BIOETHICS, LTD. Item 2.01. Completion of Acquisition of Assets.4
THE CONTRIBUTION AGREEMENT AND RELATED TRANSACTIONS4
DESCRIPTION OF BUSINESS6 DESCRIPTION OF PROPERTIES8 RISK FACTORS8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT15
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS16
EXECUTIVE COMPENSATION17
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS18
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS18
DESCRIPTION OF SECURITIES19
LEGAL PROCEEDINGS21
INDEMNIFICATION OF DIRECTORS AND OFFICERS21
Item 5.02.Departure of Directors or Certain Officers; Election of Directors; Appointment
of Certain Officers; Compensatory Arrangements of Certain Officers.22
Item 9.01.Financial Statements and Exhibits.23
--------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K ("Report") contains forward-looking statements
in the sections captioned "Description of Business," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" and elsewhere. Any and all statements contained in this Report that
are not statements of historical fact may be deemed forward-looking statements.
Terms such as "may," "might," "would," "should," "could," "project," "estimate,"
"pro-forma," "predict," "potential," "strategy," "anticipate," "attempt,"
"develop," "plan," "help," "believe," "continue," "intend," "expect," "future,"
and terms of similar import (including the negative of any of these terms) may
identify forward-looking statements. However, not all forward-looking statements
may contain one or more of these identifying terms. Forward-looking statements
in this Report may include, without limitation, statements regarding the plans
and objectives of management for future operations, projections of income or
loss, earnings or loss per share, capital expenditures, dividends, capital
structure or other financial items, our future financial performance, including
any such statement contained in a discussion and analysis of financial condition
by management or in the results of operations included pursuant to the rules and
regulations of the
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:
?The implementation of our business model and strategic plans for our business;
?Estimates of our future revenue, expenses, capital requirements and our need for financing;
?Our financial performance;
?Current and future government regulations;
?The real estate market;
?Developments relating to our competitors; and
?Other risks and uncertainties, including those listed under the section titled "Risk Factors."
Readers are cautioned not to place undue reliance on forward-looking statements
because of the risks and uncertainties related to them and to the risk factors.
We disclaim any obligation to update the forward-looking statements contained in
this Report to reflect any new information or future events or circumstances or
otherwise, except as required by law. Readers should read this Report in
conjunction with the discussion under the caption "Risk Factors," our financial
statements and the related notes thereto in this Report, and other documents
which we may file from time to time with the
--------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------
EXPLANATORY NOTE
Item 1.01. Entry into a Material Definitive Agreement
The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets
THE CONTRIBUTION AGREEMENT AND RELATED TRANSACTIONS
This section describes the material provisions of the Contribution Agreement (as defined below) but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of the Contribution and Subscription Agreement, a copy of which is attached hereto as Exhibit 2.1. Unless otherwise defined herein, the capitalized terms used below are defined in the Contribution and Subscription Agreement.
The Contribution Agreement
On
Property descriptions for the parcels held in fee simple are disclosed on
Schedule 1 to the Contribution Agreement. Immediately prior to First Federal
entering into the Contribution Agreement the Company, First Federal entered into
a contribution agreement with its affiliate
As part of the Contribution Agreement, First Federal executed a deed transferring the real property Assets from First Federal to the Company. Pursuant to the Contribution Agreement, First Federal contributed, assigned and transferred to the Company the Assets in exchange for the issuance to First Federal of 220,000,000 shares of common stock of the Company (the "Bioethics Common Stock") representing 95.2% of the issued and outstanding shares of the Company (the "Contribution Consideration")
The assets transferred to the Company as part of the Contribution Agreement include:
Transfer of Real Property
--------------------------------------------------------------------------------
4--------------------------------------------------------------------------------
approximately
Rights to Purchase Real Property
Rights to Promissory Notes Receivable
As used in this Report, unless otherwise stated or the context clearly indicates otherwise, the terms "Registrant," "we," "us" and "our" refer to the Company, giving effect to the Asset Transfer.
This Report contains summaries of the material terms of various agreements executed in connection with the Asset Transfer described herein. The summaries of these agreements are subject to, and are qualified in their entirety by reference to, these agreements, which are filed as exhibits hereto and incorporated herein by reference.
Prior to the Asset Transfer, we were a "shell company" as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a result of the Asset Transfer, we have ceased to be a "shell company." The information contained in this Report constitutes the information necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933, as amended ("Securities Act").
