sophisticated laboratory, which
allows a comprehensive quality control of ingredients and ready-mix
concrete to BS and ASTM standards throughout the production process,
as well as post-production tests of fresh and hardened concrete before
delivery to customers. In addition, quality tests will be carried out
upon delivery at the customers' sites with vis-a-vis a mobile
laboratory.
Selective Job Portfolio
In our marketing activities, we will be very selective and will focus on
entering into long-term relationships with reliable clients, who enjoy a very
good reputation in the market regarding prompt and secured payment for the
supplied concrete. Al Ain International is a potential client that is our first
choice. A number of preliminary agreements have been already negotiated for the
supply of City Mix's products.
Pricing
Our pricing strategy will be based on existing local market prices, which are
subject to little fluctuation and thus predictable. Nevertheless, at the
start-up stage and during approximately the first three operating months,
product prices will be minimized to facilitate market entry and lower entry
barriers. Simultaneously, we will not lower prices to an extent that would
jeopardize the operating margins or lead to a price war on the market. In the
beginning, we will concentrate on supplying the most widely-used types of
ready-mix concrete with high market prices. Simultaneously, we plan to pursue
and establish long-term relationships with suppliers of raw materials. We hope
to offset our favorable receivables policy by negotiating favorable credit terms
with our suppliers.
Promotion
We plan to pursue the following promotional activities:
19
o Streamlined presentation of our products, technology and services to
potential customers including governmental institutions;
o Introduction of printed advertising materials to potential customers;
o An aggressive Internet presence
o Advertising in printed media and industry publications focusing on the
target market segment.
Development, marketing and distribution, on a worldwide basis, of a program for
teaching American English as a second language with the aid of a personal
computer
Purpose
-------
Our purpose in this area is to establish a long-term commercial presence in a
growing international market - education, and to develop a number of projects
and activities in this area. We plan to achieve this strategic purpose in
several stages, implementation of the Language Program project being the initial
stage. The project will focus on entering the international market by
introducing a unique technology and products providing advanced teaching
materials and education services in teaching the English language as a second
language.
The teaching method and technology developed by us to be used in our software
products and education services have no analogy; they provide development of
most advanced teaching programs and materials for educational purposes. They
also can be used to create other products and teaching materials with different
areas of application capable of meeting various demands of the educational
market worldwide.
Product
-------
The product offered by us is a computer software program designed for teaching
foreign languages. The program is the latest development in modern teaching
techniques for self-studying of foreign languages. It is a multi-purpose
application designed for studying any foreign language, but we will commence the
project by introducing the first edition of the program developed for
self-studying of the American English as a second language.
The program is designed to teach non-English speakers the American English as a
second (foreign) language, as well as to expand the vocabulary and improve
general knowledge of the language of those who command the American English in
one degree or another. The program is used for self-studying and ensures
reliable memorization, correct pronunciation, spelling and practical utilization
of the spoken English material of about 10,000 most frequently used words and
word expressions. The program incorporates a combination of various techniques
designed to develop all language skills: listening, speaking, reading and
writing. It includes the following components:
o Vocabulary (English words and expressions)
o Translation into native language
o Transcription and phonetics
o Audio material (standard pronunciation)
o Video material (images)
o Record and playback
o Practical exercises
o Grammar
o Help (user manual)
The program comprises three levels of training, which provide reliable
perception of the educational material and development of good command of
American English. This will allow students to pass the entrance examinations at
US educational institutions. The three levels are:
o Primary (for beginners)
o Intermediate
o Advanced (with extensive grammar)
Each level is a separate product and will be offered to customers in the form of
a set of compact disks. We will start the Language Program by developing the
Primary Education product.
20
Distinctive and Unique Features
-------------------------------
The program for teaching the American English with the help of a personal
computer developed by us incorporates a number of distinctive features making it
unique and having no analogy in the world. These can be summarized as follows:
o The material (vocabulary) is placed into the student's subconscious
and then, using certain techniques, the information is transferred
from the subconscious into the consciousness where by means of
practical exercises it is reliably and effectively memorized.
o The material (vocabulary) is placed into the subconscious with the
help of the 25th frame effect. All the vocabulary is displayed in form
of images with English equivalents with frequency 25 frames per
second.
o Subconscious perception of the material is accompanied by the Mozart
music, which stimulates human memory and the work of human brain as a
whole. (Don Campbell: `The Mozart Effect').
o The program trains all types of human memory and develops all language
skills: listening, speaking, reading and writing.
o Any teaching function can be utilized momentarily any time during the
learning process.
o The program is highly ergonomic and requires no other teaching
instruments or materials.
o Technology applied in the program can be used as an effective
instrument in a continuous process of creating and upgrading teaching
programs for studying foreign languages to any level of
diversification and sophistication, as well as creating other teaching
programs for any other subject, which requires reliable comprehension
of large volumes of information in reasonably short time.
The program makes a complex intellectual work of studying foreign languages a
well-organized and easy activity. The studying process becomes spontaneous and
reliable memorization of new information takes place faster than under available
learning techniques, which deal with similar volumes of information.
Marketing
---------
Our marketing efforts to promote sales of our products worldwide will be carried
out in a number of regions of the world carefully selected by us based on our
cooperation and relationship with key market players, as well as our own
business presence in such areas. We will market and promote our software
products in cooperation with reputable professional companies specializing in
these activities.
In order to achieve our goals in marketing and promoting our products, we are
planning to enter into dealership contracts with local market key players
specializing in promotion and distribution of educational software. Negotiations
are underway with a number of dealers in Russia, India and the Gulf countries.
Each of the agency and dealership contracts will provide for an extensive
marketing effort, including but not limited to:
o Presentation of our products and services to potential customers
including governmental and private educational institutions;
o Introduction of printed advertising materials to potential customers;
o Advertising in printed media and industry publications focusing on the
target market segment.
In addition, we are planning to carry out a wide advertising and promotion
campaign through the Internet. For this purpose we are in the process of
development of our web site dedicated to the English Learning Program. Our
Internet-based marketing campaign will focus on the key principles as follows:
o education of potential customers about the benefits and unique
features of our English Learning Program;
o advertising publications in English and the native languages;
o direct sales of our educational software products;
o demo version with a download option;
o technical support
21
We believe that the sales of our products will be successfully ensured by the
marketing activities through a network of regional agents and dealers, and our
marketing campaign through the Internet based on the distinctive features of our
English Learning Program described above, which make it unique, less time
consuming and more effective than a large variety of similar educational
software products available in the market.
License Agreement with YZ Business Consulting
---------------------------------------------
Effective July 26, 2002, we signed a license agreement with YZ Business
Consulting. The License Agreement is the primary asset we are using to develop,
market and distribute, on a worldwide basis, a program for teaching American
English as a second language with the aid of a personal computer. Yevsey D.
Zilman, our Vice President and Deputy Chairman of the Board of Directors owns YZ
Business Consulting. Pursuant to the agreement, we are required to pay royalties
to YZ Business Consulting as follows: 40% of the total revenues from our sales
of any products, services or other activities utilizing the licensed technology
only after complete recovery of all r initial stage operation costs, including
legal fees, advertising and production.
Production, marketing and distribution of gourmet bread products in the East
Coast of the United States of America.
We are planning to create a new baking enterprise in cooperation with Jake's
Bakes Challah Works ("Jake's"), a bakery currently owned and operated by the
Rusanov Corp., which is owned by our President, Y. Jacob Rusanov. Today Jake's
produces, markets and distributes gourmet bread products made with a "Challah"
dough base that is very delicious. During the last thirty months that Jake's has
been conducting its operations, it has received great reviews and has a large
following in the Northern New Jersey Suburbs. Management wants to expand
production and distribution to allow consumers in NYC, Long Island,
Philadelphia, Boston and other areas, an opportunity to enjoy Jake's.
Our marketing campaign to advertise and promote our gourmet bread products will
be based on emphasizing and developing the achievements secured by the operation
of Jake's. These can be summarized as follows.
All Jake's products bear the O.K. kosher supervision symbol, which is recognized
throughout the US and the world as the strictest and most reliable such service.
Jake's products not only stand up to the strictest levels of Kashruth, they are
also appropriate for vegetarian, vegan and Muslim diets. Currently, Jake's
products are sold in large supermarkets such as Shop Rite and Acme/Albertsons.
They are also sold in smaller privately managed stores in various New Jersey
communities such as Teaneck, Englewood, and Fair Lawn. Negotiations are already
underway to introduce Jake's products to Pathmark, Stop & Shop, A&P and Foodtown
supermarkets as well as expand the number of Shop Rite stores that carry Jake's.
Since Jake's products have a shelf life of 10 to 14 days, they can be marketed
to stores in communities as far as two days driving time from the NYC area.
Management feels that sales will be a function of supply. Therefore, we will
focus on ensuring uninterrupted delivery of our products to customers. On a
price basis, Jake's is cheaper per ounce than most competitors. On a brand
recognition basis, Jake's is sold in very noticeable blue and yellow packaging.
Customers
Commissioning and start-up of the ready-mix concrete plant in Abu Dhabi,
the United Arab Emirates
The construction sector in the United Arab Emirates is the second largest
industry after oil and gas. The UAE authorities, and the government of the
Emirate of Abu Dhabi in particular, pursue a very aggressive policy of
establishing and developing new commercial, industrial, residential and
entertainment zones to attract local and foreign investments in order to ensure
permanent growth of the country. All Abu Dhabi investment and construction
projects are based on concrete structures. Concrete is the only locally
available, and thus widely used construction material. The construction projects
include construction of commercial and industrial infrastructure objects,
residential and office buildings, and bridges
22
Major construction projects in Abu Dhabi are managed by private construction
companies contracted by various governmental institutions such as:
o The Abu Dhabi Municipality
o The Abu Dhabi Water and Electricity Authority
o The Abu Dhabi Sewage Authority
o The Abu Dhabi Department of Public Works
o The Abu Dhabi Defense Ministry
There is also a large variety of private construction projects in Abu Dhabi
owned by large and medium sized private companies.
All of the construction projects are normally tender-based. In upcoming years,
Abu Dhabi expects local and foreign investments to invest at least $10 billion
only into emerging industrial zones (`Abu Dhabi Economy', Issue 381, March
2004). The ready-mix concrete share in Abu Dhabi is expected to consume about
25% of these investments.
Our job portfolio will include supply contracts and orders from both the
government and public sector. Our subsidiary, City Mix LLC, has entered into
preliminary agreements for the supply of products from our ready-mix concrete
plant for future construction projects of a number of project owners, such as Al
Ain International Group, RAPCO (Roads and General Contracting Projects, S&H
Engineering and Alwan Engineering.
Development, marketing and distribution, on a worldwide basis, of a program for
teaching American English as a second language with the aid of a personal
computer
Our software product designed to teach American English as a second/foreign
language to non-English speakers will be distributed to a variety of potential
customers. The target audience falls into two major categories.
o Individual customers of any sex, nationality, religion, social status and
profession from fourteen/fifteen years old to no upper limit of age.
o Governmental and private educational institutions, including any type of
training centers, schools, colleges and universities.
Based on the fact that our product does not require any specific training means,
materials or knowledge and that the learning techniques are very simple and
easy-to-understand, it can be used effectively and is designed for any user.
Production, marketing and distribution of gourmet bread products in the East
Coast of the United States of America.
Our target audience is the kosher and nonkosher consumers. Currently, Jake's
products are sold in large supermarkets such as Shop Rite and Acme/Albertsons.
They are also sold in smaller privately managed stores in various New Jersey
communities such as Teaneck, Englewood, and Fair Lawn. Negotiations are already
underway to introduce Jake's products to Pathmark supermarkets as well as expand
the number of Shop Rite store that carry Jake's.
Since Jake's products have a shelf life of 10 to 14 days, they can be marketed
to stores in communities as far as two days driving time from the NYC area.
Management feels that sales will be a function of supply. Therefore,m we will
focus on ensuring uninterrupted delivery of our products to customers. On a
price basis, Jake's is cheaper per ounce than most competitors. On a brand
recognition basis, Jake's is sold in very noticeable blue and yellow packaging.
The kosher consumer is weight conscious, as are all other consumers. We will
also be offering traditional kosher favorites in "Low Carb" varieties.
How We Compete
Commissioning and start-up of the ready-mix concrete plant in Abu Dhabi,
the United Arab Emirates
Competition
A number of producers of ready mixed concrete are active in Abu Dhabi, but most
of them are insignificant in terms of quality and production capacity. There are
about five plants that produce quality output in terms of strict quality and
uninterrupted delivery (Abu Dhabi Ready Mix, Tremix and Trans Gulf). Some of
them have been in business for in excess of 10-15 years.
