10SB12G: Registration of securities for small business [Section 12(g)]
Published on August 9, 2001
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
DIGICORP
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(Name of Small Business Issuer)
Utah 87-0398271
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(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
1206 West South Jordan Parkway, Unit B
South Jordan, Utah 84095
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(Address of Principal Executive Offices including Zip Code)
(801) 566-3000
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(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.
DigiCorp (the "Company"), was incorporated on July 19, 1983 under the laws
of the State of Utah for the purpose of developing and marketing computer
software programs. From 1983 to 1995, the Company's sales and investments had
been attributable to the sale of computer software and investments related to
oil, gas and mining.
On June 30, 1995, the Company became a development stage enterprise as
defined in SFAS No. 7 (See Notes to Company's financials) when it sold its
investments and changed its business plan. Since June 30, 1995, the Company has
been in the developmental stage and has had no operations other than issuing
shares for financing the preparation of financial statements and for preparing
this Form 10-SB.
The Company's business plan is to attempt to locate and negotiate with
another company for the purpose of a business combination of the two companies.
The combination will normally take the form of a merger, stock-for-stock
exchange or stock-for-assets exchange. In most instances the company combing
with DigiCorp 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 another company in a
business combination.
The Company has been formed to provide a method for a foreign or domestic
private company to become a reporting ("public") company qualified to trade on a
secondary market in the United States.
Bankruptcy, receivership or similar proceedings
Neither the Company nor any of its predecessors has been subject to any
bankruptcy, receivership or similar proceeding.
Benefits Achieved by Combining With Another Company
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. Some of these benefits are 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 of a company's stock,
shareholder liquidity, greater ease in raising additional capital, market
valuation of stock options for compensating key employees and enhancement of the
corporate image.
Business Entities That May Be Interested in a Business Combination with
DigiCorp.
A business entity, if any, which may be interested in a business
combination with DigiCorp may include the following:
1. A company that desires to go public for the purpose of having
its securities used for the acquisition of assets or other businesses;
2. A company that is unable to find an underwriter for its securities
or is unable to find an underwriter to sell its securities on terms
acceptable to the company;
3. A company that desires to become public with less dilution of its
common stock than would occur upon an underwriting;
4. A company, that believes it can obtain investment capital on more
favorable terms after it has become public;
5. A foreign company that may desire to enter the equity markets of
the United States;
6. A special situation company, such as a company seeking a public
market to satisfy redemption requirements under a qualified Employee
Stock Option Plan;
7. A company that desires to become public in less time than would be
required for a registration statement.
8. A company that may desire any other benefits associated with being a
company with publicly trading securities.
A business combination will normally involve the transfer to the company
that is being combined with of the majority of the issued and outstanding common
stock of DigiCorp, and the substitution by the combining company of its own
management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, or as to the terms of a business combination, or as to the
nature of the company that will be combining with DigiCorp.
The Company has elected to file this Form 10-SB registration statement on a
voluntary basis in order to become a reporting company under the Securities
Exchange Act of 1934.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the
following:
Minimal Operating History and Very Few Assets. The Company has not been
operating for several years and has no significant assets. The Company will, in
all likelihood, sustain operating expenses without corresponding revenues, at
least until the consummation of a business combination. As a result the Company
will be operating at a loss until at least a business combination with another
company can be completed. There is no assurance that the Company can identify
another company for a business combination nor that the business combination can
be completed.
Speculative Nature of the Company's Business. The success of the Company's
proposed plan of operation will depend to a great extent on the operations,
financial condition and management of the target company to be combined with.
While management will prefer business combinations with entities having
established operating histories, there can be no assurance that the Company will
be successful in locating candidates meeting such criteria. In the event the
Company completes a business combination, of which there can be no assurance,
the success of the Company's operations will be dependent upon management of the
target company and numerous other factors beyond the Company's control.
Competition for Business Combinations. The Company is 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 the Company. Nearly all such entities have significantly greater
financial resources, technical expertise and managerial capabilities than the
Company and, consequently, the Company will be at a competitive disadvantage in
identifying possible business opportunities and successfully completing a
business combination. Moreover, the Company will also compete with numerous
other small public companies in seeking merger or acquisition candidates.
