AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2001
REGISTRATION NO. 333-55166
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2/A
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SMI Products, Inc.
(Name of small business issuer in our charter)
Nevada
------
(State or other jurisdiction of incorporation or organization)
7299 88-0363465
- ---------------------------- ------------------------------------
(Primary standard industrial (I.R.S. Employer Identification No.)
classification code number)
3503 Cedar Locust
Sugarland, TX 77479
713-265-8660
(Address and telephone number of principal executive offices)
Michael J. Morrison, Esq.
1495 Ridgeview Drive, Suite 220
Reno, NV 89509
775-827-6300
(Name, address and telephone of agent for service)
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "SECURITIES ACT"), check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE (1)
Title of class of Proposed maximum Amount of
securities to be registered aggregate offering price Registration Fee
and number of shares
- --------------------------------------------------------------------------------
Common Stock, par value $.001 $25,160 $6.64
2,516,000 shares
Total Registration Fee $6.64
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 (c).
Registrant hereby amends this registration statement on the
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 the date as the Commission, acting pursuant to said
section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
commission. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This prospectus
shall not constitute an offer to sell nor the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which the offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any state.
SMI PRODUCTS, INC.
2,516,000 shares of Common Stock
The registration statement of which this prospectus is a part relates to the
offer and sale of 2,516,000 shares of our common stock by the selling security
holders.
These securities involve a high degree of risk and should be considered only by
persons who can afford the loss of their entire investment. See "Risk Factors".
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this preliminary prospectus is June, 2001.
TABLE OF CONTENTS
Page
Front Cover Page of Prospectus 2
Inside Front and Outside Back Cover Pages of Prospectus 3
Summary Information & Risk Factors 5
Use of Proceeds 17
Determination of Offering Price 17
Dilution 17
Selling Security Holders 18
Plan of Distribution 20
Legal Proceedings 22
Directors, Executive Officers, Promoters and Control Management 22
Security Ownership of Certain Beneficial Owners and Management 26
Description of Securities 26
Interest of Named Experts and Counsel 30
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities 30
Description of Business 31
Management's Discussion and Analysis or Plan of Operation 40
Description of Property 42
Certain Relationships and Related Transactions 42
Market for Common Equity and Related Stockholder Matters 43
Executive Compensation 44
Financial Statements 44
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 61
Indemnification 61
Other Expenses of Issuance and Distribution 62
Recent Sales of Unregistered Securities 62
Exhibits 63
Undertakings 64
SUMMARY INFORMATION AND RISK FACTORS
PROSPECTUS SUMMARY
You should read carefully all information in the prospectus including its
detailed information and the financial statements and their explanatory notes
before making an investment decision.
Our Company is in the development stage and we have never produced any revenues.
THE OFFERING.
Securities Offered 2,516,000 shares of Common Stock.
Offering Price
Per Share $.001
Offering The Shares are being offered by the selling
securities holders.
Proceeds The Company will receive no proceeds from this
offering.
Number of Shares Before the Offering: 7,551,000 Shares of Common
Outstanding Stock. After the Offering: 7,551,000 Shares of
Common Stock
FINANCIAL SUMMARY INFORMATION.
Because this is a only a financial summary, it does not contain all the
financial information that may be important to you. You should also read
carefully all the information in this prospectus, including the financial
statements included in this prospectus and their explanatory notes.
Balance Sheet Data: 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96
- ------------------- -------- -------- -------- -------- --------
CASH $13,178 $0 $0 $0 $0
TOTAL ASSETS $14,261 $283 $483 $683 $883
TOTAL LIABILITIES $ 900 $900 $900 $900 $900
STOCKHOLDERS'EQUITY $13,361 ($617) ($417) ($217) ($ 17)
RISK FACTORS.
Our Status as a Development Stage Company with No Revenues Subjects Your Invest-
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ment to a High Degree of Risk.
- -----------------------------
We only recently started our business operations and have never had any
revenues. We cannot assure that we will ever generate revenues, develop
operations, or make a profit. We have just recently developed a website, but we
have no operating history for investors to evaluate our business strategy. As a
result of our lack of operating history, we have limited insight into trends
that may emerge and affect our business. You must consider the risks and
difficulties frequently encountered by development stage companies. Furthermore,
we face risks due to our anticipated participation in the new and
rapidly-evolving Internet market. Therefore, your investment is at high risk
because we may fail in our business.
We Have Substantial Near-Term Capital Needs and No Source of Additional Funding.
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We will require funding over the next twelve months to develop our business. In
fact, after paying the expenses of this offering, we will have minimal capital
for operations and we will need immediate funding. We currently have no source
of funds. Our capital requirements will depend on many factors including, but
not limited to, the timing of further development of our web site and the growth
of the Internet. If adequate funds are not available, as and when needed, we may
be required to curtail operations or obtain funds by entering into collaboration
agreements on unattractive terms. Our inability to raise capital would impair
the technical and presentational aspects of our website and our marketing
abilities. In fact, if we do not obtain the necessary fundings, we may be forced
to cease operations.
We Have Substantial Long-Term Capital Needs and No Source of Additional Funding.
- -------------------------------------------------------------------------------
Substantial expenditures will be required in the next 12-24 months to further
develop our web site and to market our services. The level of expenditures
required for these activities will depend in part on whether we develop and
market our services independently or with other companies through collaborative
arrangements. If adequate funds are not available, we may be unable to develop
our operations to a sufficient level to generate revenues or become profitable.
We Have a Poor Financial Condition and May be Unable to Adequately Develop our
- --------------------------------------------------------------------------------
Business.
- --------
Because we have no operating history, assets, or revenue sources, an investor
cannot determine if we will ever be profitable. We will experience financial
difficulties during our operational development and beyond. We may be unable to
operate profitably, even if we develop operations and generate revenues. We plan
to generate revenues from advertising sales through our website, but there can
be no assurance that our revenues will exceed our costs. Our poor financial
condition could adversely affect our ability to provide a website that will
attract website users or distribute mortgage information in a useful, efficient
and timely fashion, or generate revenues.
Our Management Will Devote Limited Attention to Our Business Operations and this
- --------------------------------------------------------------------------------
May Limit the Development of Our Business.
- -----------------------------------------
Our management personnel will all be devoting their efforts to other businesses
and will only devote a portion of their time to our businesses and will only
devote a portion of their time to our Company's business. This lack of full-time
attention could result in our business not developing as well or as fast as it
otherwise could, or it may result in the failure of our business.
We Have Little Managerial Expertise in the Development or Dissemination of
- --------------------------------------------------------------------------------
Mortgage Information and This May Cause Our Business to Suffer.
- --------------------------------------------------------------
Because our management has little experience in developing and disseminating
mortgage information, our abilities in this area may be limited and our business
may suffer. Even if our management develops a sufficient quantity of mortgage
information, it may be unable to particularize or adapt it to the needs of
website visitors.
We Have Little Managerial Expertise in Internet Operations and This May Cause
- --------------------------------------------------------------------------------
Our Business to Suffer.
- ----------------------
Our management has very little Internet experience. Unless management has the
financial resources to hire qualified Internet consultants, as and when needed,
the presentation and technical aspects of our website may suffer.
We Do Not Have Any Material Contracts or Future Prospects for Material Contracts
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and This may Cause our business to Suffer.
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We have no contracts or prospective contracts that will assist us in promoting
--------- ---------
or further developing our website or operations. We have no contracts with
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Internet, computer, mortgage, technical or marketing professionals which would
assist us in the development, selection, presentational or technical aspects of
our website information. We have no contracts or prospective contracts with
------- --------- ---------
other websites that would provide visitation links to our website. We have
-------- ------
not developed a plan to obtain any of these contracts. If we fail to develop
---------
contracts with other websites or other professionals, our revenues will be
- --------- --------
negatively impacted.
The Information on Our Website May Be Available on Other Websites or in Other
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Informational Formats and May be Purchased at Little or No Cost, We May Never
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Generate Any Revenues.
- ---------------------
We have conducted no research to determine what mortgage information is
available over the Internet or in other informational formats and whether that
information may be purchased at nominal fees or free to the public. We have not
yet determined all of the specific mortgage information we will make available
on our website. Because our website information may be more easily accessible at
------- -------
other websites or informational formats, and/or at little or no cost, website
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visitors may find our website of little or no utility and we may not develop any
-------
subscribers for our services or realize any revenues.
Our Lack of a Well-Developed Business Plan Makes it Difficult for Your to
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Evaluate Our Business.
- ---------------------
Because we currently do not have a well-developed business plan, we may spend an
excessive amount of our financial and operational resources in development of
our business plan. Our website may not be developed with the computer, technical
-------
and marketing skills necessary to provide a superior website or one which would
-------
attract customers or produce revenues.
Our Lack of Revenues and Profits, Combined With Our Losses, Make it Difficult
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for Us to Succeed as a Business.
- -------------------------------
We have no revenues or revenue sources, yet we have significant costs and
losses. Our website has not been fully developed. We cannot assure that we will
-------
obtain the necessary working capital to fully develop our website. Further, even
-------
if our website is fully developed, we cannot assure that our website will
------- -------
receive enough Internet traffic or purchases to generate revenues or achieve
profitability. We believe that we will incur net losses for at least the next
two years.
