Item 1.
Business
General
The Company was incorporated in Nevada in 1999 for the purpose of creating and operating a global network of independently owned websites. During Fiscal 2016, the Company sold its domain names, including the
zap.com
domain name.
HRG, our Principal Stockholder, owns approximately
99.5%
of our outstanding common stock. Currently, we have no business operations, other than complying with our reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). While its possible that we may search for assets or businesses to acquire so that we may in the future become an operating company, we expect, although there can be no assurance, that we will wind down our business, liquidate our operations and/or dissolve the Company.
We have broad discretion in selecting a business strategy for the Company and there can be no assurance that we will be successful in implementing such a strategy. If we elect to pursue a business combination, we have broad discretion in identifying and selecting both the industries and the possible acquisition or business combination opportunities. We have not identified a specific industry to focus on and have no present plans, proposals, arrangements or understandings with respect to a business combination or acquisition. See “Risk Factors” elsewhere in this report for further discussion.
Available Information
We file annual, quarterly and current reports and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed under the Exchange Act, as well as Section 16 filings by our officers and directors, are available free of charge at
www.sec.gov
. We will provide a copy of these documents to stockholders upon request. We do not maintain a website.
In addition, the public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
We have adopted a Code of Ethics and Business Conduct that applies to all of our directors and key employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. We will provide without charge, upon request, a copy of the Code of Ethics and Business Conduct. Anyone wishing to obtain a copy should write to NZCH Corporation, Investor Relations, 450 Park Avenue, 29th Floor, New York, New York 10022.
Financial Information about Industry Segments
We follow the accounting guidance which establishes standards for the way companies report information about operating segments in annual financial statements and for related disclosures about products and services, geographic areas and major customers. We have determined that we do not have any separately reportable operating segments.
Employees
At
December 31, 2016
, we employed
three
executive personnel. These employees are also employees of our Principal Stockholder and do not receive a salary or bonus from the Company. In the normal course of business, we may, from time to time, contract personnel to supplement our employee base to meet our business needs. We believe that our employee relations are generally satisfactory.
Item 1A.
Risk Factors
Any of the following factors could materially and adversely affect our business, financial condition, cash flows and results of operations and the risks described below are not the only risks that we may face. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations.
We have no source of revenue; our ability to manage our business is highly dependent on our business strategy and there can be no assurance that we will be able to effectively or successfully implement our business strategy.
We have had no significant revenues since our inception and we do not expect to have revenues in the near future. Accordingly, our ability to manage our business is highly dependent on the implementation of our business strategy. We have broad discretion in selecting a business strategy for the Company and there can be no assurance that we will be able to effectively or successfully implement such business strategy.
While it is possible that we may search for assets or businesses to acquire so that we may in the future become an operating company, we expect, although there can be no assurance, that we will wind down our business, liquidate our operations and/or dissolve the Company.
If we elect to wind down our business, liquidate our operations and/or dissolve the Company, we expect to incur costs and expenses and may experience delays and difficulties with respect to this process.
If we elect to search for assets or businesses to acquire, we expect to incur costs and expenses and may experience delays and difficulties with respect to this process. To date, we have not identified any particular industry or business on which to concentrate our efforts. Accordingly, our current stockholders and prospective investors have no basis to evaluate the comparative risks and merits of investing in the industry of any business we may acquire, and we can provide no assurance we will acquire any businesses or that any investment will ultimately prove to be favorable to us. In any event, stockholders and potential investors will likely not have access to any information about any new business until a transaction is completed (if any) and we have filed a report with the SEC disclosing the nature of the transaction and/or business.
Our Principal Stockholder is under no obligation to maintain its investment in the Company and may dispose of its holdings at any time. A result, a substantial amount of our common stock is eligible for sale into the market and this could depress our stock price.
Our Principal Stockholder is under no obligation to maintain its investment in the Company and may dispose of its holdings at any time. Such disposition may be conducted through one or more public or private transactions without prior notice or disclosure.
