UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form 10SB
General Form for Registration of Securities of Small
Business Issuers under Section 12(b) or (g) of the
Securities Exchange Act of 1934
Modena 2 Inc.
(Exact Name of Small Business Issuer in its Charter)
Delaware 98-0412432
(State of Incorporation) (Primary Standard (IRS Employer ID No.)
Classification Code)
6540 E.Hastings St. #615 Burnaby
British Columbia V5B 4Z5
(Address of Registrant's Principal Executive Offices) (Zip Code)
604/590 0979
(Name, Address and Telephone Issuer's telephone number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act:
Common Stock
$.001 Par Value
(Title of Class)
PART I
ITEM 1. BUSINESS.
Modena 2 Inc. was incorporated on November 18, 2003 under the laws of the State
of Delaware to engage in any lawful corporate undertaking, including, but not
limited to, selected mergers and acquisitions. We have been in the developmental
stage since inception and has no operations to date other than issuing shares to
our original shareholder.
We will attempt to locate and negotiate with a business entity for the
combination of that target company with us. The combination will normally take
the form of a merger, stock- for-stock exchange or stock-for-assets exchange. In
most instances the target company will wish to structure the business
combination to be within the definition of a tax-free reorganization under
Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No
assurances can be given that we will be successful in locating or negotiating
with any target company.
We have been formed to provide a method for a foreign or domestic private
company to become a reporting ("public") company whose securities are qualified
for trading in the United States secondary market.
1
PERCEIVED BENEFITS
There are certain perceived benefits to being a reporting company with a class
of publicly-traded securities. These are commonly thought to include the
following:
* the ability to use registered securities to make acquisitions
of assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options for which
there may be a market valuation;
* enhanced corporate image;
* a presence in the United States capital market.
POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business combination
with us may include the following:
* a company for which a primary purpose of becoming public is the use of
its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able to obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public market
to satisfy redemption requirements under a qualified Employee Stock
Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
2
A business combination with a target company will normally involve the transfer
to the target company of the majority of the issued and outstanding common stock
of the Company, and the substitution by the target company of its own management
and board of directors.
No assurances can be given that we will be able to enter into a business
combination, as to the terms of a business combination, or as to the nature of
the target company.
We are voluntarily filing this Registration Statement with the Securities and
Exchange Commission and is under no obligation to do so under the Securities
Exchange Act of 1934.
RISK FACTORS
Our business is subject to numerous risk factors, including the following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS.
We have had no operating history nor any revenues or earnings from operations.
We have no significant assets or financial resources. We will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in us
incurring a net operating loss which will increase continuously until we can
consummate a business combination with a target company. There is no assurance
that we can identify such a target company and consummate such a business
combination.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS.
The success of our proposed plan of operation will depend to a great extent on
the operations, financial condition and management of the identified target
company. While management will prefer business combinations with entities having
established operating histories, there can be no assurance that we will be
successful in locating candidates meeting such criteria. In the event we
complete a business combination, of which there can be no assurance, the success
of our operations will be dependent upon management of the target company and
numerous other factors beyond our control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
We are and will continue to be an insignificant participant in the business of
seeking mergers with and acquisitions of business entities. A large number of
established and well-financed entities, including venture capital firms, are
active in mergers and acquisitions of companies which may be merger or
acquisition target candidates for us. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than us and, consequently, we will be at a competitive disadvantage
in identifying possible business opportunities and successfully completing a
business combination. Moreover, we will also compete with numerous other small
public companies in seeking merger or acquisition candidates.
IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION; FAILURE TO MEET ITS FIDUCIARY
OBLIGATIONS.
3
Our limited funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exhaustive investigation and analysis of
a target company. The decision to enter into a business combination, therefore,
will likely be made without detailed feasibility studies, independent analysis,
market surveys or similar information which, if we had more funds available to
it, would be desirable. We will be particularly dependent in making decisions
upon information provided by the principals and advisors associated with the
business entity seeking our participation. Management may not be able to meet
its fiduciary obligation to us and our stockholders due to the impracticability
of completing thorough due diligence of a target company. By its failure to
complete a thorough due diligence and exhaustive investigation of a target
company, we are more susceptible to derivative litigation or other stockholder
suits. In addition, this failure to meet our fiduciary obligations increases the
likelihood of plaintiff success in such litigation.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION-NO STANDARDS FOR
BUSINESSCOMBINATION-MANAGEMENTS SOLE DISCRETION REGARDINGBUSINESS COMBINATION.
We have no current arrangement, agreement or understanding with respect to
engaging in a business combination with a specific entity. There can be no
assurance that we will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination. John Fitzpatrick
is our sole officer, director and controlling shareholder and as such has
complete control and discretion with regard to our business and affairs. Mr.
Fitzpatrick has complete discretion whether we will enter into a business
combination. Management has not identified any particular industry or specific
business within an industry for evaluation by us. There is no assurance that we
will be able to negotiate a business combination on terms favorable to us. We
have not established a specific length of operating history or a specified level
of earnings, assets, net worth or other criteria which we will require a target
company to have achieved, or without which we would not consider a business
combination with such business entity. Accordingly, we may enter into a business
combination with a business entity having no significant operating history,
losses, limited or no potential for immediate earnings, limited assets, negative
net worth or other negative characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY.
While seeking a business combination, management anticipates devoting only a
limited amount of time per month to our business. Our sole officer has not
entered into a written employment agreement with us and he is not expected to do
so in the foreseeable future. We have not obtained key man life insurance on our
officer/director. Notwithstanding the combined limited experience and time
commitment of management, loss of the services of this individual would
adversely affect development of our business and likelihood of continuing
operations.