23
We believe that our ready-mix plant due to its specific and highly effective
design is capable of producing the full range of high quality products at much
less production costs than most of the producers in the area. Our plant's
advanced aggregate storage system alone provides saving energy and water
consumption of up to 32%, which will drastically reduce production costs. On the
other hand, we will need a market share of only about 3% to make our operation
viable and provide financial self-sufficiency and profit margins. We believe
that this is very conservative as we are capable of much more favorable sales
due to the unique technology, high quality of end products and expertise of
production and administrative personnel to be employed using our extensive work
force database.
Generally, we anticipate that based on a number of technological advantages
incorporated in our plant and a balanced market entry strategy, we will be able
to offer more competitive prices to customers maintaining the highest standards
of quality, production capacity and delivery.
Development, marketing and distribution, on a worldwide basis, of a program for
teaching American English as a second language with the aid of a personal
computer
There are plenty of various software products in the international markets
related to teaching foreign languages and the English language in particular.
These products are manufactured and marketed by different producers and differ
substantially both in terms of quality and price. It should be noted though that
the educational sector is one the world's permanently growing business markets
and has practically no limits in demand for effective educational material.
We believe that our ability to successfully compete on the international arena
is based on the following major factors.
Unique character of our product. In our marketing campaign, we will focus on
-------------------------------
educating our potential customers about the distinctive features and benefits of
our product. These include, but are not limited to the following.
o The educational material (vocabulary) is placed into the student's
subconscious with the help of the 25th frame effect and then, using
certain techniques, the information is transferred from the
subconscious into the consciousness where by means of practical
exercises it is reliably and effectively memorized.
o The subconscious perception of the material is accompanied by the
Mozart music, which stimulates human memory and the human brain
activity as a whole (Don Campbell: `The Mozart Effect').
o The program trains all types of human memory and develops all language
skills: listening, speaking, reading and writing.
o Any teaching function can be utilized by the student momentarily at
any time of the learning process.
o The program is highly ergonomic and requires no other teaching
instruments or materials.
Many of the educational software products currently available in the market do
not provide for the subconscious mode of instruction. Those which do, normally
require the use of additional technical means such as TV sets or overhead
projectors or double-side cards. For example, the autogenic training, which
requires a substantial amount of additional time and which is not effective with
every individual. Our product makes a complex intellectual work of studying
foreign languages a well-organized and easy activity. The studying process
becomes spontaneous and reliable memorization of new information occurs
incommensurately faster than under available learning techniques, offered by
other products.
Balanced Marketing Strategy. We are planning to market and distribute our
---------------------------
product though a network of regional agents and dealers, who are key local
market players having an extensive experience in marketing similar products. On
the other hand, though our English Learning Program which provides for teaching
American English to speakers of any other language, we intend to commence this
project by introducing our products in such countries of the world as, Russia,
Ukraine and other countries of the former Soviet Union, where the demand for
educational software products designed for self-studying of foreign languages is
unlimited.
24
Sound Price Policy. The selling prices for educational software products
------------------
currently available in the markets, which are designed for teaching foreign
languages, and the English language in particular, range up to a few thousand US
dollars. In order to ensure the market entry and low entry barriers into this
market, we are planning to maintain the selling prices for our product in the
average range of local market prices.
Production, marketing and distribution of gourmet bread products in the East
Coast of the United States of America.
Management feels that the Challah/Baked goods market is worth billions of
dollars a year. Management feels that sales will be a function of supply.
Additionally the kosher consumer is weight conscious, as are all other
consumers. Offering traditional kosher favorites in "Low Carb" varieties will be
very successful.
Jake's is a relative newcomer to the kosher baked goods industry. In most stores
that Jake's is sold, there are at least two other brands of products that can be
categorized as "Challah". At that point, all similarities cease.
1. On a price basis, Jake's is cheaper per ounce than most competitors.
2. On a taste basis, it is our opinion that Jake's beats out the
competition.
3. On a brand recognition basis, Jake's is sold in very noticeable blue
and yellow packaging.
Employees
As of October 20, 2004, we have five (5) employees. We consider our relations
with our employees to be good. From time to time, we also utilize services of
independent contractors for specific projects or to support our research and
development effort. City Mix LLC, our wholly owned subsidiary, currently has one
employee, Andrey Kharlanov, its General Manager. At the same time, City Mix LLC
maintains cooperation with a number of commercial, financial and legal
institutions, who provide necessary personnel to satisfy City Mix LLC's
operating requirements on a consulting basis. These include drivers and
technicians who operate City Mix LLC's trucks, erection team, legal and
financial advisors.
DESCRIPTION OF PROPERTY
New Jersey Corporate Headquarters: We presently utilize the home office
of Eduard Klebanov located at 325 Flower Lane, Morganville, New Jersey as
our corporate headquarters. Mr. Klebanov is our Vice President and
Director. This is at no cost to us.
Abu Dhabi, UAE Lease: City Mix, LLC, our wholly owned subsidiary, entered into a
sublease agreement with our UAE national partner/sponsor for sublease of land on
which the concrete plant is constructed. The original agreement was dated
November 26, 2000. Subject to this agreement, , the term of the sublease is 20
years and renewable. The sublease payment is $13,605 per year. The Abu Dhabi
Municipality registers the land sublease on an annual basis after an annual
registration fee is paid. The next annual registration fee will be paid in
October 2004.
On July 13, 2003, we entered into a lease agreement for office space for a term
commencing July 13, 2003 through July 12, 2004. The lease payment for the year
was approximately $10,500. This amount was paid at the commencement of the
lease. On June 9, 2004, we signed a new lease agreement for office space for the
period from July 13, 2004 to July 12, 2005 with the same annual payment of
approximately $10,500. The first payment of about $5,250 was made at the
commencement of the new lease. The outstanding balance of about $5,250 is due in
October 2004.
25
(I) Other Property of City Mix LLC, Abu Dhabi, United Arab Emirates
-------------------------------------------------------------------
1. Twin Type Concrete Mixing Plant `CIFAMIX 2.85' located at the City Mix LLC
factory site at Mussafah, Sector M-35, Plot 31, Abu Dhabi, United Arab
Emirates, comprising:
1.1 Two (2) Mixing Units 'ROTOMIX RM 3000/2000'
1.2 Aggregate Feeding Unit
1.3 Aggregate Storage Unit
1.4 Batched Aggregate Conveying Unit
1.5 Cement Batching and Conveying Unit
1.6 Water Batching Unit
1.7 Liquid Additive Batching Unit
1.8 Cement Batching and Feeding Unit (to transit mixers)
1.9 Control Unit 'PC-BATCH'
1.10 Cement Storage Unit with Roofing
1.11 Concrete Reclaimer Unit 'PROJEKO'
1.12 Concrete Quality Laboratory
1.13 Diesel Generator `Caterpillar' Model 3306 ATAAC S.No. 8NSO123
1.14 Diesel Generator `Caterpillar' Model 3412 S.No. 4BZ0043
1.15 Diesel Generator `Caterpillar' Model 3412 STA S.No. 4BZ00415
1.16 Two (2) Chillers 01 30GT11 R-22
1.17 Thirty (30) A.C.Units
2. Readymix factory site located at Mussafah, Sector M-35, Plot 31, Abu Dhabi,
United Arab Emirates, comprising:
2.1 Mixing Plant Concrete Structural Building
2.2 Aggregate Feeding Concrete Structural Building
2.3 Reclaimer Unit Concrete Structural Facility
2.4 Underground Insulated Water Storage Reservoir
2.5 Additional Aggregate Storage Area
2.6 Diesel Generators Room
2.7 Electrical Room
2.8 Transformer Unit
2.9 Diesel Tank
2.10 Workshop and Laboratory Building
2.11 Office Building
2.12 Administrative/Accommodation Building
2.13 Transit Mixer Parking Area
3. Sixteen (16) Trucks `ASTRA' HD7 64.34 completed with Concrete Mixer Unit
`C.G.I. GRANDI IMPIANTI', spare wheels, and set of accessories as follows:
3.1 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421203, Engine 41K
4070-498771, Plate No. 73060
3.2 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421222, Engine 41K
4070-499160, Plate No. 73062
3.3 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421223, Engine 41K
4070-499565, Plate No. 73064
3.4 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421224, Engine 41K
4070-499322, Plate No. 73059
3.5 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421226, Engine 41K
4070-500492, Plate No. 73067
3.6 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421227, Engine 41K
4070-500237, Plate No. 73054
3.7 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421228, Engine 41K
4070-501918, Plate No. 73053
3.8 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421231, Engine 41K
4070-501668, Plate No. 73063
3.9 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421235, Engine 41K
4070-500379, Plate No. 73057
3.10 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421236, Engine 41K
4070-504025, Plate No. 73061
3.11 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421237, Engine 41K
4070-508891, Plate No. 73066
26
3.12 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421239, Engine 41K
4070-506470, Plate No. 73055
3.13 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421240, Engine 41K
4070-507301, Plate No. 73056
3.14 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421241, Engine 41K
4070-506448, Plate No. 73142
3.15 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421243, Engine 41K
4070-507274, Plate No. 73058
3.16 Truck `ASTRA' HD7 64.34 - Chassis ZCNH76434AF421244, Engine 41K
4070-504358, Plate No. 73065
4. Office Equipment and Furniture including:
4.1 Desktop computer `Mirage'
4.2 Laptop computer `Compaq Pressario'
4.3 Photocopier `Olivetti'
4.4 Two (2) printers
4.5 Scanner
4.6 Telephone switchboard
4.7 10 telephone sets
4.8 Mobile telephone
4.9 Set of office furniture
5. Legal ownership of 49% shareholding in City Mix LLC.
6. The exclusive rights to exercise 100% beneficial ownership of City Mix LLC,
and full and exclusive rights to operate and manage the assets and business
of City Mix LLC.
(II) Property of Royal Capital Management, Inc., New Jersey, USA
----------------------------------------------------------------
1.The license rights for commercial utilization of the technology for perception
and memorization of information with the help of a personal computer subject to
License agreement with YZ Business Consulting dated 07/26/02.
LEGAL PROCEEDINGS
From time to time in the normal course of business we have been involved in
litigation. At present we have one on-going litigation, which involves our
subsidiary, City Mix LLC. It is connected with our claims against Armitage
Engineering Co., LLC ("Armitage"), the main contractor of City Mix LLC. These
claims are based on the fact that Armitage failed to complete its work on time
in violation of its contractual agreement as per Contract of 03/28/99 and Annex
A-1 of 09/11/01 and refused to assume liabilities as stipulated by the contract.
Armitage disputed the allegation of untimely performance and took a series of
actions against us including locking of the City Mix LLC's factory site in order
to thrust its unfair position on City Mix LLC, which resulted in substantial
material damage to City Mix LLC.
City Mix LLC consulted Al Tamimi & Company, one of the leading law firms in the
United Arab Emirates, who studied the situation and concluded that Armitage's
actions were illegal. In response to City Mix LLC's proposal to Armitage to
resolve the dispute in an amicable way, Armitage filed Case 422/02 against City
Mix LLC with the Abu Dhabi Court of First Instance, Abu Dhabi, United Arab
Emirates seeking recovery from City Mix LLC of $158,514 representing final
payment under the contract. At the same time, Armitage continued locking the
City Mix LLC's site and refused to resume and complete the contractual work or
assume contractual sanctions for untimely performance. Then Cit Mix LLC was
advised by its lawyers to seek in court compensation from Armitage for the
damage incurred due to non-performance by Armitage of its contractual
obligations and illegal locking of City Mix LLC's site, which led to the
inability of City Mix LLC to operate its factory.
Therefore, City Mix LLC filed Urgent Case 72/02 against Armitage seeking to hold
Armitage liable for illegal actions and to stop Armitage from locking City Mix,
LLC's factory site so that City Mix LLC can use its own property. At the same
time, City Mix LLC counter-sued Armitage under Case 422/02 for $739,048, daily
compensation of $4,924 for loss of daily profits, and $2,449 for daily fees for
a consultant.
27
On December 23, 2003 the Abu Dhabi Court of First Instance, Abu Dhabi, United
Arab Emirates issued a judgment in case 72/02, in which it confirmed the
findings of its expert Saeed Geisah, who had been appointed by the court to
investigate the issue, and ruled that Armitage's action to lock City Mix LLC's
factory was illegal. This judgment is now being used as evidence against
Armitage in Case 422/02 where City Mix LLC counter-sued Armitage and seeks
compensation from Armitage for damages incurred.
The Armitage's claim and the City Mix LLC's counter-claim in Case 422/02 are
still being examined by the court. The court is expected to rule in this action
sometime prior to December 2004.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and
directors.
[Enlarge/Download Table]
Name Age Position
Yan Jacob Rusanov 35 President
Yuli Ginzburg 67 Vice President and Chairman of the Board of Directors
Yevsey D. Zilman 60 Vice President and Deputy Chairman of the Board of Directors
Eduard Klebanov 41 Vice President and Director
Leonard Khodorovsky 52 Director
Set forth below is certain biographical information regarding our executive
officers and directors:
Yan Jacob Rusanov has been our President since August 2003. Since 2001 he was
the President and CEO of Jake's Bakes, a bakery located in Fair Lawn, New
Jersey. He owns and operates this business. In addition to being a bread
manufacturer, it is also a retailer of such products. From 1995 to 2000, Mr.