Impracticability of a Thorough Investigation. The Company's 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 the Company had more funds
available to it, would be desirable. The Company will however, require audited
financial statements from a company it intends to combine with.
No Agreement for Business Combination or Other Transaction. The Company has
no arrangement, agreement or understanding with respect to engaging in a merger,
joint venture or acquisition of, a private or public entity. There can be no
assurance the Company will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination. Management has
not identified any particular industry or specific business within an industry
for evaluation by the Company. There is no assurance the Company will be able to
negotiate a business combination on terms favorable to the Company.
No Standards for Business Combination. The Company has not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which it will require a target business opportunity
to have achieved. Accordingly, the Company may enter into a business combination
with another business having no significant operating history. In addition, the
target company may have had no history of earnings, have limited assets a
negative net worth or other characteristics that are associated with development
stage companies.
Continued Management Control, Limited Time Availability. While seekinga
business combination, none of the management will be devoting their full time to
such an enterprise. None of the officers have entered into a written employment
agreement with the Company and none is expected to do so in the foreseeable
future. The Company does not have key man life insurance on any of its officers
or directors. Notwithstanding the combined limited experience and time
commitment of management, loss of the services of any of the management team
would adversely affect the opportunity of a business combination for the
Company. See "Directors, and Executive Officers".
Conflicts of Interest - General. Officers and directors of the Company may
participate in business ventures which could be deemed to compete directly with
the Company. Additional conflicts of interest and non-arms length transactions
may also arise in the event the officers or directors are involved in the
management of any firm with which the Company transacts business. Management
does not plan to seek a merger with, or acquisition of, any entity in which
management serves as officers, directors or partners, or in which they or their
family members own or hold any direct or
indirect ownership interest.
Affiliation With Other Development Stage Companies. Officers and
Directorsof the Company may be affiliated with other development stage companies
such as DigiCorp. In the event that management identifies a candidate for a
business combination, and the candidate expresses no preference for a particular
company, management may make a business combination with another development
stage company that it is associated with. As a result, there can be no assurance
that there will be sufficient business opportunities to consummate a business
combination for DigiCorp.
Reporting Requirements May Delay or Preclude Acquisition.Sections 13and
15(d) of the Securities Exchange Act of 1934 require reporting companies to
provide certain information about significant acquisitions, including certified
financial statements for the company acquired, covering one, two, or three
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target entities to prepare such
statements may significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects that do
not have or are unable to obtain the required audited statements may be
inappropriate for acquisition so long as the reporting requirements of the
Securities Exchange Act of 1934 are applicable.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with another company. Consequently, the Company's activities may be
limited to those business opportunities engaged in by the target company. The
Company's inability to diversify its activities into a number of areas may
subject the Company to economic fluctuations within a particular business or
industry and therefore increase the risks associated with the operations.
International Business Risk. If the Company enters into a business
combination with a foreign company, the Company will be subject to risks
inherent in business operations outside of the United States. Such risks
include, for example, currency fluctuations, regulatory problems, punitive
tariffs, unstable local tax policies, trade embargoes, risks related to shipment
of raw materials and finished goods across national borders and cultural and
language differences. Foreign economies may differ favorably or unfavorably from
the United States economy in growth of gross national product, rate of
inflation, market development, rate of savings and capital investment, resource
self-sufficiency and balance of payments positions, and in other respects.
Probable Change in Control and Management. A business combination involving
the issuance of the Company's common stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's common stock held by them, or
resign as members of the Board of Directors of the Company. The resulting change
in control of the Company could result in removal of one or all the present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Dilution of Present Shareholders After Business Combination. The Company's
plan for a business combination would be with another private company that would
most likely result in the private company's shareholders owning a majority
interest of the outstanding shares of the combined company. As a result the
percentage ownership of the present shareholders in DigiCorp would be
substantially diluted if the Company is successful in completing a business
combination.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination undertaken by the Company.