There is No Public Market for Our Common Stock and You May be Unable to Sell
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Your Shares.
- -----------
There is no established public trading market or market maker for our
securities. There can be no assurance that a market for our common stock will be
established or that, if established, a market will be sustained. Therefore, if
you purchase our securities you may be unable to sell them. Accordingly, you
should be able to bear the financial risk of losing your entire investment.
If We Are Unable To Attract and Retain Qualified Personnel with Internet
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Experience, Our Business Could Suffer.
- -------------------------------------
Our current and future success depends on our ability to identify, attract,
hire, train, retain and motivate highly skilled technical, managerial, sales and
marketing, customer service and professional personnel with internet experience.
Competition for these types of employees is intense, especially in the
e-commerce sector. We may be unable to successfully attract, assimilate or
retain sufficiently qualified personnel. If we fail to attract and retain the
necessary technical professionals, the efficiency of our website will suffer in
-------
its presentation, search abilities and information accessibility. If we fail to
retain and attract the necessary managerial, sales and marketing and customer
service personnel, we may not develop a sufficient customer base to adequately
fund our operations.
If Consumers Do Not Embrace On-Line Mortgage Financing And Sales, We May Not
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Realize Any Revenues or Profits.
- -------------------------------
Our success depends upon the general acceptance of on-line mortgage information
and services by consumers. If consumers do not embrace online mortgage
information, our operations will be adversely affected. The market for
electronic mortgage information and services, particularly over the Internet, is
in its early stages of development, but is evolving rapidly. We cannot assure
that a sufficiently broad base of consumers will adopt, and continue to use, the
Internet to obtain mortgage services, traditionally provided in person-to-person
and paper transactions. Our business prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in the
new and rapidly evolving market for Internet services.
If Mortgage Broker Businesses Do Not Embrace On-Line Mortgage Financing And
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Sales, We may Never Realize Any Revenues or Profits.
- ---------------------------------------------------
Our success depends upon the general acceptance of on-line mortgage information
and services by mortgage brokers and relalated business. If they do not embrace
online mortgage information, our operations will be adversely affected. The
market for electronic mortgage information and services, particularly over the
Internet, is in its early stages of development, but is evolving rapidly. We
cannot assure that a sufficiently broad base of mortgage brokers and related
businesses will adopt, and continue to use, the Internet to obtain mortgage
services, traditionally provided in person-to-person and paper transactions.
If the Securities Do Not Meet Blue Sky Resale Requirements, You May Be Unable to
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Resell Your Securities.
- ----------------------
The securities offered by this prospectus must meet the blue sky resale
requirements in the states in which the proposed purchasers reside. If we fail
to meet these qualifications, the securities may be deprived of any value. Since
we have extremely limited capital, we may not be able to affort the expenses
necessary to meet Blue Sky requirements.
USE OF PROCEEDS
Not applicable. We will not receive any proceeds from the sale of the securities
by the selling security holders.
DETERMINATION OF OFFERING PRICE
Not applicable. The selling security holders will be able to determine the price
at which they sell their securities.
DILUTION
Not applicable. We are not registering any unissued shares in this registration
statement.
SELLING SECURITY HOLDERS
The securities are being sold by the selling security holders named below. The
table indicates that all the securities will be available for resale after the
offering. However, any or all of the securities listed below may be retained by
any of the selling security holders, and therefore, no accurate forecast can be
made as to the number of securities that will be held by the selling security
holders upon termination of this offering. We believe that the selling security
holders listed in the table have sole voting and investment powers with respect
to the securities indicated. We will not receive any proceeds from the sale of
the securities.
Beneficial Maximum Beneficial
Ownership Number of Ownership
Before Offering Shares Being After Offering(2)
NAME(1) Shares Percent Offered Shares Percent
- ---------------------------------------------------------------------------------------
477633 B.C. Ltd. 1000 Less than 1% 1000 0 0
Abey, Michael in Trust
For Bo Edison Abey 500 Less than 1% 500 0 0
Abey, Michael in Trust
For Michaela Abey 500 Less than 1% 500 0 0
Anderson, Elizabeth 1000 Less than 1% 1000 0 0
Armor Capital Partners 150,000 2% 150,000 0 0
Associated Product Services 310,000 4% 310,000 0 0
Bank Sol Oppenheim 200,000 3% 200,000 0 0
Biedka, Lucia 2000 Less than 1% 2000 0 0
Charuk, Al 1000 Less than 1% 1000 0 0
Charuk, Barbara 1000 Less than 1% 1000 0 0
Charuk, Jill 1000 Less than 1% 1000 0 0
Coutts, Steve 1000 Less than 1% 1000 0 0
Destin Pacific 320,000 4% 320,000 0 0
Dick, Brian 1000 Less than 1% 1000 0 0
Dispasquale, Anna 1000 Less than 1% 1000 0 0
Dispasquale, Paul 1000 Less than 1% 1000 0 0
Eckert, Dale 1000 Less than 1% 1000 0 0
E-Ternity Trading Corp. 1000 Less than 1% 1000 0 0
Extreme Investment Corp. 1000 Less than 1% 1000 0 0
Harris, Graham in Trust
For Bryton Harris 1000 Less than 1% 1000 0 0
Harris, Graham in Trust
For Graydon Harris 1000 Less than 1% 1000 0 0
Havanna Consultants Inc. 1000 Less than 1% 1000 0 0
Holden, Mark 1000 Less than 1% 1000 0 0
Holt, Chanel in Trust 1000 Less than 1% 1000 0 0
Holt, Julie 1000 Less than 1% 1000 0 0
Holt, Oliver in Trust 1000 Less than 1% 1000 0 0
Holt, Paul 1000 Less than 1% 1000 0 0
Holt, Spencer in Trust 1000 Less than 1% 1000 0 0
Gajdics, Tibor in Trust
For Merrick Gajdics 1000 Less than 1% 1000 0 0
Gajdics, Tibor in Trust
For Michael Gajdics 1000 Less than 1% 1000 0 0
Iucolino, Marco 1000 Less than 1% 1000 0 0
Kiss, Ilona 1000 Less than 1% 1000 0 0
Kurtyka, Anna 1000 Less than 1% 1000 0 0
Legg, David 1000 Less than 1% 1000 0 0
Matrix Holdings Foundation 320,000 4% 320,000 0 0
McCleod, Bruce 1000 Less than 1% 1000 0 0
McDermid, Elaine 1000 Less than 1% 1000 0 0
McLeod, Don 1000 Less than 1% 1000 0 0
M.D.I. Small Cap Fund 280,000 4% 280,000 0 0
Miller, David 1000 Less than 1% 1000 0 0
Miller, Ron W. 1000 Less than 1% 1000 0 0
Mitchell, David 1000 Less than 1% 1000 0 0
Nelson, Candice 1000 Less than 1% 1000 0 0
Noel, C.M. 1000 Less than 1% 1000 0 0
Noel, D.R. 1000 Less than 1% 1000 0 0
Robertson, Jayde 1000 Less than 1% 1000 0 0
Robertson, John 1000 Less than 1% 1000 0 0
Roman, Roman 17 Ltd. 320,000 4% 320,000 0 0
Shaw, Brent 276,000 276,000 0 0
Shaw, Grant 1000 Less than 1% 1000 0 0
Shaw, Wade 2000 2000 0 0
Stead, Martin 1000 Less than 1% 1000 0 0
Symes, Sharon 1000 Less than 1% 1000 0 0
Symes, Sharon in Trust
For Zachary Symes 1000 Less than 1% 1000 0 0
Venture Consultants 290,000 4% 290,000 0 0
Vanger, Tony 1000 Less than 1% 1000 0 0
Whitmore, Kay Brian 1000 Less than 1% 1000 0 0
Wills, Les 1000 Less than 1% 1000 0 0
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Total 2,516,000 2,516,000
(1) None of the selling security holders have, or ever had, any material rela-
tionship with our corporation or any of its predecessors and/or affiliates.
(2) Assumes the sale of all shares offered by Selling Security Holder.
We intend to seek qualification for sale of the securities in those states where
the securities will be offered. That qualification is necessary to resell the
securities in the public market and only if the securities are qualified for
sale or are exempt from qualification in the states in which the selling
shareholders or proposed purchasers reside. There is no assurance that the
states in which we seek qualification will approve of resales of our securities
resales.
PLAN OF DISTRIBUTION
The securities offered by this prospectus may be sold by the selling security
holders or by those to whom the shares are transferred. We are not aware of any
underwriting arrangements that have been entered into by the selling security
holders. The distribution of the securities by the selling security holders may
be effected in one or more transactions that may take place in the
over-the-counter market, assuming a market for our securities exists, including
broker's transactions, privately negotiated transactions or through sales to one
or more dealers acting as principals in the resale of these securities.