Rusanov founded and ran a cosmetics manufacturing and export company called
Diane Dubeau Company. It was located in Carlstadt, New Jersey. He was the
Executive Vice President and Chief Operating Officer. His responsibilities
included supervising shipping, warehousing, accounting, Human Resources and
Management Information Systems departments as well as outside consultants. Mr.
Rusanov is a graduate of Binghamton University, Binghamton, New York, where he
received his Bachelor of Arts degree in History with a concentration in
International Relations.
Yuli Ginzburg has been our Vice President and Chairman of the Board of Directors
since January 2003. He has been our advisor in the engineering and technology
areas. Mr. Ginzburg has more than 40 years experience in development and
implementation of highly complex projects in electronic, chemical and paper
industries. He has been an independent engineering consultant for several
industrial clients since 2000. From 1983 to 2000, he was a Project Engineer with
Sweitzer-Mauduit In., Inc., based in Spotswood, New Jersey. From 1965 to 1982,
he was the Group Leader at the Leningrad Project Bureau, based in Leningrad,
Russia. He supervised the development of new processes, equipment and machinery
for the light industry. In 1959, he received a Master of Science degree in
Mechanical Engineering from Technological Institute, based in Leningrad, Russia.
From 1962-63, he studied Electro-Measuring Instruments at Polytechnic Institute,
Leningrad, Russia. Mr. Ginzburg is a holder of 12 patents in Russia, and a trade
secret in the United States.
28
Yevsey D. Zilman has been our Vice President and Deputy Chairman of the Board of
Directors since January 2003. Mr. Zilman is an expert in development and
management of technological, production processes and commercial projects. He
has 30 years experience as a Technical and Administrative Manager in major
governmental and commercial institutions. He has been the President, and is
presently the Vice President of R.A.L.Y. Partners, Inc. where he oversees
prospective commercial business project management. From 2000 to the present,
Mr. Zilman has been the President of Y.Z. Business Consulting, Inc., where he
provides consulting services for a variety of commercial business projects. He
also has significant experience in rail shipments, production of polyetheric
garment accessories, and in cryogenic engineering. In 1968, he received his
Masters in Mechanical Engineering form Russian Polytechnic Institute,
Novocherkassk, Russia, and completed post-graduate education at the Russian
Agricultural Institute. He also holds a Russian State Patent.
Eduard Klebanov has been our Vice President and Director since January 2003.
From 1998 to the present, he has been an Audit Manager at Shanholt Glassman
Klein Kramer & Co., certified public accountants located in New York, New York.
As an audit manager, he supervises, plans and performs certified audits, reviews
and compiles engagements for medium sized public firms, with an emphasis on
commercial and residential real estate. From 1990 to 1998, he was the Audit
Supervisor at Ellenbogen Rubenstein Eisdorfer & Co., LLP. In 1986, he received
his Bachelor of Science degree in Accounting from Brooklyn College, City
University of New York.
Leonard Khodorovsky has been our director since January 2003. Since 1981, he has
worked as an electrical engineer amd support maintainer for the NYC Transit
Authority. His responsibilities include testing different systems of a car,
locating problems, repairing and testing electrical systems, wiring and
installing electrical components, running tests of subway cars, tests and
repairs of electrical motors and tests and repair of temperature control systems
of cars. In 1983, he received his diploma in Business Management Administration
from Touro College of New York, based in New York City. In 1976, he received his
Masters Degree in Telecommunication Systems from the University of
Telecommunications based in Odessa, Ukraine.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information
concerning the annual and long-term compensation awarded to, earned by, or paid
to the named executive officer for all services rendered in all capacities to
our company, or any of its subsidiaries, for the years ended December 31, 2003,
2002 and 2001:
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
Long-Term
Annual Compensation Compensation
--------------------------------------- -------------------------------------------------
Securities
Restricted Securiites
Name and Other Annual Stock Underlying
Principal Position Year Salary Bonus Compensation Award(s) Options
------------------------------------------------------------------------------------------------------------------
None (1)
(1) We have paid our general manager, Andrei Kharlanov, for our wholly owned
subsidiary, City Mix LLC, the sum of $4,490 per month pursuant to a contract
that commenced on November 27, 2001.
Option Grants Table. The following table sets forth information concerning
individual grants of stock options to purchase our common stock made to the
executive officer named in the Summary Compensation Table during fiscal 2003.
29
OPTIONS GRANTS IN LAST FISCAL YEAR
(Individual Grants)
[Enlarge/Download Table]
Number of securities Percent of total
underlying options options granted to Exercise or base
granted employees in last price Expiration
Name (#) fiscal year ($/Share) Date
------------------------------------------------------------------------------------------------
None
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The
following table sets forth certain information regarding stock options exercised
during fiscal 2003 and held as of December 31, 2003, by the executive officer
named in the Summary Compensation Table.
[Enlarge/Download Table]
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
at Fiscal at Fiscal
Year-End(#) Year-End($)(1)
------------- --------------
Shares acquired on Exercisable/ Exercisable/
Name exercise (#) Value realized ($) Unexercisable Unexercisable
--------------------------------------------------------------------------------------------
None
Employment Contracts
We presently do not have any employment agreements with our officers.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their
services as directors. The Board of Directors has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued to,
directors in such capacity.
Stock Option and Stock Issuance Plans
We presently do not have any stock option plans.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information derived from the named
person, or from the transfer agent, concerning the ownership of common stock as
of October 20 , 2004, of (i) each person who is known to us to be the beneficial
owner of more than 5 percent of the common stock; (ii) all directors and
executive officers; and (iii) directors and executive officers as a group:
30
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Ownership Percent Percent
of Class (1) of Class (2)
--------------------------------------------------------------------------------
Yan Jacob Rusanov (3) 330,000 * *
28-10 Fair Lawn Avenue
Fair Lawn, NJ 07410
Yevsey Zilman (4) 7,473,790 17.54% 12.75%
182 Myrtle Ave
Mahwah, NJ 07430
Yuli Ginzburg 6,953,800 16.32% 11.86%
4 Schindler Drive South
Old Bridge, NJ 08857
Eduard Klebanov 150,000 * *
325 Flower Lane
Morganville, NJ 07751
Leonard Khodorovsky 70,000 * *
Eugene Gurevich 5,964,930 14% 10.17%
2-01 50th Ave., Apt 28B
Long Island City, NY 11101
Vladimir Davidov 5,040,000 11.83% 8.60%
23 Place
Karhula Finland 48601
Andrew Kharlanov 2,531,200 5.94% 4.31%
1101, Sultan Tower, Liwa Street
Abu Dhabi, P.O.Box 47427,
United Arab Emirates
Alexander Shishkin 6,400,000 15.02% 10.92%
Apt. #310, 6 Bibliotechnaya,
Moscow, Russia 129090
Eugene Koupsin
15-17 Rubinsteyn Street
St. Petersburg, Russia 3,200,000 7.51% 5.46%
Officers and Directors 14,977,590 35.16% 25.55%
as a Group (5)
* - Less than 1%
(1) percent of class before offering based on 42,600,000 shares issued and
outstanding after giving effect to a 1 for 10 forward split of our shares
of common stock undertaken on October 20, 2004.
(2) percent of class after offering based on 58,600,000 shares issued and
outstanding, assuming the maximum offering is sold .
(3) Includes 30,000 shares held by Tatyana Rusanov, Mr. Rusanov's wife.
(4) Includes 1,400,000 shares held by Olga Safanova, Mr. Zilman's wife; and
100,000 shares held by Mikhail Safonova, Mr. Zilman's minor son.
DILUTION
As of October 20, 2004, we had issued and outstanding 42,600,000 shares of
common stock. We are offering 16,000,000 shares during this offering. Therefore,
the dilution tables below are based on 58,600,000 shares of our common stock
issued on a fully diluted basis. Dilution is a reduction in the net tangible
book value of a purchaser's investment measured by the difference between the
purchase price and the net tangible book value of the shares after the purchase
takes place. The net tangible book value of common stock is equal to
stockholders' equity applicable to the common stock as shown on our balance
sheet divided by the number of shares of common stock outstanding. As a result
of such dilution, in the event we liquidated, a purchaser of shares may receive
less than their initial investment and a present stockholder may receive more.
31
The following calculations assume that all of the shares we are registering are
issued. Our net tangible book value as of June 30, 2004 was $2,945,325 or
$0.0691 per share. The adjusted pro forma net tangible book value after this
offering (assuming all of the shares are sold in the offering) will be
$6,842,825 or $.1167 per share based on a per share price of $0.25.
Therefore, the increase in the net tangible book value per share attributable to
the offering is $.0476. There is no minimum or maximum amount of shares that
must be sold in this offering. Therefore, purchasers of shares of common stock
in this offering will realize immediate dilution of $.1333 per share or
approximately 46.68% of their investment assuming all of our shares offered in
this prospectus are sold. The following table describes the dilution effect:
As of June 30, 2004
Tangible book value before offering $2,945,325
Offering to new investors $4,000,000
Less expenses $ 102,500
Net proceeds $3,897,500
Tangible book value after offering $6,842,825
Increase in Net Tangible Per Share $0.0476
Book value by old investors $0.0691 per share
Offering price paid by new investors $0.25 per share
Dilution for new investors $0.1333 per share
SELLING STOCKHOLDERS
The shares being offered for resale by the selling stockholders consist of the
total of 2,331,410 shares of our common stock.
The following table sets forth the name of the selling stockholders, the number
of shares of common stock beneficially owned by each of the selling stockholders
as of October 20, 2004 and the number of shares of common stock being offered by
the selling stockholders. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholders may offer all
or part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
[Enlarge/Download Table]
Shares of Percent of Shares of Percent of
common stock common common stock Number of shares
owned prior shares owned to be sold shares owned owned
Name of selling to the prior to the in the after the after
stockholder offering offering(1) offering(1) offering(1) offering(1)
------------------------------ ----------- ---------- ----------- --------- --------
Anna Ginzburg 991,410 2.32% 991,410 0 0
Nikita Sukhin 20,000 * 20,000 0 0
Mikhail Khrakovsky 10,000 * 10,000 0 0
Victoria Reznik 10,000 * 10,000 0 0
Ilya Bykov 20,000 * 20,000 0 0
Mark Filstein 20,000 * 20,000 0 0
Margarita Ginzburg 10,000 * 10,000 0 0
Tatiana Klatz 20,000 * 20,000 0 0
Julia Parsons 50,000 * 50,000 0 0
Julie Litvinova 10,000 * 10,000 0 0
Alla Shor 30,000 * 30,000 0 0
Mikhail Kupsis 10,000 * 10,000 0 0
Ekaterina Gavin 10,000 * 10,000 0 0
Tigran Makarian 10,000 * 10,000 0 0
Mikhail Shor 10,000 * 10,000 0 0
Julian Parsons 10,000 * 10,000 0 0
Elena Marcucci 10,000 * 10,000 0 0
Boris Zavlin 10,000 * 10,000 0 0
Larisa Garcia 10,000 * 10,000 0 0
Walter Eizenberg 10,000 * 10,000 0 0
Ashley Goodman 30,000 * 30,000 0 0
Marina Ivanova 10,000 * 10,000 0 0
Berci Cherpician 10,000 * 10,000 0 0
Vadim Nebuchin 10,000 * 10,000 0 0
32
Yury Rubinovich 10,000 * 10,000 0 0
Elena Smirnova 10,000 * 10,000 0 0
Dilbar Sultanova 10,000 * 10,000 0 0
Gla Ni 10,000 * 10,000 0 0
Lana Koifman 20,000 * 20,000 0 0
Igor Sluzhevsky 20,000 * 20,000 0 0
Zhana Kvetnaya 10,000 * 10,000 0 0
Araz Khachatrian 20,000 * 20,000 0 0
Oksana Tkachenko 10,000 * 10,000 0 0
Natalia Sarafanova 10,000 * 10,000 0 0
Teresa Bergstrom 220,000 * 220,000 0 0
Galina Polina 10,000 * 10,000 0 0
Marina Terletsky 30,000 * 30,000 0 0
Alexander Terletsky 20,000 * 20,000 0 0
Boris Magidenko 20,000 * 20,000 0 0
Souren Soumbatov 20,000 * 20,000 0 0
Sonia Bromberg 500,000 1.17% 500,000 0 0
Jacob Fortun 20,000 * 20,000 0 0
Anna Kanevsky 20,000 * 20,000 0 0
*-Less than 1%
PLAN OF DISTRIBUTION
We are offering our shares of common stock in a direct public offering basis.
