================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
WENTWORTH III, INC.
(Name of Small Business Issuer in its Charter)
Delaware 6770 84-1588927
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
650 So. Cherry Street, Suite 420, Denver, CO 80246 (303) 320-1870
(Address and Telephone Number of Principal Executive Offices and
Principal Place of Business)
Spencer I. Browne, Secretary
650 So. Cherry Street, Suite 420, Denver, CO 80246 (303) 320-1870
(Name, Address and Telephone Number of Agent for Service)
==============================================================================
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
CALCULATION OF REGISTRATION FEE
No registration fee is due on a reconfirmation offer under Rule 419.
ii
PROSPECTUS
Wentworth III, Inc.
50,000 shares of common stock, par value $.01 per share
RECONFIRMATION OFFER
This prospectus relates to the reconfirmation offering required by Rule 419
promulgated by the U.S. Securities and Exchange Commission under the Securities
Act of 1933.
The reconfirmation offering concerns the 50,000 shares (the "Shares") of
common stock, par value $.01 per share ("Common Stock") which we sold in our
initial public offering ("IPO") which was completed in November 2002.
We entered into a Securities Exchange Agreement with Whitco Company, L.L.P.
("Whitco") in February 2003 (the "Agreement"). Pursuant to the terms of the
Agreement, we have agreed to exchange with Whitco all of its issued and
outstanding partnership units, and options to purchase partnership units, for
authorized but unissued shares of Common Stock aggregating not less than 80% of
our issued and outstanding capital stock. Currently, it is anticipated that
holders of Whitco units will receive 2,991,368 shares of Common Stock and
holders of Whitco options will receive options to purchase 808,632 shares of
Common Stock, or an aggregate of 3,800,000 shares and options to purchase Common
Stock, on the basis of 3,350.47217 shares of Common Stock for each unit of
Whitco owned or option held. The options represent options issued to key
employees of Whitco from June 2000 through December 31, 2002. The options are
converted on the same basis as the Common Stock. The exercise price, on a
converted basis, is $0.30/share for 350,125 shares and $0.86 for 458,507 shares.
Our current shareholders will continue to own 200,000 shares of Common Stock,
assuming that all of the investors in the IPO reconfirm their investment, and an
additional 200,000 shares will be issued to Keating Investments, LLC as a fee in
connection with the securities exchange with Whitco. We are aware that Whitco
intends to reorganize itself as a limited partnership and assign its rights
under the Agreement to that limited partnership. For purposes of this
prospectus, the term Whitco will apply to both the current limited liability
partnership and the proposed limited partnership.
As a result of the transaction, Whitco will become a wholly-owned
subsidiary of Wentworth. Whitco sells commercial lighting poles and accessories
used for sports arenas, outdoor area lighting and roadways. The terms of the
Agreement and rights thereunder are more fully described later in this
prospectus. Subject to the satisfaction of the requirements of Rule 419 under
the Securities Act of 1933, we intend to consummate the transaction with Whitco,
but we cannot assure you that the transaction will, in fact, be consummated.
It is expected that our stockholders at the effective time of our
acquisition of Whitco will collectively own approximately 6% of our outstanding
Common Stock immediately following the effective time of such acquisition,
assuming that all of the investors in our IPO reconfirm their investment
(excluding the potential exercise of any of the outstanding options issued in
the exchange).
This reconfirmation prospectus is being furnished to you, as the investors
in the IPO, so you may consider whether or not to reconfirm your investment as a
result of our entering into the Agreement. The proceeds from our IPO have been
placed into escrow and may only be released to us if a sufficient number of
investors reconfirm their investment in their respective Shares.
Prior to the IPO, and as of the date of this reconfirmation offering, there
has been no public market for our Common Stock and we cannot assure you that an
active trading market will exist after the proposed exchange is completed, or
otherwise.
This reconfirmation offering involves a high degree of risk and an
immediate substantial dilution in your investment. Only those persons who can
afford the loss of their entire investment should reconfirm their investment in
the Shares. See "Risk Factors" commencing on page 4 hereof.
Throughout this prospectus, the terms "we," "our" and "our company" refers
to Wentworth III, Inc. and, unless the context indicates otherwise, Whitco on a
consolidated basis.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Price to Public Underwriting Proceeds to the Proceeds paid Proceeds
Discounts and Company out for in Escrow
Commissions Expenses
---------------- ------------------ --------------------- --------------- ------------
Per Share $ 1.00 $ 0 $ 1.00 $ 0.10 $ 0.90
TOTAL $ 50,000.00 $ 0 $ 50,000.00 $ 5,000 $ 45,000
The date of this prospectus is February 20, 2003
iii
TABLE OF CONTENTS
Page
RECONFIRMATION PROSPECTUS SUMMARY..............................................1
Our Company...........................................................1
Corporate Information.................................................1
Our Initial Public Offering and Rule 419..............................1
Our Proposed Acquisition..............................................1
The Reconfirmation Offering...........................................2
Whitco Company L.L.P..................................................2
Outstanding Securities................................................2
Accounting Treatment..................................................3
Certain Income Tax Consequences.......................................3
Summary Financial Information.........................................3
RISK FACTORS...................................................................6
Risks Relating to the Proposed Acquisition............................10
FORWARD-LOOKING STATEMENTS.....................................................12
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER SEC RULE 419......................12
RECONFIRMATION LETTER..........................................................13
TERMS OF RECONFIRMATION OFFERING...............................................13
THE EXCHANGE AGREEMENT ........................................................14
DILUTION AND OTHER COMPARATIVE PER SHARE DATA..................................14
DIVIDEND POLICY................................................................16
CAPITALIZATION.................................................................16
USE OF PROCEEDS............................................................... 17
PLAN OF OPERATION............................................................. 18
THE SECURITIES EXCHANGE AGREEMENT............................................. 19
BUSINESS OF WHITCO COMPANY LLP................................................ 19
Overview ............................................................ 19
Products and Services................................................ 21
Business Strategy.................................................... 22
Competition.......................................................... 22
History.............................................................. 22
Management Experience................................................ 22
Risk Factors Affecting Whitco's Business Operations.................. 23
Legal Proceedings.................................................... 26
Seasonality.......................................................... 26
Employees............................................................ 26
Properties........................................................... 26
WHITCO COMPANY L.L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................... 27
Results of Operations................................................ 27
Liquidity and Capital Resources...................................... 30
Impact of Recently Issued Accounting Pronouncements.................. 31
WENTWORTH III, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATION........................... 32
Business............................................................. 32
Plan of Operation.................................................... 32
MANAGEMENT.................................................................... 34
Executive Officers and Directors..................................... 34
Other Blank Check Offerings.......................................... 35
Executive Compensation............................................... 36
Certain Relationships and Related Transactions....................... 36
Property............................................................. 36
Limitation on Liability and Indemnification Matters.................. 37
Conflict of Interest Policy.......................................... 37
iv
PRINCIPAL STOCKHOLDERS........................................................38
DESCRIPTION OF SECURITIES.....................................................39
General ............................................................39
Common Stock.........................................................39
Preferred Stock......................................................40
State Blue Sky Information...........................................40
Transfer Agent ....................................................40
PLAN OF DISTRIBUTION..........................................................40
CERTAIN MARKET INFORMATION....................................................41
SHARES ELIGIBLE FOR FUTURE SALE...............................................42
ADDITIONAL INFORMATION........................................................43
LEGAL PROCEEDINGS.............................................................43
EXPERTS .....................................................................44
INDEX TO FINANCIAL STATEMENTS.................................................45
-------------------------------------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information that is different. This
prospectus is intended to offer no securities other than the Common Stock. This
prospectus may be used only where it is legal to offer and sell these
securities. The information in this prospectus may be accurate on the date of
this document only.
------------------------------------------
v
RECONFIRMATION PROSPECTUS SUMMARY
This is a summary of the information contained in this reconfirmation
prospectus. You should carefully read the entire prospectus, including the "Risk
Factors" section, to fully understand our proposed business operations, the
reconfirmation offering being made under this prospectus and the risks
associated with an investment in our securities.
Our Company
We were organized as a Delaware corporation on March 7, 2001 as a "blank
check" company for the purpose of creating a corporate vehicle to seek,
investigate and, if the investigation warrants, acquire one or more interests in
business opportunities presented to us by persons or firms who or which desire
to employ our funding in their businesses or to seek the perceived advantages of
a publicly-held corporation.
Corporate Information
Our offices are currently located at 650 So. Cherry Street, Suite 420,
Denver, CO 80246. Our telephone number is (303) 320-1870.
Our Initial Public Offering and Rule 419
We completed our initial public offering in November 2002. We sold a total
of 50,000 shares of Common Stock at a price of $1.00 per share. All of the
Shares were sold for our benefit and there were no selling stockholders in the
IPO.
The $50,000 proceeds of the IPO, less 10% which was disbursed to us for
expenses, were placed into escrow in accordance with Rule 419 promulgated by the
U.S. Securities and Exchange Commission (the "SEC" or "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). Rule 419 requires us,
as a "blank check" company, to hold the proceeds from our IPO, less 10% for
payment of expenses incurred in connection with the IPO, in escrow pending the
earlier of the (a) expiration of an eighteen month period commencing on the date
on which the registration statement for our IPO was originally declared
effective or (b) reconfirmation by a sufficient number of investors in our IPO
of their respective purchases in the IPO following receipt by these investors of
a prospectus containing required information and disclosures concerning, among
other matters, the results of the IPO and our proposed acquisition of one or
more businesses or assets that will constitute our business and for which the
fair value of the business or net assets to be acquired represents at least 80%
of the maximum proceeds to be received from the IPO.
Our Proposed Acquisition
We entered into a Securities Exchange Agreement with Whitco Company, L.L.P.
("Whitco") in February 2003 (the "Agreement"). Under the Agreement, we have the
right to exchange authorized but unissued Common Stock aggregating not less than
80% of our issued and outstanding Common Stock for all of the issued and
outstanding partnership units, and all options to purchase partnership units, of
Whitco, subject to specified conditions and terms set forth in the Agreement.
The exchange will be structured as an exchange of equity. The consideration to
be paid by us in acquiring the partnership units, and options to purchase
partnership units, of Whitco will consist of our issuance of 2,991,368 shares of
Common Stock and options to purchase 808,632 shares of Common Stock. We are
aware that Whitco intends to reorganize itself as a limited partnership and
assign its rights under the Agreement to that limited partnership. For purposes
of this prospectus, the term Whitco will apply to both the current limited
liability partnership and the proposed limited partnership.
1
The Reconfirmation Offering
This prospectus is to serve as the means by which we are soliciting the
investors in our IPO to reconfirm their respective purchases of the Shares in
the IPO. We must receive, by no later than April 7, 2003, 45 days from
the date of this prospectus, written confirmations from all investors in the
IPO. The IPO proceeds will be released to us upon receipt of these written
reconfirmations. The IPO proceeds, together with accrued interest, will be
returned to those IPO investors who do not provide us with written confirmation
within the confirmation period, if the reconfirmation offer is accepted by a
sufficient number of other IPO investors.
Whitco Company, L.L.P.
Whitco is a nationwide marketer and distributor of steel and aluminum
outdoor lighting poles and related accessories. Founded in 1969, Whitco
generates revenue through the sale of poles directly to original equipment
manufacturers (OEM's) and indirectly to other third parties through its sales
representatives.
Outstanding Securities
We set forth below a summary of our equity ownership both before the IPO
and after giving effect to the completion of our proposed securities exchange
with Whitco, as well as other information concerning the securities sold in our
IPO. We have assumed, for the purposes of this summary, that all of the
investors in the IPO will reconfirm their respective purchases of Shares.
Shares of Common Stock outstanding immediately prior to the IPO................. 150,000
Shares of Common Stock sold in the IPO.......................................... 50,000
Shares of Common Stock issued after the IPO..................................... 0
Shares to be issued in connection with our acquisition of Whitco................ 2,991,368
Shares to be issued as a fee in connection with the acquisition of Whitco....... 200,000
--------------
Shares to be outstanding after our acquisition of Whitco....................... 3,391,368
Use of proceeds from our IPO.............................. Payment of deferred offering costs of IPO.
2
Accounting Treatment
The proposed exchange will be treated, for accounting purposes, as a
reverse acquisition which results in the recapitalization of Whitco in as much
as it is deemed to be the acquiring entity. Whitco will be treated as the
acquirer for accounting purposes because the former partners of Whitco will
receive a larger portion of the common stockholder interests and voting rights
than those retained by our stockholders immediately prior to completion of the
acquisition.
Certain Income Tax Consequences
The acquisition is intended to qualify as a "tax-free reorganization"
for purposes of the United States federal income tax laws. As such, our
stockholders, as well as the holders of partnership units and options to
purchase partnership units of Whitco, who are subject to United States income
tax will not recognize gain or loss upon the closing of the acquisition
transaction. The acquisition also is not intended to result in the recognition
of gain or loss to either us or Whitco in the respective jurisdictions where we
and they are subject to taxation. NO OPINION OF COUNSEL, NOR ANY RULING FROM THE
INTERNAL REVENUE SERVICE, HAS BEEN OBTAINED IN CONNECTION WITH THE PUBLICATION
OF THE FOREGOING INCOME TAX CONSEQUENCES. THIS INFORMATION IS FOR GENERAL
INFORMATION ONLY AND YOU SHOULD CONSULT WITH YOUR OWN ACCOUNTANTS AND TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION TRANSACTION TO
YOU.
SUMMARY FINANCIAL INFORMATION
Wentworth III
-------------
The table below contains certain summary historical and pro forma
financial data of Wentworth III. The historical financial data for the period
ended December 31, 2002, has been derived from our audited financial statements
which are contained in this prospectus. The information should be read in
conjunction with those financial statements and notes, and other financial
information included in this prospectus.
For the Year Ended From
December 31, 2002 March 7, 2001 to
December 31, 2001
Statement of Income Data:
Net Sales $ -0- $ -0-
Net Income(Loss) $ (18,525) $ (1,322)
Net Gain (Loss) Per Share $ (.01) $ (.01)
Shares Outstanding 200,000 150,000
As of December
31, 2002
Balance Sheet Data
Working Capital (Deficit) $ (36,910)
Total Assets $ 47,125
Long-Term Debt $ 0
Total Liabilities $ 39,035
Total Shareholders' Equity $ 8,090
3
Whitco
------
The table below contains certain summary historical financial data of
Whitco. Net income (loss) for purposes of this summary equals the historical net
income (loss) adjusted for pro forma taxes, as if Whitco were a C-corporation
for tax purposes. The historical and pro forma financial data for the year ended
September 30, 2002 has been derived from our audited financial statements which
are contained in this prospectus. The information should be read in conjunction
with those financial statements and notes, and other financial information
included in this prospectus.