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. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; 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.
PRINCIPAL PRODUCTS AND SERVICES
The primary activities by the Company are to seek out and investigate the
acquisition of any viable business opportunity by purchase and exchange for
securities of the Company for ownership in the target company resulting in a
business combination.
Distribution Methods of the Products or Services.
Management will seek out and investigate business opportunities through
every reasonably available fashion, including personal contacts, professionals,
securities broker-dealers, venture capital personnel, members of the financial
community and others who may present unsolicited proposals; the Company may also
advertise its availability as a vehicle to bring a company to the public market
through a "reverse" reorganization or merger. The Company presently does not
have any company as a target for a business combination nor does the Company
presently have any products or services.
COMPETITIVE BUSINESS CONDITIONS
Competitors include thousands of other publicly-held companies whose
business operations have proven unsuccessful, and whose only viable business
opportunity is that of providing a publicly-held vehicle through which a private
entity may have access to the public capital markets. There is no reasonable way
to predict the competitive position of the Company or any other entity under the
circumstances; however, the Company, will be at a competitive disadvantage in
competing with companies that have recently completed an initial public
offering, have significant cash resources and have recent operating histories
when compared with the complete lack of any substantive operations by the
Company for the past several years.
Sources and Availability of Raw Materials and Names of Principal Suppliers.
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Since the Company does not have any products or services it does not
presently require any raw materials and therefore, has no dependence on any one
supplier or customers to purchase products.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
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The Company does not have any patents, trademarks, licenses, franchises,
concessions, royalty agreements or labor contracts. In addition, the Company is
not presently involved in any research or development.
Need for any Governmental Approval of Principal Products or Services.
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The Company currently produces no products or services, therefore, it is
not presently subject to any governmental regulation in this regard. However, in
the event that the Company engages in a merger or acquisition transaction with
an entity that engages in such activities, it will become subject to all
governmental approval requirements to which the merged or acquired entity is
subject.
Effect of Existing or Probable Governmental Regulations on Business.
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The integrated disclosure system for small business issuers adopted by the
Securities and Exchange Commission in Release No. 34-30968 and effective as of
August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25 million; is a U.S. or Canadian issuer; is not an
investment company; and if a majority-owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25 million or more.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc. ("NASAA") have
expressed an interest in adopting policies that will streamline the registration
process and make it easier for a small business issuer to have access to the
public capital markets.
Cost and Effects of Compliance with Environmental Laws.
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Presently environmental laws are not applicable to the Company, however,
environmental laws, rules and regulations may have an adverse effect on any
business venture viewed by the Company as an attractive acquisition,
reorganization or merger candidate, and these factors may further limit the
number of potential candidates available to the Company for acquisition,
reorganization or merger.
Number of Employees.
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The Company presently has no full-time employees, however, management will
devote whatever time they deem necessary to evaluate different business
opportunities for a business combination. Management of the Company also expects
to use consultants, attorneys and accountants as necessary, and does not
anticipate a need to engage any full-time employees so long as it is seeking and
evaluating companies for a business combination. The need for employees and
their availability will be addressed in connection with the decision whether or
not to acquire or participate in a specific business combination.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operation
The Company is presently a development stage company conducting virtually
no business operation, other than its efforts to effect a business combination
with a target business which the Company considers to have significant growth
potential. Currently, the Company does not engage in any operation or receive
any cash flow. The Company will carry out its plan of business as discussed
above. See "Description of Business". The Company cannot predict to what extent
its liquidity and capital resources will be diminished prior to the consummation
of a business combination or whether its capital will be further depleted by the
operating losses (if any) of the target business combining with the Company.