CONFLICTS OF INTEREST--GENERAL.
Our officer and director may participate in other business ventures which may
compete directly with the Company. Additional conflicts of interest and non-arms
length transactions may also arise in the future. Management has adopted a
policy that we will not seek a business combination with any entity in which any
member of management serves as an officer, director or partner, or in which they
or their family members own or hold any ownership interest. See "ITEM 5.
4
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION.
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act") requires
companies subject thereto to provide certain information about significant
acquisitions including audited financial statements for the company acquired
covering one or two years, depending on the relative size of the acquisition.
The time and additional costs that may be incurred by some target companies to
prepare such financial statements may significantly delay or essentially
preclude consummation of an otherwise desirable acquisition by us. Acquisition
prospects that do not have or are unable to obtain the required audited
statements may not be appropriate for acquisition so long as the reporting
requirements of the Exchange Act are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION.
We have neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by us. Even in
the event demand exists for a transaction of the type contemplated by us, there
is no assurance we will be successful in completing any such business
combination.
LACK OF DIVERSIFICATION.
Our proposed operations, even if successful, will in all likelihood result in
our engaging in a business combination with only one target company.
Consequently, our activities will be limited to those engaged in by the business
entity which we will merge with or acquire. Our inability to diversify its
activities into a number of areas may subject us to economic fluctuations within
a particular business or industry and therefore increase the risks associated
with our operations.
REGULATION UNDER INVESTMENT COMPANY ACT.
Although we will be subject to regulation under the Exchange Act, management
believes we will not be subject to regulation under the Investment Company Act
of 1940, insofar as we will not be engaged in the business of investing or
trading in securities. In the event we engage in business combinations which
result in us holding passive investment interests in a number of entities, we
could be subject to regulation under the Investment Company Act of 1940. In such
event, we would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. We have
obtained no formal determination from the Securities and Exchange Commission as
to our status under the Investment Company Act of 1940 and, consequently, any
violation of such Act could subject us to material adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT.
A business combination involving the issuance of our common stock will, in all
likelihood, result in shareholders of a target company obtaining a controlling
interest in the Company. Any such business combination may require our
shareholder to sell or transfer all or a portion of their common stock. The
resulting change in control of the Company will likely result in removal of the
present officer and director of the Company and a corresponding reduction in or
elimination of his participation in the future affairs of the Company.
5
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION.
Our primary plan of operation is based upon a business combination with a
business entity which, in all likelihood, will result in our issuing securities
to shareholders of such business entity. The issuance of previously authorized
and unissued common stock of the Company would result in reduction in percentage
of shares owned by our present shareholder and would most likely result in a
change in control of our management.
TAXATION.
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination we may undertake. Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to both us and the target company; however, there can be no
assurance that such business combination will meet the statutory requirements of
a tax-free reorganization or that the parties will obtain the intended tax-free
treatment upon a transfer of stock or assets. A non-qualifying reorganization
could result in the imposition of both federal and state taxes which may have an
adverse effect on both parties to the transaction.
POSSIBLE RELIANCE UPON UNAUDITED FINANCIAL STATEMENTS.
We will require audited financial statements from any business entity we propose
to acquire. No assurance can be given, however, that audited financials will be
available to us prior to a business combination. In cases where audited
financials are unavailable, we will have to rely upon unaudited information that
has not been verified by outside auditors in making our decision to engage in a
transaction with the business entity. The lack of the type of independent
verification which audited financial statements would provide increases the risk
that we, in evaluating a transaction with such a target company, will not have
the benefit of full and accurate information about the financial condition and
operating history of the target company. This risk increases the prospect that a
business combination with such a business entity might prove to be an
unfavorable one for us.
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
Plan of Operation
-----------------
The Registrant is continuing its efforts to locate a merger Candidate for the
purpose of a merger. It is possible that the registrant will be successful in
locating such a merger candidate and closing such merger. However, if the
registrant cannot effect a non-cash acquisition, the registrant may have to
raise funds from a private offering of its securities under Rule 506 of
Regulation D. There is no assurance the registrant would obtain any such equity
funding.
Results of Operation
--------------------
The Company did not have any operating income from inception (November 18,
2003). For the one day ended November 18, 2003, the registrant recognized a net
loss of $600. Some general and administrative expenses from inception were
accrued. Expenses from inception were comprised of costs mainly associated with
legal, accounting and office.
6
Liquidity and Capital Resources
-------------------------------
At November 18, 2003 the Company had no capital resources and will rely upon the
issuance of common stock and additional capital contributions from shareholders
to fund administrative expenses pending acquisition of an operating company.
Management anticipates seeking out a target company through solicitation. Such
solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Management may engage in such solicitation
directly or may employ one or more other entities to conduct or assist in such
solicitation. Management and its affiliates will pay referral fees to
consultants and others who refer target businesses for mergers into public
companies in which management and its affiliates have an interest. Payments are
made if a business combination occurs, and may consist of cash or a portion of
the stock in the Company retained by management and its affiliates, or both.
John Fitzpatrick will supervise the search for target companies as potential
candidates for a business combination. John Fitzpatrick will pay as his own
expenses any costs he incurs in supervising the search for a target company.