Any of the selling security holders, acting alone or in concert with one
another, may be considered statutory underwriters under the Securities Act of
1933, if they are directly or indirectly conducting an illegal distribution of
the securities on behalf of our corporation. For instance, an illegal
distribution may occur if any of the selling securities holders provide us with
cash proceeds from their sales of the securities. If any of the selling
shareholders are determined to be underwriters, they may be liable for
securities violations in connection with any material misrepresentations or
omissions made in this prospectus.
In addition, the selling security holders and any brokers and dealers through
whom sales of the securities are made may be deemed to be "UNDERWRITERS" within
the meaning of the Securities Act, and the commissions or discounts and other
compensation paid to the persons may be regarded as underwriters' compensation.
The selling security holders may pledge all or a portion of the securities owned
as collateral for margin accounts or in loan transactions, and the securities
may be resold pursuant to the terms of the pledges, accounts or loan
transactions. Upon default by the selling security holders, the pledgee in the
loan transaction would have the same rights of sale as the selling security
holders under this prospectus. The selling security holders may also transfer
securities owned in other ways not involving market makers or established
trading markets, including directly by gift, distribution, or other transfer
without consideration, and upon any transfer the transferee would have the same
rights of sale as the selling security holders under this prospectus.
In addition to, and without limiting, the foregoing, each of the selling
security holders and any other person participating in a distribution will be
affected by the applicable provisions of the Securities Exchange Act of 1934,
including, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the securities by the selling security holders or
any other person. Furthermore, transferees who replace selling security holders
will need to be named in the prospectus filed as part of a post-effective
amendment to this registration statement before they may accede to the rights of
the named selling security holder.
There can be no assurances that the selling security holders will sell any or
all of the securities. In order to comply with state securities laws, if
applicable, the securities will be sold in jurisdictions only through registered
or licensed brokers or dealers. In various states, the securities may not be
sold unless these securities have been registered or qualified for sale in the
state or an exemption from registration or qualification is available and is
complied with. Under applicable rules and regulations of the Exchange Act, as
amended, any person engaged in a distribution of the securities may not
simultaneously engage in market-making activities in these securities for a
period of one or five business days prior to the commencement of the
distribution.
All of the foregoing may affect the marketability of the securities. Pursuant to
the various agreements we have with the selling securities holders, we will pay
all the fees and expenses incident to the registration of the securities, other
than the selling security holders' pro rata share of underwriting discounts and
commissions which is to be paid by the selling security holders.
LEGAL PROCEEDINGS
We are not aware of any pending or threatened legal proceedings which involve
SMI Products, Inc.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
(a) Directors and Officers.
----------------------
Our Bylaws provide that we shall have a minimum of one director and a
------
maximum of nine directors on the board at any one time. Our current
directors and executive officers are as follows:
NAME AND ADDRESS AGE POSITIONS HELD
---------------- --- --------------
James M. Charuk 44 President and Director
Cynthia A. Carter 42 Secretary, Treasurer and Director
Philip R. Herr 59 Director
These persons will serve as directors until our next annual shareholder
meeting or until a successor is elected who accepts the position. Directors are
elected for one-year terms.
Philip Herr
- -----------
Mr. Herr was the founder and has been an Officer and a Director
of the company since inception in 1991 to present. Mr. Herr has worked as an
independent consultant specializing in small business development. During the
past five years, he has been consulting primarily in the field of tax
preparation. From February 1993 to April 2000, he was also involved as a
founder, president, secretary, treasurer, director and principal shareholder in
Institute for Counseling, Inc., a public shell company which subsequently, on
April 14, 2000, merged with a private company and changed its name to China
Broadband Corp. He retired as a Captain in the U.S. Navy in 1988. He received a
B.S. Degree in Accounting and Taxation from the University of Roosevelt,
Chicago, IL, in 1963. He is a Graduate Accountant. Mr. Herr will devote
approximately 5% of his time to the business of the company.
James Charuk
- ------------
Mr.Charuk was born in Canada and immigrated to the United States
in May 1990. During 1990-1991, Mr. Charuk was a database analyst for Digitech
Information, a private company specializing in oil reservoir analyses.
From 1991 to December 1997, Mr. Charuk served as a principal of Western Atlas
International, a Houston, Texas- based company specializing in geosciences and
interpretation services for forestry and mining companies. Mr. Charuk's
responsibilities included overseeing an annual budget in excess of $14 Million
for Western Atlas in the areas of Geosciences and Interpretation Software
Systems and Data Analysis.
In December 1997, Mr. Charuk became a Director of CCR Internet Realty, now known
as E-Realty, and served as a Director until January 2000. E-Realty is a pioneer
in the E-Broker residential real estate industry in the United States.
eRealty.com is a team of real estate professionals who combine local real estate
expertise with the power of the Internet to better serve home buyers and
sellers. By utilizing technology, eRealty.com's goal is to save their customers
time and money. eRealty.com is involved in the real estate buying and selling
process: expediting, informing and executing these transactions in the most
effective and cost effective manner. eRealty.com does not compete with SMI
Products, Inc.'s mortgagecommunicator.com, nor at this time, does it have any
plans to do so in the future. From January 2000 to present, Mr. Charuk has been
the Chief Technology Officer and V.P. of Technology for E-Realty. From June 1998
to April 2000, he was also involved as a secretary, director and shareholder in
Institute for Counseling, Inc., a public shell company which subsequently, on
April 14, 2000, merged with a private company and changed its name to China
Broadband Corp.
He earned a Bachelor of Science degree from Mount Allison University in Moncton,
New Brunswick in 1981.
Mr. Charuk will devote approximately 20% of his time to the business of the
company.
Cynthia Carter
- --------------
From 1992 to present, Ms. Carter has been sole officer, director
and shareholder of White Pine Productions, Inc., a Nevada corporation engaged in
direct and integrated marketing strategy and development, website development
and internet branding in Chicago, IL. Her company concentrates on the branding
of new products and services, focusing on internet marketing. Her clients
include The Quaker Oats Company, and major international advertising agencies,
such as DDB Needham, Leo Burnett and J. Walter Thompson. Ms. Carter has also
been involved in the broadcasting and related F.C.C. industry since 1984. Ms
Carter received a B.S. in English from Southwest Missouri State University in
1979. Ms. Carter will devote approximately 5% of her time to the business of the
company.
(b) Significant Employees.
---------------------
Other than James Charuk, there are no employees who are expected to
-------------
make a significant contribution to our corporation.
(c) Family Relationships.
--------------------
There are no family relationships among our officers, directors, or
persons nominated for such positions.
(d) Legal Proceedings.
-----------------
No officer, director, or persons nominated for these positions, and no
promoter or significant employee of our corporation has been involved in legal
proceedings that would be material to an evaluation of our management.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the ownership, as of December 31, 2000, of our
common stock (a) by each person known by us to be the beneficial owner of more
than 5% of our outstanding common stock, and (b) by each of our directors, by
all executive officers and by our directors as a group. To the best of our
knowledge, all persons named have sole voting and investment power with respect
to the shares, except as otherwise noted.
Security Ownership of Officers and Directors.
TITLE OF NO. OF NATURE OF CURRENT
CLASS NAME & ADDRESS SHARES OWNERSHIP %OWNED
- ----- -------------- ------ --------- ------
Common Philip Herr 5,000,000 Direct 66%
1817 Morena Blvd., #A
San Diego, CA 92110
Common James Charuk 25,000 Direct Less
3503 Cedar Locust than 1%
Sugarland, TX 77479
Common Cynthia Carter 10,000 Direct Less
1802 North Sheffield Ave. than 1%
Chicago, IL 06014
All Officers and Directors as a Group 5,035,000 Direct 66%
(Approx.) (3 Individuals)
(c) Changes in Control.
There are currently no arrangements, which would result in a change in
control of SMI Products, Inc.
Our company founder, principal stockholder and Director, Philip Herr, currently,
owns approximately 66% of our common stock. Therefore, he will have significant
influence over all matters requiring approval by our stockholders, but not
requiring the approval of the minority stockholders. In addition, Philip Herr
will be able to elect all of the members of our Board of Directors, allowing him
to exercise significant control of our affairs and management. In addition,
Philip Herr may affect most corporate matters requiring stockholder approval by
written consent, without a duly-noticed and duly-held meeting of stockholders.
In essence, Mr. Herr controls our Company and your vote is of little importance.
DESCRIPTION OF SECURITIES
The following description is a summary and you should read the provisions of our
Articles of Incorporation and Bylaws, copies of which have been filed as
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exhibits to the registration statement of which this prospectus is a part.
COMMON STOCK.
General.
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We are authorized to issue 25,000,000 shares of common stock, $0.001 par value.
As of December 31, 2000, there were 7,551,000 common shares issued and
outstanding. The Board of Directors has authority to issue the balance of
17,449,000 shares of our authorized stock without shareholder consent, on terms
and conditions set in the discretion of the Board, which may dilute the value of
your stock. All shares of common stock outstanding are validly issued, fully
paid for and non-assessable.
Voting Rights.