During its fiscal year ending June 30, 2001, the Company received a cash
infusion of $5,000 from Vernal Western Drilling, a company owned by the officers
of the Company. See "Recent Sales of Unregistered Securities". The $5,000 was
contributed to the Company for common stock in the Company. The directors of the
Company believe that the cash contributed should be able to cover the
professional fees of the audit and other expenses that the Company expects to
incur within the next 12 months. However, in the event that a business
combination does not occur during the next 12 months the Company may need to
raise additional capital to meet its needs to continue to pursue a business
combination or that it may cease operations. No commitments of any kind to
provide additional funds have been made by management, other present
shareholders or any other third person. There are no agreements or
understandings of any kind with respect to any future loans from officers or
directors of the Company on behalf of the Company. Accordingly, there can be no
assurance that any additional funds will be available to the Company to allow it
to cover its expenses. In the event the Company elects to raise additional
capital prior to the effectuation of a business combination, it expects to do so
through the private placement of restricted securities rather than through a
public offering. The Company does not currently contemplate making a Regulation
S offering.
Since the Company's cash reserves are minimal, officers and director's of
the Company are compensated by the Company by issuances of stock in lieu of
cash. See "Executive Compensation". Presently, there are no arrangements or
anticipated arrangements to pay any type of additional compensation to any
officer or director in the near future. Regardless of whether the Company's cash
assets prove to be inadequate to meet the Company's operational needs, the
Company might seek to compensate providers of services by issuances of stock in
lieu of cash. See "Certain Relationships and Transactions".
Results of Operations.
The Company has had no material operations for the last three fiscal years.
Losses were ($5,110), ($264), and ($202) respectively, for the fiscal years
ended June 30, 2001, 2000, and 1999. 2001 losses resulted from the issuances of
shares of common stock to officers of the Company for services rendered in
providing the legal and other work necessary to file this registration
statement. These services included the preparation of this Form 10-SB and
arranging for the preparation and auditing of the financial statements. Losses
for 2000 and 1999, were primarily due to the payment of bank service charges,
taxes and fees.
Liquidity.
The Company had no liquidity during the fiscal years ended June 30, 1999
through 2000. The liquidity of the Company for the year ended June 30, 2001, was
from the contribution of capital made by Vernal Western Drilling. See "Recent
Sales of Unregistered Securities". The Company does not contemplate raising
capital over the next twelve months by issuance of any debt or additional equity
securities. The Company has no loan agreements with any officer or director.
ITEM 3. DESCRIPTION OF PROPERTY.
The executive and business office of the Company consists of office space
located at 1206 W. South Jordan Parkway, Unit B, South Jordan, Utah 84095. The
office space is owned by Gregg B. Colton, Don J. Colton and John O. Anderson and
is leased to Pioneer Oil and Gas. Currently, the Company is not charged for
using the office space. The Company believes this office space is adequate to
serve its needs until such time as a business combination occurs. The Company
also expects to be able to utilize this office space until such time as a
business combination is consummated. The Company has no other property that it
uses or owns.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by each person or group that is known by
the Company to be the beneficial owner of more than five percent of its
outstanding Common Stock, each director of the Company, each person named in the
Summary Compensation Table, and all directors and executive officers of the
Company as a group as of June 30, 2001. Unless otherwise indicated, the Company
believes that the persons named in the table below, based on information
furnished by such owners, have sole voting and investment power with respect to
the Common Stock beneficially owned by them, where applicable.
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Owner of Class
Common Gregg B. Colton 1,000,984* 11.07%
10026 Ridge Gate Circle
Sandy, Utah 84092
Common Don J. Colton 1,276,394* 14.11%
10026 Ridge Gate Circle
Sandy, Utah 84092
Common Glenn W. Stewart 328,200 3.6%
2360 South Scenic Drive
Salt Lake City, Utah 84109
Common Norman Sammis 68,220 .75%
5858 West 11140 North
Highland, Utah 84003
Common Andrew Buffmire 532,419 5.89%
4270 South Vallejo
Salt Lake City, Utah 84124
Common Pioneer Oil and Gas 820,779 9.08%
1206 W. South Jordan Parkway
Unit B
South Jordan, Utah 84095
All Directors and Officers as a Group
(4 Persons)** 2,673,798 29.57%
*Includes 50% of the 500,000 common shares owned by Vernal Western Drilling
since Gregg B. Colton owns 50% of Vernal Western Drilling and Don J. Colton owns
50%. Also included in Don J. Colton's total shares are 544,344 shares held in
the name of American Drilling Services, Inc. in which Don J. Colton is the sole
shareholder.