Nine months ended September 30, Three months Twelve months Twelve months
2002 ended December ended December Ended December
31, 2002 31, 2002 31, 2001
Statement of Income Data:
Sales $10,243,036 $3,282,406 $13,525,442 $11,784,438
Net Income (Loss)- Proforma $89,672 $ (43,156) $ 46,516 $ 198,531
Net Income (Loss) Per Unit $107.26 $ (51.62) $ 55.64 $ 165.44
Partnership Units Outstanding 836 836 836 1,200
As of As of December 31, 2002
September 30, 2002
Balance Sheet Data
Working Capital (Deficit) ($146,978) $(242,457)
Total Assets $6,275,218 $6,008,173
Long-Term Debt $1,838,572 $1,809,413
Total Liabilities $5,137,721 $4,936,670
Total Partners' Equity $1,137,497 $1,071,503
4
Whitco and Wentworth III
------------------------
Pro-forma Combined, Condensed Information
-----------------------------------------
The pro forma information in the table below combines the balance sheet of
Whitco and Wentworth III as of December 31, 2002 as if the acquisition was
effective on December 31, 2002, and as if certain noteholders of Whitco
converted $376,000 of notes into partnership units that will be converted into
Wentworth III common stock. The table also combines the statements of operations
of Whitco and Wentworth III for the twelve months ended December 31, 2002 as if
the acquisition was effective on January 1, 2002. This information is not
necessarily indicative of future operations or the actual results that would
have occurred had the merger been consummated as of January 1, 2002. This pro
forma information should be read in conjunction with the historical and pro
forma financial statements included elsewhere in this document.
----------------------------------------------- ----------------------
Statement of Income Data
----------------------------------------------- ----------------------
Sales $13,525,442
----------------------------------------------- ----------------------
Loss before pro forma taxes $(452,185)
----------------------------------------------- ----------------------
Net Loss after pro forma taxes $(461,415)
----------------------------------------------- ----------------------
Net Loss (after pro forma taxes) $(.14)
per share
----------------------------------------------- ----------------------
Balance Sheet Data
----------------------------------------------- ----------------------
Working capital $(375,867)
----------------------------------------------- ----------------------
Total assets $6,055,298
----------------------------------------------- ----------------------
Long-term debt $1,433,413
----------------------------------------------- ----------------------
Total liabilities $4,741,205
----------------------------------------------- ----------------------
Stockholders' equity $1,314,093
----------------------------------------------- ----------------------
5
RISK FACTORS
An investment in our securities is highly speculative and subject to numerous
and substantial risks. These risks include those set forth below and elsewhere
in this prospectus. You should not reconfirm your investment in the Shares you
purchased in the IPO unless you can afford to lose your entire investment.
Readers are encouraged to review these risks carefully before making any
investment decision.
We used an arbitrary basis for determining the offering price of the Shares.
The offering price of the Shares had no relation to the value of our
actual or proposed assets or other objective criteria of value, so you may not
be able to judge whether or not you are likely to achieve a return on your
investment. We arbitrarily determined the offering price of the Shares and such
price was not necessarily related to our net worth, assets, earnings, book value
or any other objective financial statement criteria. Among the factors
considered by us were our lack of operating history, estimates of our business
potential, the proceeds to be raised by the IPO, the amount of capital to be
contributed by the public in proportion to the amount of stock to be retained by
stockholders prior to the IPO, our relative requirements and the current market
conditions in the over-the-counter market. Accordingly, you should not consider
the price you paid for the Shares as any objective indication of our actual
value. You are therefore bearing the risk that you are paying more for our
Shares than our Common Stock is objectively worth or valued by the public
markets. This could result in an insufficient return, or even a loss, on your
investment even if we successfully consummate the business combination with
Whitco or any other business combination.
There could be conflicts of interest among management which may be adverse to
your interests.
Conflicts of interest create the risk that management may have an incentive
to act adversely to the interests of other investors. A conflict of interest may
arise between our management's personal pecuniary interest and its fiduciary
duty to our stockholders. While management would own only approximately four
percent (4%)of our outstanding Common Stock after the transaction with Whitco is
completed, in the event such transaction is not completed, management would
continue to own seventy-five percent (75%), and would therefore continue to
retain control. Currently, Kevin R. Keating, President, owns a total of 90,000
shares of Common Stock, comprising approximately 45% of the outstanding shares.
Further, management's own pecuniary interest may at some point compromise its
fiduciary duty to our stockholders. In addition, both Mr. Keating and Spencer I.
Browne, who is our secretary and a director, are currently involved with other
blank check offerings and conflicts may arise in the pursuit of business
combinations with such other blank check companies with which Mr. Keating, Mr.
Browne and other members of our management are, and may be in the future,
affiliated. If we and the other blank check companies our officers and directors
are affiliated with desire to take advantage of the same opportunity, those
officers and directors affiliated with both companies would abstain from voting
upon the opportunity. In the event of identical officers and directors, the
company that first filed a registration statement with the SEC will be entitled
to proceed with the proposed transaction.
6
Management can exercise nearly complete control of the Company.
Current management owns 75% of the issued and outstanding Common Stock.
Given their large voting control, current management is in the position to elect
all of the members of our board of directors and thereby control the policies of
our company. Further, management controls a significant portion of the voting
power of the Common Stock. As such, our management has substantial influence
over our company, which influence may not necessarily be consistent with the
interests of our other stockholders.
We have no operating history.
As we have no operating history or revenue and only minimal assets,
there is a risk that, if the Whitco transaction is not consummated, we will be
unable to continue as a going concern and consummate a business combination. We
have had no recent operating history nor any revenues or earnings from
operations since inception. We have no significant assets or financial
resources. We will sustain operating expenses without corresponding revenues, at
least until the consummation of a business combination. This may result in our
incurring a net operating loss that will increase continuously until we can
consummate a business combination with a profitable business opportunity. In the
event the proposed transaction with Whitco is not consummated, we cannot assure
you that we can identify a suitable business opportunity and consummate a
business combination.
Currently, there is no public market for your shares.
Escrowed securities can only be transferred under limited
circumstances, resulting in little or no liquidity for your investment for a
substantial period of time. No transfer or other disposition of the escrowed
securities sold in the IPO is permitted other than by will or the laws of
descent and distribution, or under a qualified domestic relations order, as
defined by the Internal Revenue Code of 1986, as amended, or Title 7 of the
Employee Retirement Income Security Act of 1974, or the related rules. Under
Rule 15g-8 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), it is unlawful for any person to sell or offer to sell the securities or
any interest in or related to the securities held in a Rule 419 escrow account
other than under a qualified domestic relations order in divorce proceedings.
Therefore, any and all contracts for sale to be satisfied by delivery of the
securities and sales of derivative securities to be settled by delivery of the
securities are prohibited. You are further prohibited from selling any interest
in the securities or any derivative securities whether or not physical delivery
is required while the securities are in the Rule 419 escrow account. As a
result, you will have little or no liquidity for your investment for a
substantial period of time, and may therefore be unable to invest your funds in
alternative investments. In the event you elect not to rescind your purchase of
Shares and we do not consummate the transaction with Whitco or any other
business combination satisfying the requirements of Rule 419, you will have no
right to the return of or the use of your funds or the securities purchased
until February 6, 2004. You will be offered the return of your funds only under
the circumstances set forth in Rule 419, which include upon our entering into
any proposed business combination satisfying the requirements of Rule 419.
If the Common Stock is released to you from the escrow account and a viable
public market for them does not develop, you will not be able to easily sell
your shares, if at all.
7
There has not been and may never be a public market for the Common
Stock and we cannot assure you that a public market will ever develop. We cannot
predict the extent, if any, to which investor interest will lead to the
development of a viable trading market in our shares. The absence of a public
market could effectively eliminate your ability to sell your shares.
Target companies that fail to comply with SEC reporting requirements may delay
or preclude acquisition.
Sections 13 and 15(d) of the Exchange Act 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. In the event the
business combination with Whitco is not consummated and we identify another
suitable business which is already a reporting company, the time and additional
costs that may be incurred by some target entities to prepare these statements
may significantly delay or essentially preclude consummation of an acquisition.
Otherwise suitable acquisition prospects which 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 Exchange Act are applicable.
We may be subject to further government regulation which would adversely affect
our operations.
Although we will be subject to the reporting requirements under the
Exchange Act, management believes we will not be subject to regulation under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), since
we will not be engaged in the business of investing or trading in securities. If
we engage in business combinations which result in our holding passive
investment interests in a number of entities, we could be subject to regulation
under the Investment Company Act. If so, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission (the "SEC" or "Commission") as to our status under the
Investment Company Act and, consequently, violation of the Act could subject us
to material adverse consequences.
We may not be able to structure our acquisition to result in tax-free treatment
for the companies or their shareholders or partners, which could deter third
parties from entering into certain business combinations with us or result in
your being taxed on consideration received in a transaction.
Currently, a transaction may be structured so as to result in tax-free
treatment to both companies and all of its equity holders, as prescribed by
various federal and state tax provisions. We intend to structure any business
combination so as to minimize the federal and state tax consequences to
Wentworth III, Whitco and all of their respective equity holders, or whomever is
our eventual target entity, if any. However, we cannot guarantee the 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 that may have an adverse effect on either or
both parties to the transaction as well as their equity holders.
If we raise additional funds through the issuance of our equity securities, or
determine to register the Common Stock granted in any business combination, the
percentage ownership of our stockholders will be reduced and stockholders will
experience dilution which could substantially diminish the value of their common
stock.
One of the factors which generally affects the market price of publicly
traded equity securities is the number of shares outstanding in relationship to
assets, net worth, earnings or anticipated earnings. If a public market develops
for our shares, or if we determine to register for sale to the public those
shares of Common Stock granted in any business combination, a material amount of
dilution can be expected to cause the market price of our Common Stock to
decline. Furthermore, the public perception of future dilution can have the same
effect even if the actual dilution does not occur.
If we raise additional funds through the issuance of our equity securities,
those securities may convey rights, preferences or privileges senior to those of
the rights of the holders of Common Stock which could substantially diminish the
rights of the holders of Common Stock and the value of their Common Stock.
In order for us to obtain additional capital, we may find it necessary
to issue securities conveying rights senior to those of the holders of Common
Stock. Those rights may include voting rights, liquidation preferences and
conversion rights. To the extent we convey senior rights, the value of our
Common Stock can be expected to decline.
8
If we incur indebtedness, we may become too highly leveraged and would be in
risk of default.
There is no contractual limit to the amount of debt we can take on,
although we intend to follow a conservative debt policy. If our policy were to
change or be eliminated due to unforeseen circumstances, we could become more
highly leveraged, which could adversely affect our ability to meet our
obligations and we would then be in risk of default, which could have a material
adverse effect on our financial condition and business prospects.
If we do not qualify our securities in states other than Colorado and Delaware,
your resale of any Shares you acquired may be limited.
We offered and sold the Shares only in the State of Colorado. We
believe the Common Stock will be eligible for sale on a secondary market basis
in other states based upon applicable exemptions from that state's registration
requirements; subject, in each case, to the exercise of the broad discretion and
powers of the securities commission or other administrative bodies having
jurisdiction in each state, and any changes in statutes and regulations which
may occur after the date of this prospectus. However, the lack of registration
in most states and the requirement of a seller to comply with the requirements
of state blue sky laws in order for the seller to qualify for an applicable
secondary market sale exemption may cause an adverse effect on the resale price
of our securities, as well as the delay or inability of a holder of our
securities to depose of such securities.
If we do not consummate the business combination with Whitco, there is the
possibility we will not be able to identify another suitable business for
acquisition or merger and we and our stockholders will face uncertainty over the
future of our company.
Although we have an existing agreement for a business combination with
Whitco, there can be no assurance such transaction will, in fact, be
consummated. The proposed transaction is subject to a number of conditions,
including satisfactory due diligence review, third party approvals and no
material adverse change in Whitco's business. In the event the business
combination with Whitco is not consummated, there can be no assurances we will
successfully identify, evaluate or conclude a suitable business combination. We
cannot guarantee we will be able to negotiate a business combination on
favorable terms, and there is consequently a risk that funds allocated to the
purchase of our shares will not be invested in a company with active business
operations. In the event we fail to complete the business combination with
Whitco, or any other transaction in compliance with Rule 419 on or before
February 6, 2004, we are required by Rule 419 to promptly return to the IPO
investors the funds paid for their Common Stock which are being held in escrow.
In such event, your funds could be returned to you with some loss of capital due
to expenses.
9
Risks Relating to the Proposed Acquisition
Issuance of Common Stock in the proposed acquisition transaction will result in
substantial additional dilution.
The proposed transaction with Whitco will result in our issuing an
aggregate of 3,800,000 shares and options to purchase shares of Common Stock.
This issuance will result in substantial and immediate dilution to your
percentage ownership of Common Stock.
Because a public market for our securities is not likely to develop after the
Whitco transaction, you may not be able to sell your securities or achieve
liquidity in your investment.
Currently, there is no public market for our securities. It is unlikely
a regular trading market will develop when the reconfirmation offering is
concluded or immediately following the completion of the proposed acquisition
with Whitco. You will likely not be able to sell your securities if a regular
trading market for our securities does not develop. Further, we can give no
assurance such a market could be sustained if a trading market for our
securities were to develop, nor that the Shares could be resold at their
original offering price or at any other price. Any market for our securities
which may develop will very likely be a limited one. In any event, if our
securities traded at a low price, many brokerage firms may choose not to engage
in market making activities or effect transactions in our securities.
Accordingly, purchasers of our securities may have difficulties in reselling
them and many banks may not grant loans using our securities as collateral.
We will lack business diversification.
Whitco will be our sole operating business following the proposed
acquisition. Accordingly, the prospects for our success will be entirely
dependent upon the future performance of a single business. Unlike other
entities with resources to consummate several business combinations or entities
operating in multiple industries, we do not expect to have the resources to
diversify our operations or benefit from the possible spreading of risks or
offsetting of losses.
We have a limited ability to evaluate management of a target business.
We expect our present management to play no managerial role in the
company following a business combination. Although we have met with the
management of Whitco in connection with our evaluation of the proposed business
combination, our assessment of management may be incorrect. In evaluating
Whitco, we have considered several factors, including the following:
o experience and skill of management and availability of additional personnel
of the target business;
o costs associated with effecting the business combination;
o equity interest retained by our stockholders in the merged entity;
o the financial statements of the target business;
o growth potential of the target business;
o capital requirements of the target business;
o capital available to the target business;
o competitive position of the target business;
o stage of development of the target business;
o degree of current or potential market acceptance of the target business,
products and services;
o proprietary features and degree of intellectual property or other
protection of the target business; and
o the regulatory environment in which the target business operates.
Failure to implement Whitco's business strategy may result in our inability to
be profitable.
We anticipate Whitco will pursue an aggressive growth strategy
following its acquisition by our company. The success of this growth strategy
will depend in large part upon the ability to:
o develop and expand Whitco's business through the selection of appropriate
new markets;
o acquire, merge with or enter into partnering arrangements with other
companies within and related to Whitco's market; and
o identify, obtain and retain experienced personnel.
10
Additionally, Whitco may incur significant start-up costs in connection
with entering new markets. There can be no assurance Whitco will achieve its
planned expansion goals on a timely basis, if at all, or manage its growth
effectively. Failure to expand or manage its growth could have a material
adverse effect on Whitco's and our financial condition and results of
operations.
Even if Whitco is successful in acquiring, merging or partnering with additional
companies, there can be no assurance as to how long a period of time
accomplishing such profitability will take or the levels of future profitability
which may be achieved.