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Each share of common stock entitles the holder to one vote, either in person or
by proxy, at meetings of shareholders. The holders are not permitted to vote
their shares cumulatively. Accordingly, the holders of common stock holding, in
the aggregate, more than fifty percent of the total voting rights can elect all
of our directors and, in this event, the holders of the remaining minority
shares will not be able to elect any of the directors. The vote of the holders
of a majority of the issued and outstanding shares of common stock entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to the act or
action, except as otherwise provided by law.
Dividend Policy.
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All shares of common stock are entitled to participate proportionally in
dividends if our Board of Directors declares them out of the funds legally
available and subordinate to the rights of the holders of loan or other
financing documents. These dividends may be paid in cash, property or additional
shares of common stock. We have not paid any dividends since our inception and
presently anticipate that all earnings will be retained for development of our
business. Any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, and other factors.
Therefore, there can be no assurance that any dividends on the common stock will
be paid in the future.
Miscellaneous Rights and Provisions.
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Holders of common stock have no cumulative voting rights, and no preemptive or
other subscription rights, conversion rights, redemption or sinking fund
provisions. In the event of our dissolution, whether voluntary or involuntary,
each share of common stock is entitled to share proportionally in any assets
available for distribution to holders of our equity after satisfaction of all
liabilities and payment of the applicable liquidation preference of any
outstanding loan or financing documents.
Stock Transfer Agent
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Upon completion of this offering, we intend to engage an independent stock
transfer agency firm to serve as our registrar and stock transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE.
The 2,516,000 shares of common stock registered in this offering will be freely
tradable without restrictions under the Securities Act. No shares held by our
"affiliates" (officers, directors or 10% shareholders) are being registered
hereunder. The remaining 5,035,000 of our outstanding shares are held by
affiliates: Mr. Herr owns 5,000,000 shares, all of which have been held for over
one year; Mr. Charuk owns 25,000 shares, all of which have been held for less
than one year; and Ms. Carter owns 10,000 shares, all of which have been held
for less than one year.
In general, under Rule 144, as currently in effect, any of our affiliates and
any person or persons whose sales are aggregated who has beneficially owned his
or her restricted shares for at least one year, may be entitled to sell in the
open market within any three-month period a number of shares of common stock
that does not exceed the greater of (i) 1% of the then outstanding shares of our
common stock, or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding any sale. Sales under Rule 144 are also
affected by limitations on manner of sale, notice requirements, and availability
of current public information about us. Non-affiliates who have held their
restricted shares for two years may be entitled to sell their shares under Rule
144 without regard to any of the above limitations, provided they have not been
affiliates for the three months preceding any sale.
The 5,000,000 outstanding restricted securities held by Mr. Herr, a director of
the company, are subject to the sale limitations imposed by Rule 144. The
availability for sale of substantial amounts of common stock under Rule 144
could adversely affect prevailing market prices for our securities.
EXPERTS
ACCOUNTANTS
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Our Audited Financial Statements for the period from June 17, 1996 (inception)
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to December 31, 2000, have been included in this prospectus in reliance upon of
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Amisano Hanson, Chartered Accountants, 750 West Pender Street, Suite 604,
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Vancouver, B.C. Canada, V6C 2T7, telephone 604-689-0188, as experts in
accounting and auditing.
LEGAL MATTERS
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The law office of Michael J. Morrison, Chtd., 1495 Ridgeview Drive, Suite 220,
Reno, Nevada 89509, telephone 775-827-6300, has passed upon the validity of the
shares offered and certain other legal matters in connection with this
registration statement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the SEC, the indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against the liabilities, other than
the payment by us of expenses incurred or paid by our directors, officers or
controlling persons in the successful defense of any action, suit or
proceedings, is asserted by the director, officer, or controlling person in
connection with any securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to
court of appropriate jurisdiction the question whether the indemnification by us
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of the issues.
DESCRIPTION OF BUSINESS
We have commenced operations on the internet. We have filed and registered a
domain name and have developed a website with information services related to
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the mortgage industry. There can be no assurance that we will be able to develop
operations in this area, or any other area.
The discussion of our future business is management's best estimate and analysis
of the potential market, opportunities and difficulties that we face. There can
be no assurances that our estimates and analysis accurately reflect our
opportunities and potential for success. Competitive and economic forces make
forecasting of revenues and costs difficult and unpredictable.
BUSINESS DEVELOPMENT.
We were incorporated in the State of Nevada on June 17, 1996, for the purpose of
providing consulting services to businesses, and engaging in any other lawful
activity. We were inactive from inception until January 2000, when we commenced
our current operations.
PRINCIPAL PRODUCTS AND SERVICES.
We currently have a web site at the URL mortgagecommunicator.com. We have
registered a domain name, and have a hosting service for
mortgagecommunicator.com.
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Our web site provides information to visitors about different mortgages. The
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site offers both free information services, as well as "subscribed for" member
services. The free information services include: a daily mortgage commentary; a
listing of the top online mortgage companies; and the daily top news headlines
and stories for the mortgage and real estate industry.
The subscribed for services include: A glossary of terms and frequently asked
questions for the mortgage and real estate industry; mortgage calculators; an
interest rate survey empowering individuals to make a more informed mortgage
decision; and rate alert, a feature which allows the subscriber to set the rate
and points they want, then be notified when the rate and points reach the level
desired.
Visitors who wish to subscribe for the member services will pay an annual
subscription fee of $49.95 per year, which allows them to use the member
services on our site for one year from the subscription date. Each subscriber
will be granted a password for entry into the member services section of our
website. We plan to charge this fee to the subscriber's credit or debit card.
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We plan to process all orders by on line credit card or cyber cash systems. We
currently have developed a relationship to process online orders. In addition,
we have researched the needs of our planned website functions and the fees
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associated with the services needed to fulfill those needs.
Our site content will consist of information relating to the mortgage industry.
In the future, we may plan to provide interest rate information by geographic
area. A portion of the information available on our website may be available
free of charge at other locations; however, we intend to develop more expansive
information than that available free of charge.
Applying for a mortgage can be a confusing, tedious and intrusive experience for
homebuyers, especially first-time homebuyers. We plan to demystify the mortgage
loan process by providing more expansive information to familiarize persons
interested in mortgages.
We plan to establish our market through e-mail advertising. We have not
conducted any market testing to determine prospective advertisers on our
website. Visitors will be able to obtain information twenty-four hours per day,
seven days per week through the website. We also plan to sell advertising on our
website to banks, mortgage brokers, builders, land appraisers, surveyors,
inspectors, title companies and real estate brokers. We have not developed
criteria for pricing of the advertising space; however, we anticipate pricing
will be based upon advertisement size, web page placement, content requirements,
contract duration and other factors. We currently have no advertisers.
We plan to classify lenders' advertisements by loan products they each offer.
We plan to seek lender advertisers that have a variety of products including
full disclosure loans that require verification of income, assets, credit,
source of funds, employment and residence history, based solely on the
borrower's credit history and the loan to value ratios without any further
documentation. We also plan to attract advertisers who offer programs for
borrowers with previous credit blemishes and those offering sub-prime loans.
The process of applying for a mortgage may be an invasive and foreign process.
We believe we can take the mystique out of the process by familiarizing the
borrower with required steps to obtain a mortgage.
We face many challenges in the rapidly-evolving and changing internet
marketplace. These challenges include our:
o Need to further develop, maintain, and increase awareness of our web site;
o Need to attract and retain customers;
o Dependence on web site and transaction processing performance and reliability;
o Need to compete effectively;
o Need to establish ourselves as a participant in the evolving market for
mortgage information;
o Need to establish and develop relationships with entities related to and
involved in the mortgage industry in order to obtain advertising revenues for
our site.
Because significant u-front advertising, sales, and other expenses are required
to develop our web site, we anticipate that we may incur losses until revenues
are sufficient to cover our operating costs. We expect that our total additional
website development costs will be approximately $10,000, based on the following
estimated costs:
(1) $125 for domain name registration and listing;
(2) $7,500 for technical, presentational and other developmental costs;
(3) $1,000 for annual hosting service fees;
(4) $1,000 for annual site maintenance; and
(5) $375 for miscellaneous administrative expenses.
We will allocate advertising and promotional expenses as we develop operations
and research market demand for our services. Future losses are likely before our
operations will become profitable.
We expect to increase our operating expenses substantially as we:
o Further develop our website;
o Initiate our marketing activities and advertising efforts;
o Provide our customers with promotional benefits;
o Increase our general and administrative functions to support our developing
operations; and
o Develop enhanced technologies and features to improve our web site.
We will pay our increased operating expenses from our revenues, assuming they
are sufficient; otherwise, we plan to borrow funds from our management to pay
expenses, assuming management has sufficient resources to loan us monies, as and
when required. Otherwise, we will have to seek additional debt and/or equity
financing from third parties. Depending upon the extent that our development
costs outpace our revenues, our losses will accumulate more rapidly. In
addition, we may find that our development efforts are more expensive than we
currently anticipate.