Sales of a substantial number of shares of our common stock in the future could cause the market price of our common stock to decline. As of the date of this report, we have outstanding 50,004,474 shares of common stock, of which our Principal Stockholder owns 49,730,905 shares, with the remainder owned by other stockholders. Additionally, we have 3,000,000 shares of common stock reserved for issuance under our 1999 Plan. As of March 13, 2017, we had no stock options outstanding and 3,000,000 shares available for issuance under the plan.
We have registered 1,000,000 shares of our common stock for resale by our Principal Stockholder from time to time under a separate registration statement. We have also granted our Principal Stockholder registration rights with respect to all of its shares. These registration rights effectively allow our Principal Stockholder to register and publicly sell all of its shares at any time and to participate as a selling stockholder in future public offerings by the Company.
Our Principal Stockholder controls us and holds a significant portion of our voting power and the interests of our Principal Stockholder may differ from yours.
As of
March 13, 2017
, our Principal Stockholder owns approximately
99.5%
of our outstanding common stock. As a result, the directors and officers of our Principal Stockholder are able to control the outcome of substantially all matters submitted to our stockholders for approval, including the election of directors and any proposed merger, liquidation, transfer or encumbrance of a substantial portion of our assets, or amendment to our charter to change our authorized capitalization.
The Principal Stockholder could cause corporate actions to be taken even if its interests conflict with or are not aligned with interests of our other stockholders. Moreover, matters not directly related to us can nevertheless affect our Principal Stockholder’s decisions regarding their investment in us. We are one investment in our Principal Stockholder’s group of control investments. Numerous considerations regarding our Principal Stockholder could influence our Principal Stockholder’s decisions whether to maintain, decrease or increase their investment in us, or whether to cause the dissolution of us as a company.
We are dependent on certain key personnel and our affiliation with our Principal Stockholder; our Principal Stockholder and its affiliates will exercise significant influence over us and our business activities; and business activities and other matters that affect our Principal Stockholder and certain key personnel could adversely affect our ability to execute our business strategy.
We are dependent upon the skills, experience and efforts of Omar M. Asali, who serves as the Chairman of our Board of Directors, Chief Executive Officer and President, as well as other personnel, each of whom is also an employee of our Principal Stockholder. As a result of their positions with our Company, such persons have significant influence over our business strategy and make most of the significant policy and managerial decisions of our Company. Mr. Asali has informed HRG that he plans to leave HRG and the Company during HRG’s fiscal year ending September 30, 2017. While we expect to find a suitable replacement for Mr. Asali, there can be no assurance that we will find such a replacement or that the Company and/or HRG will not experience the loss of the services of other senior executives.
While Mr. Asali and our other personnel may devote a portion of their time to our business, they are not required to commit their full time to our affairs and will allocate their time between our operations and their other commitments in their discretion. If Mr. Asali’s or our other personnel’s interests, or HRG’s other business interests, require them to devote more substantial amounts of time to those matters, it could limit their ability to devote time to our affairs and could have a negative effect on our ability to execute our business strategy.
Our officers are also officers of our Principal Stockholder and our officers and our Principal Stockholder may have conflicts of interest.
Although we have not identified any potential acquisition targets or new business opportunities, the possibility exists that we could acquire or merge with a business or company in which our executive officers, directors or their affiliates, including the Principal Stockholder, may have an ownership interest. A transaction of this nature may present a conflict of interest for those parties with a managerial position and/or an ownership interest in both the Company and the acquired entity. Moreover, our Principal Stockholder is also currently seeking potential acquisition candidates and new business opportunities. Our executive officers could identify a potential acquisition target or business opportunity that is suitable for us as well as for our Principal Stockholder, thereby creating a conflict of interest for our officers in determining which entity the potential acquisition candidate or business opportunity should be presented.
We may suffer adverse consequences if we are deemed an investment company under the Investment Company Act and we may be required to incur significant costs, and our activities and investments will be restricted, to avoid investment company status.
We believe we are not an investment company as defined by the Investment Company Act of 1940 (the “Investment Company Act”). The Investment Company Act contains substantive legal requirements that regulate the manner in which investment companies are permitted to conduct their business activities. If the SEC or a court were to disagree with us, we could be required to register as an investment company. This would negatively affect our ability to consummate an acquisition of an operating company; subject us to disclosure and accounting guidance geared toward investment, rather than operating, companies; limit our ability to borrow money, issue options, issue multiple classes of stock and debt, and engage in transactions with affiliates; and require us to undertake significant costs and expenses to meet the disclosure and regulatory requirements to which we would be subject as a registered investment company. To avoid investment company status, we may be required to incur significant costs and our activities and investments will be restricted.
