Item 1. Business.
Strategic Acquisitions, Inc. (the "Company" or "Strategic") was incorporated
under the laws of the State of Nevada on January 27, 1989. Since inception the
Company had no revenues other than nominal interest income. As of the date
hereof, the Company has no commercial operations, has no full- or part-time
employees, and owns no real estate.
The Company's current business plan is to seek, investigate, and, if warranted,
acquire a business, and to pursue other related activities intended to enhance
shareholder value. The acquisition of a business opportunity may be made by
purchase, merger, exchange of stock, or otherwise, and may encompass assets or a
business entity, such as a corporation, joint venture, or partnership. The
Company has limited capital, and it is unlikely that the Company will be able to
take advantage of more than one such business opportunity. The Company intends
to seek opportunities demonstrating the potential of long-term growth as opposed
to short-term earnings.
At the present time the Company has not identified any business opportunity
that it plans to pursue, nor has the Company reached any agreement or
definitive understanding with any person concerning an acquisition.
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given that limited funds are
available for acquisitions, or that any acquisition that occurs will be on
terms that are favorable to the Company or its stockholders.
The Company's search will be directed toward small and medium-sized enterprises
which have a desire to become public corporations and which are able to satisfy,
or anticipate in the reasonably near future being able to satisfy, the minimum
asset requirements in order to qualify shares for trading on NASDAQ or
another stock exchange.
The Company anticipates that the business opportunities presented to it
will (i) be recently organized with no operating history, or a history of
losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv) above. The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
1
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. The Company's discretion in the selection of business opportunities
is unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
In connection with such a merger or acquisition, it is highly likely that
an amount of stock constituting control of the Company would be issued by the
Company or purchased from the current principal shareholders of the Company by
the acquiring entity or its affiliates. If stock is purchased from the current
shareholders, the transaction is very likely to result in substantial gains to
them relative to their purchase price for such stock. In the Company's judgment,
none of its officers and directors would thereby become an "underwriter" within
the meaning of the Section 2(11) of the Securities Act of 1933, as amended (the
"Act").
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company, although its
officers, directors and significant shareholders seek out such opportunities and
respond to unsolicited proposals in their ordinary course of business.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Nevada law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
2. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it
is authorized, approved or ratified, by the Board of Directors or the
stockholders.
2
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, and numerous
other factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is anticipated that
the historical operations of a specific business opportunity may not necessarily
be indicative of the potential for the future because of the possible need to
shift marketing approaches substantially, expand significantly, change product
emphasis, change or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proven
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to only one venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors, to seek the
stockholders' advice and consent, or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors. Although there are no
current plans to do so, Company management might also hire an outside consultant
to assist in the investigation and selection of business opportunities,and might
pay a finder's fee. Since Company management has no current plans to use
any outside consultants or advisors to assist in the investigation and selection
of business opportunities, no policies have been adopted regarding use of such
consultants or advisors, the criteria to be used in selecting such consultants
or advisors, the services to be provided, the term of service, or regarding the
total amount of fees that may be paid. However, because of the limited resources
of the Company, it is likely that any such fee would be paid in stock and not
in cash.
3
In assessing a potential transaction, the Company anticipates that it
will consider, among other things, the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity will
be received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition of
the business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for trading in the over-the-counter markets or listing on a
securities exchange;
4. Capital requirements and anticipated availability of required funds, to
be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size and
experience within the industry;
7. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment; and
8. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur 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 extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired. It should be noted that the Company
has not completed a transaction in the twenty years of its existence.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals, if
and when any are received, and the selection of a business opportunity may take
several months or more.
The Company has no business proposals under consideration as of the date of
this annual report.
4
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity 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 services 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 prior to completion of a merger
transaction; and other information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there can be no assurance that the
Company would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
5
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of common stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986 (the "Internal Revenue Code"), depends upon the
issuance to the stockholders of the acquired company of a controlling interest
(i.e., 80% or more) of the common stock of the combined entities immediately
following the reorganization. If a transaction were structured to take advantage
of these provisions rather than other "tax free" provisions provided under the
Internal Revenue Code, the Company's current stockholders would retain in the
aggregate 20% or less of the total issued and outstanding shares. This could
result in substantial additional dilution in the equity of those who were
stockholders of the Company prior to such reorganization. Any such issuance of
additional shares might also be done simultaneously with a sale or transfer of
shares representing a controlling interest in the Company by the current
officers, directors and principal shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
6
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision were made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
An acquisition made by the Company may be in an industry which is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "Blank Check" companies, some of which may have
more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide its shareholders with disclosure
documentation concerning a possible target company prior to acquisition, because
the Nevada Business Corporation Act vests authority in the board of directors to
decide and approve matters involving acquisitions within certain restrictions.
If any transaction is structured as an acquisition, not a merger, with the
Company being the parent company and the acquiree being merged into a wholly
owned subsidiary, a shareholder will have no right of dissent under Nevada law.
Employees
The Company has no employees. Management of the Company 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
business opportunities. The need for employees and their availability will be
addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities. The Company has previously
paid its Secretary/Treasurer in 2004 and 2009 for her services in bookkeeping,
recordkeeping, filing tax forms and filing of reports with the SEC. Although
there is no current plan with respect to its nature or amount, additional
remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered.
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