Our success will be largely dependent upon our communications software and
hardware, which we acquire from third parties. Our systems will also be
vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. Failure of
information delivery can occur due to e-mail system, hosting site and/or local
system failures. Any of these events could adversely affect our business
operations and revenues. We have no insurance coverage on our property or
business interruption insurance coverage and we do not intend to obtain this
coverage in the near future. we may be vulnerable to computer viruses, physical
or electronic break-ins, deliberate attempts by third parties to exceed the
capacity of our systems leading to interruptions, delays, loss of data or
cessation of service. The occurrence of any of these events could cause our
current and prospective users to question our ability to keep their information
confidential.
DISTRIBUTION.
We plan to deliver our services through our website. As of the date of this
prospectus, we have an Internet service provider, web site developer and a basic
web site, all of which will be necessary to execute our plan of business.
NEW PRODUCTS OR SERVICES.
We currently have no new products or services announced or planned to be
announced to the public.
COMPETITIVE BUSINESS CONDITIONS.
The conventional method of obtaining mortgage information, for at least the past
fifty years, has been through personal contact with mortgage brokers or lenders,
commercial banks, savings and loan associations, credit unions and insurance
companies. The public has been reticent to try new vehicles or formats through
which they would receive mortgage information. Despite the convenience of
information offered over the Internet, including at our website, many consumers
will view conventional methods of obtaining this information more convenient and
offering better customer service. We believe conventional methods will continue
to be a prime source of competition, along with the many other internet based
mortgage information and service sites.
Several on-line mortgage service companies have already failed and are no longer
in business. The industry is extremely volatile and competitive.
We believe that acceptance of our services will depend on the following factors,
among others:
o the growth of the Internet as a medium for commerce generally, and as a market
for financial products and services in particular;
o development of the necessary Internet network infrastructure to support new
technologies and handle the demands placed upon the Internet;
o government regulation of the Internet;
o our ability to successfully and efficiently develop on-line information that
is attractive to a sufficiently large number of consumers and mortgage
brokers; and
o a change in the perception among many consumers and real estate service
providers that obtaining mortgage information on-line is less dependable than
obtaining mortgage information through more traditional methods.
Slower response times could adversely affect use of our website. We may be
unable to develop and introduce new services or service enhancements in a timely
manner. In addition, because the market for on-line mortgage information is in
the early stagtes of development, data pertaining to the volume of visitors to
other mortgage websites is difficult to predict. If the volume of website
visitors falls below expectations of financial analysts or the public, we may be
unable to obtain quality advertising contracts. The occurrence of any of these
factors could have a material adverse effect upon the very nature of our
business and the continuation of our website.
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Mortgage business depends upon the overall level of sales and refinancing of
residential real estate, as well as mortgage loan interest rates. The
residential real estate industry is highly cyclical. Shifts in the economy and
residential real estate values generally affect the number of home sales and new
housing starts. The demand for mortgage loan increases as the number of home
sales increases. Declining interest rates generally increase mortgage loan
financing activity, because homeowners refinance existing mortgage loans to
obtain favorable interest rates. Rising interest rates, in contrast, discourage
refinancing activities and generally reduce the number of home sales that occur.
Any fluctuation in interest rates or an adverse change in residential real
estate or general economic conditions could cause a serious decline in
visitation to our website, memberships, and the retention rate of our previously
enrolled members. we may be unable to develop our business if higher interest
rate and decreased home sales occur.
The market for Internet services is recent and rapidly changing. Market demand
and acceptance for recently introduced Internet services is uncertain and
difficult to predict. The success of our website will depend upon the adoption
of the Internet by a broad base of consumers and vendors. There can be no
assurance of widespread acceptance of Internet commerce in general, including
Internet mortgage information and services. Companies now offering services
similar to ours have relied on consumers and vendors who use traditional means
of commerce. Consumers and vendors must accept and utilize novel ways of
conducting business and exchanging information if our business is to be
successful.
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COMPETITORS
We will face intense competition in all aspects of the mortgage business. We
will compete with financial intermediaries, commercial banks, savings
associations, credit unions, loan brokers and insurance companies that also
provide mortgage information and services to the public. These companies may
offer convenience and customer service superior to that offered by our company.
Many sites offer free information and have financial resources far greater than
ours, thus giving them a distinct advantage over us because they can afford to
offer free information, as they have other sources of revenues and we have to
rely only on subscriber fees. In addition, these companies may have better
marketing and distribution channels. There can be no assurance that we will be
able to compete effectively in this highly competitive industry, which could
have a material adverse impact upon market acceptance of our website and the
information we wish to disseminate.
Our main, existing and potential competitors for real estate professionals and
service providers, homebuyers, homeowners, sellers and renters and related
content include:
o Web sites offering real estate listings together with other related services,
such as Apartments.com, Microsoft's HomeAdvisor, NewHomeNetwork.com, Move.com
and RentNet; CyberHomes, HomeSeekers, Homes.com, Homestore.com.
o Web sites offering real estate and mortgage related content and
services such as mortgage calculators and information on the home
buying, selling and renting processes, such as IndyMac Bank Home
Lending, LoansDirect, Mortgagebot.com, PHH Mortgage Services,
Countrywide Home Loans, Infoloan.com, Quicken Loans, East West
Mortgage, Washington Mutual Mortgage, E-Loan, Alliance Mortgage,
FiNet.com, MortgageIT.com, First Union, GMAC Mortgage, ditech.com,
SFNB, Nexstar, Regions Mortgage, LoanSurfer.com
o General-purpose consumer web sites, such as AltaVista and Yahoo! that also
offer real estate-related content; and
o Traditional print media such as newspapers and magazines.
OUR COMPETITIVE POSITION
We believe competition takes place on many levels, including pricing,
convenience in obtaining mortgage information and loans, specialization, breadth
of product offerings and lending sources. Our intent is to brand ourself as one
of the leading online interactive mortgage/financing magazine offering an all in
one "one stop mortgage shop" for consumers interested in information on
financing or refinancing their home regionally and nationally. We intend to
serve as a content aggregator for related information on the Internet, an
unbiased comprehensive information source, as well as marketplace and
facilitator for mortgage financings, loans and other services related to the
home real estate industry.
Our objective is to provide a service that helps the consumer cut through the
often perceived clutter, confusion and noise of the marketplace and help them
confidently and quickly find a loan or information that meets their goals and
fits their lifestyle.
We will attempt to brand mortgagecommunicator.com as the consumer's partner in
his or her search for mortgages and related information. We will attempt to
provide consumers with a one stop shopping destination where they can access
information and decision support tools, such as mortgage calculators and finance
worksheets, information concerning the home buying and selling process and
features that aid users in evaluating the home mortgage decision to assist them
in deciding to buy or finance a home. By attempting to provide specialized
information services and tools for consumers, we will seek to differentiate
ourselves from other competing service offerings. However, we have no assurance
we will be successful in differentiating ourselves from our competitors, or that
we will be successful in competing in the marketplace for our services.
By offering a specialized mortgage information service we will be targeting
those consumers that are looking for such. We believe that consumers will pay
for a service that is specialized, unbiased, and comprehensive and a service
that helps them cut through the perceived clutter, confusion and noise of the
marketplace and help them confidently and quickly find a loan or information
that meets their goals and fits their lifestyle.
We expect that our operations will depend on a number of third parties over
which we will have limited control. Specifically, we do not plan to own an
Internet gateway, but instead we will rely on a third-party, independent and
unrelated Internet Service Provider to host our website. We may experience
interruptions in our website connection and our telecommunications access due to
our reliance upon third parties. This could result in loss of business and
revenues. We anticipate that we will use software that is dependent on an
operating system, database and server software developed and produced by and
licensed by independent third parties. we may discover errors and defects in
this third party software and rely on the third parties to correct these errors
and defects in a timely manner. Accordingly, continuous or prolonged
interruptions in our website connection or in our telecommunications access
would have an adverse effect upon consumer perception of our ability to provide
information in a timely and efficient manner.
A significant barrier to entry in the area of electronic commerce and
communications is the secure transmission of confidential information over
public networks. We will rely on encryption and authentication technology
licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information. There can be no
assurance that advances in computer capabilities, new discoveries in the field
of cryptography or other events or developments will not result in a compromise
or breach of the algorithms we may use to protect customer transaction data. If
any compromise of our security were to occur, potential users may lack
confidence in our site and our ability to protect their commerce information,
such as credit card information, billing address, etc. Furthermore, we may be
subject to damage claims from our users or others.
A party who is able to circumvent our security measures could misappropriate
proprietary information. We may be required to expend significant capital and
other resources to protect against security breaches or to alleviate problems
caused by breaches. Concerns over the security of Internet transactions and the
privacy of users may also inhibit the growth of the Internet generally, and the
World Wide Web in particular, especially as a means of conducting commercial
transactions. To the extent that our future activities or those of third party
contractors whom we may use involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could expose us to a
risk of loss or litigation. There can be no assurance that we will be able to
implement security measures that will prevent security breaches.
SOURCES AND AVAILABILITY OF RAW MATERIALS.
As of the date of this prospectus, we have no need for raw materials or
suppliers.
CUSTOMER BASE.
As of the date of this prospectus, we have no customers. If we are able to
establish a customer base in the future, we do not anticipate we will depend on
one or a few major customers. There can be no assurance that this assumption is
correct.