There is no minimum number of shares that we must sell before we can utilize the
proceeds of the offering. Therefore, there is a possibility that no proceeds
will be raised or that if any proceeds are raised, they may not be sufficient to
cover the cost of this offering. Our officers and directors will be the only
people that will conduct the direct public offering. You will be purchasing our
shares from us and not our selling security holders. They intend to offer and
sell the shares in the primary offering through their business and personal
contacts. They will not be paid any commissions or other expenses incurred by
him in connection with the offering. The shares may also be offered by
participating broker-dealers which are members of the National Association of
Securities Dealers, Inc. We may, in our discretion, pay commissions of up to 10%
of the offering price to participating broker-dealers and others who are
instrumental in the sale of shares. Our officers and directors may not purchase
shares in this offering.
Our officers and directors, are the only persons that plan to sell our common
stock. They are not registered broker-dealers. They intend to claim reliance on
Exchange Act Rule 3a4-1 which provides an exemption from the broker-dealer
registration requirements of the Exchange Act for persons associated with an
issuer. Specifically, the officers and directors (i) at the time of sale, they
will not be subject to a statutory disqualification as that term is defined in
section 3(a)39 of the Securities Act; (ii) will not be compensated in connection
with their participation in the offering by payment of commissions or other
remuneration; at the time of participation in the sale of shares, they will not
be an associated person of a broker or a dealer; (iii) pursuant to Rule
3a4-1(a)(4)(ii), the officers and directors will meet all of the following
requirements: at the end of the offering, they will perform substantial duties
for us, other than in connection with transactions in securities; they are not a
broker or dealer, or an associated person of a broker or dealer within the last
12 months; and they have not participated in, or do not intend to participate
in, selling an offering of securities for any issuer more than once every 12
months other than in reliance on paragraph(a)(4)(i) or (iii) of Rule 3a4-1.
The selling security holder offering will run concurrently with the primary
offering. All of the stock owned by the selling security holders, including our
officers and directors, will be registered by the registration statement of
which this prospectus is a part. The selling security holders may sell some or
all of their shares immediately after they are registered. There is no
restriction on the selling security holders to address the negative effect on
the price of your shares due to the concurrent primary and secondary offering.
In the event that the selling security holders sell some or all of their shares,
which could occur while we are still selling shares directly to investors in
this offering, trading prices for the shares could fall below the offering price
of the shares. In such event, we may be unable to sell all of the shares to
investors, which would negatively impact the offering. As a result, our planned
operations may suffer from inadequate working capital.
33
The selling security holders shares may be sold or distributed from time to time
by the selling stockholders or by pledgees, donees or transferees of, or
successors in interest to, the selling stockholders, directly to one or more
purchasers (including pledgees) or through brokers, dealers or underwriters who
may act solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be effected in one or more of the following
methods:
* ordinary brokers transactions, which may include long or short sales,
* transactions involving cross or block trades on any securities or market
where our common stock is trading,
* purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus, "at the
market" to or through market makers or into an existing market for the
common stock,
* in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
* through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
* any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933,
and any commissions received by them and any profit realized by them on the
resale of shares as principals may be deemed underwriting compensation under the
Securities Act of 1933. Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $102,500.
We have informed the selling stockholders that certain anti-manipulative rules
contained in Regulation M under the Securities Exchange Act of 1934 may apply to
their sales in the market and have furnished the selling stockholders with a
copy of such rules and have informed them of the need for delivery of copies of
this prospectus. The selling stockholders may also use Rule 144 under the
Securities Act of 1933 to sell the shares if they meet the criteria and conform
to the requirements of such rule.
34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We are planning to create a new baking enterprise in cooperation with
Jake's Bakes Challah Works, a bakery currently owned and operated by the
Rusanov Corp., which is owned by our President, Y. Jacob Rusanov.
Eduard Klebanov, our Vice President and Director, assists us with our internal
bookkeeping on a consultant basis.
On July 26, 2002, we entered into a License Agreement with YZ Business
Consulting. The License Agreement is the primary asset we are using to develop,
market and distribute, on a worldwide basis, a program for teaching American
English as a second language with the aid of a personal computer. Yevsey D.
Zilman, our Vice President and Deputy Chairman of the Board of Directors owns YZ
Business Consulting.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
Common Stock
We are presently authorized to issue 100,000,000 shares of $.0001 par value
common stock. On October 20, 2004, we undertook a 1 for 10 forward split of our
issued and outstanding stock. At October 20, 2004, we had 42,600,000 shares of
common stock outstanding. The holders of our common stock are entitled to equal
dividends and distributions when, as, and if declared by the Board of Directors
from funds legally available therefore. No holder of any shares of common stock
has a preemptive right to subscribe for any of our securities, nor are any
common shares subject to redemption or convertible into other of our securities,
except for outstanding options described above. Upon liquidation, dissolution or
winding up, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. All shares of common stock now outstanding are
fully paid, validly issued and non-assessable. Each share of common stock is
entitled to one vote with respect to the election of any director or any other
matter upon which shareholders are required or permitted to vote. Holders of our
common stock do not have cumulative voting rights, so the holders of more than
50% of the combined shares voting for the election of directors may elect all of
the directors if they choose to do so, and, in that event, the holders of the
remaining shares will not be able to elect any members to the Board of
Directors.
Preferred Stock
We are presently authorized to issue up to 10,000,000 shares of $.0001 par value
preferred stock upon such terms and conditions as the Board of Directors may
determine at the time of issuance, without further action of the stockholders
being required. At October 20, 2004, we had no shares of preferred stock
outstanding. Such preferred shares may or may not be: issued in series,
convertible into shares of common stock, redeemable by the corporation and
entitled to cumulative dividends. Other terms and conditions may be imposed at
the time of issuance. In the event that some or all of the preferred stock is
issued with a conversion privilege, any future conversion will cause an increase
in the number of issued and outstanding shares of common stock, and may or may
not have a depressive effect on the market value of the common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
During the two most recent fiscal years and interim period subsequent to
December 31, 2003, there have been no disagreements with Gately & Associates,
LLC, our independent auditor, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
35
TRANSFER AGENT
To date, we have not hired a transfer agent. We are in the process of retaining
a transfer agent.
EXPERTS
The financial statements included in this prospectus have been audited by Gately
& Associates, LLC, independent auditors, as stated in their report appearing
herein and elsewhere in the registration statement (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to our
recurring losses from operations which raise substantial doubt about our ability
to continue as a going concern), and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow &
Jaclin, LLP, Manalapan, New Jersey 07726.
FINANCIAL STATEMENTS
We have attached to this prospectus copies of our audited financial statements
as of December 31, 2003 and 2002. We have also included unaudited financial
statements for the six months ended June 30, 2004 and 2003.
36
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(a development stage company)
Financial Statements
For the periods ending June 30, 2004 and 2003
Table of Contents
Page
-------------
Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statement of stockholders Equity 3
Consolidated Statements of Cash Flows 4
Notes to Financial Statements 5
[Enlarge/Download Table]
ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
BALANCE SHEET
As of June 30, 2004 and December 31, 2003
ASSETS
------
June 30, December 31,
2004 2003
----------------- -----------------
CURRENT ASSETS
--------------
Cash, total restricted and unrestricted $ 695,129 $ 717,489
Accounts receivable, trade - 37,320
Deposits, advances and prepayments 86,216 18,229
----------------- -----------------
Total Current Assets 781,345 773,038
Buildings and Machinery under construction, at cost 2,641,275 2,637,683
Truck rental and office equipment, net of depreciation 523,940 607,683
----------------- -----------------
Total Properties 3,165,215 3,245,366
TOTAL ASSETS $ 3,946,560 $ 4,018,404
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Accounts payable, trade $ 652,959 $ 652,645
Accruals and provisions 54,666 80,605
Bank borrowings 293,610 287,983
----------------- -----------------
Total current liabilities 1,001,235 1,021,233
SHAREHOLDERS' EQUITY
--------------------
Common stock - $.0001 par value;
authorized 6,000,000 shares;
issued and outstanding: 4,260,000 and 4,260,000 4,260 4,260
Additional paid-in-capital 4,271,823 4,271,823
Accumulated deficit during Development Stage (1,330,758) (1,278,912)
----------------- -----------------
Total shareholders' equity 2,945,325 2,997,171
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,946,560 $ 4,018,404
================= =================
The accompanying notes are an integral part of these consolidated financial statements.
F-1
[Enlarge/Download Table]
ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF OPERATIONS
For the six months ended June 30, 2004 and 2003
and for the Period From Inception (December 11, 2000)
Through June 30, 2004
Period from
Inception
Through
Jun. 30 Jun. 30 Jun. 30,
2004 2003 2004
----------- ----------- -----------
REVENUES
--------
Revenue, ready mix cement sales $ -- $ -- $ --
----------- ----------- -----------
TOTAL REVENUES -- -- --
-------------- ----------- ----------- -----------
COST OF SALES
-------------
Cost of sales, ready mix cement sales -- -- --
----------- ----------- -----------
TOTAL REVENUES -- -- --
-------------- ----------- ----------- -----------
GROSS MARGIN ON SALES -- -- --
--------------------- ----------- ----------- -----------
EXPENSES
--------
General and administrative 135,859 127,614 1,331,204
----------- ----------- -----------
TOTAL EXPENSES 135,859 127,614 1,331,204
-------------- ----------- ----------- -----------
OPERATING INCOME (LOSS) BEFORE OTHER (135,859) (127,614) (1,331,204)
------------------------------------ ----------- ----------- -----------
OTHER INCOME (LOSS)
-------------------
Truck rental income net of depreication and other costs 89,846 140,369 26,623
Finance cost (10,056) (19,895) (128,352)
Gain on disposal of equipment -- -- 22,055
Other non-operating income 4,223 61 80,120
----------- ----------- -----------
TOTAL OTHER INCOME (LOSS) 84,013 120,535 446
------------------------- ----------- ----------- -----------
NET INCOME (LOSS) $ (51,846) $ (7,079) $(1,330,758)
----------------- ----------- ----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ (0.02)
---------------------------------- =========== ===========
(EPS for 2002 was retroactively calculated based on the merged parent company's EPS)
WEIGHTED AVERAGE COMMON
-----------------------
SHARES OUTSTANDING 4,260,000 462,353
------------------ =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
F-2
[Enlarge/Download Table]
ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
As of June 30, 2004
Accumulated
Deficit
Additional During the
Common Stock Paid-In Development Total
Shares Amount Capital Stage Equity
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 (City Mix) $ 11,000 $ 2,355,639 $ (763,512) $ 1,603,127
Additional capital contributed 1,878,871 1,878,871
Net Income (Loss) (464,397) (464,397)
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 (City Mix) -- 11,000 4,234,510 (1,227,909) 3,017,601
--------- ----------- ----------- ----------- -----------
Additional capital contributed 29,820 29,820
Recapitalization of equity on exchange of
assets for stock with Royal Capital
Management, Inc. and City Mix
on December 17, 2003:
Balance, Royal Capital Management, Inc.: 996,000 996 4 (247) 753
Recapitalization of prior deficit of Royal: (247) 247 --
Recapitalization of prior shares of City Mix: (11,000) 11,000 --
Shares provived for assets of City Mix: 3,200,000 3,200 (3,200) --
Shares issued for services: on exhange: 64,000 64 (64) --
Net Income (Loss) (51,003) (51,003)
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 4,260,000 4,260 4,271,823 (1,278,912) 2,997,171
--------- ----------- ----------- ----------- -----------
Net Income (Loss) $ (51,846)
--------- ----------- ----------- ----------- -----------
Balance, June 30, 2004 4,260,000 $ 4,260 $ 4,271,823 $(1,330,758) $ 2,997,171
--------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements.
F-3
[Enlarge/Download Table]
ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2004 and 2003
and for the Period From Inception (December 11, 2000)
Through June 30, 2004
Period from
Inception
Through
Jun. 30 Jun. 30 Jun. 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2004 2003 2004
------------------------------------ ----------- ----------- -----------
Net (loss) $ (51,846) $ (7,079) $(1,330,758)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and organization costs 87,683 91,637 674,688
Gain on disposal of equipment -- -- (25,048)
(Increase) Decrease in accounts receivable 37,320 -- --
(Increase) Decrease in deposits, advances and prepayments (67,987) (169) (86,216)
Increase (Decrease) in accounts payable 314 6,016 652,959
Increase (Decrease) in accurals and provisions (25,939) 13,532 54,666
----------- ----------- -----------
Net cash flows provided by (used in) operating activities (20,455) 103,937 (59,709)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Cash received from sales of property and equipment -- -- 28,298
Cash paid for property and equipment equipment (7,532) (105,248) (3,843,153)
----------- ----------- -----------
Net cash flows provided by (used in) investing activites (7,532) (105,248) (3,814,855)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Cash received (paid) regarding bank borrowings 5,627 (110,430) 293,610
Proceeds from issuance of share capital -- -- 4,276,083
----------- ----------- -----------
Net cash flows provided by (used in) financing activities 5,627 (110,430) 4,569,693
----------- ----------- -----------
CASH RECONCILIATION
-------------------
Net increase (decrease) in cash (22,360) (111,741) 695,129
Cash at beginning of period, unrestricted 165,642 29,139 --
Cash at beginning of period, restricted 551,847 551,847 --
----------- ----------- -----------
...........