John Fitzpatrick may enter into agreements with other consultants to assist in
locating a target company and may share stock received by it or cash resulting
from the sale of its securities with such other consultants. John Fitzpatrick
controls us and therefore has the authority to enter into any agreement binding
us. John Fitzpatrick as our sole officer, director and only shareholder can
authorize any such agreement binding us. See "ITEM 4:
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have no full time employees. Our president has agreed to allocate a portion
of his time to the activities of the Company, without compensation. The
president anticipates that our business plan can be implemented by his devoting
no more than 10 hours per month to the business affairs of the Company and,
consequently, conflicts of interest may arise with respect to the limited time
commitment by such officer.
Our Certificate of Incorporation provides that we may indemnify our officers
and/or directors for liabilities, which can include liabilities arising under
the securities laws. Therefore, our assets could be used or attached to satisfy
any liabilities subject to such indemnification.
GENERAL BUSINESS PLAN
Our purpose is to seek, investigate and, if such investigation warrants, acquire
an interest in a business entity which desires to seek the perceived advantages
of a corporation which has a class of securities registered under the Exchange
Act. We will not restrict our search to any specific business, industry, or
geographical location and we may participate in a business venture of virtually
any kind or nature. Management anticipates that it will be able to participate
in only one potential business venture because we have nominal assets and
limited financial resources. This lack of diversification should be considered a
substantial risk to our shareholders because we will not offset potential losses
from one venture against gains from another.
We may seek a business opportunity with entities which have recently commenced
operations, or which wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes.
7
We anticipate that the selection of a business opportunity in which to
participate will be complex and extremely risky. Management believes(but has not
conducted any research to confirm) that there are business entities seeking the
perceived benefits of a publicly registered corporation. Such perceived benefits
may include facilitating or improving the terms on which additional equity
financing may be sought, providing liquidity for incentive stock options or
similar benefits to key employees, increasing the opportunity to use securities
for acquisitions, providing liquidity for shareholders and other factors.
Business opportunities may be available in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities difficult and complex.
We have, and will continue to have, no capital with which to provide the owners
of business entities with any cash or other assets. However, management believes
we will be able to offer owners of acquisition candidates the opportunity to
acquire a controlling ownership interest in a public company without incurring
the cost and time required to conduct an initial public offering. Management has
not conducted market research and is not aware of statistical data to support
the perceived benefits of a business combination for the owners of a target
company.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, our officer and director, who is not a professional business
analyst. In analyzing prospective business opportunities, management may
consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; the potential for further research,
development, or exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact our proposed activities; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trades; name identification; and other
relevant factors. This discussion of the proposed criteria is not meant to be
restrictive of our virtually unlimited discretion to search for and enter into
potential business opportunities.
The Exchange Act requires that any merger or acquisition candidate comply with
certain reporting requirements, which include providing audited financial
statements to be included in the reporting filings made under the Exchange Act.
We will not acquire or merge with any company for which audited financial
statements cannot be obtained at or within the required period of time after
closing of the proposed transaction.
We may enter into a business combination with a business entity that desires to
establish a public trading market for its shares. A target company may attempt
to avoid what it deems to be adverse consequences of undertaking its own public
offering by seeking a business combination with us. Such consequences may
include, but are not limited to, time delays of the registration process,
significant expenses to be incurred in such an offering, loss of voting control
to public shareholders or the inability to obtain an underwriter or to obtain an
underwriter on satisfactory terms.
We will not restrict our search for any specific kind of business entities, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its business life. It is
impossible to predict at this time the status of any business in which we may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which we may offer.
8
Our management, which in all likelihood will not be experienced in matters
relating to the business of a target company, will rely upon its own efforts in
accomplishing our business purposes. Following a business combination, we may
benefit from the services of others in regard to accounting, legal services,
underwritings and corporate public relations. If requested by a target company,
management may recommend one or more underwriters, financial advisors,
accountants, public relations firms or other consultants to provide such
services.
A potential target company may have an agreement with a consultant or advisor
providing that services of the consultant or advisor be continued after any
business combination. Additionally, a target company may be presented to us only
on the condition that the services of a consultant or advisor be continued after
a merger or acquisition. Such preexisting agreements of target companies for the
continuation of the services of attorneys, accountants, advisors or consultants
could be a factor in the selection of a target company.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. On the consummation of a
transaction, it is likely that our present management and shareholder will no
longer be in control of the Company. In addition, it is likely that our officer
and director will, as part of the terms of the acquisition transaction, resign
and be replaced by one or more new officers and directors.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon exemption from registration under applicable federal and
state securities laws. In some circumstances, however, as a negotiated element
of its transaction, we may agree to register all or a part of such securities
immediately after the transaction is consummated or at specified times
thereafter. If such registration occurs, it will be undertaken by the surviving
entity after we have entered into an agreement for a business combination or
have consummated a business combination and we are no longer considered a blank
check company. The issuance of additional securities and their potential sale
into any trading market which may develop our securities may depress the market
value of our securities in the future if such a market develops, of which there
is no assurance.
While the terms of a business transaction to which we may be a party cannot be
predicted, it is expected that the parties to the business transaction will
desire to avoid the creation of a taxable event and thereby structure the
acquisition in a tax-free reorganization under Sections 351 or 368 of the
Internal Revenue Code of 1986, as amended.
With respect to negotiations with a target company, management expects to focus
on the percentage of the Company which target company shareholders would acquire
in exchange for their shareholdings in the target company. Depending upon, among
other things, the target company's assets and liabilities, our shareholders will
in all likelihood hold a substantially lesser percentage ownership interest in
the Company following any merger or acquisition.