If we consummate an acquisition or business combination, our stockholders will likely not know its structure in advance and will likely suffer dilution.
As of
December 31, 2016
, our management had not had any contact or discussions regarding, and there are no present plans, proposals or arrangements to acquire, any specific assets, property or business. Accordingly, it is unclear whether such an acquisition or business combination would take the form of an exchange of capital stock, a merger or an asset acquisition. However, because we have limited resources, an acquisition or business combination, if any, is likely to involve the issuance of our capital stock.
We currently have 1,500,000,000 authorized shares of common stock and 150,000,000 authorized shares of preferred stock. As of the date of this report, we have
50,004,474
shares of common stock outstanding and no outstanding preferred stock. We will be able to issue significant amounts of additional shares of common stock without obtaining stockholder approval, provided we comply with the rules and regulations of any exchange or national market system on which our shares are then listed (if any). As of the date of this report, we are not subject to the rules of any exchange that would require stockholder approval. To the extent we issue additional common stock in the future, existing stockholders will experience dilution in percentage ownership.
As of the date of this report, we have reserved 3,000,000 shares for options issued or to be issued pursuant to our 1999 Long-Term Incentive Plan (the “1999 Plan”). There are no outstanding options as of the date of this report. The issuance of shares upon the exercise of these potentially issuable options may have a dilutive effect in the future on our common stock, which may adversely affect the price of our common stock.
Management devotes insignificant time to our activities.
Members of our management are not required to and do not devote their full time to our affairs. Because of their time commitments to our Principal Stockholder, and the fact that we have no business operations, we do not anticipate that our management will devote any significant amount of time to the activities and management of the Company.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to document and test our internal controls over financial reporting and to report on our assessment as to the effectiveness of these controls. Any delays or difficulty in satisfying these requirements or negative reports concerning our internal controls could adversely affect our future results of operations and our stock price.
We may in the future discover areas of our internal controls that need improvement, particularly with respect to businesses that we may acquire in the future. We cannot be certain that any remedial measures we take will ensure that we implement and maintain adequate internal controls over our financial reporting processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the market price of our common stock. Failure to comply with Section 404 could potentially subject us to sanctions or investigations by the SEC, or other regulatory authorities, which could also result in a decrease in the market price of our common stock.
We are categorized as a “shell company” under the SEC’s rules.
The SEC’s rules prohibit the use of Form S-8 by a shell company, and require a shell company to file a Form 8-K to report the same type of information that would be required if it were filing to register a class of securities under the Exchange Act when the shell company reports the event that caused it to cease being a shell company. Being a shell company may adversely impact our ability to offer our stock to officers, directors and consultants, and thereby make it more difficult to attract and retain qualified individuals to perform services for the Company, and will likely increase the costs of registration compliance following the completion of a business combination.
There is no assurance of a continued public trading market for our stock and being a low priced security may affect the trading activity and market value of our stock.
As of
December 31, 2016
, there was a limited public market for our common stock. Our common stock is currently quoted on the Over-the-Counter Bulletin Board Quarterly Trade (“OTCQB”), under the symbol “ZPCM”, and an investor may find it difficult to obtain accurate quotations as to the market value of our stock. The trading price of our common stock is highly volatile and could be subject to fluctuations based on a number of factors, some of which are beyond our control. Accordingly, we cannot provide any assurance that investors in our common stock will receive any return or any portion of the cost of their investment in our common stock upon a disposition or in the event we decide to wind down our business, liquidate our operations and/or dissolve the Company.
Our stock is subject to the low-priced security (less than $5.00), or so-called “penny stock,” rules of the SEC that impose additional sales practice requirements on broker/dealers who sell such securities. Some of these requirements are discussed below.