**Don J. Colton and Gregg B. Colton are the officers and two of the three
directors of Pioneer Oil and Gas. If the shares of Pioneer Oil and Gas are
included in the total amount for all directors and officers the number of shares
is 3,494,577 and the percentage is then 38.64%.
The shares listed above also include those that are held jointly with
the director's spouse.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers and significant employees of the
company are as follows:
NAME AGE POSITION WITH COMPANY
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Gregg B. Colton 48 President, Treasurer & Director
Don J. Colton 55 Vice President, Secretary & Director
Glenn W. Stewart 61 Director
Norman Sammis 63 Director
Note: Gregg B. Colton and Don J. Colton are brothers.
Gregg B. Colton serves as the Company's President, Treasurer and Director.
Mr. Colton is employed with Pioneer Oil and Gas a publicly traded company as its
Vice President, Secretary, General Counsel and a member of the Board of
Directors. Mr. Colton has been employed with the Pioneer Oil and Gas since it
actually commenced business in 1981. Mr. Colton is involved in handling the
contracts, sales of oil and gas products and legal problems of the Company along
with the day to day decision making for the Company with the Company's
President. From 1981 to 1984, Mr. Colton was also a partner in the law firm of
Cannon, Hansen & Wilkinson. Mr. Colton is a member of the Utah State Bar and a
real estate broker. He is also a member of the Corporate Counsel and Business
sections of the Utah State Bar. Mr. Colton earned his BA from the University of
Utah in 1976 and a Juris Doctor and a Master of Business Administration from
Brigham Young University in 1981.
Don J. Colton serves as the Vice President, Secretary and Director of the
Company. Mr. Colton is employed as the President, Treasurer and Chairman of the
Board of Directors of Pioneer Oil and Gas. Since the inception of Pioneer Oil
and Gas in October 1980 Mr. Colton has been involved in all aspects of the
business for Pioneer Oil and Gas including exploration, acquisition and
development of producing properties. From 1979 to 1981, Mr. Colton was Chief
Financial Officer and a member of the Board of Directors of Drilling Research
Laboratory in Salt Lake City, Utah. The Drilling Research Laboratory is a
subsidiary of Terra Tech, Inc. and prior to his involvement with the Drilling
Research Laboratory, Mr. Colton was Manager of Special Projects for Terra Tech.
Mr. Colton received a BS in Physics from Brigham Young University in 1970 and a
Master of Business Administration from the University of Utah in 1974.
Glenn W. Stewart. Mr. Stewart received his B.S. In Physics in 1962 from
Brigham Young University and his M.B.A. from B.Y.U. in 1966. For the last ten
years Mr. Stewart has been President and CEO of Moxtek, Inc. of Orem, Utah.
Norman W. Sammis.
Mr. Sammis received his B.S. in Engineering in 1960 from the U.S.
Naval Academy. He received his M.S. in Business Management in 1967 from the
Naval Postgraduate School in Monterey, California. From 1968 to 1980, Mr. Sammis
was employed with the U.S. Marine Corps in various capacities. From 1980 to
1981, Mr. Sammis was Director of Systems Implementation for Weidner
Communications, Inc. of Provo, Utah. Since 1981, Mr. Sammis has been employed by
the Church of Jesus Christ of Latter-Day-Saints as a Quality Assurance Analyst
and later as a Supervisor of a Project Development Team. In his current
position, Mr. Sammis is the Manager of Technical Services in the Purchasing
Division of the LDS Church and acts as contract manager for all technology
items.
ITEM 6. EXECUTIVE COMPENSATION
No cash compensation was paid to any officer or director of the Company
during the fiscal year ending June 30, 2001. No cash compensation was paid to
any of the present executive officers during the fiscal year ended June 30, 2000
and June 30, 1999. However, the Company, in a Board meeting held on May 30,
2001, issued Gregg B. Colton and Don J. Colton each a total of 250,000 common
shares valued together at $5,000 to prepare and file a Form 10-SB on behalf of
the Company and assist with the preparation of the financial statements of the
Company. The Company, at the same Board meeting issued Vernal Western Drilling a
total of 500,000 common shares for $5,000 contributed to the Company. Vernal
Western Drilling is a company owned 100% by Don J. Colton and Gregg B. Colton.