The percentage of ownership may be subject to significant reduction in the event
we acquire a target company with substantial assets. Any merger or acquisition
effected by us can be expected to have a significant dilutive effect on the
percentage of shares held by our shareholder at such time.
9
We will participate in a business opportunity only after the negotiation and
execution of appropriate agreements. Although the terms of such agreements
cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing and will
include miscellaneous other terms.
We will not enter into a business combination with any entity which cannot
provide audited financial statements at or within the required period of time
after closing of the proposed transaction. We are subject to all of the
reporting requirements included in the Exchange Act. Included in these
requirements is our duty to file audited financial statements as part of or
within 60 days following the due date for filing our Form 8-K (or Form 8-K12G3
if we decide to enter into a "back door" registration which we do not intend to
do) which is required to be filed with the Securities and Exchange Commission
within 15 days following the completion of the business combination. If such
audited financial statements are not available at closing, or within time
parameters necessary to insure our compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the target company, the closing documents may
provide that the proposed transaction will be voidable at the discretion of our
present management.
Management has orally agreed that it will advance to us any additional funds
which we need for operating capital and for costs in connection with searching
for or completing an acquisition or merger. Such advances will be made without
expectation of repayment. There is no minimum or maximum amount management will
advance to us. We will not borrow any funds to make any payments to our
management, its affiliates or associates.
Our Board of Directors has passed a resolution which contains a policy that we
will not seek a business combination with any entity in which our officer,
director, shareholder or any affiliate or associate serves as an officer or
director or holds any ownership interest.
UNDERTAKINGS AND UNDERSTANDINGS REQUIRED OF TARGET COMPANIES
As part of a business combination agreement, we intend to obtain certain
representations and warranties from a target company as to their conduct
following the business combination. Such representations and warranties may
include (i) the agreement of the target company to make all necessary filings
and to take all other steps necessary to remain a reporting company under the
Exchange Act (ii) imposing certain restrictions on the timing and amount of the
issuance of additional free-trading stock, including stock registered on Form
S-8 or issued pursuant to Regulation S and (iii) giving assurances of ongoing
compliance with the Securities Act, the Exchange Act, the General Rules and
Regulations of the Securities and Exchange Commission, and other applicable
laws, rules and regulations.
A prospective target company should be aware that the market price and volume of
its securities, when and if listed for secondary trading, may depend in great
measure upon the willingness and efforts of successor management to encourage
interest in us within the United States financial community. We do not have the
market support of an underwriter that would normally follow a public offering of
its securities. Initial market makers are likely to simply post bid and asked
prices and are unlikely to take positions in our securities for their own
account or customers without active encouragement and a basis for doing so. In
addition, certain market makers may take short positions in our securities,
10
which may result in a significant pressure on their market price. We may
consider the ability and commitment of a target company to actively encourage
interest in its securities following a business combination in deciding whether
to enter into a transaction with such company.
A business combination with us separates the process of becoming a public
company from the raising of investment capital. As a result, a business
combination with us normally will not be a beneficial transaction for a target
company whose primary reason for becoming a public company is the immediate
infusion of capital. We may require assurances from the target company that it
has a reasonable belief that it will have sufficient sources of capital to
continue operations following the business combination. However, it is possible
that a target company may give such assurances in error, or that the basis for
such belief may change as a result of circumstances beyond the control of the
target company.
Prior to completion of a business combination, we will generally require that it
be provided with written materials regarding the target company containing such
items as a description of products, services and company history; management
resumes; financial information; available projections, with related assumptions
upon which they are based; an explanation of proprietary products and services;
evidence of existing patents, trademarks, or service marks, or rights thereto;
present and proposed forms of compensation to management; a description of
transactions between such company and its affiliates during relevant periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated capital
requirements; audited financial statements, or if they are not available,
unaudited financial statements, together with reasonable assurances that audited
financial statements would be able to be produced within a reasonable period of
time not to exceed 75 days following completion of a business combination; and
other information deemed relevant.
COMPETITION
We will remain an insignificant participant among the firms which engage in the
acquisition of business opportunities. There are many established venture
capital and financial concerns which have significantly greater financial and
personnel resources and technical expertise than us. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to the
our competitors.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to acquire any
properties. The Company currently uses the offices of management at no cost to
the Company. Management has agreed to continue this arrangement until the
Company completes an acquisition or merger.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known by us to be the beneficial
owner of five percent or more of the Company's Common Stock, all directors
individually and all directors and officers of the Company as a group. Except as
noted, each person has sole voting and investment power with respect to the
shares shown.
11
Name and Address of Amount of Percentage
Beneficial Owner Beneficial Ownership of Class
---------------- -------------------- --------
John Fitzpatrick 100,000 100%
6540 E.Hastings St. #615
Burnaby, BC
V5B 4Z5
All Executive Officers
and Directors as a Group 100,000 100%
(1 Person)
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
We have one Director and Officer as follows:
Name Age Positions and Offices Held
---- --- --------------------------
John Fitzpatrick 70 President/Director
There are no agreements or understandings for the officer or director to resign
at the request of another person and the above-named officer and director is not
acting on behalf of nor will act at the direction of any other person.
Set forth below is the name of our director and officer, all positions and
offices with the Company held, the period during which he has served as such,
and the business experience during at least the last five years:
John Fitzpatrick is the President and Chairman of the Board of the Quick Drill
Corporation. The Quick Drill Corporation was incorporated in British Columbia,
Canada in 1983 to research new technologies in reverse auger drill technology.