CASH AT END OF PERIOD $ 695,129 $ 469,245 $ 695,129
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 10,056 $ 28,142
Cash paid for income taxes $ -- $ --
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
NOTE 1 --- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Royal Capital Management, Inc. (the "Company"), a development stage company, was
established on January 11, 1994 under the laws of the State of New Jersey, a USA
company. The Company is the parent company of a development stage business in
the ready mix cement industry and English as a second Language Education
Software. The Company has established its intended operations in the Abu Dhabi
Municipality, Abu Dhabi, United Arab Emirates. For Accounting purposes, the
subsidiary corporation (City Mix) is considered the accounting acquirer of the
Company.
The Company also holds certain computer program technology, English as a second
Language Education Software, that is being developed into Educational Software
application "English as a second Language). This is intended to be a separate
business from City Mix, the subsidiary.
All inter-company account balances and transactions have been eliminated in the
accounting consolidation of these companies as guided by US Generally Accepted
Accounting Principle under Financial Accounting Standard No. 94 "Consolidation
of All Majority-Owned Subsidiaries".
The Accounting Acquirer
-----------------------
Prior to the acquisition of City Mix, the Company was a development stage
corporation with nominal assets and liabilities. The owners and management of
City Mix, a private development stage company, have operating control of the
Company as a result of the exchange of stock. Therefore, this transaction is a
capital transaction in substance, rather than a business combination. That is,
the transaction is equivalent to the issuance of stock by a private company for
the net monetary assets City Mix, accompanied by recapitalization of the
Company. The accounting is identical to that resulting from a reverse
acquisition, except no goodwill or other intangible assets are recorded. Because
City Mix is essentially then treated as the acquirer for accounting purposes,
the equity accounts are adjusted for the share exchange and carried forward.
Prior accumulated deficits of the Company, the parent, are adjusted to
additional paid in capital therefore carrying forward the accumulated deficit or
earnings of City Mix, as such, the financial statements for the periods prior to
the merger are those of City Mix.
F-5
Results of Operations, Liquidity, Capital Resources and Going Concern
---------------------------------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company, a development stage company, is considered to be an ongoing entity. The
Company's shareholders may fund, at their discretion, any shortfalls in the
Company's cash flow on a day to day basis during the time period that the
Company is in the development stage. The Company may also seek both private and
public debt and/or equity funding during this time period.
While in the development stage, City Mix is making use of its 16 cement mixer
trucks by renting them to a single company.
Basis of Accounting
-------------------
The Company's financial statements are prepared in accordance with US Generally
Accepted Accounting Principles.
Summary of Significant Accounting Policies
Use of Estimates --- Management uses estimates and assumptions in preparing
these financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from those
estimates.
Cash and Cash Equivalents, and Credit Risk --- For purposes of reporting cash
flows, the Company considers all cash accounts with maturities of 90 days or
less and which are not subject to withdrawal restrictions or penalties, as cash
and cash equivalents in the accompanying balance sheet.
The Company has deposits in a financial institution that does not guarantee the
cash balance. The portion of the deposits in excess of $100,000 in a US
institution is not subject to US FDIC insurance and represents a credit risk to
the Company. At this time the Company does not have deposits in any US banking
institution in excess of $100,000.
F-6
Trade Receivable --- Trade receivables are carried at anticipated realizable
value. A provision is made for doubtful receivables based on a review of all
outstanding amounts at the year-end. Bad debts are written off during the year
in which they are identified.
Contract Receivables --- The Company follows the practice of forming formal
contracts with the companies it does business under the jurisdiction of the
company that is party to the contract. The Company's subsidiary is registered to
do business in the jurisdiction of these contracts.
Property and Equipment --- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for repairs and maintenance are charged
to expense as incurred, as are any items purchased which are below the Company's
capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any related gain or loss is
reflected in income for the period.
Revenue and Cost Recognition--- Revenues from contracts are recognized on the
performance method, measured on the basis of incurred costs per contract. The
cost to cost method is used because management considers it to be the best
available measure of progress on these contracts.
Contract costs will include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation. Selling, general and administrative
costs are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated job
profitability are recognized in the period in which the revisions are
determined.
Income Taxes --- The Company utilizes the asset and liability method to measure
and record deferred income tax assets and liabilities for USA taxes. Deferred
tax assets and liabilities reflect the future income tax effects of temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and are measured using enacted
tax rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
Foreign Currencies --- The Company's subsidiary operates with its functional
currency in UAE Dirhams at rates ruling when entered. The translation of the
financial statements is done at USD 1 = AED 3.675. The exchange rate between US
dollars and UAE Dirhams are fixed, hence there are no translation adjustments.
The Company uses Financial Accounting Standard No. 52 "Foreign Currency
Translation" to account for foreign currencies.
F-7
NOTE 2 --- CASH AND CASH EQUIVALENTS
The Company's cash balances at June 30, 2004 and December 31, 2003 were $695,129
and $717,489, respectively. Of these balances, $551,848 has been restricted by
the Anglo American Bank, a Grenada Corporation. The Anglo American Bank was an
offshore bank that is undergoing a liquidation. The Company has been notified by
the Minister of Finance that the issue of the bank liquidation and return of the
funds to the account holders is being supervised by the Ministry.
NOTE 3 --- ACCOUNTS RECEIVABLE
Trade receivables held by the Company are from its single customer for the
rental of truck mixers. For June 30, 2004 and December 31, 2003, the Company has
found due to the history of the association with this customer that the balance
in allowance for doubtful accounts is $0 and $0, respectively.
NOTE 4 --- PROPERTY, PLANT AND EQUIPMENT
City Mix Management Co., Inc. (the Management Company) acquired the assets and
liabilities (the majority of assets held) of City Mix L.L.C. (City Mix) in a
private auction on November 18, 2000. The Management Company took over the
factory being setup as the previous owners could not invest further to complete
the project and commence commercial production. The cost of property purchased
after the auction is the purchase cost together with any incidental expenses of
acquisition.
Depreciation on property, plant and equipment has been computed using the
straight-line method at the annual rates estimated to write off the assets over
its expected useful lives. Depreciation has not been charged on assets which
have not been put to use except for truck mixers that are being rented, office
furniture and office equipment in use from the date of acquisition.
June 30, Dec. 31,
2004 2003
---- ----
Building (20 years) $ 1,752,189 $ 1,749,806
Plant and Machinery (10 years) 889,086 887,877
Truck Mixers (7 years) 1,132,545 1,131,005
Furniture and Office Equipment (4 years) 23,991 20,850
Vehicles (4 years) 0 0
Less accumulated Depreciation (632,596) (544,172)
Total Property, Plant and Equipment $ 3,165,215 $ 3,245,366
----------- -----------
F-8
NOTE 5 --- CURRENT LIABILITIES
Accruals and Provisions are generated in the normal course of its business. The
-----------------------
balance of these Accruals and Provisions at June 30, 2004 was $652,959 and at
December 31, 2003 was $652,645.
Trade Payable was created to finance the purchase of cement mixer trucks in
-------------
November of 1999 with Ramoil Engineering S.r.l. (an Italy based company) for a
principal balance of approximately $684,433 to be paid from operating funds when
the Company commences its intended operations. At June 30, 2004 the balance was
$652,959 and at December 31, 2003 the balance was $652,645 Bank Borrowings
include a liability assumed by the City Mix with First Gulf Bank and an
arrangement with HSBC Bank of Middle East (HSBC) to discount post dated checks.
The liability assumption was created with the private auction agreement dated
November 18, 2000 when the City Mix acquired the assets and liabilities of City
Mix from its former shareholders. The loan carries an interest rate of 5.00%.
City Mix is currently making payments, on average, in the amount of $7,000 which
represents an amount of $6,000 on principal and $1,000 to the interest owed and
these amounts are derived from rental income that are currently being applied on
this financing. At June 30, 2004 the balance was $218,869 and at December 31,
2003 the balance of the assumed liability was $250,663. The post dated check
arrangement with HSBC is derived from the discounting of checks received on the
rental of trucks. The rental payments are written as post dated for a period of
90 days. HSBC then accepts these checks and loans the Company the value of the
checks discounted at an annual rate of 9%. At June 30, 2004 the balance with
HSBC was 74,741 and at December 31, 2003 the balance with HSBC was $37,320.
NOTE 6 --- STOCKHOLDERS EQUITY
Preferred Stock
---------------
The Company has not authorized or issued preferred stock.
Common Stock
------------
The Company has authorized 6,000,000 of common stock with a par value of $0.0001
per share. As of June 30, 2004 and December 31, 2003 the Company had issued and
outstanding 4,260,000 common shares.
-----------------------
The Subsidiary
--------------
On December 17, 2003 the Company entered into an agreement whereby the Company
issued 3,200,000 common shares of stock for all of the assets of City Mix, the
subsidiary. On that same date the Company issued 64,000 shares for services
connected to the above exchange of stock and assets.
"City Mix" shall be considered the name of the collective subsidiary
relationships of the City Mix Management Co. Inc. and City Mix L.L.C., related
companies whereby the board of directors have dissolved City Mix Management
simultaneously with the share and asset exchange with the parent company.
F-9
City Mix plans to complete the development stage and become the operating
company in the ready mix cement industry.
The Company acquired an effective 100% interest in City Mix L.L.C. (City Mix), a
development stage company through the acquisition of assets of City Mix
Management Co. Inc. (the Management Company), a Grenada West Indies corporation
incorporated on December 11, 2000 by the Commonwealth of London. The Management
Company was created to first acquire the development stage company, City Mix, in
a private auction, to raise capital for this transaction, and to make certain
contractual agreements with the UAE national. On November 18, 2000 the
Management Company acquired a 49% ownership of City Mix with a contractual right
to exercise 100% beneficial ownership and control in City Mix pursuant to the
Power of Attorney granted by agreement of the 51% owner, a UAE national. In
essence the agreement states that the Management Company shall exercise 100%
beneficial ownership of City Mix by virtue of a power of attorney granted to it
by Mubarak Al Ahbabi, the 51% owner. Under United Arab Emirates (UAE) Commercial
Companies Law being Federal Law no. (8) of 1984 as amended, the minimum
cumulative shareholding of UAE nationals in a limited liability company must be
a 51% owner of the paid in capital. On April 4, 2004 the Company renewed this
contract agreement with the UAE national for an additional term. The Management
Company was later dissolved simultaneously with the parent Company's exchange of
common shares for the assets of City Mix. The shareholders of the Management
Company also became shareholders in the parent Company.
City Mix has been issued Commercial Registration Certificate No. 47837 dated
November 13, 1997 and Industrial License No. 54831 dated November 13, 1997. The
General Industry Corporation, Abu Dhabi, has issued industrial license 2/507
dated may 6, 2002.
NOTE 7 --- LITIGATION
From time to time in the normal course of business the Company has been involved
in litigation. The Company's management has determined that past and current
litigation will not have a material effect on the financial statements.
City Mix LLC vs Armitage Engineering LLC:
The basis for the dispute of City Mix LLC ("City Mix") and their main contractor
Armitage Engineering Co. LLC ("Armitage") is the fact that Armitage failed to
complete its work in time as was specified by Contract dated March 28, 1999 and
Annex A-1 dated September 11, 2001. Armitage disputed this fact and has taken a
series of illegal actions to thrust its unfair position upon City Mix, which has
caused substantial damage to City Mix.
F-10
City Mix tried to resolve the dispute in an amicable way but with no success,
and therefore it was advised that City Mix should seek a compensation for
damages and losses in court.
Currently there are two court actions related to the dispute between City Mix
and Armitage.
1. Main Action 422/02, in which Armitage seeks recovery of $158,514
representing the final payment under the contract and City Mix filed a counter
claim claiming compensation from Armitage for the amount of $739,048 plus a
daily compensation of $4,924 for loss of daily profits resulting from City Mix
being deprived from utilizing its factory from February 26, 2002 until a final
judgment is rendered and $2,449 daily as fees for the consultant until a final
judgment is rendered.
2. Urgent Case 73/02 filed by City Mix to stop Armitage's illegal actions of
locking the City Mix's factory site, preventing City Mix's subcontractors,
engineers and technical staff from accessing the site and preventing City Mix
from completing installation and commissioning work.
On December 23, 2003 the court issued its judgment on this urgent case and
confirmed the findings of a previously appointed expert that Armitage had in
fact taken wrongful actions causing damages to City Mix. This claim is being
used as evidence for the requests of compensation in the counter claim filed by
City Mix in the action No. 422/02.
The Company's management feels the chances of City Mix recovering the
compensation are good, however, it might be very difficult to give an estimation
as to how much compensation may be awarded as this is at the discretion of the
trial judge.