Acquisitions, mergers and partnerships all involve a number of risks,
including the diversion of management's attention and finances, issues related
to the assimilation of the operations and personnel of the businesses and
potential adverse effects on operating results. There can be no assurance that
Whitco will find attractive candidates for such arrangements, that such deals
can be consummated on acceptable terms, that the demands of any such arrangement
can be integrated successfully into Whitco's existing operations or that any
such transaction will not have an adverse effect on Whitco's financial condition
or results of operations.
There was no independent valuation of Whitco upon which you can base an
investment decision.
Because of our lack of suitable financial resources, we are unable to
obtain a feasibility study, independent analysis or current market survey of
Whitco. Feasibility studies, independent analyses and market surveys are
customarily used by companies in determining whether to make an acquisition.
Companies which have historically made successful acquisitions have relied upon
the information in those documents. If we had the information those documents
would have disclosed to us, we may have decided either not to enter into the
transaction with Whitco or to attempt to renegotiate the terms and conditions.
Accordingly, the terms and consideration we will pay in the Whitco
transaction were established through our own analysis and arms-length
negotiations with Whitco, and does not necessarily bear any relationship to
Whitco's asset value, net worth or other established criteria of value, and
should not be considered indicative of the actual value of Whitco or us. You
should not consider the number of shares of Common Stock to be issued in the
proposed acquisition of Whitco as any indication of our value following
completion of the acquisition transaction. Furthermore, neither we nor Whitco
has obtained either an appraisal of any entity or their respective securities or
an opinion that the acquisition is fair from a financial perspective.
If we are unable to effectively manage the anticipated growth, our business,
financial condition and results of operations will suffer.
If Whitco is successful in expanding its business as planned, this
growth will place a significant strain on its financial and managerial
resources. As part of this anticipated growth, we may have to implement new
operational and financial systems and procedures and controls to expand, train
and manage employees. If the systems, procedures and controls do not function as
planned, our financial condition and results of operations may be significantly
impaired. The impairment could result in the failure of our business in which
case our stockholders could expect to lose their total investment.
11
FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus include "forward-looking
statements" within the meaning of such term under the Securities Act of 1933 and
Securities Exchange Act of 1934. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which could cause actual
financial or operating results, performances or achievements expressed or
implied by such forward-looking statements not to occur or be realized. Such
forward-looking statements generally are based on our best estimates of future
results, performances or achievements, based upon current conditions and
assumptions. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "can," "could," "project," "expect,"
"believe," "plan," "predict," "estimate," "anticipate," "intend," "continue,"
"potential," "will," "would," "should," "aim," "opportunity" or similar terms,
variations of those terms or the negative of those terms or other variations of
those terms or comparable words or expressions. These risks and uncertainties
include, but are not limited to:
o general economic conditions in both foreign and domestic markets,
o cyclical factors affecting Whitco's industry,
o lack of growth in Whitco's industry,
o our ability to comply with government regulations,
o a failure to manage our business effectively and profitably, and
o our ability to sell both new and existing products and services at
profitable yet competitive prices.
You should carefully consider such risks, uncertainties and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER SEC RULE 419
Rule 419, promulgated by the SEC under the Securities Act, requires the
proceeds of our IPO, after deducting underwriting commissions, underwriting
expenses and dealer allowances, if any, to be deposited into an escrow or trust
account governed by an agreement that contains certain terms and provisions
specified by Rule 419. Of the $50,000 of gross proceeds from the IPO, $45,000
has been placed into escrow. Rule 419 permits us to retain up to 10% of the
funds to pay for IPO expenses. Additionally, the Shares sold in the IPO were
placed into escrow in accordance with Rule 419.
Under Rule 419, the IPO funds will be released to us and the IPO
securities will be released to the IPO investors, only after we have met the
following three basic conditions:
o First, we must execute an agreement for an acquisition of a business or
assets that will constitute our business and for which the fair value of
the business or net assets to be acquired represents at least 80% of the
maximum offering proceeds, but excluding underwriting commissions,
underwriting expenses and dealer allowances, if any. We have entered into
such an agreement to acquire Whitco.
o Second, we must file a post-effective amendment to the registration
statement which includes results of the IPO including, but not limited to,
the gross offering proceeds raised to date, amounts paid for underwriting
commissions, underwriting expenses and dealer allowances, if any, amounts
dispersed to us and amounts remaining in the escrow account. In addition,
12
we must disclose the specific amount and use of funds disbursed to us to
date, including payments to officers, directors, controlling stockholders
and affiliates, specifying the amounts and purposes of these payments. We
must also disclose the terms of the reconfirmation offer with the
conditions prescribed by the rules. The post-effective amendment must also
contain information regarding the acquisition candidate and business,
including audited financial statements. This reconfirmation prospectus is
part of a post-effective amendment we filed to comply with this
requirement.
o Third, we must mail a copy of the reconfirmation prospectus to each IPO
investor within five business days of the effective date of the
post-effective amendment. This prospectus is the reconfirmation prospectus
which we believe conforms to the requirements of Rule 419. After we submit
a letter to the escrow agent stating we have met the requirements of Rule
419, and after the proposed acquisition is completed, the escrow agent can
release the funds and securities.
We entered into an escrow agreement with Key Bank, National
Association, pursuant to which Key Bank will hold the IPO proceeds and the stock
certificates of the IPO investors in escrow pursuant to Rule 419. If we have not
completed a business combination on or before February 6, 2004, all of the IPO
proceeds will be promptly returned to the IPO investors, the certificates
evidencing the securities comprising the Shares purchased in our IPO will be
canceled. Under the terms of the escrow agreement, the funds may only be
released upon written notice from us to Key Bank confirming we have met the
three conditions described above.
Of the $50,000 of gross proceeds from our IPO, $45,000 has been placed
into escrow. Rule 419 permits us to retain up to 10% of the funds to pay for the
IPO expenses. The IPO funds, and any dividends or interest earned, are being
held for the sole benefit of the IPO investors and can only be invested in bank
deposits, money market mutual funds, federal government securities or securities
for which the principal or interest is guaranteed by the federal government.
RECONFIRMATION LETTER
If you, an investor in our IPO, decide to accept the reconfirmation
offer being made under this reconfirmation prospectus, you should complete and
sign a reconfirmation letter in the form that accompanies this prospectus and
return it to us using the pre-addressed, postage-paid envelope that also
accompanies this prospectus. We will forward a copy of each reconfirmation
letter to the escrow agent. You will have 45 business days from the date of this
prospectus to reconfirm your purchase of Shares in our IPO. Any IPO investor who
fails to complete, sign and return a reconfirmation form so that it is received
by us within 45 business days from the date of this prospectus will be deemed to
have rejected the reconfirmation offer. Rejecting IPO investors will
automatically be sent a check representing the investor's funds that are being
held in the escrow account, plus interest on such funds.
The acceptance of the reconfirmation offer by completing, signing, and
returning the reconfirmation letter is irrevocable.
TERMS OF THE RECONFIRMATION OFFER
Each purchaser of Shares pursuant to the Offering has no fewer than 20
business days and no more than 45 business days from the date hereof to
reconfirm in writing their desire to invest in us. Please send your written
reconfirmation notice to:
Wentworth III, Inc.
c/o Spencer I. Browne, Secretary
650 So. Cherry Street, Suite 420
Denver, Colorado 80246
If we do not receive reconfirmation offers within 45 business days from
the date hereof, or by April 7, 2003, funds and interest or dividends, if
any, held in the escrow account will be sent by first class mail or other
equally prompt means to you within five business days. The funds held in the
escrow account will be released to us and the securities will be delivered to
you at the same time as or after the escrow agent receives a signed
representation from us that the requirements of Rule 419 have been met and
consummation of the transaction with Whitco.
13
EXCHANGE AGREEMENT
Pursuant to the Agreement, Whitco has agreed to merge with and into a
wholly owned subsidiary to be formed by us. The terms of the merger are set
forth in the Agreement and consummation of the merger is conditioned upon, among
other things, the acceptance of the reconfirmation offer by all holders of the
Shares.
Each shareholder who holds Shares and who accepts the reconfirmation
offer shall continue to hold his or her share certificate(s) representing our
registered Common Stock.
At the effective date of the exchange, 100% of Whitco's issued and
outstanding partnership units and options to purchase partnership units will be
canceled and we will issue 2,991,368 shares of Common Stock and options to
purchase 808,632 shares of Common Stock. The options to purchase partnership
units will be replaced with options to purchase Common Stock. The issuance of
3,800,000 shares and options represents 90.48% of our issued and outstanding
Common Stock (assuming the exercise of options) and is issued to former Whitco
unit and option holders in proportion to their holdings in Whitco. In addition,
shares of Common Stock representing 4.76% of the merged entity, will be issued
to Keating Investments, LLC. After the merger, assuming that all of our
shareholders reconfirm their investment, our shareholders will own approximately
4.76% of the Company (assuming the exercise of options).
The surviving entity will remain our wholly owned subsidiary. After the
merger, we anticipate changing our name to Catalyst Lighting Group, Inc.
DILUTION AND OTHER COMPARATIVE PER SHARE DATA
The following table summarizes, as of the date of this reconfirmation
prospectus and assuming that we complete the proposed acquisition of Whitco:
o the number of shares of Common Stock issued by us;
o the number of shares issued as a percentage of our total outstanding
Common Stock;
o the aggregate cash and non-cash consideration paid for such shares;
o the aggregate consideration paid as a percentage of total
consideration paid; and
o the average consideration per share paid for such shares by the IPO
investors, our pre-IPO stockholders and the Whitco partners.
For purposes of this summary, (a) we have valued the consideration paid by
the Whitco members as the net book value of Whitco as of December 31, 2002 and
the conversion of $376,000 of notes to partnership units subsequent to December
31, 2002, and (b) we assume that we will issue a total of 3,191,368 shares of
Common Stock upon consummation of the proposed acquisition (200,000 of which are
being paid to Keating Investments, LLC as a fee in connection with the
acquisition).
14
Shares of Percentage Percentage Average
Common Stock of Total Aggregate of Total Consideration
Purchased Shares Consideration Consideration Per Share
--------------- --------------- ---------------- --------------- ----------------
IPO investors............... 50,000 1.47 % $ 50,000 3.32% % $ 1.00
Pre-IPO stockholders........ 150,000 4.42 7,500 0.50% 0.05
Post-IPO stockholders....... 200,000 5.89 0 * 0.00
Whitco Partnership Unit .... 2,991,368 88.22 1,447,503 96.18% .48
----------- --------- ----------- ----------
Totals...................... 3,391,368 100.0% $1,505,003 100.0%
=========== ========= =========== ==========
As a result of the completion of our acquisition of Whitco, investors in
the IPO, subject to the reconfirmation offering being made under this
prospectus, will experience immediate and substantial dilution from the IPO
price in the net tangible book value per share of the Common Stock.
For purposes of this discussion, dilution has been calculated based on two
triggering events. Dilution has been first calculated as a result of the IPO by
subtracting net tangible book value of Wentworth III as of December 31, 2002
from the IPO offering price. Dilution to the IPO shareholders as a result of the
merger with Whitco was also calculated based on the pro forma combined condensed
financials statements included elsewhere in this document. Net tangible book
value for purposes of this discussion is the amount that results from
subtracting our total liabilities and intangible assets from our total assets.
At December 31, 2002, Wentworth III had net tangible book value of $8,090,
or approximately $.04 per share. This results in dilution to the IPO
shareholders of $.96 per share. The pro forma net tangible book value of the
combined entities as a result of the acquisition is $(1,657,269), or
approximately $(.49) per share. The negative amount is primarily impacted by the
$2,971,362 of goodwill recorded on the books of Whitco, which is deducted for
the net tangible book value calculation. Pro forma dilution to the IPO
shareholders as a result of the acquisition is an additional $.53 per share.
Total pro forma dilution to the IPO shareholders after the acquisition is
therefore $1.49 per share.
Dilution Table
-------------------------------------------------------------------------------------------------- ----------------------------
Net price per IPO $1.00
-------------------------------------------------------------------------------------------------- ----------------------------
Net tangible book value per share at December 31, 2002 .04
-------------------------------------------------------------------------------------------------- ----------------------------
Dilution for IPO to net tangible book value at December 31, 2002 $.96
====
-------------------------------------------------------------------------------------------------- ----------------------------
Net tangible book value per share (deficiency) after merger with Whitco $(.49)
======
-------------------------------------------------------------------------------------------------- ----------------------------
Dilution as a result of the merger with Whitco $.53
====
-------------------------------------------------------------------------------------------------- ----------------------------
Dilution to the IPO shareholders after merger with Whitco based on IPO price $1.49
=====
15
DIVIDEND POLICY
We have never declared or paid any dividends to the holders of our common
stock and we do not expect to pay cash dividends in the foreseeable future. We
currently intend to retain all earnings for use in connection with the
development of our business and for general corporate purposes. Our board of
directors will have the sole discretion in determining whether to declare and
pay dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. In addition, our
ability to pay cash dividends in the future could be limited or prohibited by
the terms of financing agreements that we may enter into or by the terms of any
preferred stock that we may authorize and issue. Accordingly, you will have to
look to appreciation in the value of your securities to obtain a return on your
investment.
CAPITALIZATION
In February 2003, we entered into the Agreement with Whitco Company, L.L.P.
In accordance with the Agreement, the partners of Whitco will exchange all of
their partnership units (including all options to purchase partnership units)
for 2,991,368 shares of Common Stock and options to purchase 808,632 shares of
Common Stock. The acquisition transaction will be accounted for as a reverse
acquisition.
The following table sets forth our capitalization as of December 31, 2002:
o on an actual basis and
o on a pro forma, as adjusted basis giving effect to:
o our acquisition of Whitco, pursuant to which we will issue:
o 2,991,368 shares which includes the shares issued to the
noteholders that converted $376,000 of notes to partnership units
subsequent to December 31,2002.
o 200,000 shares of Common Stock to Keating Investments, LLC as a
fee in connection with the Whitco transaction
December 31, 2002
------------------------------------------------------------
Wentworth III Whitco Adjustments Pro Forma
------------- ------------- -------------- ------------
Long-term debt.................................................... $ -- $ 1,809,413 $ 376,000 $ 1,433,413
------------- ------------- -------------- ------------
Stockholders equity:
Preferred stock, par value $.01 per share; 10,000,000 shares
authorized, no shares issued and outstanding................. -- -- --
Common stock, par value $.01 per share; 40,000,000 shares
authorized, 200,000 (actual), 3,391,368 (pro forma)
shares issued and outstanding................................ 2,000 -- 31,914 33,914
Paid-in capital / Owners' Contribution......................... 25,937 655,000 712,238 1,393,175
(Accumulated deficit) retained earnings........................ (19,847) 416,503 (509,562) (112,996)
------------- ------------- -------------- --------------
Total stockholders' equity................................... 8,090 1,071,503 234,590 1,314,093
============= ============= ============== ==============
16
USE OF PROCEEDS
We sold an aggregate of 50,000 Shares in our IPO at $1.00 per Share.