There is currently no policy in place that prevents the Company from
compensating any officer, director or affiliate in the form of the Company's
shares of common stock or other non-cash compensation.
The Company has no agreement or understanding, express or implied, with any
officer, director, or principal stockholder, or their affiliates or associates,
regarding employment with the Company or compensation for services. The Company
has no plan, agreement, or understanding, express or implied, with any officer,
director, or principal stockholder, or their affiliates or associates, regarding
the issuance to such persons of any shares of the Company's authorized and
unissued common stock. There is no understanding between the Company and any of
its present stockholders regarding the sale of a portion or all of the common
stock currently held by them in connection with any future participation by the
Company in a business. There are no other plans, understandings, or arrangements
whereby any of the Company's officers, directors, or principal stockholders, or
any of their affiliates or associates, would receive funds, stock, or other
assets in connection with the Company's participation in a business. No advances
have been made or contemplated by the Company to any of its officers, directors,
or principal stockholders, or any of their affiliates or associates.
There is no policy that prevents management from adopting a plan or
agreement in the future that would provide for cash or stock based on
compensation for services rendered to the Company.
The Company presently has not granted options to any of its directors or
officers. However, the Company in the future may grant options to officers and
directors as determined by the Board of Directors.
Upon the merger or acquisition of a business, it is possible that current
management will resign and be replaced by persons associated with the business
acquired, particularly if the Company participates in a business by effecting a
stock exchange, merger, or consolidation as discussed under the "Description of
Business" above. In the event that any member of current management remains
after effecting a business acquisition, that member's time commitment and
compensation will likely be adjusted based on the nature and location of such
business and the services required, which cannot now be
foreseen.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the Board meeting described above under "Executive Compensation" held on
May 30, 2001, the Board of Directors of the Company issued 250,000 common shares
to Gregg B. Colton and 250,000 common shares to Don J. Colton. The shares were
issued for the preparation and filing this Form 10-SB and assisting with the
preparation of the Company's financial statements. At the same meeting, Vernal
Western Drilling was issued 500,000 common shares of the Company for
contributing $5,000 in cash. Vernal Western Drilling is a privately held company
owned 50% by Don J. Colton and 50% by Gregg B. Colton.
The Company presently is using office space that is owned two-thirds by Don
J. Colton and Gregg B. Colton. Currently, the Company is not charged for rent
nor do Don J. Colton or Gregg B. Colton intend to have the Company pay any rent
within the next year. However, in the event the office space is leased to the
Company it will be leased on terms reasonable for the same kind of office space
in the area that it is located.
ITEM 8. DESCRIPTION OF SECURITIES.
Qualification. The following statements constitute brief summaries of the
Company's Articles of Incorporation and Bylaws. Such summaries do not purport to
be fully complete and are qualified in their entirety by reference to the full
text of the Articles of Incorporation and Bylaws of the Company.
Common Stock. The Company's Articles of Incorporation authorize it to issue
up to 50,000,000 (fifty million) Shares of its Common Stock, which carry a par
value of $0.001 per Share.
Liquidation Rights. Upon liquidation or dissolution, each outstanding
Common Share will be entitled to share equally in the assets of the Company
legally available for the distribution to shareholders after the payment of all
debts and other liabilities.
Dividend Rights. There are no limitations or restrictions upon the rights
of the Board of Directors to declare dividends out of any funds legally
available therefor. The Company has not paid dividends to date and it is not
anticipated that any dividends will be paid in the foreseeable future. The Board
of Directors initially will follow a policy of retained earnings, if any, to
finance the future growth of the Company. Accordingly, future dividends, if any,
will depend upon, among other considerations, the Company's need for working
capital and its financial conditions at the time.