Judgment from the court of First Instance is expected before December 2004
NOTE 8 --- REVENUE CONTRACT
The Company holds a rental agreement contract with RMC Super Mix (RMC), a United
Arab Emirates company, dated August 29, 2002 for its 16 cement trucks for a
monthly rental amount of approximately $2,500 per truck. RMC provides the
company 90 day post-dated checks per this agreement. The term is for each six
month period renewable each six months with a 30 day termination clause. All
servicing costs are the of the renter. The Company uses the services of a
financial institution to advance the post dated check balance at a discounted
value.
There is a concentration of risk when having only one rental contract.
F-11
NOTE 9 --- OPERATING LEASE
The Company has entered into a sub-lease agreement with the UAE national
partner/sponsor for sub-lease of land on which the plant is constructed as per
the side agreement dated November 26, 2000. The sub-lease amount is $13,605 per
year. The lease agreement between the UAE national and Abu Dhabi Municipality
for lease of this land will have to be renewed by July 5, 2004.
On July 13, 2003 the Company entered into a lease for office space for the term
July 13, 2003 through July 12, 2004 in the amount of approximately $10,500 that
would be paid at the beginning of the tenancy period.
NOTE 10 --- RELATED PARTY TRANSACTIONS
As per the agreement dated November 26, 2000 the UAE national sponsor is
entitled to share profits at a rate of 12% of annual profits of the Company
after the setoff of accumulated losses and will not share in losses. The
national sponsor is the 51% owner as required in the UAE of City Mix who has
given, under this contract, power of attorney to the Company for 100% effective
ownership and control per this contract. The national sponsor will not be liable
for any liabilities of the Company. An annual fee of approximately $41,000 for
services and annual rent of approximately $13,500 for the land leased.
In 2003 the Company's subsidiary had a management and a consulting agreement
with one of its shareholders, RALLY Partners, USA. This agreement was superseded
by the management with Royal Capital Management, Inc. signed on January 1, 2004.
Management fees for the periods ending June 30, 2004 and June 30, 2003 were
$60,000 and $25,000, respectively. Consulting fees for the periods ending June
30, 2004 and June 30, 2003 were $0.00 and $29,061, respectively.
NOTE 11 --- CONCENTRATIONS OF RISK
As noted in Footnote 2, the Company has a cash balance that is at risk with
regarding the restriction of use and the eventual transfer of an amount to be
determined.
As noted in Footnote 10, the Company has a rental agreement with a single
customer which concentrates risks associated with the contract to a single
customer.
The Company is in the development stage whereby the Company needs capital to
complete this stage and commence operation. There are no guarantees that the
Company will be successful in raising debt or equity in the public or private
market.
NOTE 12 --- INCOME TAXES
The Company located in the UAE is not required to pay taxes in that country.
Should the parent Company, incorporated in the US, have income it will apply US
Generally Accepted Accounting Principals regarding income taxes. The Parent
Company has less than $1,000 in its net operating loss to date and has therefore
determined that no deferred tax asset would be material to record. If such an
asset was recorded, management would establish an allowance for the deferred tax
asset as the Company may not be able to use the net operating loss in the near
future.
F-12
NOTE 13 --- SIGNIFICANT EVENTS OCCURRING SUBSEQUENT TO THE BALANCE SHEET DATE
There were no significant events occurring after the balance sheet date which
require disclosure in the financial statements.
F-13
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(a development stage company)
Audited Financial Statements
For the periods ending December 31, 2003 and 2002
Table of Contents
Page
-------------
Audited Financial Statements
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of stockholders Equity 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholder
Royal Capital Management, Inc.
(a development stage company)
Morganville, NJ USA
We have audited the accompanying consolidated balance sheets of Royal
Capital Management, Inc. as of December 31, 2003 and 2002 and the related
consolidated statements of operations, stockholders equity, and cash flows for
the years ended December 31, 2003, December 31, 2002, and from inception
(December 11, 2000) through 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 the audit.
We conducted the audit in accordance with standards of the Public
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 the audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of Royal
Capital Management as of December 31, 2003 and 2002 and the results of its
operations and its cash flows for each of the years ended December 31, 2003,
2002 and from inception (December 11, 2003) through December 31, 2003 in
conformity with U.S. generally accepted accounting principles.
Gately & Associates, LLC
Altamonte Springs, FL
April 15, 2004
1
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ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
BALANCE SHEET
As of December 31, 2003 and December 31, 2002
ASSETS
------
December 31, December 31,
2003 2002
----------------- -----------------
CURRENT ASSETS
--------------
Cash, total restricted and unrestricted $ 717,489 $ 580,986
Accounts receivable, trade 37,320 74,612
Deposits, advances and prepayments 18,229 343,072
----------------- -----------------
Total Current Assets 773,038 998,670
Buildings and Machinery under construction, at cost 2,637,683 2,292,074
Truck rental and office equipment, net of depreciation 607,683 782,359
----------------- -----------------
Total Properties 3,245,366 3,074,433
TOTAL ASSETS $ 4,018,404 $ 4,073,103
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURENT LIABILITIES
------------------
Accounts payable, trade $ 652,645 $ 658,087
Accruals and provisions 80,605 19,644
Bank borrowings 287,983 377,771
----------------- -----------------
Total current liabilities 1,021,233 1,055,502
SHAREHOLDERS' EQUITY
--------------------
Common stock - $.0001 par value;
authorized 6,000,000 shares;
issued and outstanding: 4,260,000 and 996,000 4,260 11,000
Additional paid-in-capital 4,271,823 4,234,510
Accumulated deficit during Development Stage (1,278,912) (1,227,909)
----------------- -----------------
Total shareholders' equity 2,997,171 3,017,601
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,018,404 $ 4,073,103
================= =================
The accompanying notes are an integral part of these consolidated financial statements.
-2-
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ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF OPERATIONS
For the twelve months ended December 31, 2003 and 2002
and for the Period From Inception (December 11, 2000)
Through December 31, 2003
Period from
Inception
Through
Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003
-------------- -------------- --------------
REVENUES
--------
Revenue, ready mix cement sales $ - $ - $ -
-------------- -------------- --------------
TOTAL REVENUES - - -
-------------- -------------- -------------- --------------
COST OF SALES
-------------
Cost of sales, ready mix cement sales - - -
-------------- -------------- --------------
TOTAL REVENUES - - -
-------------- -------------- -------------- --------------
GROSS MARGIN ON SALES - - -
--------------------- -------------- -------------- --------------
EXPENSES
--------
General and administrative 293,347 412,676 1,195,345
-------------- -------------- --------------
TOTAL EXPENSES 293,347 412,676 1,195,345
-------------- -------------- -------------- --------------
OPERATING INCOME (LOSS) BEFORE OTHER (293,347) (412,676) (1,195,345)
------------------------------------ -------------- -------------- --------------
OTHER INCOME (LOSS)
-------------------
Truck rental income net of depreciation and other costs 273,573 (93,741) (63,223)
Finance cost (39,790) (44,251) (118,296)
Gain on disposal of equipment - 22,055 22,055
Other non-operating income 8,561 64,216 75,897
-------------- -------------- --------------
TOTAL OTHER INCOME (LOSS) 242,344 (51,721) (83,567)
NET INCOME (LOSS) $ (51,003) $ (464,397) $ (1,278,912)
----------------- ============== ============== ==============
NET INCOME (LOSS) PER COMMON SHARE $ (0.05) $ (1.00)
---------------------------------- ============== ==============
(EPS for 2002 was retroactively calculated based on the merged parent company's EPS)
WEIGHTED AVERAGE COMMON
-----------------------
SHARES OUTSTANDING 1,132,000 462,353
------------------ ============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
-3-
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ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
December 31, 2003 and 2002
Accumulated
Deficit
Additional During the
Common Stock Paid-In Development Total
Shares Amount Capital Stage Equity
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 (City Mix) $ 11,000 $ 2,355,639 $ (763,512) $ 1,603,127
Additional capital contributed 1,878,871 1,878,871
Net Income (Loss) (464,397) (464,397)
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 (City Mix) -- 11,000 4,234,510 (1,227,909) 3,017,601
--------- ----------- ----------- ----------- -----------
Additional capital contributed 29,820 29,820
Recapitalization of equity on exchange of
assets for stock with Royal Capital
Management, Inc. and City Mix
on December 17, 2003:
Balance, Royal Capital Management, Inc.: 996,000 996 4 (247) 753
Recapitalization of prior deficit of Royal: (247) 247 --
Recapitalization of prior shares of City Mix: (11,000) 11,000 --
Shares provided for assets of City Mix: 3,200,000 3,200 (3,200) --
Shares issued for services: on exchange: 64,000 64 (64) --
Net Income (Loss) (51,003) (51,003)
--------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 4,260,000 $ 4,260 $ 4,271,823 $(1,278,912) $ 2,997,171
========= =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
-4-
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ROYAL CAPITAL MANAGEMENT INC.
( A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the twelve months ended December 31, 2003 and 2002
and for the Period From Inception (December 11, 2000)
Through December 31, 2003
Period from
Inception
Through
Dec. 31, Dec. 31, Dec. 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2003 2002 2003
------------------------------------ ----------- ----------- -----------
Net (loss) $ (51,003) $ (464,397) $(1,278,912)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and organization costs 174,819 183,274 587,005
Gain on disposal of equipment -- (22,055) (25,048)
(Increase) Decrease in accounts receivable 37,292 (74,612) (37,320)
(Increase) Decrease in deposits, advances and prepayments 324,843 (26,347) (18,226)
Increase (Decrease) in accounts payable (5,442) 6,016 652,645
Increase (Decrease) in accurals and provisions 60,961 10,916 80,605
----------- ----------- -----------
Net cash flows provided by (used in) operating activities 541,470 (387,205) (39,251)
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Cash received from sales of property and equipment -- 23,945 28,298
Cash paid for property and equipment (345,752) (26,168) (3,835,622)
----------- ----------- -----------
Net cash flows provided by (used in) investing activities (345,752) (2,223) (3,807,324)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Cash received (paid) regarding bank borrowings (80,415) (1,675,472) 287,981
Proceeds from issuance of share capital 29,820 1,878,871 4,276,083
----------- ----------- -----------
Net cash flows provided by (used in) financing activities (50,595) 203,399 4,564,064
----------- ----------- -----------
CASH RECONCILIATION
-------------------
Net increase (decrease) in cash 145,123 (186,029) 717,489
Cash at beginning of period, unrestricted 20,519 215,168 --
Cash at beginniong of period, restricted 551,847 551,847 --
----------- ----------- -----------
CASH AT END OF PERIOD $ 717,489 $ 580,986 $ 717,489
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 39,790 $ 44,251
Cash paid during the year for income taxes $ -- $ --
The accompanying notes are an integral part of these consolidated financial statements.
-5-
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(Please read the independent auditors report.)
NOTE 1 --- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Royal Capital Management, Inc. (the "Company"), a development stage
company, was established on January 11, 1994 under the laws of the State of New
Jersey, a USA company. The Company is the parent company of a development stage
business in the ready mix cement industry and English as a second Language
Education Software. The Company has established its intended operations in the
Abu Dhabi Municipality, Abu Dhabi, United Arab Emerites. For Accounting
purposes, the subsidiary corporation (City Mix) is considered the accounting
acquirer of the Company.
The Company also holds certain computer program technology, English as a second
Language Education Software, that is being developed into Educational Software
application "English as a second Language). This is intended to be a separate
business from City Mix, the subsidiary.
All inter-company account balances and transactions have been eliminated in the
accounting consolidation of these companies as guided by US Generally Accepted
Accounting Principle under Financial Accounting Standard No. 94 "Consolidation
of All Majority-Owned Subsidiaries".
The Accounting Acquirer
-----------------------
Prior to the acquisition of City Mix, the Company was a development stage
corporation with nominal assets and liabilities. The owners and management of
City Mix, a private development stage company, have operating control of the
Company as a result of the exchange of stock. Therefore, this transaction is a
capital transaction in substance, rather than a business combination. That is,
the transaction is equivalent to the issuance of stock by a private company for
the net monetary assets City Mix, accompanied by recapitalization of the
Company. The accounting is identical to that resulting from a reverse
acquisition, except no goodwill or other intangible assets are recorded. Because
City Mix is essentially then treated as the acquirer for accounting purposes,
the equity accounts are adjusted for the share exchange and carried forward.
Prior accumulated deficits of the Company, the parent, are adjusted to
additional paid in capital therefore carrying forward the accumulated deficit or
earnings of City Mix, as such, the financial statements for the periods prior to
the merger are those of City Mix.
-6-
Results of Operations, Liquidity, Capital Resources and Going Concern
---------------------------------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company, a development stage company, is considered to be an ongoing entity. The
Company's shareholders may fund, at their discretion, any shortfalls in the
Company's cash flow on a day to day basis during the time period that the
Company is in the development stage. The Company may also seek both private and
public debt and/or equity funding during this time period.
While in the development stage, City Mix is making use of its 16 cement mixer
trucks by renting them to a single company.