Quick Drill Corporation's reverse auger drill can drill through sub-surface
material at a much faster rate than the drills that are presently in use and
only require one man to operate.
Quick Drill Corporation has patents pending for their reverse auger technology
in the United States (US Patent Number: 4.484.682) and around the world. Quick
Drill Corporation intends to raise additional capital to develop, manufacture
and market their reverse auger drill technology.
John Fitzpatrick is also the President and sole shareholder of five other
Delaware Corporations that intend to file a Form 10SB with the United States
Securities and Exchange Commission. The other five Delaware Corporations that
John Fitzpatrick is President of are Modena 1 Inc., Modena 3 Inc., Modena 4
Inc., Modena 5 Inc., and Modena 6 Inc.
CONFLICTS OF INTEREST
Mr. Fitzpatrick is also the President of Quick Drill Corporation, Modena 1 Inc.,
Modena 3 Inc., Modena 4 Inc., Modena 5 Inc., and Modena 6 Inc. were As such,
demands may be placed on the time of Mr. Fitzpatrick which will detract from the
amount of time he is able to devote to us. Mr. Fitzpatrick intends to devote as
much time to the activities of the Company as required. However, should such a
conflict arise, there is no assurance that Mr. Fitzpatrick would not attend to
other matters prior to those of the Company. Mr. Fitzpatrick projects that
initially up to ten hours per month of his time may be spent locating a target
company which amount of time would increase when the analysis of, and
negotiations and consummation with, a target company are conducted.
12
Mr. Fitzpatrick owns 100,000 shares, of the Company's common stock. At the time
of a business combination, management expects that some or all of the shares of
common stock owned by John Fitzpatrick, will be purchased by the target company
or retired by the Company. The amount of Common Stock sold or continued to be
owned by John Fitzpatrick, cannot be determined at this time.
The terms of the business combination may include such terms as Mr. Fitzpatrick
remaining a director or officer of the company. The terms of a business
combination may provide for a payment by cash or otherwise to John Fitzpatrick,
for the purchase or retirement of all or part of his common stock by a target
company or for services rendered incident to or following a business
combination. Mr. Fitzpatrick would directly benefit from such payment. Such
benefits may influence Mr. Fitzpatrick's choice of a target company.
We may agree to pay finder's fees, as appropriate and allowed, to unaffiliated
persons who may bring a target company to us where that reference results in a
business combination. No finder's fee of any kind will be paid by us to
management or our promoters or to their associates or affiliates. No loans of
any type have, or will be, made by us to management or our promoters or to any
of their associates or affiliates.
We will not enter into a business combination, or acquire any assets of any kind
for its securities, in which our management or any affiliates or associates have
any interest, direct or indirect.
There are no binding guidelines or procedures for resolving potential conflicts
of interest. Failure by management to resolve conflicts of interest in favor of
us could result in liability of management to us. However, any attempt by
shareholders to enforce a liability of management to us would most likely be
prohibitively expensive and time consuming.
CURRENT AND FUTURE BLANK CHECK COMPANIES
Our President is in the process of filing a Form 10SB for five other blank check
companies, and may be in the future, an officer, director and/or beneficial
shareholder of other blank check companies. The initial business purpose of each
of these companies was or is to engage in a business combination with an
unidentified company or companies and each were or will be classified as a blank
check company until completion of a business combination. The following chart
summarizes certain information concerning blank check companies with which our
President is or has been involved whose registration statements are effective as
of the date hereof. In most instances that a business combination is transacted
with one of these companies, it is required to file a current Report on Form 8-K
describing the transaction. Reference is made to the Form 8-K filed for any
company listed below for detailed information concerning the business
combination entered into by that company.
13
Corporation Registration Form Status
----------- ----------------- ------
Modena 1, INC. Filed on December 4, 2003 To date no merger has been
- still in registration effectuated and the Company's shares
with comments outstanding. are not available on any public
market. No IPO or
offering has been
undertaken for
this company. Mr.
Fitzpatrick is
still the sole
officer and
director of
Modena 1, Inc.
Modena 3, Inc. Filed on December 4, 2003 To date no merger has been
- still in registration effectuated and the Company's shares
with comments outstanding. are not available on any public
market. No IPO or
offering has been
undertaken for
this company Mr.
Fitzpatrick is
still the sole
officer and
director of
Modena 3, Inc.
Modena 4, Inc. Filed on December 4, 2003 To date no merger has been
- still in registration effectuated and the Company's shares
with comments outstanding. are not available on any public
market. No IPO or
offering has been
undertaken for
this company
Mr.Fitzpatrick is
still the sole officer
and director of Modena 4, Inc.
Modena 5, Inc. Filed on December 4, 2003 To date no merger has been
- still in registration effectuated and the Company's shares
with comments outstanding. are not available on any public
market. No IPO or
offering has been
undertaken for
this company.
Mr.Fitzpatrick is
still the sole
officer and
director of
Modena 5, Inc.
Modena 6, Inc. Filed on December 4, 2003 To date no merger has been
- still in registration effectuated and the Company's shares
with comments outstanding. are not available on any public
market. No IPO or
offering has been
undertaken for
this company.
Mr.Fitzpatrick is
still the sole
officer and
director of
Modena 6, Inc.