INTELLECTUAL PROPERTY.
We do not have any trademarks, patents, licenses, royalty agreements, or other
proprietary interests, except for the web domain name mortgagecommunicator.com.
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GOVERNMENTAL REGULATION ISSUES.
We are not now affected by direct government regulation. However, we are
affected by laws, rules and regulations directly applicable to access to or
commerce on the Internet generally. However, due to increasing usage of the
Internet, a number of laws and regulations may be adopted relating to the
Internet, covering user privacy, pricing, and characteristics and quality of
products and services. Furthermore, the growth and development for Internet
commerce may prompt more stringent consumer protection laws imposing additional
burdens on those companies conducting business over the Internet. The adoption
of any additional laws or regulations may decrease the growth of the Internet,
which, in turn, could decrease the demand for Internet services and increase the
cost of doing business on the Internet. These factors may have an adverse effect
on our business, results of operations and financial condition.
Moreover, the interpretation of sales tax, libel and personal privacy laws
applied to Internet commerce is uncertain and unresolved. We may be required to
qualify to do business as a foreign corporation in each state or foreign
country. Our failure to qualify as a foreign corporation in a jurisdiction where
we are required to do so could subject us to taxes and penalties. Any existing
or new legislation or regulation, including state sales tax, or the application
of laws or regulations from jurisdictions whose laws do not currently apply to
our business, could have a material adverse effect on our business, results of
operations and financial condition.
RESEARCH AND DEVELOPMENT.
To date, we have not undergone any research and development, except fthat
required to put up our website.
ENVIRONMENTAL LAW COMPLIANCE.
To the extent which environmental compliance may be necessary, we do not
anticipate any significant compliance expense.
EMPLOYEES.
We currently have one employee, James Charuk, our president and a director, who
works for our corporation part-time. We have no employment contracts and our
employee is not a union member or affected by labor contracts.
REPORTS TO SECURITY HOLDERS.
After the effective date of this registration statement, we will be a reporting
company under the requirements of the Exchange Act and will file quarterly,
annual and other reports with the Securities and Exchange Commission. Our annual
report will contain the required audited financial statements. We are not
required to deliver an annual report to security holders and will not
voluntarily deliver a copy of the annual report to the security holders. The
reports and other information filed by us will be available for inspection and
copying at the public reference facilities of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549.
Copies of the material may be obtained by mail from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission
maintains a World Wide Website on the Internet at http://www.sec.gov that
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contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
PLAN OF OPERATIONS
The discussion contained in this prospectus contains "FORWARD-LOOKING
STATEMENTS" that involve risk and uncertainties. These statements may be
identified by the use of terminology such as "BELIEVES," "EXPECTS," "MAY,"
"WILL," "SHOULD" or "ANTICIPATES" or expressing this terminology negatively or
similar expressions or by discussions of strategy. The cautionary statements
made in this prospectus are applicable to all related forward-looking statements
wherever they appear in this prospectus. Our actual results could differ
materially from those discussed in this prospectus. Important factors that could
cause or contribute to these differences include those discussed under the
caption entitled "RISK FACTORS," as well as those discussed elsewhere in this
registration statement.
We are a development stage company without operations or revenues. We are unable
to satisfy cash requirements without management's financial support or other
funding. Our management and certain investors have made $50,100 of capital
contributions to our business. We anticipate, but have no assurance, that we
will meet our cash requirements for the foreseeable future through the financial
support of our management. Management's capital contributions will be
accomplished through interest bearing promissory notes between our company and
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management. No promissory notes are currently in effect. We have not determined
the amount of funds that will be necessary for management to contribute at this
time. Nor is there any assurance our management will have funds available to
loan us as and when we require funds. In this event, we will be required to seek
loans and/or equity funding from third parties, and there is no assurance we
will be able to do so.
Over the next twelve months, --we plan to further develop our web site to
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provide mortgage related information. Specifically, during the next 12 months,
we anticipate focusing our efforts on the following specific areas of
operations:
1. Internet marketing
2. Maintaining and enhancing content of website
3. Subscriber payment credit card processing
We will require additional funds to further develop our website. Although
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we plan to raise additional funds, we have not yet determined how, where or when
we will obtain these funds. There is no assurance that we will be able to obtain
financing for our business development. If adequate funds are not available to
us, we believe that our business development will be adversely affected.
The cash available for operations after paying offering expenses will be in the
sum of $3,211.53. This cash will be used to fund operations until approximately
until the end of May 2001. The Company's overhead and operating expenses, are
expected to be as follows:
1. Internet Marketing - $400/month
2. Subscriber Credit Card Processing - $200 set-up; $100/month
3. Web Site Maintenance- $200/month
4. Payment for web site content - $725/month
5. Office/phone/fax/internet - Free (provided by eRealty.com)
During the period prior to June 2001, the Company will seek additional funding
in the form of equity or debt, in the amount of approximately $12,000.00, to
fund operations for the balance of its first year ending February 2002.
Our future capital
requirements will also depend on one or more of the following factors:
o market acceptance of our services;
o the extent and progress of our research and development programs;
o competing technological and market developments; and
o the costs of commercializing our services.
There can be no assurance that funding will be available on favorable terms to
permit successful commercialization of our website or be successful in our.
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business operations.
In addition, we have no credit facility or other committed sources of capital.
We may be unable to establish credit arrangements on satisfactory terms, if at
all. If capital resources are insufficient to meet our future capital
requirements, we may have to raise additional funds to continue development of
our website. There can be no assurance that the funds will be available on
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favorable terms, if at all.
To the extent that additional capital is raised through the sale of equity
and/or convertible debt securities, the issuance of the securities will likely
result in dilution to our shareholders.
Until such time as our website is fully developed, we do not expect to have any
significant revenues from our operations. We anticipate that if our website
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becomes fully operational, we will generate revenues from the sale of
subscriptions to the website and though the sale of advertisements. There is no
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assurance that we will be successful in selling subscriptions or advertising for
our website. We have no other sources of revenue. Therefore,, if we are
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not successful in this regard, we will be unable to achieve revenues under our
current business plan.
If our company or its management receives proceeds from the sales of the
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securities by the selling security shareholders, which neither the company nor
its management has any intent to do, those persons may have conducted an illegal
distribution of our securities and may be deemed underwriters. Accordingly, they
will have liability for any material misrepresentations or omissions in this
document and otherwise in the offer and sale of securities.
We do not anticipate significant research and development expenses over the next
twelve months. We do not expect to purchase or sell any plant and significant
equipment or make any significant changes in the number of employees over the
next twelve months.
The principal uses of capital received by us to date ($50,100), are as follows:
Auditors $ 4,719.60
Legal $ 836.70
Information Service contract $ 2,700.00
Business Plan development $24,481.65
Website design $ 2,000.00
Other consultants $ 1,246.00
Marketing $10,904.52
Cash on hand $ 3,211.53
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TOTAL $50,100.00
DESCRIPTION OF PROPERTY
Our executive offices are located at 3503 Cedar Locust, Sugarland, TX 77479,
telephone (713) 265-8660, where we share space in the offices our President,
James Charuk. The space is approximately 400 square feet total, of which we
- -------------
occupy a small portion without charge. We feel that this space is adequate for
our needs at this time, and we feel that we will be able to locate adequate
space in the future, if needed, on commercially reasonable terms.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the sale of shares to our officers and directors, we have not entered
--------
into any transactions with our officers, directors, persons nominated for these
positions, beneficial owners of 5% or more of our common stock, or family
members of these persons. We are not a subsidiary of any other company. Our
President, James Charuk, and our founder and Director, Philip Herr, were our
only promoters. Mr. Herr provided organizational services and cash in the sum of
$100.00 for his 5,000,000 shares of Common Stock. Mr. Charuk paid the cash sum
of $250.00 for his 25,000 shares of Common Stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information.
Our common stock is not traded on any exchange. We plan to eventually seek
listing on the OTC Bulletin Board, once our registration statement has cleared
comments of the Securities and Exchange Commission, and the N.A.S.D. We cannot
guarantee that we will obtain a listing. There is no trading activity in our
securities, and there can be no assurance that a regular trading market for our
common stock will ever be developed.
A market maker sponsoring a company's securities is required to obtain a listing
of the securities on any of the public trading markets, including the
Over-the-Counter Bulletin Board ("OTCBB"). If we are unable to obtain a market
maker for our securities, we will be unable to develop a trading market for our
common stock. We may be unable to locate a market maker that will agree to
sponsor our securities. Even if we do locate a market maker, there is no
assurance that our securities will be able to meet the requirements for a
quotation or that the securities will be accepted for listing on the OTCBB.
We intend to apply for listing of the securities on the OTCBB, but there can be
no assurance that we will be able to obtain this listing. The OTCBB securities
are not listed and traded on the floor of an organized national or regional
stock exchanges. Instead, OTCBB securities transactions are conducted through a
telephone and computer network connecting dealers in stocks. Over-the-counter
stocks are traditionally smaller companies that do not meet the financial and
other listing requirements of a regional or national stock exchange.