Basis of Accounting
-------------------
The Company's financial statements are prepared in accordance with US Generally
Accepted Accounting Principles.
Summary of Significant Accounting Policies
Use of Estimates --- Management uses estimates and assumptions in preparing
these financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from those
estimates.
Cash and Cash Equivalents, and Credit Risk --- For purposes of reporting cash
flows, the Company considers all cash accounts with maturities of 90 days or
less and which are not subject to withdrawal restrictions or penalties, as cash
and cash equivalents in the accompanying balance sheet.
The Company has deposits in a financial institution that does not guarantee the
cash balance. The portion of the deposits in excess of $100,000 in a US
institution is not subject to US FDIC insurance and represents a credit risk to
the Company. At this time the Company does not have deposits in any US banking
institution in excess of $100,000.
Trade Receivable --- Trade receivables are carried at anticipated realizable
value. A provision is made for doubtful receivables based on a review of all
outstanding amounts at the year-end. Bad debts are written off during the year
in which they are identified.
-7-
Contract Receivables --- The Company follows the practice of forming formal
contracts with the companies it does business under the jurisdiction of the
company that is party to the contract. The Company's subsidiary is registered to
do business in the jurisdiction of these contracts.
Property and Equipment --- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for repairs and maintenance are charged
to expense as incurred, as are any items purchased which are below the Company's
capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any related gain or loss is
reflected in income for the period.
Revenue and Cost Recognition--- Revenues from contracts are recognized on the
performance method, measured on the basis of incurred costs per contract. The
cost to cost method is used because management considers it to be the best
available measure of progress on these contracts.
Contract costs will include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation. Selling, general and administrative
costs are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated job
profitability are recognized in the period in which the revisions are
determined.
Income Taxes --- The Company utilizes the asset and liability method to measure
and record deferred income tax assets and liabilities for USA taxes. Deferred
tax assets and liabilities reflect the future income tax effects of temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and are measured using enacted
tax rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
Foreign Currencies --- The Company's subsidiary operates with its functional
currency in UAE Dirhams at rates ruling when entered. The translation of the
financial statements is done at USD 1 = AED 3.675. The exchange rate between US
dollars and UAE Dirhams are fixed, hence there are no translation adjustments.
The Company uses Financial Accounting Standard No. 52 "Foreign Currency
Translation" to account for foreign currencies.
-8-
NOTE 2 --- CASH AND CASH EQUIVALENTS
The Company's cash balances at December 31, 2003 and 2002 were $717,489 and
$580,986, respectively. Of these balances, $551,848 has been restricted by the
Anglo American Bank, a Grenada Corporation. The Anglo American Bank was an
offshore bank that is undergoing a liquidation. The Company has been notified by
the Minister of Finance that the issue of the bank liquidation and return of the
funds to the account holders is being supervised by the Ministry.
NOTE 3 --- ACCOUNTS RECEIVABLE
Trade receivables held by the Company are from its single customer for the
rental of truck mixers. For December 31, 2003 and 2002, the Company has found
due to the history of the association with this customer that the balance in
allowance for doubtful accounts is $0 and $0, respectively.
NOTE 4 --- PROPERTY, PLANT AND EQUIPMENT
City Mix Management Co., Inc. (the Management Company) acquired the assets and
liabilities (the majority of assets held) of City Mix L.L.C. (City Mix) in a
private auction on November 18, 2000. The Management Company took over the
factory being setup as the previous owners could not invest further to complete
the project and commence commercial production. The cost of property purchased
after the auction is the purchase cost together with any incidental expenses of
acquisition.
Depreciation on property, plant and equipment has been computed using the
straight-line method at the annual rates estimated to write off the assets over
its expected useful lives. Depreciation has not been charged on assets which
have not been put to use except for truck mixers that are being rented, office
furniture and office equipment in use from the date of acquisition.
2003 2002
---- ----
Building (20 years) $ 1,749,806 $ 1,409,558
Plant and Machinery (10 years) 887,877 882,516
Truck Mixers (7 years) 1,131,005 1,131,005
Furniture and Office Equipment (4 years) 20,850 20,707
Vehicles (4 years) 0 0
Less accumulated Depreciation (544,172) (369,353)
Total Property, Plant and Equipment $ 3,245,366 $ 3,074,433
----------- -----------
NOTE 5 --- CURRENT LIABILITIES
Accruals and Provisions are generated in the normal course of its business. The
-----------------------
balance of these Accruals and Provisions for the years ending December 31, 2003
and 2002 were $652,645 and $658,087, respectively.
-9-
Trade Payable was created to finance the purchase of cement mixer trucks in
-------------
November of 1999 with Ramoil Engineering S.r.l. (an Italy based company) for a
principal balance of approxametly $684,433 to be paid from operating funds when
the Company commences its intended operations. For the years ending December 31,
2003 and 2002 the balances were $652,645 and $658,087.
Bank Borrowings include a liability assumed by the City Mix with First Gulf Bank
---------------
and an arrangement with HSBC Bank of Middle East (HSBC) to discount post dated
checks. The liability assumption was created with the private auction agreement
dated November 18, 2000 when the City Mix acquired the assets and liabilities of
City Mix from its former shareholders. The loan carries an interest rate of
5.00%. City Mix is currently making payments, on average, in the amount of
$7,000 which represents an amount of $6,000 on principal and $1,000 to the
interest owed and these amounts are derived from rental income that are
currently being applied on this financing. For the years ending December 31,
2003 and 2002 the balance of the assumed liability were $250,663 and $303,159,
respectively. The post dated check arrangement with HSBC is derived from the
discounting of checks received on the rental of trucks. The rental payments are
written as post dated for a period of 90 days. HSBC then accepts these checks
and loans the Company the value of the checks discounted at an annual rate of
9%. For the years ending December 31, 2003 and 2002 balance with HSBC were
$37,320 and 74,612, respectively.
NOTE 6 --- STOCKHOLDERS EQUITY
Preferred Stock
---------------
The Company has not authorized or issued preferred stock.
Common Stock
------------
The Company has authorized 6,000,000 of common stock with a par value of $0.0001
per share. As of December 31, 2003 the Company had issued and outstanding
4,260,000 common shares.
-----------------------
The Subsidiary
--------------
On December 17, 2003 the Company entered into an agreement whereby the Company
issued 3,200,000 common shares of stock for all of the assets of City Mix, the
subsidiary. On that same date the Company issued 64,000 shares for services
connected to the above exchange of stock and assets.
"City Mix" shall be considered the name of the collective subsidiary
relationships of the City Mix Management Co. Inc. and City Mix L.L.C., related
companies whereby the board of directors have dissolved City Mix Management
simultaneously with the share and asset exchange with the parent company.
-10-
City Mix plans to complete the development stage and become the operating
company in the ready mix cement industry.
The Company acquired an effective 100% interest in City Mix L.L.C. (City Mix), a
development stage company through the acquisition of assets of City Mix
Management Co. Inc. (the Management Company), a Grenada West Indies corporation
incorporated on December 11, 2000 by the Commonwealth of London. The Management
Company was created to first acquire the development stage company, City Mix, in
a private auction, to raise capital for this transaction, and to make certain
contractual agreements with the UAE national. On November 18, 2000 the
Management Company acquired a 49% ownership of City Mix with a contractual right
to exercise 100% beneficial ownership and control in City Mix pursuant to the
Power of Attorney granted by agreement of the 51% owner, a UAE national. In
essence the agreement states that the Management Company shall exercise 100%
beneficial ownership of City Mix by virtue of a power of attorney granted to it
by Mubarak Al Ahbabi, the 51% owner. Under United Arab Emerites (UAE) Commercial
Companies Law being Federal Law no. (8) of 1984 as amended, the minimum
cumulative shareholding of UAE nationals in a limited liability company must be
a 51% owner of the paid in capital. On April 4, 2004 the Company renewed this
contract agreement with the UAE national for an additional term. The Management
Company was later dissolved simultaneously with the parent Company's exchange of
common shares for the assets of City Mix. The shareholders of the Management
Company also became shareholders in the parent Company.
City Mix has been issued Commercial Registration Certificate No. 47837 dated
November 13, 1997 and Industrial License No. 54831 dated November 13, 1997. The
General Industry Corporation, Abu Dhabi, has issued industrial license 2/507
dated may 6, 2002.
NOTE 7 --- LITIGATION
From time to time in the normal course of business the Company has been involved
in litigation. The Company's management has determined that past and current
litigation will not have a material effect on the financial statements.
City Mix LLC vs Armitage Engineering LLC:
The basis for the dispute of City Mix LLC ("City Mix") and their main contractor
Armitage Engineering Co. LLC ("Armitage") is the fact that Armitage failed to
complete its work in time as was specified by Contract dated March 28, 1999 and
Annex A-1 dated September 11, 2001. Armitage disputed this fact and has taken a
series of illegal actions to thrust its unfair position upon City Mix, which has
caused substantial damage to City Mix.
-11-
City Mix tried to resolve the dispute in an amicable way but with no success,
and therefore it was advised that City Mix should seek a compensation for
damages and losses in court.
Currently there are two court actions related to the dispute between City Mix
and Armitage.
1. Main Action 422/02, in which Armitage seeks recovery of $158,514
representing the final payment under the contract and City Mix filed a counter
claim claiming compensation from Armitage for the amount of $739,048 plus a
daily compensation of $4,924 for loss of daily profits resulting from City Mix
being deprived from utilizing its factory from February 26, 2002 until a final
judgment is rendered and $2,449 daily as fees for the consultant until a final
judgment is rendered.
2. Urgent Case 73/02 filed by City Mix to stop Armitage's illegal actions of
locking the City Mix's factory site, preventing City Mix's subcontractors,
engineers and technical staff from accessing the site and preventing City Mix
from completing installation and commissioning work.
On December 23, 2003 the court issued its judgment on this urgent case and
confirmed the findings of a previously appointed expert that Armitage had in
fact taken wrongful actions causing damages to City Mix. This claim is being
used as evidence for the requests of compensation in the counter claim filed by
City Mix in the action No. 422/02.
The Company's management feels the chances of City Mix recovering the
compensation are good, however, it might be very difficult to give an estimation
as to how much compensation may be awarded as this is at the discretion of the
trial judge.
Judgment from the court of First Instance is expected before December 2004
NOTE 8 --- REVENUE CONTRACT
The Company holds a rental agreement contract with RMC Super Mix (RMC), a United
Arab Emirates company, dated August 29, 2002 for its 16 cement trucks for a
monthly rental amount of approximately $2,500 per truck. RMC provides the
company 90 day post-dated checks per this agreement. The term is for each six
month period renewable each six months with a 30 day termination clause. All
servicing costs are the of the renter. The Company uses the services of a
financial institution to advance the post dated check balance at a discounted
value.
There is a concentration of risk when having only one rental contract.
-12-
NOTE 9 --- OPERATING LEASE
The Company has entered into a sub-lease agreement with the UAE national
partner/sponsor for sub-lease of land on which the plant is constructed as per
the side agreement dated November 26, 2000. The sub-lease amount is $13,605 per
year. The lease agreement between the UAE national and Abu Dhabi Municipality
for lease of this land will have to renewed by July 5, 2004.
On July 13, 2003 the Company entered into a lease for office space for the term
July 13, 2003 through July 12, 2004 in the amount of approximately $10,500 that
would be paid at the beginning of the tenancy period.
NOTE 10 --- RELATED PARTY TRANSACTIONS
As per the agreement dated November 26, 2000 the UAE national sponsor is
entitled to share profits at a rate of 12% of annual profits of the Company
after the setoff of accumulated losses and will not share in losses. The
national sponsor is the 51% owner as required in the UAE of City Mix who has
given, under this contract, power of attorney to the Company for 100% effective
ownership and control per this contract. The national sponsor will not be liable
for any liabilities of the Company. An annual fee of approximately $41,000 for
services and annual rent of approximately $13,500 for the land leased.
The Company's subsidiary has a management and a consulting agreement with one of
its shareholders, RALLY Partners, USA. Management fees for the years ending
December 31, 2003 and 2002 were $29,142 and $55,000, respectively. Consulting
fees for the years ending December 31, 2003 and 2002 were $42,161 and $0,
respectively.
On January 5, 2004, Royal Capital Management, Inc. entered into a management
agreement with City Mix, LLC.
NOTE 11 --- CONCENTRATIONS OF RISK
As noted in Footnote 2, the Company has a cash balance that is at risk with
regarding the restriction of use and the eventual transfer of an amount to be
determined.
As noted in Footnote 10, the Company has a rental agreement with a single
customer which concentrates risks associated with the contract to a single
customer.
The Company is in the development stage whereby the Company needs capital to
complete this stage and commence operation. There are no guarantees that the
Company will be successful in raising debt or equity in the public or private
market.
-13-
NOTE 12 --- INCOME TAXES
The Company located in the UAE is not required to pay taxes in that country.