The gross proceeds from our IPO were $50,000, $45,000 of which has been and
remains in an escrow account maintained by Key Bank, National Association in
accordance with our escrow agreement and SEC Rule 419. The expenses of our IPO
totaled $32,280.95, composed of the following items:
Type of Expense Amount of Expense
--------------- -----------------
SEC registration filing fee........................ $ 11.95
Legal fees......................................... 23,818.00
Accounting fees.................................... 5,745.00
Printing costs..................................... 1,018.00
Blue Sky qualification fees and expenses........... 500.00
Escrow agent fee................................... 250.00
Miscellaneous fees and expenses.................... 938.00
-------------
Total expenses..................................... $ 32,280.95
=============
Such expenses are to be paid from the IPO proceeds upon release of such
proceeds from escrow. If we do not complete the proposed acquisition of Whitco
and do not otherwise complete an acquisition transaction with another company
and comply with Rule 419, the escrow funds will be returned to the IPO investors
in accordance with Rule 419 promptly after February 6, 2004.
The above listed use of proceeds represents our best estimate of the
allocation of the net proceeds from the sale of the Shares sold in the IPO based
upon the status of our current plans and current economic conditions. Future
events, relevant changes in laws and regulations governing companies such as
Whitco and competitive activities affecting our business operations may make
shifts in allocation of funds necessary or desirable.
The expenses we anticipate incurring in connection with the reconfirmation
offering made under this prospectus are estimated to total $36,000, which does
not include expenses associated with the acquisition. Set forth below are the
types and amounts of expenses we anticipate incurring in the reconfirmation
offering:
Type of Expense Amount of Anticipated Expense
--------------- -----------------------------
Legal fees......................................... $ 25,000.00
Accounting fees.................................... 10,000.00
Printing costs..................................... 500.00
Transfer agent fee................................. 250.00
Miscellaneous fees and expenses.................... 250.00
-------------
Total expenses................................ $ 36,000.00
=============
We are subject to the reporting requirements of the Exchange Act and, in
accordance with these requirements, we are obligated to file reports, proxy
statements and other documentation with the SEC. We also intend to furnish our
stockholders with annual reports containing audited financial statements and
other periodic reports as we deem appropriate or as may be required by law.
These reports, proxy statements and other documentation will contain information
concerning the actual usage of the proceeds of our IPO and any changes in our
anticipated allocations of the proceeds from those set forth above.
17
PLAN OF OPERATION
We have no operating business and all our activities since inception
have been related to our formation and completing our initial public offering in
which we raised $50,000 of gross proceeds from the sale of 50,000 Shares. Our
ability to continue operations is contingent upon completing a business
combination. To date, we have not incurred any material costs or expenses other
than those associated with formation of the company, our IPO and this
reconfirmation prospectus. In November 2002, we completed our IPO. Pursuant to
Rule 419 promulgated under the Securities Act, the gross proceeds from the
offering of $50,000, less 10% for expenses incurred in connection with the IPO,
are being held in escrow and, as of December 31, 2002 we had cash on hand of
$47,125 including such escrowed funds. We will use the net proceeds of our IPO,
together with the income and interest earned thereon, if any, to pay for the
expenses of the IPO. We do not have discretionary access to any income on the
monies in the escrow account and stockholders will not receive any distribution
of the income or have any ability to direct the use or distribution of any such
income. Thus, any such income will cause the amount in escrow to increase. No
cash compensation has been paid to any officer or director in their capacities
as such. Since the role, if any, of present management after a business
combination is uncertain, we cannot determine what remuneration, if any, will be
paid to present management after a business combination.
If we do not complete a business combination within eighteen months
from the date of the commencement of our IPO, the escrow agent will return the
escrowed funds to the IPO investors on a proportionate basis, with interest, if
any, in accordance with SEC Rule 419.
We have entered into the Agreement, dated as of February 12, 2003, with
Whitco Company, L.L.P. The Agreement calls for our acquisition of the issued and
outstanding partnership units, and all options to purchase partnership units, of
Whitco in exchange for 2,991,368 shares of Common Stock and options to purchase
808,632 shares of Common Stock.
The closing of the transaction contemplated by the Agreement is
conditioned upon a number of factors, including satisfactory due diligence
reviews, our filing and causing to become effective a post-effective amendment
to our registration statement on Form SB-2 in compliance with SEC Rule 419 and
reconfirmation of investment by all investors who purchased Shares. The proceeds
from our IPO currently held in escrow will be released to us, and the Shares
sold will be released to the purchasers, if we close the transaction
contemplated by the Agreement, our post-effective amendment to our registration
statement is declared effective and all purchasers in the IPO reconfirm their
investment in our company. No assurance can be given that the due diligence
reviews contemplated by the Agreement will be completed satisfactorily, that our
post-effective amendment to our registration statement will be declared
effective by the SEC, that a sufficient number of purchasers in our IPO will
reconfirm their investments in our company or that all other conditions
necessary to close the transactions contemplated by the Agreement will be
successfully completed and that we will acquire Whitco.
18
THE SECURITIES EXCHANGE AGREEMENT
We entered into the Agreement with Whitco as of February 12, 2003.
Pursuant to the terms of the Agreement, we intend to acquire Whitco through an
exchange of all of their partnership units and options to purchase partnership
units for 2,991,368 shares of Common Stock and options to purchase 808,632
shares of Common Stock. The options represent options issued to key employees of
Whitco from June 2000 through December 31, 2002. The options are converted on
the same basis as the Common Stock. The exercise price, on a converted basis, is
$0.30/share for 350,125 shares and $0.86 for 458,507 shares. The options will
continue under the original terms of the option agreement. If not previously
exercised, the options will expire over the years of 2011 to 2013. Whitco will
become a subsidiary of ours as a result of such transaction and will be our sole
operating business as a result of the exchange.
The completion of the acquisition is contingent upon, among other
things:
o a sufficient number of IPO investors reconfirming their purchases of Shares
in our IPO;
o satisfactory results of due diligence reviews by all parties to the
acquisition transaction; and
o customary closing conditions.
A copy of the Agreement is attached as Appendix A to this
reconfirmation prospectus. Neither you, nor any other stockholder of our
company, are being asked to approve the Agreement or the acquisition
contemplated thereby.
BUSINESS OF WHITCO
Overview
Whitco is a nationwide marketer and distributor of steel and aluminum
outdoor lighting poles. Founded in 1969, Whitco generates revenue through the
sale of poles directly to Original Equipment Manufacturers (OEM's) and
indirectly to other third parties through its own sales representatives. Whitco
seeks to become the preferred marketer and distributor of steel and aluminum
lighting pole structures and accessories, and may attempt to acquire or develop
additional subsidiaries to pursue additional market opportunities. Whitco
believes the necessary systems and people are in place to aggressively grow and
expand in its defined markets.
In June 2000, Whitco was acquired from its original owners by an
investment group led by Dennis Depenbusch, who currently serves as Whitco's
managing partner and is expected to become Chief Executive Officer of the
Company upon consummation of the exchange.
Whitco divides the light pole industry into eight different areas
serving four distinct market segments. Whitco's participation in each area and
segment is presented in the table below.
19
======================= ===================== ============== ======================= ============================
Commercial City and Utility and Department of
And Industrial County Municipality Transportation
----------------------- --------------------- -------------- ----------------------- ----------------------------
Area Yes Yes Yes No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Sports Yes Yes Yes No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Highmast Yes Yes Yes No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Street/Roadway Yes Yes Yes No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Traffic Control No No No No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Decorative No No No No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Sign Structure No No No No
----------------------- --------------------- -------------- ----------------------- ----------------------------
Communication Tower No No No No
======================= ===================== ============== ======================= ============================
Whitco has and will continue to operate in the commercial and
industrial lighting ("C&I"), city and county and utility and municipality
segments. The C&I segment of the market represents the commercial sales area of
the market, primarily commercial real estate developments and industrial
development areas not related to governmental areas. City and County segments
are those areas developments directed by local governments without the
involvement of federal highway funds. In some cases Whitco lighting agents also
place sales emphasis on local developments by cities and counties. Utility and
Municipality represent those developments directed by local utilities or
municipal developments in which the local utility controls the lighting aspects
of the real estate development, without the involvement of federal highway
funds. In local areas, a utility may direct the installation of lighting in
areas and provide a usage fee to the local government for that lighting area. In
some cases, Whitco lighting agents sell to utilities. Department of
Transportation segments represent those areas involving the deployment of both
local and federal highway funds with specifications directed by both the local
(or state) governments as well as the federal government. Whitco rarely
participates in the DOT business segment as it is a different sales channel than
traditionally served by the Company.
Whitco markets area and sports lighting products through its catalog
and via the Internet at www.whitcopoles.com.
--------------------
20
Products and Services
All of Whitco's poles are made to order and are sold either directly to
OEM's through sales representatives from their primary offices in Fort Worth,
Texas or indirectly through sales representatives (known in the lighting
industry as lighting agencies).
OEM's sell existing lines of lighting fixtures. Some OEM's manufacture
lighting poles as well, while other source pole manufacturing on a private label
basis through companies such as Whitco. Whitco sells poles which complement
existing fixture lines, provides engineering expertise and has specialty design
features to allow the poles to be easily integrated with the lighting fixture.
The entire unit (pole and fixtures) is then shipped to the customer under the
OEM brand name. Although some OEM's manufacture their own poles, they often
require Whitco's poles because they do not have the capability to manufacture
the poles required for a specific order. When selling to an OEM, Whitco arranges
shipment direct to the project location for final assembly and installation.
Whitco has the capability to join an OEM on national account bids. In 2002,
Whitco sold to approximately 32 OEM customers.
Whitco has contracts in place with approximately 76 lighting agencies,
each in separate, defined geographic territories throughout the United States.
These agencies primarily sell fixtures and Whitco's poles complement their
product line. Whitco works diligently to find the most appropriate agency in a
territory to sell its products and further strives to have that agency sell only
poles manufactured by Whitco. A typical order will come from an agency for
shipment direct to a construction location with billing routed through the
electrical distributor or contractor. Terms are predominantly, net 30 days.
For the complete 12 months ended December 31, 2002, no customer
accounted for more than 17% of Whitco's total net revenues. Whitco believes it
gains and keeps top lighting agents through competitive pricing, timeliness and
the ability to effectively deliver needed technical information on specified
products.
Whitco purchases raw steel tubes from both domestic and foreign
suppliers. Whitco primarily relies on a single manufacturer to supply steel
tubes, but also places orders with three other suppliers. The raw steel tubes
are held in inventory at one of two designated manufacturing locations in Fort
Worth, Texas. These manufacturers complete all stages of pole fabrication,
including painting and attaching a steel base. All operational aspects of
manufacturing, including inventory control, purchasing, adherence to
specifications and shipping are performed by Whitco. Whitco has no financial
responsibility for raw aluminum product inventory as the poles are made to order
and, once completed, shipped directly from the manufacturer to the customer.
Once an order has been placed in production, the time until completed
poles are ready for shipment is approximately one week, while larger orders can
take up to three weeks. Whitco has the ability to engineer and design customized
products through its proprietary design and engineering capabilities.
Whitco has a staff of 12 full-time employees which serves the sales,
marketing, technical and engineering needs of its customers, as well as manages
the processes for the ordering, production and delivery of raw and finished
materials.
21
Business Strategy
Virtually all of Whitco's revenues are currently generated in the C&I
market. It is the intent of Whitco to continue serving this niche while seeking
to acquire or start new business ventures within this segment in an attempt to
increase market share. The focus on the C&I market is the result of Whitco's
historical expertise in this market and the fact that most of Whitco's lighting
agents and OEM customers are focused on this area.
Whitco is placing particular emphasis on the C&I market, and in
particular the sports, high mast and area lighting areas. The sports lighting
area represents those venues lit by outdoor lighting for night time play. This
ranges from professional sports venues to local parks and recreation areas.
Whitco has the ability to complete pre-wiring for its sports lighting products
prior to shipment. High mast is those installations requiring large area
lighting needs of commercial areas. These represent typical heights of 55 feet
or higher with multiple fixtures installed at the top of the pole. Area lighting
typically represents the lighting of an outdoor area such as parking lots.
Competition
Whitco competes with pole manufacturers as well as those OEM's which
manufacture poles themselves. Whitco competes against exclusive pole
manufacturers such as K-W Industries, United Lighting Standards and Valmont
Industries. Some OEM companies that also manufacture poles include Hubbell
Lighting, Cooper Lighting, Musco Lighting (sports segment only) and Ruud
Lighting.
History
Whitco dates its original history to 1969, when Whitco was formed by
the Pritchard family in Fort Worth, Texas. Whitco has been profitable from its
founding through today. On June 30, 2000, Whitco was acquired by a group of
three investors led by Dennis Depenbusch. On May 1, 2002, two of the three
original investors were bought out by a replacement investor group again led by
Dennis Depenbusch.
Whitco was originally formed to provide both lighting and pole
products. During the 1980's Whitco made the decision to concentrate on steel
pole products sold through agents and OEM's throughout the United States. Upon
acquisition of Whitco in June 2000, Whitco expanded its product offering to
include additional steel products as well as aluminum poles. In 2002, Whitco
further expanded its product line to include pre-wired products for the sports
lighting segment.
Management Experience
Whitco believes that it enjoys significant advantages over other
companies within its industry, including the advantage generated by the
experience of its management team. We believe Whitco's management has the needed
experience, talent and knowledge to grow and prosper in this industry. Set forth
below is a brief description of the business experience and background of
Whitco's executive officers, based upon information they have supplied to us.
Dennis H. Depenbusch - Managing Partner
Mr. Depenbusch, 39, has been managing partner of Whitco Company, LLP since its
acquisition in June of 2000. Prior to his leading the acquisition of Whitco, he
was a Vice President for Euronet Worldwide from May 1995 to June 2000. During
his tenure with Euronet, a technology company based in Leawood, Kansas, he
assisted in building its country operations in Poland, Germany and the United
Kingdom, as well as contributed to Euronet's acquisition of venture capital
investment and eventual listing on the NASDAQ (EEFT). Mr. Depenbusch holds an
MBA, Summa Cum Laude, and a BS in Business from the University of Kansas. Mr.
Depenbusch is expected to become the Chief Executive Officer and Chairman of the
Board of Directors of the Company upon consummation of the merger.
22
Henry M. Glover - President/CEO
Mr. Glover, 46, joined Whitco in January 2002 as the President. Mr. Glover has
twenty years of experience in the lighting industry in key leadership roles.
These assignments included work for three of the larger lighting conglomerates
in the country: Genlyte Thomas, USI Lighting and Lithonia Lighting. Mr. Glover
has held senior level positions in sales and operational management for these
companies. In 2001, Mr. Glover was CEO and principal of iCareers, LLC, an
Internet recruiting site focused on lighting placements. From 1996 to 2000, he
was General Manager of Wide-Lite, a subsidiary of Genlyte Thomas. Mr. Glover has
an MBA from the University of Georgia and a BS in Economics from the College of
Charleston. Mr. Glover is expected to become President and a member of the Board
of Directors of the Company upon consummation of the merger.
Kevin B. Medlin - Vice President of Sales
Mr. Medlin, 42, joined Whitco in October 2001 as its national sales manager. Mr.
Medlin has over twenty years experience in the lighting industry in both
electrical distribution and sales management for a major lighting manufacturer.
Prior to joining Whitco, Mr. Medlin was employed by Thomas Lighting a division
of Genlyte Thomas as a Regional Sales Manager for the West/Central Region from
1996 to 2001. Mr. Medlin has a BS in Business Administration from the University
of Texas.