The Asset Transfer will be treated as a "transfer of net assets between entities under common control" for financial accounting purposes. First Federal, the seller of the properties, had control of the properties before selling to the Company, and as a result of the issuance of a majority block of shares in exchange for the properties, First Federal maintains control of the properties subsequent to the transaction. As such, First Federal purchased a shell company, and therefore is basically moving the assets from its own books over to the Company's books. In this situation, the properties and associated rights to the properties are transferred over to the Company at their historical cost to First Federal. There will be a recapitalization because of the stock split and change in control, but the prior year
--------------------------------------------------------------------------------
5--------------------------------------------------------------------------------
financials will be the Company's, there's no acquisition or reverse acquisition accounting, and no fair market value assessments of the properties.
The issuance of Bioethics Common Stock to the Sellers, in connection with the
Asset Transfer have not been registered under the Securities Act, in reliance
upon the exemption from registration provided by Section 4(a)(2), which exempts
transactions by an issuer not involving any public offering, and Regulation D
and/or Regulation S promulgated by the
The foregoing description of the Contribution Agreement does not purport to be complete. For further information, please refer to the copy of the Contribution Agreement that is filed as Exhibit 2.1 to this Report. There are representations and warranties contained in the Contribution Agreement that were made by the parties to each other as of specific dates. The assertions embodied in these representations and warranties were made solely for purposes of the Contribution Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating their terms. Moreover, some representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual standard of materiality that is different from certain standards generally applicable to shareholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. For these reasons, investors should not rely on the representations and warranties in the Contribution Agreement as statements of factual information.
DESCRIPTION OF BUSINESS
Our Corporate History
The Company was incorporated in 1990 as a
Since its organization in 1990, and up until the Asset Transfer, the Company was not engaged in active business operations and its activities consisted of its search for and evaluation of potential business opportunities for acquisition or participation by the Company. During that period, the Company incurred limited operating expenses necessary to maintain its status as a corporation in good standing and incurred expenses in connection with its search for and evaluation of potential business opportunities. Due to the lack of active operations and the Company's stated purpose of seeking to acquire a currently unknown business opportunity, the Company was classified as a "shell" company subject to all the risks of a new business together with the substantial risks associated with the search for and acquisition of business opportunities.
We currently operate our business from the personal residence of the Company's
president in
Business
Due to our acquisition of assets pursuant to the Contribution Agreement, our business model has shifted to purchasing, holding, reselling, and in some cases improving undeveloped real property. We target land acquisitions in areas where we believe there will be relatively high increased population and economic growth. In some cases, we may conduct engineering analysis of the real property parcels that we acquire which may include hydraulic, seismic and other analysis. We may also conduct feasibility studies relating to optimal residential density or, in some case, commercial configuration. Many of the density and configuration decisions are contingent upon local governments' growth targets. During any attempted improvements to real property parcels that we own, there are a significant number of variables that result from governmental approvals, infrastructural developments, economic conditions, availability of credit and demographic shifts. The process of taking several, or in some cases hundreds, of acres of raw land to the point where home or commercial construction can begin takes years as opposed to months. In some cases, projects could require sewage connections, or even construction of new sewage plants, roads, bridges, water ways and other significant infrastructural improvements to accommodate the number of buildings and new inhabitants. Projects may require agreements with local governments as to who will bear what percentage of the costs of infrastructural improvements necessary to sustain the population influx. In addition, environmental approvals, construction plans and financing arrangements take significant time.
--------------------------------------------------------------------------------
6
--------------------------------------------------------------------------------
Our business can be deeply affected by downturns in the commercial real estate
and homebuilding industries. The last real estate downturn in the
Competition
Our competitors include established real estate development companies and individuals. Many of our current and potential competitors have longer operating histories and financial, sales, marketing and other resources substantially greater than those we possess. As a result, our competitors may be able to adapt more quickly to changes in the real estate market or to devote greater resources than we can to the sales of our real estate projects. For example, resistance among groups who wish to curb the building development growth in the area where we own real property to preserve the status quo may be more easily offset by larger firms with more resources that can afford larger and perhaps more skilled professional teams to respond to regulatory issues or organizational interference. Such competitors could also attempt to increase their presence in our markets by forming strategic alliances with other competitors. As the market for real estate development has evolved, price competition and ability to purchase prime real estate for development has intensified and is likely to continue to intensify. Such competition could adversely affect our gross profits, margins and results of operations. There can be no assurance that we will be able to compete successfully with existing or new competitors. Most of our competitors have substantially greater financial resources than we have, and they have much larger staffs allowing them to analyze more potential transactions, entitle land more quickly and sell it sooner and for more money.