Should the parent Company, incorporated in the US, have income it will apply US
Generally Accepted Accounting Principals regarding income taxes. The Parent
Company has less than $1,000 in its net operating loss to date and has therefore
determined that no deferred tax asset would be material to record. If such an
asset was recorded, management would establish an allowance for the deferred tax
asset as the Company may not be able to use the net operating loss in the near
future.
NOTE 13 --- SIGNIFICANT EVENTS OCCURRING SUBSEQUENT TO THE BALANCE SHEET DATE
There were no significant events occurring after the balance sheet date which
require disclosure in the financial statements.
-14-
ROYAL CAPITAL MANAGEMENT, INC.
16,000,000 Shares of Common Stock
2,331,410 Selling Security Holder Shares of Common Stock
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The General Corporation Law of the State of New Jersey expressly authorizes a
New Jersey corporation to indemnify its officers, directors, employees, and
agents against claims or liabilities arising out of such persons' conduct as
officers, directors, employees, or agents for the corporation if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the Company. Neither the articles of incorporation nor the
Bylaws of the Company provide for indemnification of the directors, officers,
employees, or agents of the Company. The Company has not adopted a policy about
indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
The eighth article of our Certificate of Incorporation includes provisions to
eliminate, to the fullest extent permitted by New Jersey General Corporation Law
as in effect from time to time, the personal liability of our directors for
monetary damages arising from a breach of their fiduciary duties as directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
SEC registration fee $ 581
Legal fees and expenses (1) $ 50,000
Accounting fees and expenses (1) $ 25,000
Miscellaneous and Printing fees(1) $ 26,919
----------
Total (1) $ 102,500
==========
(1) Estimated.
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On May 9, 2002, we issued 5,000 shares of our restricted common stock to Julia
Parsons in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.0001 per share or $.50. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Parsons
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Parsons had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On May 9, 2002, we issued 3,000 shares of our restricted common stock to Alla
Shor in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.0001per share or $.30. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Shor
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Shor had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On May 9, 2002, we issued 1,000 shares of our restricted common stock to Boris
Zavlin in consideration for services rendered with the analysis of our English
language software. The issuance was valued at $.0001per share or $.10. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Zavlin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Zavlin had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-2
On May 9, 2002, we issued 1,000 shares of our restricted common stock to Mikhail
Khrakovsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Khrakovsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Khrakovsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On May 9, 2002, we issued 3,000 shares of our restricted common stock to Marina
Terletsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001per share or $.30.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Terletsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Terletsky had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On May 9, 2002, we issued 7,000 shares of our restricted common stock to Leonard
Khodorovsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001per share or $.70.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Khodorovsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Khodorovsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-3
On July 26, 2002, we issued 242,900 shares of our restricted common stock to
Yuli Ginzburg in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.0001per share or
$24.29. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Ginzburg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Ginzburg had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 149,379 shares of our restricted common stock to
Yevsey Zilman in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.0001 per share or
$14.94. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Zilman was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Zilman had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 140,000 shares of our restricted common stock to
Olga Savanova in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.0001per share or
$14.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Safanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Safanova had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-4
On July 26, 2002, we issued 168,653 shares of our restricted common stock to
Eugene Gurevich in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $.0001per share or
$16.86. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Gurevich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Gurevich had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 60,927 shares of our restricted common stock to Vera
Shatokhina in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.0001 per share or
$6.09. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Shatokhina was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Shatokhina had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 22,000 shares of our restricted common stock to
Teresa Bergstrom in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $..0001per share or
$2.20. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Bergstrom was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Bergstrom had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-5
On July 26, 2002, we issued 50,000 shares of our restricted common stock to
Sonia Bromberg in consideration for the license agreement entered into between
us and YZ Business Consulting. The issuance was valued at $.0001per share or
$5.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Bromberg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Bromberg had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 2,000 shares of our restricted common stock to
Nikita Sukhin in consideration for the license agreement entered into between us
and YZ Business Consulting. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Sukhin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Sukhin had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On July 26, 2002, we issued 1,000 shares of our restricted common stock to
Margarita Ginzburg in consideration for the license agreement entered into
between us and YZ Business Consulting. The issuance was valued at $.0001per
share or $.10. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. The above issuance of
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance of such shares by us did not involve a
public offering. Ms. Ginzburg was a sophisticated investor and had access to
information normally provided in a prospectus regarding us. The offering was not
a "public offering" as defined in Section 4(2) due to the insubstantial number
of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. We did not undertake an offering in which we sold
a high number of shares to a high number of investors. In addition, Ms. Ginzburg
had the necessary investment intent as required by Section 4(2) since she agreed
to and received a share certificate bearing a legend stating that such shares
are restricted pursuant to Rule 144 of the 1933 Securities Act. These
restrictions ensure that these shares would not be immediately redistributed
into the market and therefore not be part of a "public offering." Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for the above
transaction.
II-6
On July 26, 2002, we issued 2,000 shares of our restricted common stock to Anna
Kanevsky in consideration for the license agreement entered into between us and
YZ Business Consulting. The issuance was valued at $..0001per share or $.20. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Kanevsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Kanevsky had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 3,000 shares of our restricted common stock to
Ashley Goodman in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.30.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Goodman
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Goodman had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Walter Eizenberg in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Eizenberg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Eizenberg had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-7
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Zhana Kvetnaya in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Kvetnaya was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Kvetnaya had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Galina Polina in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Polina
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Polina had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 10, 2002, we issued 2,000 shares of our restricted common stock to
Araz Khachatrian in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Khachatrian was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Khachatrian had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-8
On October 10, 2002, we issued 2,000 shares of our restricted common stock to
Mark Filstein in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Filstein was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Filstein had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Marina Ivanova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $..0001per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Ivanova
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Ivanova had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Vadim Nebuchin in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Nebuchin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Nebuchin had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-9
On October 10, 2002, we issued 2,000 shares of our restricted common stock to
Ilya Bykov in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Bykov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Bykov had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 10, 2002, we issued 2,000 shares of our restricted common stock to
Tatiana Klatz in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Klatz
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Klatz had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 10, 2002, we issued 1,000 shares of our restricted common stock to
Tigran Makarian in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Makarian was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Makarian had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-10
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Natalia Sarafanova in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $..0001 per share or
$.10. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Ms.
Sarafanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Sarafanova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Dilbar Sultanova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Sultanova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Sultanova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Oksana Tkachenko in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Tkachenko was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Tkachenko had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-11
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Julia Parsons in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Parsons
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Parsons had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Elena Marcucci in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Marcucci was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Marcucci had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Julie Litvinova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $..0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Ltvinova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Litvinova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-12
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Ekaterina Gavin in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $..0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Gavin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Gavin had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Elena Smirnova in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms.
Smirnova was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Ms. Smirnova had the
necessary investment intent as required by Section 4(2) since she agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Larisa Garcia in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $..0001per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Garcia
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Garcia had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-13
On November 14, 2002, we issued 2,000 shares of our restricted common stock to
Lana Koifman in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Koifman
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Koifman had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Victoria Reznik in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Reznik
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Reznik had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Berci Cherpician in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Cherpician was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Cherpician had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-14
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Yury Ribinovich in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Ribinovich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Ribinovich had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Mikhail Kupsis in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Kupsis
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Kupsis had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 14, 2002, we issued 1,000 shares of our restricted common stock to
Mikhail Shor in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.10.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Shor
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Shor had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-15
On November 14, 2002, we issued 2,000 shares of our restricted common stock to
Alexander Terletsky in consideration for services rendered with the analysis of
our English language software. The issuance was valued at $.0001 per share or
$.20. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Terletsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Terletsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 2,000 shares of our restricted common stock to
Igor Sluzhevsky in consideration for services rendered with the analysis of our
English language software. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Sluzhevsky was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Sluzhevsky had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 10,000 shares of our restricted common stock to
Mikhail Safanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $1.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Safanov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Safanov had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
II-16
On December 17, 2003, we issued 2,000 shares of our restricted common stock to
Souren Sombatov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Sombatov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Sombatov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 2,000 shares of our restricted common stock to
Jacob Fortun in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Fortun
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Fortun had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On December 17, 2003, we issued 3,000 shares of our restricted common stock to
Tatyana Rusanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.30.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Rusanov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Rusanov had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
II-17
On December 17, 2003, we issued 15,000 shares of our restricted common stock to
Eduard Klebanov in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.15.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Klebanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Klebanov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 30,000 shares of our restricted common stock to
Y. Jacob Rusanov in consideration for services rendered to us assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.30.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Rusanov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Rusanov had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 2,000 shares of our restricted common stock to
Boris Magidenko in consideration for services rendered to us for assistance with
the City Mix transaction. The issuance was valued at $.0001 per share or $.20.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Magidenko was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Magidenko had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-18
On December 17, 2003, we issued 427,840 shares of our restricted common stock to
Eugene Gurevich in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $42.78.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Gurevich was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Gurevich had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 154,560 shares of our restricted common stock to
Shatokhina Vera in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $15.46.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Ms. Vera
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Ms. Vera had the necessary investment intent
as required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On December 17, 2003, we issued 448,000 shares of our restricted common stock to
Yevsey Zilman in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $44.80.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Zilman
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Zilman had the necessary investment intent
as required by Section 4(2) since he agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-19
On December 17, 2003, we issued 452,480 shares of our restricted common stock to
Yuli Ginzburg in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $45.25.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Ginzburg was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Ginzburg had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 504,000 shares of our restricted common stock to
Vladimir Davidov in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $50.40.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Davidov
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Davidov had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On December 17, 2003, we issued 253,120 shares of our restricted common stock to
Anrew Kharlanov in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $25.31.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr.
Karlanov was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Karlanov had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
II-20
On December 17, 2003, we issued 640,000 shares of our restricted common stock to
Alexander Shishkin in consideration for the share exchange with City Mix, LLC,
our wholly owned subsidiary. The issuance was valued at $.0001 per share or
$64.00. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. The above issuance of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. Mr.
Shishkin was a sophisticated investor and had access to information normally
provided in a prospectus regarding us. The offering was not a "public offering"
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number of
shares to a high number of investors. In addition, Mr. Shishkin had the
necessary investment intent as required by Section 4(2) since he agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 320,000 shares of our restricted common stock to
Eugene Koupsin in consideration for the share exchange with City Mix, LLC, our
wholly owned subsidiary. The issuance was valued at $.0001 per share or $32.00.
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. The above issuance of shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such shares by us did not involve a public offering. Mr. Kuopsin
was a sophisticated investor and had access to information normally provided in
a prospectus regarding us. The offering was not a "public offering" as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Mr. Kuopsin had the necessary investment
intent as required by Section 4(2) since he agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
All of the above issuances of shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance of such
shares by us did not involve a public offering. Each of these shareholders was a
sophisticated investor and had access to information regarding us. The offering
was not a "public offering" as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in which
we sold a high number of shares to a high number of investors. In addition,
these shareholders had the necessary investment intent as required by Section
4(2) since they agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transactions.
II-21
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
EXHIBIT DESCRIPTION
3.1 Articles of Incorporation of Royal Capital Management, Inc.
and Amendments
3.2 By-Laws
5.1 Opinion and Consent of Anslow & Jaclin, LLP
10.1 License Agreement dated July 26, 2002 between us and YZ
Business Consulting
23.1 Consent of Gately & Associates, LLC, independent auditors
24.1 Power of Attorney (included on signature page of Registration
Statement)
ITEM 28. UNDERTAKINGS.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
II-22
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Marlboro, State of
New Jersey, on the 26rg day of October 2004.
ROYAL CAPITAL MANAGEMENT, INC.
By:/S/ YAN JACOB RUSANOV
-------------------------
YAN JACOB RUSANOV
President
POWER OF ATTORNEY
The undersigned directors and officers of Royal Capital Management, Inc. hereby
constitute and appoint Yan Jacob Rusanov, with full power to act without the
other and with full power of substitution and resubstitution, our true and
lawful attorneys-in-fact with full power to execute in our name and behalf in
the capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such attorneys-
in-fact, or any them, or their substitutes, shall lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
[Enlarge/Download Table]
SIGNATURE TITLE DATE
/S/ YAN JACOB RUSANOV President and Principal Executive Officer October 26, 2004
--------------------
YAN JACOB RUSANOV
/S/ YULI GINZBURG Vice President, Principal Financial Officer October 26, 2004
-------------------- and Chairman of the Board of Directors
YULI GINZBURG
/S/ YEVSEY D. ZILMAN Vice President and Deputy October 26, 2004
-------------------- Chairman of the Board of Directors
YEVSEY D. ZILMAN
/S/ EDUARD KLEBANOV
---------------------- Director October 26, 2004
EDUARD KLEBANOV
/S/ LEONARD KHODOROVSKY
---------------------- Director October 26, 2004
LEONARD KHODOROVSKY
II-24
Dates Referenced Herein and Documents Incorporated by Reference
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