Thomas S. Lach - Vice President of Engineering
Mr. Lach, 34, joined Whitco in October of 2000. Mr. Lach has over 11 years
experience in steel structural design and engineering. Prior to joining Whitco,
Mr. Lach worked for GE Sports Lighting Systems, Fort Worth, Texas as manager of
engineering from 1998 to 2000. From 1997 to 1998, he worked as Vice President of
Engineering for Trans American Power Products, Houston, Texas. Mr. Lach
previously was a project engineer for Valmont Industries in Valley, Nebraska.
Mr. Lach has a BS in Mechanical Engineering from the University of Missouri,
Rolla and has a PE in Civil Engineering for the State of Nebraska.
James K. "Kip" Pritchard - Vice President
Mr. Pritchard, 47, has been with Whitco for 24 years in sales. Prior to the
acquisition, he was President of Whitco. Mr. Pritchard has a BS Degree in
Business Administration from Texas Wesleyan University in Fort Worth, Texas.
Risk Factors Affecting Whitco's Business Operations
We have set forth below a number of risk factors affecting Whitco's business
operations.
There is intense competition in Whitco's industry.
There are numerous competitors in the fields in which Whitco is
currently involved and in which it intends to enter, all of which have developed
product lines and established customer followings. In many cases, Whitco's
competitors have far greater financial and other resources. Whitco also expects
competition to increase in the future. Increased competition is likely to result
in price reductions, reduced gross margins and loss of market share, any of
which could harm Whitco's net revenue and results of operations. Whitco competes
or will potentially compete with a variety of companies, many of which have
operated for a longer period of time and have significantly greater financial,
technical, marketing and other resources. Some of these competitors have
established relationships with leading manufacturers, suppliers, wholesalers,
distributors and sales representatives. These competitors include national
wholesalers and national and regional distributors, some of which Whitco already
has existing relationships with. Although Whitco could harm its existing
relationships, they feel that directly competing against them in a related but
different segment of the market will not harm its existing business or those
relationships. Further, Whitco may face a significant competitive challenge from
alliances entered into between and among its competitors, as well as from larger
competitors created through industry consolidation. The combined resources of
these partnerships or consolidated entities could pose a significant competitive
challenge to Whitco and could impede Whitco in or prevent it from establishing
relationships which would be most beneficial to it.
23
Whitco is dependent on a few manufacturers to make the tubes required for its
business.
Whitco's primary business is selling lighting poles in a variety of
market segments. Although Whitco owns the raw materials, it relies on
fabricators to turn the steel tubes into the poles it sells. Currently, Whitco
has written agreements with only two such pole fabricators, making them
substantially dependent on these two companies. Although there are multiple
fabricators with which Whitco could enter into agreements, the deterioration or
cessation of either relationship could be expected to have a material adverse
effect, at least temporarily, on Whitco as it attempts to negotiate a deal with
other manufacturers of lighting poles.
Federal and state regulation of the areas in which we operate, as well as the
need for licenses and authorizations, could harm Whitco's business.
Whitco is subject to regulation under federal, state and local laws and
regulations with respect to the sale of its poles for various products. These
regulations are subject to changes which could harm Whitco's business.
Additionally, if Whitco fails to receive or maintain needed licenses and
authorizations, or if obtaining such approvals takes too long or costs too much,
their financial condition and results of operations could expect to be
materially adversely affected.
Whitco may be subject to lawsuits as a result of the manufacture, design and
installation of its lighting poles.
Whitco is currently not involved in any legal proceedings. Although
Whitco does not manufacture or install the lighting poles it designs and sells,
Whitco still faces the risk of lawsuits from property owners, federal and state
governments and any injured parties from any accidents occurring as a result of
the manufacture, design or installation of the lighting poles and fixtures. Any
such lawsuit, even if without merit, could divert needed time, money and other
resources from operating Whitco's business. Although Whitco currently has
property, general liability and product liability insurance in amounts it
believes to be adequate, Whitco can give no assurance that such insurance will
remain available at a reasonable price or that any insurance policy would offer
coverage sufficient to meet any liability arising as a result of a claim. The
obligation to pay any substantial liability claim could render Whitco insolvent
and could force it to curtail or suspend operations, which would have a material
adverse effect on our company and your investment in our company. Additionally,
Whitco's failure to implement and maintain a quality control program with
respect to the manufacture and installation of its poles could increase the risk
that it becomes liable for any injury that may occur from one of its poles.
Efforts to protect intellectual property or the alleged misuse of the
intellectual property of others may cause Whitco to become involved in costly
and lengthy litigation.
Whitco's success depends in part on its ability to obtain and preserve
patent, trademark and other intellectual property rights covering the names of
Whitco's various subsidiary companies, their software created in connection with
office systems, services and products and the pole designs they have created.
Whitco does not currently have any trademark or patent protection but is
actively seeking it. The process of seeking trademark and patent protection can
be time consuming and expensive and no assurances can be given that (i) patents
or trademarks will actually be issued, (ii) new patents will be sufficient in
scope to provide meaningful protection or any commercial advantage or (iii)
others will not independently develop similar products or design around any
patents Whitco is issued. If Whitco fails to protect its intellectual property
from infringement, other companies may offer competitive products. Protection of
our intellectual property could result in costly and lengthy litigation,
diverting resources which would otherwise be dedicated to managing the business.
Whitco has employees which, if lost, could substantially harm Whitco's business
and future prospects.
Our future success depends, in significant part, upon the continued
service of our management and other key personnel. We do not maintain "key
person" life insurance on any of our executives. The loss of the services of
Henry Glover, our President and CEO, or Tom Lach, our Vice-President of
Engineering, or one or more of our other executive officers or key employees
could have a material adverse effect on our business. Our future success also
depends on our ability to attract and retain highly qualified engineering,
technical, sales, customer service and managerial personnel. Competition for
such personnel is intense, and we may not be able to attract or retain a
sufficient number of highly qualified employees in the future. Failure to hire
and retain personnel in key positions could materially and adversely affect our
business.
24
Whitco's failure to maintain its controls and processes over billing and
collecting or the deterioration of the financial condition of its payors could
reduce its cash collections and increase its accounts receivable write-offs.
The collection of accounts receivable requires constant involvement by
management. Some of Whitco's payors may experience financial difficulties, or
may otherwise not satisfy their accounts when due, which would cause Whitco to
expend additional financial and personnel resources to collect such monies. In
some cases, it may result in write-offs. There can be no assurance Whitco will
be able to maintain its current levels of collectibility. If Whitco is unable to
properly bill and collect its accounts receivable, its results and financial
condition will be adversely affected.
Whitco may need to expend time and financial resources to learn and compete in
those parts of the industry which it intends to enter for the first time.
Whitco's current business strategy contemplates entering parts of the
industry in which it has not previously competed. Although these segments of the
market are directly related to the current market in which Whitco competes, it
is expected to take time and financial resources to learn the nuances of these
segments, as well as to execute on the business plan and integrate these new
parts of the business into Whitco's existing business. Any failure in these new
markets or failure to successfully integrate them into Whitco's existing
business could be expected to have a material adverse effect on Whitco's
financial condition and results of operations.
Whitco may not be able to successfully integrate acquired businesses, if any,
which could result in a slowdown in cash collections and ultimately lead to
increases in accounts receivable write-offs.
We anticipate Whitco's acquisition strategy will result in a
labor-intensive process to integrate new businesses into Whitco's existing
business. This can shift focus away from Whitco's existing business. The
successful integration of an acquired business is also dependent on the size of
the acquired business, the complexity of system conversions, the resolution of
disputes regarding multiple sales representatives in a given geographic area and
management's execution of the integration plan. If Whitco is not successful in
integrating acquired businesses, its results may be adversely affected.
25
Whitco is substantially dependent on the construction cycle and the
infrastructure needs of federal, state and local governments.
Whitco's primary market segments include sports arenas, area lighting
(parking lot lighting for shopping malls and apartment complexes, for example),
high mast lighting and roadway lighting. In the private sector, Whitco is
dependent on the construction industry to continue building the arenas and other
complexes which require lighting poles. With regard to roadway lighting, Whitco
is dependent on the needs and financial health of federal, state and local
governments. Both the private and public sectors are highly dependent on general
economic conditions. Accordingly, any reduction in the construction cycle, dip
in the economy or deterioration of the financial health of the federal and state
governments could be expected to have a material adverse effect on the business
and financial condition of Whitco.
Whitco is dependent on the price of steel.
Whitco makes the majority of its lighting poles out of steel.
Accordingly, profit margins are dependent on the price of the raw steel tubes
purchased from time to time. Due to its size relative to the size of the world's
largest raw steel purchasers, Whitco has no impact on or ability to control or
otherwise manage the price it pays for raw steel. The major steel purchasers
could either mark prices down, which could result in decreased revenues for
Whitco as they pass the savings on to their customers, or cause an increase in
prices, which could also reduce Whitco's profit margin if it is determined that
customers would rather delay their purchases than pay higher prices or if
customers would purchase poles from a cheaper source. Although Whitco could buy
more steel when prices are low and less steel when prices are high, such a
strategy could lead to either excess inventory, which would lead to increased
fabrication and storage costs, or insufficient inventory. Accordingly, Whitco's
dependence on the price of raw steel could be expected to have a material
adverse effect on Whitco's business and financial condition.
The threat of war or other military action could affect Whitco's business.
In the event the United States is involved in a war or other military
action, such activity could affect the price and availability of raw steel, the
availability of government funds for lighting poles, the construction industry
and the economy in general. Any of these reactions to a military action could be
expected to have a material adverse effect on Whitco's business and financial
condition.
Management and its affiliates will have control of the Company.
Our anticipated management following the transaction will control
50.36% of the total voting power of our company. Given their large voting
control, it is expected that management will exert nearly total control over the
policies of our company. Further, the anticipated management will have the
ability, through exercise of options, to acquire additional shares of Common
Stock. As such, management will have substantial influence over our company,
which influence may not necessarily be consistent with the interests of our
other stockholders.
Legal Proceedings
Whitco is not a party to nor is it aware of any existing, pending or
threatened lawsuits or other legal actions.
Seasonality
The lighting industry is not seasonal in nature, but construction of
the facilities or roads where the lighting structures may be placed is seasonal
depending on the geographic location of the project.
Employees
Whitco currently has twelve full-time employees, including its two
executive officers, three employees performing sales and marketing functions,
two performing engineering, drafting and quotations functions, one in production
control and dispatch and four performing customer service and clerical duties.
Accounting and finance services are currently outsourced. We also have sales
representative agreements in place with approximately 76 sales representatives
across the continental United States. They are not employees of Whitco, but they
do receive commissions based on sales.
Properties
Whitco leases space in Fort Worth, Texas. These facilities serve as its
corporate headquarters and operations center. The facilities encompass
approximately 2,704 square feet of space at a fixed rental cost of $3,347 per
month. The lease expires November 14, 2003.
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF WHITCO
Securities Exchange Agreement
In January 2003, Whitco entered into the Agreement with Wentworth III, Inc.
We will issue an aggregate of 2,991,368 shares of common stock and options to
purchase 808,632 shares of Common Stock for all of Whitco's issued and
outstanding partnership units, as well as those units for which options are
currently held. This transaction will be accounted for as a reverse acquisition
which results in the recapitalization of Whitco in as much as it is deemed to be
the acquiring entity for accounting purposes. Accordingly, the combination will
be recorded as a recapitalization of Whitco, pursuant to which Whitco will be
treated as the continuing entity for accounting purposes and the historical
financial statements presented will be those of Whitco. Upon the completion of
the transaction, Whitco will continue to operate as a wholly-owned subsidiary of
Wentworth.
Therefore, based on the above transaction, we have provided
management's discussion and analysis of financial condition and results of
operations for Whitco.
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
Whitco's condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, which require
Whitco to make estimates and judgments that affect the reported amount of
assets, liabilities, revenues and expenses, and the related disclosures. A
summary of those significant accounting policies can be found in Whitco's Notes
to the Consolidated Financial Statements included in this report. The estimates
used by management are based upon their historical experiences combined with
management's understanding of current facts and circumstances. Certain of
Whitco's accounting policies are considered critical as they are both important
to the portrayal of Whitco's financial condition and the results of its
operations and require significant judgments on the part of management.
Management believes that the following represent the critical accounting
policies of Whitco as described in Financial Reporting Release No. 60,
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies,"
which was issued by the Securities and Exchange Commission: inventory, goodwill,
allowance for doubtful accounts, and warranty policy.
Whitco states inventory at the lower of cost or market, determined under the
first-in, first-out method. Whitco maintains a significant amount of raw
material inventory to serve future order demand of customers. While management
believes its processes for ordering and controlling inventory are adequate,
changes in economic, or industry conditions may require Whitco to hold inventory
longer than expected or write outdated inventory off as the result of
obsolescence.
During fiscal 2001, Whitco amortized goodwill using a fifteen-year life.
Beginning January 1, 2002, Whitco adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142) "Goodwill and Other Intangible Assets," and as a
result ceased amortizing goodwill. Whitco tests goodwill for impairment annually
or on an interim basis if an event or circumstance occurs between the annual
tests that may indicate impairment of goodwill. Impairment of goodwill will be
recognized in operating results in the period it is identified.
Whitco utilizes its best estimate for allowance for doubtful accounts based on
past history and accruing the expense as a percentage of sales. Whitco grants
credit to distributors of sports and area lighting poles located throughout the
United States of America. Collateral is generally not required for trade
receivables. While management considers Whitco's process to be adequate to
effectively quantify its exposure to doubtful accounts, changes in economic,
industry or specific customer conditions may require an adjustment of the
allowance for doubtful accounts.
Whitco's customers receive a one year product warranty for defects in material
and workmanship providing repair or replacement or refund of the purchase price.
Whitco provides an accrual as a reserve for potential warranty costs based on
historical experience and accruing as a percentage of sales. While management
considers Whitco's process to be adequate to effectively quantify its exposure
to warranty claims based on historical performance, changes in warranty claims
on a specific or cumulative basis may require Whitco to adjust its reserve for
potential warranty costs.
27
Three months ended December 31, 2002 compared to the three months ended December
31, 2001
The unaudited financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information. In our opinion, we have included all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation.
Revenue. For the three months ended December 31, 2002, the recognized revenue of
Whitco was $3,282,406. For the three months ended December 31, 2001, the
recognized revenue of Whitco was $3,637,142. Cost of goods sold in the quarter
ended December 31, 2002 was $2,172,735, which generated a gross margin of
33.80%, versus 34.95% for the quarter ended December 31, 2001. The decline in
sales and gross margin can be attributed to the shipment of one project in the
quarter 2001 that resulted in revenue totaling approximately $1.3 million with
over 50% gross margin. Whitco did not benefit from a similar project in 2002.
Other operating costs and expenses. For the three months ended December 31,
2002, operating expenses totaled $1,104,146, compared to $1,019,312 for the
three months ended December 31, 2001, respectively. The increase in operating
expenses resulted from the increase in product development, travel, health
insurance and legal and accounting expenses as described below. Included in
other operating costs and expenses are non-cash costs related to amortization
expense incurred of approximately $0 for the three months ended December 31,
2002, and of $57,449 for the three months ended December 31, 2001. The decrease
in amortization expense is the result of Whitco's adoption of Statement of
Financial Accounting Standards No. 142 (SFAS 142) in January 1, 2002. This
change in policy resulted in the elimination of amortization of goodwill.