Governmental and Environmental Regulation
The housing and commercial land development industries are subject to increasing environmental, building, zoning and real estate sales regulations by various federal, state and local authorities. Such regulations affect home building by specifying, among other things, the type and quality of building materials that must be used, certain aspects of land use and building design, as well as the manner in which we conduct sales activities and otherwise deal with customers. Such regulations affect development activities by directly affecting the viability and timing of projects.
We must obtain the approval of numerous government authorities which regulate such matters as land use and level of density, the installation of utility services, such as water and waste disposal, and the dedication of acreage for open space, parks, schools and other community purposes. If such authorities determine that existing utility services will not adequately support proposed development (including possibly in ongoing projects), building moratoria may be imposed. As a result, we may need to devote an increasing amount of time to evaluating the impact of governmental restrictions imposed upon a new residential development. Furthermore, as local circumstances or applicable laws change, we may be required to obtain additional approvals or modifications of approvals previously obtained or even stop all work. Such increasing regulation may result in a significant increase in time (and related carrying costs) between our initial acquisition of land and the commencement and completion of its developments.
Before we can develop a property, we must obtain a variety of discretionary approvals from local and state governments, as well as the federal government in certain circumstances, with respect to such matters as zoning, subdivision, grading, architecture and environmental matters. The entitlement approval process is often a lengthy and complex procedure requiring, among other things, the submission of development plans and reports and presentations at public hearings. Because of the provisional nature of these approvals and the concerns of various environmental and public interest groups, the approval process can be delayed by withdrawals or modifications of preliminary approvals and by litigation and appeals challenging development rights. Accordingly, our ability to develop properties and realize income from such projects could be delayed or prevented due to litigation challenging previously obtained governmental approvals. We may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or "slow-growth" or "no-growth" initiatives that could be implemented in the future.
We may be required to expend significant financial and managerial resources to comply with environmental regulations and local permitting requirements. Although we believe that our operations will be in general
--------------------------------------------------------------------------------
7--------------------------------------------------------------------------------
compliance with applicable environmental regulations, certain risks of unknown costs and liabilities are inherent in developing and owning real estate.
Available Information
Our filings with the
DESCRIPTION OF PROPERTIES
The following discussion relates to our business of residential and commercial land development with target properties. Our principal activities include securing acquisition rights to the property, obtaining zoning and other entitlements for the property, securing financing for the purchase of the property, improving the property's infrastructure and amenities, and selling the property. Below is a specific summary of each of our current material projects.
Employees
As of
Legal Proceedings
We are not a party to any other legal proceedings, other than ordinary routine litigation incidental to our business, which we believe will not have a material effect on our financial position or results of operations.
RISK FACTORS
The following risk factors apply to the business and operations of the Company. These risk factors are not exhaustive. Investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of the Company. You should carefully consider the following risk factors, as well as the other information included in this Report. In particular, please refer to the section entitled "Cautionary Note Regarding Forward-Looking Statements." We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
Risks Related to Capital Structure
There is no assurance of an active established public trading market, which
would adversely affect the ability of the Company's investors to sell their
securities in the public market. Although the Company's common stock is
registered under the Exchange Act and is traded on the OTC Market, an active
trading market for the securities does not yet exist and may not exist or be
sustained in the future. The OTC Market, also known as the "Pink Sheets," is an
over-the-counter market that provides significantly less liquidity than the
--------------------------------------------------------------------------------
8--------------------------------------------------------------------------------
to resell their securities at or near their original offering price or at any price. Market prices for the Company's common stock will be influenced by a number of factors, including:
?The Company's ability to obtain additional financing and the terms thereof;
?The Company's financial position and results of operations;
?Any litigation against the Company;
?Possible regulatory requirements on the Company's business;
?The issuance of new debt or equity securities pursuant to a future offering;
?Competitive developments;
?Variations and fluctuations in the Company's operating results;
?Change in financial estimates by securities analysts;
?The depth and liquidity of the market for the Company's common stock;
?Investor perceptions of the Company; and
?General economic and business conditions.
Shares eligible for future sale may adversely affect the market price of the Company's common stock, as the future sale of a substantial amount of outstanding stock in the public marketplace could reduce the price of the Company's common stock.
In excess of ninety nine percent (99%) of the shares of common stock issued and outstanding are owned by three stockholders, two of whom will be eligible to sell some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the . . .
© Edgar Online, source