However, broker-dealers may be discouraged from effecting transactions in our
Shares because they will be considered penny stocks and will be subject to the
penny stock rules.
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of
1934, as amended, impose sales practice and disclosure requirements on NASD
brokers-dealers who make a market in a "penny stock." A penny stock generally
includes any non-NASDAQ equity security that has a market price of less than
$5.00 per share. Assuming we get our shares listed for trading, purchases and
sales of our shares are expected to be generally faciliated by NASD
broker-dealers who will act as market makers for our shares. The additional
sales practice and disclosure requirements imposed upon brokers-dealers may
discourage broker-dealers from effecting transactions in our shares, which could
severely limit the market liquidity of the shares and impede the sale of our
shares in the secondary market, assuming one develops.
Under the penny stock regulations, a broker-dealer selling penny stock to
anyone other than an established customer or "accredited investor" (generally,
an individual with net worth in excess of $1,000,000 or an annual income
exceeding $200,000, or $300,000 together with his or her spouse) must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transactions is otherwise exempt.
In addition, the penny stock regulations require the broker-dealer to
deliver, prior to any transaction involving a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock market, unless the
broker-dealer or the transaction is otherwise exempt. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customer's account and
information with respect to the limited market in penny stocks.
As of of December 31, 2000, there were approximately 60 holders of record of our
common stock.
EXECUTIVE COMPENSATION
No executive compensation has been paid since our inception.
FINANCIAL STATEMENTS
SMI PRODUCTS, INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
December 31, 2000, 1999, 1998, 1997 and 1996
(Stated in US Dollars)
--------------------
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, C.A. CHARTERED ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Stockholders,
SMI Products, Inc.
We have audited the accompanying balance sheets of SMI Products, Inc. (A
Development Stage Enterprise) as at December 31, 2000, 1999, 1998, 1997 and 1996
and the statements of operations, stockholders' equity and cash flows for each
of the years in the four year period ended December 31, 2000, the seven months
ended December 31, 1996 and for the period from inception, June 17, 1996 to
December 31, 2000. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of SMI Products, Inc. as at December 31, 2000,
1999, 1998, 1997 and 1996 and the results of its operations and cash flows for
each of the years in the four year period ended December 31, 2000, the seven
months ended December 31, 1996 and for the period from inception, June 17, 1996
to December 31, 2000, in accordance with generally accepted accounting
principles in the United States.
The accompanying consolidated financial statements referred to above have been
prepared assuming that the company will continue as a going concern. As
discussed in Note 1 to the financial statements, the company is in the
development stage, and has no established source of revenue and is dependent on
its ability to raise capital from shareholders or other sources to sustain
operations. These factors, along with other matters as set forth in Note 1,
raise substantial doubt that the company will be able to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Vancouver, Canada "AMISANO HANSON"
January 2, 2001 Chartered Accountants
Suite 604 - 750 West Pender Street Telephone: (604) 689-0188
Vancouver, BC, Canada Facsimile: (604) 689-9773
SMI PRODUCTS, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 2000, 1999, 1998, 1997 and 1996
(Stated in US Dollars)
--------------------
ASSETS
------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Current
Cash $ 13,178 $ - $ - $ - $ -
Advance receivable - Note 3 1,000 - - - -
Organization costs - Note 4 83 283 483 683 883
------------------------------------------------------------------------
$ 14,261 $ 283 $ 483 $ 683 $ 883
========================================================================
LIABILITIES
-----------
Current
Due to related party - Note 5 $ 900 $ 900 $ 900 $ 900 $ 900
------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
--------------------
Common stock - Note 6 2,552 1 1 1 1
Additional paid-in capital 48,048 99 99 99 99
Deficit accumulated during the
development stage (37,239) (717) (517) (317) (117)
------------------------------------------------------------------------
13,361 (617) (417) (217) (17)
------------------------------------------------------------------------
$ 14,261 $ 283 $ 483 $ 683 $ 883
========================================================================
Nature and Continuance of Operations - Note 1
APPROVED BY THE DIRECTORS:
"James Charuk" "Cynthia Carter"
, Director , Director
- -------------------------------------------- --------------------------------------------
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
for the years ended December 31, 2000, 1999, 1998, 1997
and the seven months ended December 31, 1996
and June 17, 1996 (Date of Inception) to December 31, 2000
(Stated in US Dollars)
--------------------
June 17, 1996
7 months (Date of
ended Inception) to
Years ended December 31, December 31, December 31,
------------------------------------------ ------------ --------------
2000 1999 1998 1997 1996 2000
---- ---- ---- ---- ---- ----
Expenses
Amortization $ 200 $ 200 $ 200 $ 200 $ 117 $ 917
Audit fees 2,000 - - - - 2,000
Business plan 10,114 - - - - 10,114
Consulting fees 11,776 - - - - 11,776
Marketing 12,432 - - - - 12,432
-----------------------------------------------------------------------
Net loss $ 36,522 $ 200 $ 200 $ 200 $ 117 $37,239
=======================================================================
Net loss per share $ 0.01 $ 0.20 $ 0.20 $ 0.20 $ 0.12
==========================================================
Weighted average shares outstanding 6,879,334 1,000 1,000 1,000 1,000
==========================================================
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
from the period June 17, 1996 (Date of Inception) to December 31, 2000
(Stated in US Dollars)
Deficit
Accumulated
During the
Number Contributed Development
of Shares Amount Surplus Stage Total
--------- ------ ----------- ----------- -----
Issued for services - at $0.10 1,000 $ 1 $ 99 $ - $ 100
Net loss for the period - - - (117) (117)
-----------------------------------------------------------------------------
Balance, December 31, 1996 1,000 1 99 (117) ( 17)
Net loss for the year (200) (200)
-----------------------------------------------------------------------------
Balance, December 31, 1997 1,000 1 99 (317) (217)
Net loss for the year (200) (200)
-----------------------------------------------------------------------------
Balance, December 31, 1998 1,000 1 99 (517) (417)
Net loss for the year (200) (200)
-----------------------------------------------------------------------------
Balance, December 31, 1999 1,000 1 99 (717) (617)
Forward split, 5,000 for 1 4,999,000 - - - -
-----------------------------------------------------------------------------
5,000,000 1 99 (717) (617)
Issued for cash - at $0.01 2,500,000 2,500 22,500 - 25,000
- at $0.50 51,000 51 25,449 - 25,500
Net loss for the year - - - (36,522) (36,522)
-----------------------------------------------------------------------------
Balance, December 31, 2000 7,551,000 $2,552 $48,048 $(37,239) $13,361
=============================================================================
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
STATEMENTS CASH FLOWS
for the years ended December 31, 2000, 1999, 1998, 1997
and the seven months ended December 31, 1996
and June 17, 1996 (Date of Inception) to December 31, 2000
(Stated in US Dollars)
--------------------
June 17, 1996
7 months (Date of
ended Inception) to
Years ended December 31, December 31, December 31,
------------------------------------------ ------------ --------------
2000 1999 1998 1997 1996 2000
---- ---- ---- ---- ---- ----
Cash flows used in operating activities
Net loss $(36,552) $(200) $(200) $(200) $ (117) $(37,239)
Adjustment to reconcile net loss to net cash
used in operations
Amortization 200 200 200 200 117 917
Advance receivable (1,000) - - - - (1,000)
----------------------------------------------------------------------
Net cash used in operating activities (37,322) - - - - (37,322)
----------------------------------------------------------------------
Cash flow used in investing activity
Organization costs - - - - (1,000) (1,000)
----------------------------------------------------------------------
Net cash used in investing activity - - - - (1,000) (1,000)
----------------------------------------------------------------------
Cash flows provided by financing activity
Common shares issued for cash 50,500 - - - 100 50,600
Due to related party - - - - 900 900
----------------------------------------------------------------------
Net cash provided by financing activity 50,500 - - - 1,000 51,500
----------------------------------------------------------------------
Net increase in cash 13,178 - - - - 13,178
Cash, beginning of period - - - - - -
----------------------------------------------------------------------
Cash, end of period $ 13,178 $ - $ - $ - $ - $ 13,178
======================================================================
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2000, 1999, 1998, 1997 and 1996
(Stated in US Dollars)
--------------------
Note 1 Nature and Continuance of Operations
------------------------------------
The company is in the development stage and is engaged in the
business of internet real estate mortgage services.
These financial statements have been prepared on a going concern
basis. The company has accumulated losses of $37,239 since
inception. Its ability to continue as a going concern is dependent
upon the ability of the company to generate profitable operations
in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they come due. The outcome of these matters cannot
be predicted, with any certainty, at this time. Management plans
to continue to provide for its capital needs during the year ended
December 31, 2001 by the continued development of its internet
real estate mortgage services. In addition, the company's capital
requirements during the year ended December 31, 2001 will be
supplemented by issuing equity securities. These financial
statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary
should the company be unable to continue as a going concern.
Note 2 Summary of Significant Accounting Principles
--------------------------------------------
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in the
United States. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of
financial statements for a period necessarily involved the use of
estimates which have been made using careful judgement. Actual
results may differ from these estimates.