Voting Rights. Holders of Common Shares of the Company are entitled to cast
one vote for each share held at all shareholders meetings for all purposes.
Other Rights. Common Shares are not redeemable, have no conversion rights
and carry no preemptive or other rights to subscribe to or purchase additional
Common Shares in the event of a subsequent offering.
Transfer Agent. The Company's transfer agent is Atlas Stock Transfer whose
address is 5899 South State Street, Murray, Utah 84107. The phone number of
Atlas Stock Transfer is (801) 266-7151.
The Securities and Exchange Commission has adopted Rule 15g-9 which
established the definition of a "penny stock", for the purposes relevant to the
Company, 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 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 objectives of the person; and
(ii) make a reasonable determination that the transaction(s) in penny stocks are
suitable for that person and the 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 highlighted 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 investors 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 the
commissions payable to both the broker-dealer and registered representative,
current quotations for the securities and the rights and remedies available to
an investor in case of fraud in penny stock transaction. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stocks held in the account and information on the limited market in penny
stocks.
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
There is no trading market for the Company's common stock at present and
there has been no trading market for the Company's stock for more than five
years. Management has not undertaken any discussions, preliminary or otherwise,
with any prospective market maker concerning the participation of such market
maker in the aftermarket for the Company's securities and management does not
intend to initiate any such discussions until such time as the Company has
consummated a merger or acquisition or deems it feasible to do so prior to a
business combination. There is no assurance that a trading market will ever
develop or, if such a market does develop, that it will continue.
As of June 30, 2001, the Company had issued and outstanding 9,042,857
common shares held by approximately 300 holders of record. Presently, there are
no outstanding options or warrants to purchase, or securities convertible into,
common equity of the Company.
As of the date of this report, all of the Company's common stock is
eligible for sale under Rule 144 promulgated under the Securities Act of 1933,
as amended except for those shares that were issued in the May 30th, 2001 Board
of Directors Meeting (See "Certain Relationships and Related Transactions"). In
general, under Rule 144, a person (or persons whose shares are aggregated), who
has satisfied a one year holding period, under certain circumstances, may sell
within any three-month period a number of shares which does not exceed the
greater of one percent of the then outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
There have been no cash dividends declared by the Company since its
inception. Further, there are no restrictions that would limit the Company's
ability to pay dividends on its common equity or that would be likely to do so
in the future.
The Company has no plans to register any of its securities under the
Securities Act for sale by security holders. There is no public offering of
equity and there is no proposed public offering of equity.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings, nor is the Company
aware of any disputes that may result in legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company has had no changes in and/or disagreements with its
accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The most recent sale of unregistered securities by the Company is detailed
above in "Certain Relationships and Related Transactions" wherein Don J. Colton
and Gregg B. Colton were issued shares in the Company for the preparation of
this Form 10-SB and assisting in the preparation of the Company's financial
statements. In addition, Vernal Western Drilling was issued 500,000 common
shares in the Company for the contribution of $5,000 in cash to the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Officers and Directors of the Company are accountable to the Company as
fiduciaries, and consequently must exercise good faith and integrity in handling
its affairs. Law provides that a corporation organized under the laws of the
State of Utah has the power to indemnify its Officers and Directors against
expenses incurred by such persons in connection with any threatened, pending or
completed action, suit, or proceedings, whether civil, criminal, administrative,
or investigative involving such persons in their capacities as officers and
directors, so long as such persons acted in good faith and in a manner which
they reasonably believed to be in the best interests of the Company.
Because the Bylaws as amended of the Company provide for such
indemnification, the foregoing provisions are broad enough to permit the Company
to indemnify its Officers and Directors from liabilities that may arise under
the Securities Act.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
MAY BE PERMITTED TO ITS OFFICERS AND DIRECTORS, OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, THE COMPANY HAS BEEN
ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF
1933, AND IS, THEREFORE, UNENFORCEABLE.