14
INVESTMENT COMPANY ACT OF 1940
Although we will be subject to regulation under the Securities Act of 1933 and
the Securities Exchange Act of 1934, management believes we will not be subject
to regulation under the Investment Company Act of 1940 insofar as we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinations which result in our holding passive investment
interests in a number of entities we could be subject to regulation under the
Investment Company Act of 1940. In such event, we would be required to register
as an investment company and could be expected to incur significant registration
and compliance costs. We have made no formal or informal inquiries to the
Securities and Exchange Commission as to our status under the Investment Company
Act of 1940 and therefore no determination regarding such status has been made
at this time. Any violation of such Act would subject us to material adverse
consequences.
ITEM 6. EXECUTIVE COMPENSATION.
Our officer and director does not receive any compensation for his services
rendered to us, has not received such compensation in the past, and is not
accruing any compensation pursuant to any agreement with us. However, the our
officer and director anticipates receiving benefits as a beneficial shareholder
of the Company, possibly, in other ways. See "ITEM 5. DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS, Conflicts of Interest."
No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by us for the benefit of its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We have issued a total of 100,000 shares of Common Stock to the following
persons for a total of $100 in cash:
Name Number of Total Shares Consideration
---- ---------------------- -------------
John Fitzpatrick 100,000 $100
With respect to the sales made to John Fitzpatrick, the Company relied upon
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
Such security holders cannot rely on Rule 144 for resale transactions and
therefore can only be resold through Registration under the Securities Act.
ITEM 8. DESCRIPTION OF SECURITIES.
Our authorized capital stock consists of 100,000,000 shares of Common Stock, par
value $.001 per share. The following statements relating to the capital stock
set forth the material terms of our securities; however, reference is made to
the more detailed provisions of, and such statements are qualified in their
entirety by reference to, the Certificate of Incorporation, amendment to the
Certificate of Incorporation and the By-laws, copies of which are filed as
exhibits to this registration statement.
15
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each share on all
matters to be voted on by the stockholders. Holders of common stock do not have
cumulative voting rights. Holders of common stock are entitled to share ratably
in dividends, if any, as may be declared from time to time by the Board of
Directors in its discretion from funds legally available therefore. In the event
of a liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share pro rata all assets remaining after payment
in full of all liabilities. All of the outstanding shares of common stock are
fully paid and non-assessable. Holders of common stock have no preemptive rights
to purchase our common stock. There are no conversion or redemption rights or
sinking fund provisions with respect to the common stock.
The Board of Directors does not at present intend to seek stockholder approval
prior to any issuance of currently authorized stock, unless otherwise required
by law or stock exchange rules.
DIVIDENDS
Dividends, if any, will be contingent upon our revenues and earnings, if any,
capital requirements and financial conditions. The payment of dividends, if any,
will be within the discretion of our Board of Directors. We presently intend to
retain all earnings, if any, for use in its business operations and accordingly,
the Board of Directors does not anticipate declaring any dividends prior to a
business combination.
TRADING OF SECURITIES IN SECONDARY MARKET
The National Securities Market Improvement Act of 1996 limited the authority of
states to impose restrictions upon sales of securities made pursuant to Sections
4(1) and 4(3) of the Securities Act of companies which file reports under
Sections 13 or 15(d) of the Exchange Act. Upon effectiveness of this
Registration Statement, we will be required to, and will, file reports under
Section 13 of the Exchange Act. As a result, sales of our common stock in the
secondary market by the holders thereof may then be made pursuant to Section
4(1) of the Securities Act (sales other than by an issuer, underwriter or
broker). However, our security holders can not rely on Rule 144 for resale
transactions and therefore can only be resold through Registration under the
Securities Act.
Following a business combination, a target company will normally wish to list
our common stock for trading in one or more United States markets. The target
company may elect to apply for such listing immediately following the business
combination or at some later time.
16
In order to qualify for listing on the Nasdaq SmallCap Market, a company must
have at least (i) net tangible assets of $4,000,000 or market capitalization of
$50,000,000 or net income for two of the last three years of $750,000; (ii)
public float of 1,000,000 shares with a market value of $5,000,000; (iii) a bid
price of $4.00; (iv) three market makers; (v) 300 shareholders and (vi) an
operating history of one year or, if less than one year, $50,000,000 in market
capitalization. For continued listing on the Nasdaq SmallCap Market, a company
must have at least (i) net tangible assets of $2,000,000 or market
capitalization of $35,000,000 or net income for two of the last three years of
$500,000; (ii) a public float of 500,000 shares with a market value of
$1,000,000; (iii) a bid price of $1.00; (iv) two market makers; and (v) 300
shareholders.
If, after a business combination, we do not meet the qualifications for listing
on the Nasdaq SmallCap Market, we may apply for quotation of its securities on
the NASD OTC Bulletin Board. In certain cases we may elect to have its
securities initially quoted in the "pink sheets" published by the Pink Sheets,
LLC. On April 7, 2000, the Securities and Exchange Commission issued a
clarification with regard to the reporting status under the Securities Exchange
Act of 1934 of a non-reporting company after it acquired a reporting "blank
check" company. This letter clarified the Commission's position that such
Company would not be a successor issuer to the reporting obligation of the
"blank check" company by virtue of Exchange Act Rule 12g-3(a).
We intend that any merger we undertake would not be deemed a "back door"
registration since we would remain the reporting company and the Company that we
merge with would not become a successor issuer to our reporting obligations by
virtue of Commission Rule 12g-3(a).
TRANSFER AGENT
It is anticipated that Corporate Stock Transfer, Denver, Colorado will act as
transfer agent for our common stock. However, we may appoint a different tranfer
agent.