Product development expense. For the three months ended December 31, 2002
product development expense was $107,091, compared with $4,255 for the three
months ended December 31, 2001. The increase in product development for the
comparative three-month period is principally attributable to the further
development of Whitco's sports lighting product offering.
Travel expense. For the three months ended December 31, 2002 was $37,821,
compared with $14,681 for the three months ended December 31, 2001. The
increases in travel expense for the comparative periods reflect additional
travel and customer visitations during the period.
Health insurance expense. For the three months ended December 31, 2002 was
$26,226, compared with $12,012 for the three months ended December 31, 2001. The
increases in health insurance for the comparative periods reflect a general
increase in premiums as well as additional employees choosing to participate in
the program.
Legal and Accounting Expense. For the three months ended December 31, 2002 was
$27,741, compared with $18,707 for the three months ended December 31, 2001. The
increases in legal and accounting for the comparative periods reflect additional
expenses in the period for expenses related to the change in fiscal year in
accounting fees and legal fees associated with the merger described herein.
Interest expense. Interest expense for the three months ended December 31, 2002
was $71,519, compared with $71,048 for the three months ended December 31, 2001.
The increase in interest expense for the comparative periods reflect the
increase in both the operating credit line as well as an increase in subordinate
debt.
Year ended December 31, 2002 compared to the year ended December 31, 2001
In 2002, Whitco changed its fiscal year end from December 31, to September 30.
For purposes of a financial comparison of 12 month results, Whitco is combining
its September 30, 2002 9 month year end audited numbers with its 3 month
reviewed financial results. The combination of the pro-forma 12 months ended
December 31, 2002 is summarized in the following table.
28
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Quarter 9 Months 12 Months 12 Months
Ended Ended Ended Ended
12/31/02 9/30/02 12/31/02 12/31/01
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Sales $3,282,406 $10,243,036 $13,525,442 $11,784,438
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Cost of Sales $2,172,735 $7,169,790 $9,342,525 $7,887,188
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Gross Margin on Sales $1,109,671 $3,073,246 $4,182,917 $3,897,250
---------------------------------------- ----------------- ---------------- ----------------- ---------------
General Selling and Administrative
Expenses $1,104,146 $2,700,835 $3,804,981 $3,053,662
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Amortization of Goodwill $0 $0 $0 $229,797
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Income from Operations $5,525 $372,411 $377,936 $613,791
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Interest Expense $71,519 $224,677 $296,196 $292,138
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Income (Loss) Before Pro Forma Income ($65,994) $147,734 $81,740 $321,653
Taxes
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Pro Forma Income Taxes $22,838 ($58,062) ($35,224) ($123,122)
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Pro Forma Net Income (Loss) ($43,156) $89,672 $46,516 $198,531
---------------------------------------- ----------------- ---------------- ----------------- ---------------
Revenue. For the twelve month period ended December 31, 2002, the recognized
revenue of Whitco was $13,525,442. For the year ended December 31, 2001, the
recognized revenue of Whitco was $11,784,438. Cost of goods sold for the twelve
month period ended December 31, 2002 was $9,342,525, which generated a gross
margin of 30.9%, versus 33.0% in 2001. The decrease in gross margin percentage
for the comparative twelve-month period is principally attributable to the
product mix sold in 2002 vs. 2001 as lower margin category products were sold
during 2002. One particular project in 2001 contributed primarily to this
difference; the project, shipped in the quarter ended December 31, 2001 resulted
in revenue totaling approximately $1.3 million with over 50% gross margin.
General Selling and Administrative Expenses. For the twelve month period ended
2002, General Selling and Administrative expenses totaled $3,804,981 compared to
$3,053,662 for the year ended December 31, 2001, respectively. The increase in
operating expenses resulted from the salaries, wages and benefits, increase in
commissions, product development, travel and entertainment, accounting, legal
and professional fees.
Salaries, Wages and Benefits for the twelve month period ended December 31, 2002
was $1,158,929 compared with $820,588 for the year ended December 31, 2001. The
increase in salaries, wages and benefits reflects primarily an increased
headcount dedicated to the sales and administration effort at Whitco. Salaries,
exclusive of payroll taxes and fees were $950,899 for the twelve month period
ended December 31, 2002, and $721,730 for the year ended December 31,2001. As a
percentage of gross sales, salaries, wages and benefits were 8.6% of sales in
the twelve month period ended December 31, 2002, and 7.0% of sales for the year
ended December 31, 2001.
Commissions for the twelve month period ended December 31, 2002 was $1,900,600
compared with $1,705,684 for the year ended December 31, 2001. The increase in
commission expenses reflects increases in overall sales volume. As a percentage
of gross sales, commissions were 14.1% of sales in the twelve month period ended
December 31, 2002, and 14.5% of sales for the year ended December 31, 2001.
Product Development for the twelve month period ended December 31, 2002 was
$131,483 compared with $4,255 for the year ended December 31, 2001. The increase
in product development expense reflects additional investment in Whitco's
further development of a sports lighting line.
Travel and Entertainment for the twelve month period ended December 31, 2002 was
$113,502 compared with $58,619 for the year ended December 31, 2001. The
increase in travel and entertainment expense reflects additional sales travel
related to additional customer and supplier trips taken during the year.
Accounting, Legal and Professional Fees for the twelve month period ended
December 31, 2002 was $113,736 compared with $67,700 for the year ended December
31, 2001. The increase in Accounting, Legal and Professional Fees reflects
accounting and legal expenses related to the current merger described herein.
29
Included in general and administrative expenses are non-cash costs related to
amortization expense incurred of approximately $0 for the twelve months ended
December 31, 2002, and $229,797 for the year ended December 31, 2001. The
decrease in amortization expense is the result of Whitco's adoption of Statement
of Financial Accounting Standards No. 142 (SFAS 142) in January 1, 2002. This
change in policy resulted in the elimination of amortization of goodwill. Had
the Company recorded amortization expense during the twelve months ended
December 31, 2002, unaudited pro forma net income (loss) would have been
($148,057).
Interest expense for the twelve month period ended December 31, 2002 was
$296,196 compared with $292,138 for the year ended December 31, 2001. The
difference was attributable to an increase of subordinated debt as well as the
average increase of the operating credit line for the comparative periods.
Net income after pro forma income taxes for the 12 month period ended December
31, 2002 and year ended 2001 was $46,516 and $198,531, respectively.
Liquidity and Capital Resources
During the period ended December 31, 2002, Whitco's working capital deficit
was $242,457, which represented a decrease of $255,147 over December 31, 2001.
Trade receivables increased from $1,498,698 at December 31, 2001 to $1,780,197
at December 31, 2002, including provision for bad debts of $53,924 at December
31, 2002 and $22,036 at December 31, 2001, while accounts payable increased by
$680,182. Inventory increased from $886,101 at December 31, 2001 to $1,060,143
at December 31, 2002. The revolving note payable decreased from $1,186,302 at
December 31, 2001 to $1,172,105 at December 31, 2002. The overall decreases in
working capital reflect the normal expansion of Whitco's operations during 2002,
timing and more aggressive management of accounts payable. Whitco believes the
current level of receivables is acceptable and the level of reserves
appropriate. Whitco considers the inventory and accounts payable balances to be
reasonable and does not anticipate future material changes.
Long term debt, less current maturities increased by $276,946 during 2002.
During the year 2002, the Company increased its subordinated debt position as
the result of the purchase of shares of existing partners.
Cash provided by (used in) operations for the three months ended December
31, 2002, the three months ended December 31, 2001, nine months ended September
30, 2002 and year ended December 31, 2001 was ($57,720), $370,138, $397,110 and
$327,469 respectively. The cash used by operations for the three months ended
December 31, 2002 resulted primarily from a loss of $65,994, a decrease in trade
receivables of $499,912, an increase in inventories of $208,110 and a decrease
in accrued liabilities of $225,808. Accrued liabilities decreased primarily as
the result of payment of commissions. Prepaid expenses and other expenses
increased by $24,431, accounts payable decreased by $40,414 off-set by decreases
to cash flow in other assets of $2,018. For the three month period ended
December 31, 2001, cash provided by operations resulted primarily from net
income of $180,683, an increase in accounts receivable of $255,508 and a
decrease in accounts payable of $201,153. These decreases were off-set by
decreases in inventory of $381,750 and an increase in other accrued liabilities
of $197,347. Prepaid expenses and other expenses decreased by $4,109. For the
nine month period ended September 30, 2002, cash provided by operations resulted
from net income of $147,734, and an increase in accounts payable of $720,595 and
other accrued expenses of $223,000. These increases were offset by an increase
in accounts receivable of $813,817. Accrued liabilities increased as the result
of timing of commission payments. Also, inventory decreased by $34,068, prepaid
expenses and other expenses decreased by $21,938, and bad debt expense decreased
by $32,406. For the year ended December 31, 2001, cash provided by operations
resulted from net income of $321,653 depreciation and amortization of $249,415,
and an increase in other accrued liabilities of $174,631. Accrued liabilities
increased as the result of timing of commission payments. Depreciation and
amortization is higher compared to other periods as the result of Whitco's
adoption of Statement of Financial Accounting Standards No. 142 (SFAS 142) in
January 1, 2002. This change in policy resulted in the elimination of
amortization of goodwill. These increases were off-set by increases in
inventories of $190,183, and decreases in accounts payable of $219,257.
Increases were also reported in prepaid expenses and other by $14,849 and
off-set by allowance for bad debt of $9,048. Receivables increased by $2,989.
Primarily as a result of purchases of property and equipment, cash used in
investing activities for the three months ended December 31, 2002, the three
months ended December 31, 2001, nine months ended September 30, 2002 and year
ended December 31, 2001 was ($7,451), ($6,078), ($74,307) and ($26,934)
respectively.
30
Cash provided/(used) in financing activities for the three months ended
December 31, 2002, the three months ended December 31, 2001, nine months ended
September 30,2002 and year ended December 31, 2001 was $65,171, ($364,060),
($322,803) and ($308,679) respectively. For the three months ended December
31, 2002 there was an increase in revolving notes payable of $85,080 and $19,909
in payments on short-term and long-term notes payable. For the three months
ended December 31, 2001, there was a decrease in revolving notes payable of
$346,436 and payments on short-term and long-term notes payable of $17,624. For
the nine months ended September 30, 2002, cash flows decreased as the result of
redemption of partner's interest of $1,200,000 to purchase the shares of two
partners. This decrease was primarily matched by an increase from the proceeds
of long-term debt of $546,000 and the sale of partnership interest of $655,000.
Payments on short-term and long-term notes payable and revolving note payable
was $224,527 and $99,276, respectively. The Company intends to fund future
payments on debt obligations through cash flow. For the year ended December 31,
2001, there was a $213,565 increase in revolving note payable off-set by
payments on short-term and long-term notes payable of $228,644 and partners'
distributions of $293,600. The partner's distributions were made to pay
partner's tax liabilities incurred during the year.
Impact of Recently Issued Accounting Pronouncements
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, Accounting for Asset Retirement Obligations (SFAS 143). This
statement establishes standards of accounting for asset retirement obligations
arising from the acquisition, construction, or development and/or the normal
operation of a long-lived asset. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. Management does not believe that the adoption of
SFAS 143 will have a material effect of the financial statements.
In April 2002, the FASB approved for issuance Statements of Financial
Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of SFAS 13, and Technical Corrections" ("SFAS 145"). SFAS 145 rescinds
previous accounting guidance, which required all gains and losses from
extinguishment of debt be classified as an extraordinary item. Under SFAS 145
classification of debt extinguishment depends on the facts and circumstances of
the transaction. SFAS 145 is effective for fiscal years beginning after May 15,
2002 and adoption is not expected to have a material effect on the Company's
financial position or results of its operations.
In July 2002, the FASB issued Statements of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" (SFAS 146). SFAS 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Examples of costs
covered by SFAS 146 include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS 146 is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002. The adoption of SFAS 146 is not expected to have a material effect on
the Company's financial position or results of its operations.
In August 2002, the FASB issued Statements of Financial Accounting
Standards No. 147, "Acquisitions of Certain Financial Institutions" (SFAS 147).
SFAS 147 requires financial institutions to follow the guidance in SFAS 141 and
SFAS 142 for business combinations and goodwill and intangible assets, as
opposed to the previously applied accounting literature. This statement also
amends SFAS 144 to include in its scope long-term customer relationship
intangible assets of financial institutions. The provisions of SFAS 147 do not
apply to the Company.
In December 2002, the FASB issued Statements of Financial Accounting
Standards No.148, "Accounting for Stock-Based compensation - Transition and
Disclosure - an amendment of FASB Statement 123" (SFAS 123). For entities that
change their accounting for stock-based compensation from the intrinsic method
to the fair value method under SFAS 123, the fair value method is to be applied
prospectively to those awards granted after the beginning of the period of
adoption (the prospective method). The amendment permits two additional
transition methods for adoption of the fair value method. In addition to the
prospective method, the entity can choose to either (i) restate all periods
presented (retroactive restatement method) or (ii) recognize compensation cost
from the beginning of the fiscal year of adoption as if the fair value method
had been used to account for awards (modified prospective method). For fiscal
years beginning December 15, 2003, the prospective method will no longer be
allowed. The Company currently accounts for its stock-based compensation using
31
the intrinsic value method as proscribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options, therefore, it does not intend to
adopt the transition requirements as specified in SFAS 148. The Company has
adopted the new SFAS 148 disclosure requirements of SFAS 148 in these financial
statements.
Certain Factors That May Affect Future Results
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth in this prospectus. Whitco's future operating results may be affected by a
number of factors, including general economic conditions in both foreign and
domestic markets, cyclical factors affecting the industry, lack of growth in
Whitco's end-markets, the ability to comply with government regulations, failure
to manage its business and the ability to sell both new and existing products at
a profitable yet competitive price.
The industry in which Whitco operates is highly competitive and Whitco
expects such competition to continue in the future. Most of Whitco's competitors
are larger and have substantially greater financial, technical and marketing
resources.
WENTWORTH MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATION
Business
We were organized under the laws of the State of Delaware on March 7,
2001, to pursue a merger, acquisition or other business combination with an
operating business. Our principal business objective is to seek long-term growth
potential through the acquisition of a business rather than immediate,
short-term earnings. On February 12, 2003, we entered into an agreement with
Whitco Company, L.L.P. to merge with a newly formed, wholly owned subsidiary.
Since our organization, our activities have been limited to the initial sale of
shares of Common Stock in connection with our organization, the preparation of
the registration statement and the prospectus for our initial public offering,
reviewing various businesses and negotiating a merger agreement with Whitco. We
have not engaged in any substantive commercial business. We maintain our office
at 650 So. Cherry Street, Suite 420, Denver, Colorado 80246. Our telephone
number is (303) 320-1870.
Plan of Operation
We are currently in the development stage. We have no operating
business, and all our activities since inception have been related to our
formation and completing our initial public offering in which we raised $50,000
of gross proceeds from the sale of 50,000 Shares. Our ability to continue
operations is contingent upon completing a business combination. To date, we
have not incurred any material costs or expenses other than those associated
with formation of the Company and the IPO, which we completed in November 2002.