PART F/S FINANCIAL STATEMENTS
The following financial statements required by Item 310 of Regulation S-B
are furnished for the period commencing July 1, 2000, and ending June 30, 2001:
PART III. INDEX TO EXHIBITS
The following Exhibits are filed herewith:
Exhibit No. Description
3(i) Articles of Incorporation
(with amendments)
3(ii) Bylaws
SIGNATURE
In accordance with Section 12 of the Securities Act of 1934, the Company
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIGICORP
By:__/s/ Gregg B. Colton_______ Date: August 1,2001.
-----------------------------
Gregg B. Colton, President
The following Exhibits are filed herewith:
Exhibit No. Description
3(i) Articles of Incorporation
(with amendments)
3(ii) Bylaws
DIGICORP
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 2001, 2000 and 1999
DIGICORP
(A Development Stage Company)
INDEX
Page
Independent Auditors' Report F-2
Balance Sheets F-4
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders' and
Board of Directors of
DigiCorp
We have audited the accompanying balance sheets of DigiCorp (a development stage
company), as of June 30, 2001, 2000 and 1999 and the related statements of
operations, stockholders' equity, and cash flows for the years then ended and
the cumulative amounts since July 1, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DigiCorp (a development stage
company), as of June 30, 2001, 2000 and 1999 and the results of its operations
and its cash flows for the years then ended and the cumulative amounts since
July 1, 1995, in conformity with accounting principles generally accepted in the
United States of America.
F-2
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's revenue generating activities are not in
place and the Company has incurred a loss. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters also are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
JONES, WRIGHT, SIMKINS & ASSOCIATES LLP
Logan, Utah
July 9, 2001
F-3
F-7
DIGICORP
NOTES TO FINANCIAL STATEMENTS
June 30, 2001, 2000 and 1999
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
The Company was organized under the laws of the State of Utah on July 19,
1983. On July 1, 1995, the Company became a development stage enterprise as
defined in SFAS No. 7 when it sold its assets and changed its business plan.
Accordingly the financial statements include cumulative amounts since July 1,
1995. The Company proposes to seek business ventures that will allow for
long-term growth.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting, principally related
to net operating loss carryforwards.
Earnings Per Share
The computation of basic earnings per common share is based on the weighted
average number of shares outstanding during the period.
The computation of diluted earnings per common share is based on the
weighted average number of shares outstanding during the period plus the common
stock equivalents which would arise from the exercise of stock options and
warrants outstanding using the treasury stock method and the average market
price per share during the period. Common stock equivalents are not included in
the diluted earnings per share calculation when their effect is antidilutive.
The Company does not have any stock options or warrants outstanding at June 30,
2001, 2000 and 1999.
F-8
DIGICORP
NOTES TO FINANCIAL STATEMENTS
June 30, 2001, 2000 and 1999
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Concentration of Credit Risk
The Company maintains cash in bank and deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2 - Going Concern
As of June 30, 2001, the Company's revenue generating activities are not in
place, and the Company has incurred a loss for the year then ended. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management intends to seek additional funding through business
ventures. There can be no assurance that such funds will be available to the
Company, or available on terms acceptable to the Company.
F-9
DIGICORP
NOTES TO FINANCIAL STATEMENTS
June 30, 2001, 2000 and 1999
Note 3 - Income Taxes
The difference between income taxes at statutory rates and the amount
presented in the financial statements is a result of the following for the years
ended June 30:
DIGICORP
NOTES TO FINANCIAL STATEMENTS
June 30, 2001, 2000 and 1999
Note 4 - Recent Accounting Pronouncements
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of SFAS No.
133" and in June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statement No. 133." SFAS 138 and 133 establishes accounting and reporting
standards for derivative instruments and requires recognition of all derivatives
as assets or liabilities in the statement of financial position and measurement
of those instruments at fair value. SFAS 133 is now effective for fiscal years
beginning after June 15, 2000. The Company believes that the adoption of SFAS
138 and 133 will not have any material effect on the financial statements of the
Company.
In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB Statement
No. 53 and amendments to FASB Statements No. 63, 89 and 12". The Company
believes that the adoption of SFAS 139 will not have any material effect on the
financial statements of the Company.
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