GLOSSARY
"Blank Check"
Company as defined in Section 7(b)(3) of the Securities Act, a "blank check"
company is a development stage company that has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies and is issuing "penny
stock" securities as defined in Rule 3a51-1 of the Exchange Act.
Business Combination
Normally a merger, stock-for-stock exchange or stock-for-assets exchange between
the Registrant and a target company.
The Company
The corporation whose common stock is the subject of this Registration
Statement.
17
The Registrant
Modena 2 Inc.
Exchange Act
The Securities Exchange Act of 1934, as amended.
"Penny Stock" Security
As defined in Rule 3a51-1 of the Exchange Act, a "penny stock" security is any
equity security other than a security (i) that is a reported security (ii) that
is issued by an investment company (iii)that is a put or call issued by the
Option Clearing Corporation (iv) that has a price of $5.00 or more (except for
purposes of Rule 419 of the Securities Act) (v) that is registered on a national
securities exchange (vi) that is authorized for quotation on the Nasdaq Stock
Market, unless other provisions of Rule 3a51-1 are not satisfied, or (vii) that
is issued by an issuer with (a) net tangible assets in excess of $2,000,000, if
in continuous operation for more than three years or $5,000,000 if in operation
for less than three years or (b) average revenue of at least $6,000,000 for the
last three years.
Securities Act
The Securities Act of 1933, as amended.
18
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) MARKET PRICE. There is no trading market for our Common Stock at present and
there has been no trading market to date. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person's account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
(B) HOLDERS. There is one holder of our Common Stock. The issued and outstanding
shares of our Common Stock were issued in accordance with the exemptions from
registration afforded by Section 4(2) of the Securities Act of 1933.
(C) DIVIDENDS. We have not paid any dividends to date, and has no plans to do so
in the immediate future.
II-1
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against us.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
We have not changed accountants since its formation and there are no
disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have sold securities which were not registered
as follows:
Number of
Date Name Shares Consideration
---- ---- ------ -------------
November 18, 2003 John Fitzpatrick 100,000 $100
With respect to the sales made to John Fitzpatrick, we relied upon Section 4(2)
of the Securities Act of 1933, as amended.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the DGCL enables a corporation in its original certificate
of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to a corporation or its stockholders for violations of
the director's fiduciary duty, except:
o for any breach of a director's duty of loyalty to the corporation or
its stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions), or
o for any transaction from which a director derived an improper personal
benefit.
Our certificate of incorporation provides in effect for the elimination of the
liability of directors to the extent permitted by the DGCL.
Section 145 of the DGCL provides, in summary, that directors and officers of New
Jersey corporations are entitled, under certain circumstances, to be indemnified
against all expenses and liabilities (including attorney's fees) incurred by
them as a result of suits brought against them in their capacity as a director
or officer, if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, if they had
II-2
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. Our bylaws entitle
our officers and directors to indemnification to the fullest extent permitted by
the DGCL.
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING
THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
II-3
MODENA 2, INC.
FINANCIAL STATEMENTS
AS OF NOVEMBER 18, 2003
Modena 2, Inc.
Financial Statements Table of Contents
FINANCIAL STATEMENTS Page #
Independent Auditor's Report 1
Balance Sheet 2
Statement of Operations and Retained Deficit 3
Statement of Stockholders Equity 4
Cash Flow Statement 5
Notes to the Financial Statements 6-8
To The Board of Directors
Modena 2, Inc.
We have audited the accompanying balance sheet of Modena 2, Inc., as of November
18, 2003, and the related statement of operations, equity and cash flows from
inception (November 18, 2003) through November 18, 2003. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Modena 2, Inc., as of November
18, 2003, and the results of its operations and its cash flows for the one day
then ended in conformity with generally accepted accounting principles.
Gately & Associates, LLC
Certified Public Accountants
1248 Woodridge Court
Altamonte Springs, FL 32714
Tel 407-341-6942 Fax 407-522-8796
November 21, 2003
F-1
MODENA 2, INC.
BALANCE SHEET
As of November 18, 2003
ASSETS
CURRENT ASSETS November 18, 2003
Cash $ (0)
--------
TOTAL ASSETS $ (0)
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accrued expenses $ 500
TOTAL LIABILITIES 500
STOCKHOLDER'S EQUITY
Common Stock - par value $0.001;
100,000,000 shares authorized;
100,000 issued and outstanding 100
Additional paid in capital 0
Accumulated Deficit (600)
--------
Total stockholder's equity (500)
--------
TOTAL LIABILITIES AND EQUITY $ (0)
========
The accompanying notes are an integral part of these financial statements.
F-2
MODENA 2, INC.
STATEMENT OF OPERATIONS
For the one day ended November 18, 2003, and
from inception (November 18, 2003) through November 18, 2003
One day From Inception to
November 18, 2003 November 18, 2003
REVENUE Sales $ 0 $ 0
Cost of sales 0 0
----------- -----------
GROSS PROFIT 0 0
GENERAL AND ADMINISTRATIVE EXPENSES 600 600
----------- -----------
NET LOSS (600) (600)
ACCUMULATED DEFICIT, BEGINNING BALANCE 0 0
----------- -----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (600) $ (600)
=========== ===========
NET EARNINGS PER SHARE
Basic and Diluted
Net loss per share (Less than .01)
Basic and Diluted Weighted Average
Number of Common Shares Outstanding 100,000
The accompanying notes are an integral part of these financial statements.
F-3
MODENA 2, INC.