Pursuant to Rule 419 under the Securities Act, the gross proceeds from the
offering of $50,000, less 10%, are being held in escrow and, as of December 31,
2002, we had cash on hand of $47,125 including such escrowed funds. We will use
the net proceeds of the IPO, together with the income and interest earned
thereon, if any, to pay the costs associated with the Offering. We do not have
discretionary access to any income on the monies in the escrow account and
stockholders will not receive any distribution of the income or have any ability
to direct the use or distribution of any such income. Thus, any such income will
cause the amount in escrow to increase. No cash compensation has been paid to
any officer or director in their capacities as such. Since the role of present
management after a business combination is uncertain, we cannot determine what
remuneration, if any, will be paid to present management after a business
combination.
If we do not complete a business combination within eighteen months
from the date of the commencement of the IPO, the escrow agent will return the
escrowed funds to the investors on a proportionate basis, with interest, if any,
in accordance with SEC Rule 419. We anticipate being able to effect only one
business combination, due primarily to our limited financing, and the dilution
of interest for present and prospective stockholders. This lack of
diversification should be considered a substantial risk in investing in us,
because it will not permit us to offset potential losses from one venture
against gains from another.
32
We have entered into the Agreement, dated as of February 12, 2003, with
Whitco Company, L.L.P. The Agreement calls for our acquisition of all of the
issued and outstanding partnership units and options to purchase partnership
units for an aggregate of 3,800,000 shares and options to purchase shares of
Common Stock, consisting of 2,991,368 shares of Common Stock to be issued and
808,632 options to purchase Common Stock. Whitco is a national manufacturer and
seller of lighting poles for areas of the outdoor lighting industry, including
sports arenas, area lighting (such as shopping mall parking lots) and roadway
lighting. We intend to operate Whitco as a wholly-owned subsidiary upon
completion of the transaction contemplated by the Agreement.
The closing of the transaction contemplated by the Agreement is conditioned
upon a number of factors, including satisfactory due diligence reviews,
regulatory approvals, as necessary, our filing and causing to become effective a
post-effective amendment to our registration statement on Form SB-2 in
compliance with SEC Rule 419 and reconfirmation by the IPO purchasers of their
investment. Under Rule 419, we cannot acquire a target business unless its fair
value represents 80% of the Offering proceeds. In addition, the Colorado
Securities Act further requires, among other things, that the proceeds of the
Offering not be removed from escrow until 50% of the gross proceeds of the
Offering are committed to one or more specific lines of business. To determine
the fair market value of a target business, our management has examined the
financial statements, including balance sheets and statements of cash flow and
stockholders' equity, of Whitco, focusing attention on its assets, liabilities,
revenue and net worth, as well as taking into account the business plan,
opportunity for growth and other measures generally used to evaluate businesses.
Upon the consummation of the transaction with Whitco, our management will
change. It is possible that, after we successfully consummate the exchange,
Whitco may desire to employ or retain one or a number of members of our
management or our directors for the purposes of providing services to the
surviving entity. However, we have adopted a policy whereby the offer of any
post-transaction employment to members of management will not be a consideration
in our decision to undertake the Whitco transaction. Each member of management
has agreed to disclose to the Board of Directors any discussions concerning
possible employment by Whitco following the transaction and to abstain from
voting on the transaction. To date, Whitco has not had any discussions with, nor
made any offers of employment to, any officers or members of the Board of
Directors of the Company.
The proceeds from the IPO currently held in escrow will be released to us,
and the Shares sold in the IPO released to the purchasers, if we close the
transaction contemplated by the Agreement, our post-effective amendment to our
registration statement is declared effective and a sufficient number of
purchasers in the offering reconfirm their investment in our company. No
assurance can be given that the due diligence reviews contemplated by the
Agreement will be completed satisfactorily, that our post-effective amendment to
our registration statement will be declared effective by the SEC, that a
sufficient number of purchasers in the offering will reconfirm their investments
in the Company or that all other conditions necessary to close the transaction
contemplated by the Agreement will be successfully completed and that we will
acquire Whitco.
In analyzing prospective business combinations, we have considered such matters
as:
o available technical, financial, and managerial resources,
o working capital and other financial requirements,
o history of operations, if any,
o prospects for the future,
o nature of present and expected competition,
o the quality and experience of management services which may be
available and the depth of that management,
o the potential for further research, development, or exploration,
o specific risk factors not now foreseeable but which then may be
o anticipated to impact on our proposed activities,
o the potential for growth or expansion, o the potential for profit,
o the perceived public recognition or acceptance or products or services
and name identification and other relevant factors.
As part of our investigation, our officers and directors have met
personally with Whitco's management and key personnel, checked references of
management and key personnel and taken other reasonable investigative measures,
to the extent of our limited financial resources and management expertise.
33
MANAGEMENT
Executive Officers and Directors
Wentworth III, Inc.
Set forth below is Wentworth's current executive officers and directors, their
ages and principal positions with our company.
Name Age Position
--------------------- --- ----------------------
Kevin R. Keating (1) 62 President, Chief
Financial Officer and
Director
Spencer I. Browne (1) 51 Secretary and Director
--------------------
(1) May be deemed our "Promoters" as that term is defined under the Securities
Act.
Kevin R. Keating is an investment executive and for the past five (5) years has
been the Branch Manager of the Vero Beach, Florida office of Brookstreet
Securities Corporation. Brookstreet Securities is a full-service, national
network of independent investment professionals. Mr. Keating services the
investment needs of private clients with special emphasis on equities. For more
than 35 years, he has been engaged in various aspects of the investment
brokerage business. Mr. Keating began his Wall Street career with the First
Boston Corporation in New York in 1965. From 1968 through 1974, he was employed
by several institutional research boutiques where he functioned as Vice
President-Institutional Equity Sales. From 1974 until 1982, Mr. Keating was the
President and Chief Executive Officer of Douglas Stewart, Inc., a New York Stock
Exchange member firm. Since 1982, he has been associated with a variety of firms
as a registered representative servicing the needs of individual investors. Mr.
Keating is a graduate of Holy Cross College with a degree in Business
Administration. Mr. Keating is a director of Wentworth II, Inc. and Wentworth
III, Inc. and holds other directorships in the following reporting companies:
Wentworth I, Inc. and iVideoNow, Inc.
Spencer I. Browne is a principal of Strategic Asset Management, LLC, a privately
owned investment firm which he founded in November 1996. Prior to that date, Mr.
Browne held various executive and management positions with several publicly
traded companies engaged in businesses related to the residential and commercial
mortgage loan industry. From August 1988 until September 1996, Mr. Browne served
as President, Chief Executive Officer and a director of Asset Investors
Corporation (AIC), a New York Stock Exchange traded company he co-founded in
1986. He also served as President, Chief Executive Officer and a director of
Commercial Assets, Inc., an American Stock Exchange traded company affiliated
with AIC, from its formation in October 1993 until September 1996. In 1999, AIC
acquired Commercial Assets, Inc. and changed its name to American Land Lease,
Inc. (ANL). In addition, from June 1990 until March 1996, Mr. Browne served as
President and a director of M.D.C. Holdings, Inc., a New York Stock Exchange
traded company and the parent company of a major homebuilder in Colorado. Mr.
Browne also has served as a director of Annaly Management, Inc. since 1997, a
New York Stock Exchange traded company, Internet Commerce Corporation, a Nasdaq
traded company, since October 2001 and Mego Financial Corp., a Nasdaq traded
company, since January 2002. Mr. Browne received a Bachelor of Economics degree
from the University of Pennsylvania's Wharton School of Business in 1971 and
attained a J.D. Degree, Cum Laude from Villanova University School of Law in
1974. Mr. Browne is a director of Wentworth III, Inc., Wentworth II, Inc. and
Wentworth I, Inc., and holds other directorships in the following reporting
companies: Annaly Mortgage Management, Inc., Internet Commerce Corporation, Mego
Financial Corp. and iVideoNow, Inc.
Dennis H. Depenbusch, 39, is currently the managing partner and Chief Executive
Officer of Whitco Company, L.L.P. He has held these positions since June 2000,
when he led the acquisition of Whitco from its then-current owners. Prior to his
leading the acquisition of Whitco, he was a Vice President for Euronet Worldwide
from May of 1995 to June of 2000. During his tenure with Euronet, a technology
company based in Leawood, Kansas, he assisted in building its country operations
in Poland, Germany and the United Kingdom, as well as contributed to Euronet's
acquisition of venture capital investment and eventual listing on the NASDAQ
(EEFT). Mr. Depenbusch holds an MBA, Summa Cum Laude, and a BS in Business from
the University of Kansas. Mr. Depenbusch is expected to become the Chief
Executive Officer and Chairman of the Board of Directors of the Company upon
consummation of the acquisition of Whitco.
34
Mr. Glover, 46, joined Whitco in January 2002 as the President. Mr. Glover has
twenty years of experience in the lighting industry in key leadership roles.
These assignments included work for three of the larger lighting conglomerates
in the country: Genlyte Thomas, USI Lighting and Lithonia Lighting. Mr. Glover
has held senior level positions in sales and operational management for these
companies. In the year 2001, Mr. Glover was CEO and principal of iCareers, LLC,
an Internet recruiting site focused on lighting placements. From 1996 to 2000,
was General Manager of Wide-Lite, a subsidiary of Genlyte Thomas. Mr. Glover has
an MBA from the University of Georgia and a BS in Economics from the College of
Charleston. Mr. Glover is expected to become President and a member of the Board
of Directors of the Company upon consummation of the acquisition of Whitco.
Mary Titus, 43, is expected to become a director of the Company and a member of
the audit committee upon successful completion of the transaction with Whitco.
Since December 2000, Ms. Titus has worked for uRoam Corporation, a web based
remote access provider, in Sunnyvale, CA. Ms. Titus is currently the Chief
Financial Officer, Vice President of Administration and the corporate Secretary
for uRoam, handling all finance, human resource and corporate compliance
matters. From October 1999 through June 2000, Ms. Titus was the Chief Financial
Officer, Vice President of Administration and the corporate Secretary for
healthshop, an Internet based retailer of health products. From September 1998
through January 1999, Ms. Titus was Chief Financial Officer and the corporate
Secretary for Crag Technologies, a San Jose based data storage company, where
she was responsible for all finance and corporate compliance matters. From April
through August 1998, Ms. Titus handled integration and strategic acquisition
matters for Adaptec, following its acquisition of Ridge Technologies. Prior to
that, Ms. Titus handled all finance, securities and acquisition matters at Ridge
Technologies, a redundant storage controller company located in San Jose, CA.
Tracy B. Taylor, 49, is expected to become a director of the Company and a
member of the compensation committee upon successful completion of the
transaction with Whitco. Since March, 2002, Mr. Taylor has been President of the
Kansas Technology Enterprise Corporation, Topeka, Kansas. From 2001 to the KTEC
appointment, Mr. Taylor was President of Taylor and Associates, a private equity
investment firm. From 1999-2001 Mr. Taylor was Vice President for Townsend
Capital, Lee's Summit, Missouri. From 1994 to 1999, he held various positions
with Cohen Esrey real estate services in Kansas City, Missouri. From 1988 to
1994, Mr. Taylor held graduating positions leading to Treasurer and finally Vice
President for Administration for Sprint Corporation in Westwood, Kansas. Mr.
Taylor received a B.A. in history/political science, magna cum laude, in 1976
from Bethany College in Lindsborg, Kansas and an MBA with a finance
concentration, from the University of Kansas in 1979.
Other Blank Check Offerings
Kevin R. Keating, our President and a director, is involved as an officer,
director, founder, promoter and principal stockholder of Wentworth I, Inc. and
Wentworth II, Inc., which are also blank check companies. Mr. Browne, our
Secretary and a director, is also involved as an officer, director, founder,
promoter and principal stockholder of Wentworth II, Inc. and Wentworth I, Inc.
Each of these individuals works to evaluate potential business combinations with
respect to each of the blank check companies with which such individual is
affiliated. It is anticipated that both Mr. Keating and Mr. Browne will be
involved as officers, directors, founders, promoters and principal stockholders
of other blank check companies in the future.
Kevin R. Keating holds 125,000 shares of common stock of Wentworth I, Inc.,
which he purchased at a price of $0.05 per share, for an aggregate purchase
price of $6,250. After the offering of common stock by Wentworth I, Mr. Keating
held 62.5% of the outstanding shares of stock of Wentworth I. Mr. Keating holds
90,000 shares of Wentworth II, Inc. which he purchased at a price of $0.05 per
share for an aggregate purchase price of $4,500. He presently holds 60% of the
outstanding shares of common stock of Wentworth II, but after the completion of
that company's offering of common stock he will hold 45% of the outstanding
shares of common stock. Mr. Keating has not yet disposed of any shares of common
stock of Wentworth I or Wentworth II.
Spencer I. Browne holds 60,000 shares of Wentworth II, Inc. which he purchased
at a price of $0.05 per share for an aggregate purchase price of $3,000. He
presently holds 40% of the outstanding shares of common stock of Wentworth II,
but after the completion of that company's offering of common stock he will hold
30% of the outstanding shares of common stock. Mr. Browne has not yet disposed
of any shares of common stock of Wentworth II. Mr. Browne also holds 25,000
shares of Wentworth I, Inc., which he purchased at a price of $0.05 per share
for an aggregate purchase price of $1,250.00.
35
There have been no material payments to Mr. Keating or Mr. Browne in connection
with any affiliation with the above mentioned blank check companies. In
addition, there is currently no trading market for the securities of either
Wentworth I or Wentworth II.
Executive Compensation
Since our inception, we have paid no cash compensation to our officers
or directors for serving in such capacities. We do not anticipate compensating
our officers and directors prior to completing our acquisition of Whitco.
As of December 23, 2002, Whitco entered into an employment agreement
with Henry Glover, expiring December 31, 2003, providing for him to serve as
Whitco's President and Chief Executive Officer at an annual rate of $150,000.
Mr. Glover is also eligible for medical and dental benefits, as well as such
other benefits as may be offered to executive officers from time to time. Mr.
Glover's employment agreement contains a confidentiality provision, as well as a
non-compete clause for one year following his employment with Whitco. We
anticipate entering into an employment agreement with Dennis Depenbusch.
Certain Relationships and Related Transactions
On October 9, 2001, Kevin R. Keating, our President, Chief Financial
Officer and a director, purchased 90,000 shares of Common Stock for $.05 per
share, or an aggregate of $4,500. On the same day, Spencer I. Browne, our
Secretary and a director, purchased 60,000 shares of Common Stock for $.05 per
share, or an aggregate of $3,000.
The sole finder is Keating Investments, LLC, a California limited liability
company and a registered broker-dealer. Timothy J. Keating, the son of our
President, Kevin R. Keating, is the Managing Member of, and holds approximately
an 87% interest in, Keating Investments, LLC.
Property
We currently utilize office space at 650 So. Cherry Street, Suite 420, Denver,
CO 80246. This location currently serves as our principal place of business. We
have no rent obligations as this space is leased by Strategic Asset Management,
LLC, a company of which Spencer I. Browne, our Secretary and a director, is a
member and which pays all rent on the space. The landlord for the property is a
non-affiliated third party. We anticipate relocating our principal place of
business to Whitco's offices at 6777 Camp Bowie Boulevard, Suite 233, Fort
Worth, TX 76116 on consummation of the transaction with Whitco. See "Business of
Whitco - Properties."