A broker/dealer selling penny stocks must, at least two business days before effecting a customer’s first transaction in a penny stock, provide the customer with a document containing information mandated by the SEC regarding the risks of investing in such stock, and the broker/dealer must receive a signed and dated written acknowledgment of the customer’s receipt of that document before effecting a customer’s first transaction in a penny stock.
If the customer is someone other than an accredited investor (as defined in the Securities Act of 1933, as amended (the “Securities Act”)) or an established customer of the broker/dealer, the broker/dealer must approve the potential customer’s account by obtaining information from the customer concerning the customer’s financial situation, investment experience and investment objectives. Based on this information and any other information known by the broker/dealer, the broker/dealer must reasonably determine that transactions in penny stocks are suitable for the customer and that the customer has sufficient knowledge and experience in financial matters to reasonably be expected to be capable of evaluating the risks of transactions in penny stocks. A broker/dealer must, before effecting a customer’s first purchase of a penny stock, send a written statement of this determination, together with such other disclosures required by the SEC, to the customer, and the broker/dealer must receive a signed and dated copy of the statement before effecting the customer’s first purchase of a penny stock. In such situations, a broker/dealer must also, before effecting a customer’s purchase of a penny stock, deliver to the customer an agreement to the transaction that sets forth the identity and quantity of the penny stock to be purchased, and the broker/dealer must receive the customer’s agreement to the transaction before effecting the transaction.
A broker/dealer must also, orally or in writing, disclose before effecting a customer’s transaction in a penny stock (and thereafter confirm in writing):
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the bid and offer price quotes in and for the penny stock, and the number of shares to which the quoted prices apply;
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the brokerage firm’s compensation for the trade; and
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the compensation received by the brokerage firm’s sales person for the trade.
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In addition, subject to limited exceptions, a brokerage firm must send to its customers trading in penny stocks a monthly account statement that provides the identity and number of shares of each penny stock in the customer’s account and the current estimated market value of such stock, to the extent such market value may be determined. The SEC’s rules may have the effect of reducing trading activity of our common stock in the secondary market and, consequently, may limit your ability to resell any shares you may purchase.
We cannot assure you that there will be market makers in our stock. If the number of market makers in our stock declines or if there are no market makers in our stock, the liquidity of our common stock could be impaired. This could affect the number of shares of common stock which can be bought and sold, and could also result in delays in the timing of transactions and lower prices for the common stock than might otherwise prevail. Further, the lack of market makers could result in persons being unable to buy or sell shares of our common stock on any secondary market.
We may have liabilities as a member of our Principal Stockholder’s consolidated tax group.
We are a member of our Principal Stockholder’s consolidated tax group under the Federal income tax laws and will continue to be a member until the securities held by our Principal Stockholder no longer constitute 80 percent or more of either the voting power or the market value of our outstanding stock. Each member of a consolidated group for Federal income tax purposes is jointly and severally liable for the Federal income tax liability of each other member of the consolidated group. Similar rules may apply under state income tax laws. Although we have a tax sharing and indemnity agreement with our Principal Stockholder, if our Principal Stockholder or members of its consolidated tax group (other than us) fail to pay tax liabilities arising prior to the time we are no longer a member of our Principal Stockholder’s consolidated tax group, we could be required to make payments in respect of these tax liabilities and these payments could materially adversely affect our financial condition.
Because we do not intend to pay any cash dividends on our common stock, holders of our common stock will not be able to receive a return on their shares unless they sell their shares.
We have paid no dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, holders of our common stock will not be able to receive a return on their shares unless they sell them, which could be difficult unless a more active market develops in our stock.
The anti-takeover provisions in our corporate documents may have an adverse effect on the market price of our common stock.
Provisions in our charter and by-laws could make it more difficult for a third party to gain control of us, even if a change in control might be beneficial to our stockholders. This could adversely affect the market price of our common stock. These provisions include:
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the elimination of the right to act by written consent by stockholders after our Principal Stockholder no longer holds a controlling interest in us;
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the elimination of the right to call special meetings of the stockholders by stockholders, except that our Principal Stockholder may do so as long as it holds a controlling interest in us;
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the existence of a staggered board of directors; and
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the ability of our board of directors to designate, determine the rights and preferences of, and to issue preferred stock, without stockholder consent, which could adversely affect the rights of our common stockholders.
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