STATEMENT OF STOCKHOLDER'S EQUITY From inception
(November 18, 2003) through November 18, 2003
SHARES COMMON STOCK ACCUMULATED DEFICIT TOTAL
------------- ------------- ----------------- ------------
Stock issued on acceptance
Of incorporation expenses
November 18, 2003 100,000 $ 100 $ 0 $ 100
Net loss (600) (600)
------------ ------------ ---------------- ------------
Total at November 18, 2003 100,000 $ 100 $ (600) $ (500)
============ ============ ================ ============
The accompanying notes are an integral part of these financial statements.
F-4
MODENA 2, INC.
STATEMENT OF CASH FLOWS
For the one day ended November 18, 2003, and
from inception (November 18, 2003) through November 18, 2003
From
CASH FLOWS FROM OPERATING ACTIVITIES November 18, 2003 Inception
Net income (loss) $ (600) $ (600)
Increases (Decrease) in accrued expenses 500 500
------- -------
NET CASH PROVIDED OR (USED) IN OPERATIONS (100) (100)
CASH FLOWS FROM INVESTING ACTIVITIES
None 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued on incorporation expenses 100 100
CASH RECONCILIATION
Net increase (decrease) in cash 0 0
Beginning cash balance 0 0
------- -------
CASH BALANCE AT END OF PERIOD $ 0 $ 0
======= =======
The accompanying notes are an integral part of these financial statements.
F-5
MODENA 2, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
------------------------------------------
Industry - Modena 2, Inc. (the Company), a Company incorporated in the state of
--------
Delaware as of November 18, 2003, plans to locate and negotiate with a business
entity for the combination of that target company with The Company. The
combination will normally take the form of a merger, stock-for-stock exchange or
stock- for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended. No assurances can be given that The Company will be successful
in locating or negotiating with any target company.
The Company has been formed to provide a method for a foreign or domestic
private company to become a reporting ("public") company whose securities are
qualified for trading in the United States secondary market.
The Company has adopted its fiscal year end to be October 31.
Results of Operations and Ongoing Entity - The Company is considered to be an
----------------------------------------
ongoing entity. The Company's shareholders fund any shortfalls in The Company's
cash flow on a day to day basis during the time period that The Company is in
the development stage.
Liquidity and Capital Resources - In addition to the stockholder funding capital
-------------------------------
shortfalls; The Company anticipates interested investors that intend to fund the
Company's growth once a business is located.
Cash and Cash Equivalents - The Company considers cash on hand and amounts on
-------------------------
deposit with financial institutions which have original maturities of three
months or less to be cash and cash equivalents.
Basis of Accounting - The Company's financial statements are prepared in
-------------------
accordance with generally accepted accounting principles.
Income Taxes - The Company utilizes the asset and liability method to measure
------------
and record deferred income tax assets and liabilities. Deferred tax assets and
liabilities reflect the future income tax effects of temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and are measured using enacted tax
rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. At this time, The Company has set up an allowance for deferred taxes
as there is no company history to indicate the usage of deferred tax assets and
liabilities.
F-6
Fair Value of Financial Instruments - The Company's financial instruments may
-----------------------------------
include cash and cash equivalents, short-term investments, accounts receivable,
accounts payable and liabilities to banks and shareholders. The carrying amount
of long-term debt to banks approximates fair value based on interest rates that
are currently available to The Company for issuance of debt with similar terms
and remaining maturities. The carrying amounts of other financial instruments
approximate their fair value because of short-term maturities.
Concentrations of Credit Risk - Financial instruments which potentially expose
-----------------------------
The Company to concentrations of credit risk consist principally of operating
demand deposit accounts. The Company's policy is to place its operating demand
deposit accounts with high credit quality financial institutions. At this time
The Company has no deposits that are at risk.
2. Related Party Transactions and Going Concern:
--------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. At
this time The Company has not identified the business that it wishes to engage
in.
The Company's shareholders fund The Company's activities while The Company takes
steps to locate and negotiate with a business entity for combination; however,
there can be no assurance these activities will be successful.
3. Accounts Receivable and Customer Deposits:
-----------------------------------------
Accounts receivable and Customer deposits do not exist at this time and
therefore have no allowances accounted for or disclosures made.
4. Use of Estimates:
----------------
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenue
and expenses. Management has no reason to make estimates at this time.
5. Revenue and Cost Recognition:
----------------------------
The Company uses the accrual basis of accounting in accordance with generally
accepted accounting principles for financial statement reporting.
6. Accrued Expenses:
----------------
Accrued expenses consist of accrued legal, accounting and office costs during
this stage of the business.
7. Operating Lease Agreements:
--------------------------
The Company has no agreements at this time.
F-7
8. Stockholder's Equity:
--------------------
Common Stock includes 100,000,000 shares authorized at a par value of $0.001, of
which 100,000 have been issued for the amount of $100 on November 18, 2003 in
acceptance of the incorporation expenses for the Company.
9. Required Cash Flow Disclosure for Interest and Taxes Paid:
---------------------------------------------------------
The company has paid no amounts for federal income taxes and interest. The
Company issued 100,000 common shares of stock to its sole shareholder in
acceptance of the incorporation expenses for the Company.
10. Earnings Per Share:
------------------
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
F-8
PART III
ITEM 1. INDEX TO EXHIBITS
3.1 Certificate of Incorporation
3.1a Certificate of Amendment of Certificate of Incorporation
3.2 Bylaws
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
By: /s/ John Fitzpatrick
----------------------------------------------
John Fitzpatrick
Title: President
Dated: December 4, 2003
III-1