The financial statements, in management's opinion, have been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:
Organization
------------
The company was incorporated in the State of Nevada on June 17,
1996.
Development Stage Company
-------------------------
The company is a development stage company as defined in
Statement of Financial Accounting Standards No. 7.
Organization Costs
------------------
Organization costs are recorded at cost. The company provides for
amortization using the straight-line method over five years.
SMI PRODUCTS, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2000, 1999, 1998, 1997 and 1996-Page 2
(Stated in US Dollars)
- --------------------
Note 2 Summary of Significant Accounting Principles - (cont'd)
--------------------------------------------
Income Taxes
------------
The company uses the liability method of accounting for income
taxes pursuant to Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes".
Basic Loss per Share
--------------------
The company reports basic loss per share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share". Basic loss per share is computed using the weighted
average number of shares outstanding during the years. Diluted
loss per share has not been provided as it would be antidilutive.
Fair Market Value of Financial Instruments
------------------------------------------
The carrying values of cash and advance receivable approximate
fair value because of the short maturity of those instruments.
Note 3 Advance Receivable
------------------
The advance receivable, from a non-affiliated party, is unsecured,
non-interest bearing with no specific terms for repayment. This
advance was provided for future expenses to be incurred on behalf
of the company.
Subsequent to December 31, 2000, $912 was utilized for travel
($648) and legal ($264).
Note 4 Organization Costs
------------------
Accumulated Net Carrying Amounts
Cost Amortization 2000 1999 1998 1997 1996
---- ------------ ---- ---- ---- ---- ----
Incorporation fees $ 1,000 $917 $83 $283 $483 $683 $883
======== ==== === ==== ==== ==== ====
Note 5 Due to Related Party
--------------------
The amount due to related party is due to a director of the
company and is unsecured, non-interest bearing and has no specific
terms for repayment.
SMI PRODUCTS, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2000, 1999, 1998, 1997 and 1996-Page 3
(Stated in US Dollars)
- --------------------
Note 6 Capital Stock
-------------
Authorized:
25,000,000 common shares with a par value of $0.001.
Note 7 Deferred Tax Assets
-------------------
The Financial Accounting Standards Board issued Statement Number
109 in Accounting for Income Taxes ("FAS 109") which is effective
for fiscal years beginning after December 15, 1992. FAS 109
requires the use of the asset and liability method of accounting
of income taxes. Under the assets and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and
liabilities and loss carryforwards and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.
The following table summarizes the significant components of the
company's deferred tax assets:
Total
-----
Deferred Tax Assets
Net operating loss carryforward $ 37,239
========
Gross deferred tax assets $ 37,239
Valuation allowance for deferred tax asset (37,239)
--------
$ -
========
The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards which is likely
to be realized from future operations. The company has chosen to
provide an allowance of 100% against all available income tax loss
carryforwards, regardless of their time of expiry.
Note 8 Income Taxes
------------
No provision for income taxes has been provided in these financial
statements due to the net loss. At December 31, 2000, the company
has net operating loss carryforwards, which expire commencing in
2016 totalling approximately $37,239. The potential tax benefit of
these losses, if any, has not been recorded in the financial
statements.
SMI PRODUCTS, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2000, 1999, 1998, 1997 and 1996-Page 4
(Stated in US Dollars)
- --------------------
Note 9 New Accounting Standard
-----------------------
In March 1995, Statement of Financial Accounting Standards No. 12
("SFAS-12") "Accounting for Impairment of long-lived assets and
for long-lived assets to be disposed of" was issued. Certain
long-lived assets held by the company must be reviewed for
impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable.
Accordingly, the impairment loss is recognized in the period it is
determined. The company has adopted these standards and there was
no material effect on its financial position or results of
operations of the company from its adoption.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The accounting firm of Amisano Hanson, Chartered Accountants audited our
financial statements. Since inception, we have had no changes in or
disagreements with our accountants.
DEALER PROSPECTUS DELIVERY REQUIREMENT
Until __________________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation and By laws provide that, to the fullest extent
permitted by law, none of our directors or officers shall be personally liable
to us or our shareholders for damages for breach of any duty owed to our
shareholders or us. Nevada law provides that a director shall have no personal
liability for any statement, vote, decision or failure to act, regarding
corporate management or policy by a director, unless the director breached or
failed to perform the duties of a director. A company may also protect its
officers and directors from expenses associated with litigation arising from or
related to their duties, except for violations of criminal law, transactions
involving improper benefit or willful misconduct. Our By-laws contain provisions
-------
to indemnify the officers and directors of ours against any contingency or peril
as may be determined to be in our best interest and in conjunction therewith, to
procure, at our expense, policies of insurance.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by our corporation in
connection with the issuance and distribution of the securities being offered by
this prospectus. Items marked with an asterisk (*) represent estimated expenses.
We have agreed to pay all the costs and expenses of this offering. Selling
Security Holders will pay no offering expenses.
ITEM EXPENSE
---- -------
SEC Registration Fee $ 6.64
Legal Fees and Expenses $ 7,500.00
Accounting Fees and Expenses $ 1,500.00
Miscellaneous* $ 993.36
===========
Total $ 10,000.00
RECENT SALES OF UNREGISTERED SECURITIES
>From June 1996 through December 2000, we issued 7,551,000 shares of our Common
Stock, par value, $.001 per share, under exemptions from registration provided
in Regulation S promulgated under the Securities Act and/or Section 4(2) of the
Securities Act of 1933, as amended. No underwriters were used in these
transactions, and no fees or commissions were paid to anyone.
In June 1996, we issued 1,000 shares of our common stock to our founder, Philip
Herr, an "accredited" investor, for $100.00 cash and his duties as the founder
of the company. This transaction did not involve a public offering and was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
Subsequently, the company approved a forward split of the total 1,000
outstanding shares on a 5,000 for 1 basis, resulting in a total of 5,000,000
shares outstanding.
In February 2000, we issued 2,500,000 shares of our common stock at a price of
$.01 per share, or aggregate cash proceeds of $25,000.00. This transaction
involved 9 foreign purchasers and was exempt from registration pursuant to Regu-
lation S of the Securities Act of 1933, based on offshore transactions involving
all non-U.S. persons in sales that took place entirely outside the U.S. These
were Category 3 transactions under Rule 903, and satisfied the provisions of
Rule 903 (i) and (iii) by: implementing offering restrictions; making the sale
only to non-U.S. persons, who certified same; restricting the resale to
transactions done only in accordance with the provisions of Rules 901-905, and
Preliminary Notes; imposing a restrictive legend on the securities; and the
Company agreeing by contract not to register any transfer not done pursuant to
Regulation S.
This February 2000 transaction also involved 2 persons in the U.S., but did not
involve a public offering and was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933. Both of these investors were "accredited"
investors.
In October 2000, we issued 51,000 shares of our common stock for $.50 per share,
or aggregate cash proceeds of $25,500. This transaction involved 50 purchasers
and was exempt from registration pursuant to Regulation S of the Securities Act
of 1933, based on offshore transactions involving all non-U.S. persons in sales
that took place entirely outside the U.S. These were Category 3 transactions
under Rule 903, and satisfied the provisions of Rule 903 (i) and (iii) by:
implementing offering restrictions; making the sale only to non-U.S. persons,
who certified same; restricting the resale to transactions done only in
accordance with the provisions of Rules 901-905, and Preliminary Notes; imposing
a restrictive legend on the securities; and the Company agreeing by contract not
to register any transfer not done pursuant to Regulation S.
EXHIBITS
Exhibit Number Exhibit Description
- -------------- -------------------
3.1 Articles of Incorporation*
3.2 Bylaws*
4 Instrument Defining the Right of Holders - Share
Certificate*
5 Legal Opinion*
24 Consents of Experts (Amended)
* Previously filed with original SB-2, filed February 7, 2001.
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against these 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 the
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether this indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
a. Include any prospectus required by Section 10(a)(3)of the Securities Act
of 1933;
b. Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
c. Include any additional or changed material information on the
plan of distribution.
2. That, for determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bonafide offering.
3. To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
------------
4. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission the
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
5. In the event that a claim for indemnification against the liabilities, other
than the payment by the Registrant of expenses incurred and paid by a direc-
tor, officer or controlling person of the Registrant in the successfuldefense
of any action, suit or proceeding, is asserted by the director, officer or
controlling person in connection with the securities being registered by this
registration statement, will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the issue.
6. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
7. For the purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing of Form SB-2 and authorized this registration
statement to be singed on its behalf by the undersigned, in the City of Houston,
State of Texas, on this 30th day of April, 2001.
SMI Products, Inc.
By: /s/ JAMES CHARUK
----------------------------------
James Charuk, President
Date: April 30, 2001
In accordance with the requirements of the Securities act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/ JAMES CHARUK /s/ CYNTHIA CARTER
- --------------------------- ---------------------------------
James Charuk Cynthia Carter
Title: President & Director Title: Secretary, & Chief Executive
Officer
Treasurer, Chief Accounting
& Financial Officer &
Director
Date: April 30, 2001 Date: April 30, 2001