36
Limitation on Liability and Indemnification Matters
As authorized by the Delaware General Corporation Law, our certificate of
incorporation provides that none of our directors shall be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
o for any breach of the director's duty of loyalty to us or our stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o pursuant to Section 174 of the Delaware General Corporation Law;
or
o for any transaction from which the director derived an improper personal
benefit.
This provision limits our rights and the rights of our stockholders to recover
monetary damages against a director for breach of the fiduciary duty of care
except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his or her duty of care. These provisions will not alter
the liability of directors under federal securities laws.
Our certificate of incorporation further provides for the indemnification of any
and all persons who serve as our director, officer, employee or agent to the
fullest extent permitted under the Delaware General Corporation Law.
In connection with the acquisition of Whitco, we anticipate obtaining from them
an assignment of the policy of insurance under which the directors and officers
following the acquisition will be insured, subject to the limits of the policy,
against certain losses arising from claims made against our directors and
officers by reason of any acts or omissions covered under this policy in their
capacities as directors or officers, including liabilities under the Securities
Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons under the above
provisions, or otherwise, we have been advised that in the opinion of the SEC,
indemnification is against public policy as expressed in the Securities Act, and
is unenforceable.
Conflict of Interest Policy
To minimize potential conflicts of interest relating to acquisition
transactions, we have established a policy which provides that:
o we will not combine with any target business or enter into any acquisition
transaction in which any of our officers, directors or non-public
stockholders, or their respective affiliates, serves as an officer,
director or partner or owns or holds an ownership interest in any other
party to the combination or transaction; and
o our management may not negotiate or otherwise consent to the purchase of
their respective securities in our company as a condition of, or in
connection with, our entering into such a combination or transaction.
By virtue of having signed the registration statement of which this
reconfirmation prospectus is a part, our directors and officers confirm they are
aware of this policy and know of no circumstances under which, through their own
initiative, this policy has been violated.
Our officers and directors currently have and/or may in the future have real or
potential conflicts of interest with us in connection with their allocation of
business time and with respect to corporate opportunities.
37
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to
the beneficial ownership of Common Stock, as of the date of this reconfirmation
prospectus and as adjusted to reflect the issuance of the maximum 3,800,000
shares and options to purchase shares of Common Stock (which such number
includes 200,000 shares to be issued to Keating Investment, LLC as a fee) in
connection with our acquisition of Whitco by:
o each person known by us to beneficially own 5% or more of Common Stock,
o each of our executive officers and directors, and
o all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
SEC and includes voting and investment power. Under SEC rules, a person is
deemed to be the beneficial owner of securities which may be acquired by such
person upon the exercise of options and warrants or the conversion of
convertible securities within 60 days from the date on which beneficial
ownership is to be determined. Each beneficial owner's percentage ownership is
determined by dividing the number of shares beneficially owned by that person by
the base number of outstanding shares, increased to reflect the
beneficially-owned shares underlying options, warrants or other convertible
securities included in that person's holdings, but not those underlying shares
held by any other person.
For the purposes of the table, the base number of outstanding shares
are: currently, 200,000; upon completion of the acquisition, 3,391,367.
Except as otherwise indicated in the notes to the following table,
o we believe that all shares are beneficially owned, and investment and
voting power is held, by the persons named as owners; and
o the address for each beneficial owner listed in the table, except where
otherwise noted, is c/o Whitco Company, L.L.P., 6777 Camp Bowie Boulevard,
Suite 233, Fort Worth, TX 76116.
Currently After the Acquisition
------------------------------ -------------------------------
Amount and Percentage Amount and Percentage
Nature of of Shares Nature of of Shares
Beneficial Beneficially Beneficial Beneficially
Name of Stockholder Ownership Owned Ownership Owned
------------------- --------- ----- --------- -----
Kevin R. Keating (1)....................... 90,000 45.0 90,000 2.65%
Spencer I. Browne (2)...................... 60,000 30.0 60,000 1.77%
Steven P. Salinas.......................... 41,600 20.8 41,600 1.23%
Dennis H. Depenbusch (3)................... 0 0 1,610,974(4) 47.50%
Henry Glover(5)............................ 0 0 96,951(6) 2.78%
Mary Titus (7)............................. 0 0 0 0
Tracy B. Taylor (8)........................ 0 0 0 0
Keating Investments, LLC (9)............... 0 0 200,000 5.90%
Larry Doskocil Trust....................... 0 0 685,004 20.20%
Celestine Depenbusch....................... 0 0 472,048 13.92%
All executive officers and directors as a
group (two people currently and four
persons after the acquisition)......... 150,000 75.0 1,707,925 50.36%
----------
(1) Mr. Keating currently is President, Chief Financial Officer and a
director of our company. We do not believe Mr. Keating will continue to
serve as an executive officer or director of our company following the
completion of our acquisition of Whitco. The address for this
stockholder is 650 So. Cherry Street, Suite 420, Denver, CO 80246.
38
(2) Mr. Browne currently is Secretary and a director of our company. We do
not believe Mr. Browne will continue to serve as an executive officer
or director of our company following the completion of our acquisition
of Whitco. The address for this stockholder is 650 So. Cherry Street,
Suite 420, Denver, CO 80246.
(3) Mr. Depenbusch is currently managing partner of Whitco. We believe Mr.
Depenbusch will serve as chief executive officer and chairman of the
board of directors of our company following completion of our
acquisition of Whitco.
(4) Represents 3,350 shares of our Common Stock owned by Mr. Depenbusch and
1,607,624 shares owned by the Dennis Depenbusch Revocable Trust, an
entity of which Mr. Depenbusch is a co-trustee.
(5) It is anticipated that Mr. Glover will become President and a director
of our company following the acquisition.
(6) Represents 96,951 shares of Common Stock issuable upon exercise of
currently vested options granted to Mr. Glover.
(7) We believe Ms. Titus will serve as a director of our company following
completion of our acquisition of Whitco.
(8) We believe Mr. Taylor will serve as a director of our company following
completion of our acquisition of Whitco.
(9) Keating Investments, LLC is to receive 200,000 shares of Common Stock
as a finder's fee upon consummation of the transaction with Whitco. The
address for this stockholder is 383 Inverness Drive South, Suite 100,
Englewood CO 80112.
Control of our company will be held by our management. Currently, our
management controls 75% of the total voting power of our company and, upon
completion of the proposed acquisition of Whitco, our then anticipated
management will control 50.36% of the total voting power of our company, with
additional stock and option grants to be given to members of our Board of
Directors. See "Executive Compensation." Given their large voting control, our
current management is in the position to elect all of the members of our board
of directors and thereby control the policies of our company. Our anticipated
management following the acquisition transaction, together with their
affiliates, if they choose to act in concert, will control a significant portion
of the voting power of our company and have the ability, through exercise of
their options, to acquire additional shares of Common Stock. As such, our
management has and will have substantial influence over our Company, which
influence may not necessarily be consistent with the interests of our other
stockholders.
DESCRIPTION OF SECURITIES
General
We have authorized 40,000,000 shares of Common Stock, par value $.01
per share, and 10,000,000 shares of preferred stock, par value $.01 per share,
whose rights and designation(s) have not yet been established. We have 200,000
shares of Common Stock outstanding as of the date of this reconfirmation
prospectus. We currently have outstanding no shares of preferred stock. All
shares of Common Stock currently outstanding are validly issued, fully paid and
non-assessable.
Common Stock
Each share of Common Stock entitles its holder to one vote upon all
matters on which holders of Common Stock are entitled to vote under applicable
law or otherwise. Stockholders are not permitted to vote their shares
cumulatively. Accordingly, the holders of more than 50% of the issued and
outstanding Common Stock can elect all of our directors. Holders of Common Stock
have no preemptive or other subscription rights, conversion rights, redemption
or sinking fund provisions. In the event of our liquidation, dissolution or
winding up, whether voluntary or involuntary, each share of Common Stock will be
entitled to share ratably in any assets available for distribution to holders of
our equity securities after satisfaction of all liabilities and after providing
for each class of stock, if any, having preference over the Common Stock.
The rights of the holders of Common Stock are subject to any rights
that may be fixed for holders of preferred stock, when and if any preferred
stock is issued. All outstanding shares of Common Stock are, and the shares
underlying all options and warrants will be, duly authorized, validly issued,
fully paid and non-assessable.
39
Preferred Stock
Our board of directors is authorized by our certificate of
incorporation to designate and issue up to 10,000,000 shares of one or more
series of preferred stock. No shares of preferred stock have been authorized or
designated for future issuance by our board as of the date of this
reconfirmation prospectus. We have no present plans to issue any such shares.
In the event our board of directors does authorize, designate and issue
shares of preferred stock, it may exercise its discretion in establishing the
terms of such preferred stock. In the exercise of such discretion, our board may
determine the voting rights, if any, of the series of preferred stock being
issued, which could include the right to vote separately or as a single class
with our Common Stock and/or other series of preferred stock; to have more or
less voting power per share than that possessed by our Common Stock or other
series of preferred stock; and to vote on certain specified matters presented to
the shareholders or on all of such matters or upon the occurrence of any
specified event or condition. On our liquidation, dissolution or winding up, the
holders of preferred stock may be entitled to receive preferential cash
distributions fixed by our board before the holders of our Common Stock are
entitled to receive anything. Preferred stock authorized by our board could be
redeemable or convertible into shares of any other class or series of our
capital stock.
The issuance of preferred stock by our board of directors could
adversely affect the rights of holders of Common Stock by, among other things,
establishing preferential dividends, liquidation rights or voting powers. The
issuance of preferred stock could be used to discourage or prevent efforts to
acquire control of our company through the acquisition of shares of Common
Stock, even if a change in control were in our stockholders' interest.
We will not offer, sell or issue shares of any class of our preferred
stock to any of our directors or executive officers, nor any affiliate of such
persons, except:
o if the offer, sale or issuance is on the same terms as we offer such
securities to all other existing stockholders or to new stockholders, or
o if the offer, sale or issuance is approved by a majority of our independent
directors who do not have an interest in the transaction and who have
access, at our expense, to our or other independent counsel.
State Blue Sky Information
We offered the Shares for sale in the IPO only in the State of
Colorado. We believe that the Shares, upon release from escrow in accordance
with SEC Rule 419 and once they become transferable, will be eligible for sale
on a secondary market basis in other states based upon the registration of the
securities in such states, a listing in Standard and Poor's or Moody's manuals,
or the availability of an applicable exemption from the state's registration
requirements, subject, in each case, to the exercise of the broad discretion and
powers of the securities commission or other administrative bodies having
jurisdiction in each state, and any changes in statutes and regulations which
may occur after the date of this reconfirmation prospectus. We will amend this
prospectus to disclose additional states, if any, in which our securities will
be eligible for resale in the secondary trading market.
Transfer Agent
Corporate Stock Transfer of Denver, Colorado is our transfer agent and
we anticipate they will continue to serve in such capacity upon consummation of
the transaction with Whitco and the release of the Shares from escrow.
PLAN OF DISTRIBUTION
We offered the 50,000 Shares on a self underwritten, all-or-none basis.
We relied on the safe harbor exception of Rule 3a4-1 of the Securities Exchange
Act to not be deemed a broker with respect to the offering. Neither the Company
nor any officer or director of the Company received commissions in connection
with our IPO.
A market may never develop for our Common Stock
We arbitrarily set the offering price of the Shares. We will pay all
expenses incident to the registration of the Shares upon release of the IPO
proceeds from escrow and will pay the expenses relating to this reconfirmation
prospectus. We will not pay, among other things, the expenses, commissions and
discounts of brokers, dealers or agents of the purchasers of the Shares.
40
CERTAIN MARKET INFORMATION
There has been, and there currently is, no public trading market for
the Shares. A public trading market may never develop or, if one develops, may
not be sustained. Accordingly, a resale of your securities may be difficult. No
assurance can be given that a market will develop or that any security holder
will be able to liquidate their investment without considerable delay, if at
all. While we intend to apply for quotation of our securities on the NASD's
Over-the-Counter Bulletin Board, we cannot guarantee that our application will
be approved and that our securities are listed and quoted for sale. The trading
market price of our securities may decline below the price at which the
securities were sold to you. If a market for our securities should develop,
their market prices may be highly volatile. In addition, an active public market
for our securities may not develop or be sustained. If selling security holders
sell all or substantial amounts of their securities in the public market, the
market price of our securities could be adversely affected.
The Share offering price was arbitrarily determined and may not reflect
our value. The price of the Shares does not bear any relationship to our book
value, assets, current or prospective earnings or any other recognized criterion
of value.
Federal regulations governing "penny stocks" could have a detrimental
effect on holders of our securities. Our securities, when available for trading,
will be subject to the SEC rules that impose special sales practice requirements
upon broker-dealers that sell such securities to parties other than established
customers or accredited investors. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of purchasers of our
securities to buy or sell in any market that may develop. In addition, the SEC
has adopted a number of rules to regulate "penny stocks." Because our securities
41
may constitute "penny stock" within the meaning of these rules, the rules would
apply to us and our securities. The rules may further affect the ability of
owners of our securities to sell their securities in any market that may develop
for them.
SHARES ELIGIBLE FOR FUTURE SALE
We will have issued and outstanding 3,391,368 shares of Common Stock
following the completion of the proposed acquisition transaction with Whitco and
options to purchase 808,632 shares of Common Stock. Of such securities, the
50,000 Shares sold in the IPO will be freely tradable without restriction or
further registration under the Securities Act. All of the remaining Common Stock
outstanding following the acquisition transaction is restricted securities, as
that term is defined under Rule 144. All of the shares to be issued to the
Whitco partners and option holders upon completion of the acquisition
transaction will be deemed restricted stock for purposes of Rule 144 and,
accordingly, may not be sold absent their registration under the Securities Act
or pursuant to Rule 144 following their being held for the applicable holding
periods set forth in Rule 144.
In general, under Rule 144 as currently in effect, a person or group of
persons whose shares are aggregated, who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
except an affiliate of ours, would be entitled to sell, within any three month
period, a number of shares that does not exceed the greater of:
o 1% of the number of then outstanding shares of our Common Stock, or
o the average weekly trading volume of our Common Stock during the four
calendar weeks preceding the sale;
provided, that public information about us as required by Rule 144 is available
and the seller complies with manner of sale provisions and notice requirements.
The volume limitations described above, but not the one-year holding
period, also apply to sales of our non-restricted securities by our affiliates.
A person who is not an affiliate, has not been an affiliate within three months
before the sale and has beneficially owned the restricted securities for at
least two years, is entitled to sell the restricted shares under Rule 144
without regard to any of the limitations described above.
Before our IPO, there was no public market for our securities. We
cannot predict the effect, if any, that sales of, or the availability for sale
of, our securities will have on the market price of our Common Stock prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock might enter the public market through Rule 144 sales or otherwise,
could adversely affect the prevailing market price of our securities and could
impair our ability to raise capital in the future through the sale of
securities.
42
There may be an adverse effect on the market price of our securities
because Common Stock is available for future sale. No prediction can be made as
to the effect, if any, future sales, or the availability of shares of Common
Stock for future sale, by us or by our directors and executive officers will
have on the market price of our securities prevailing from time to time. Sales
of substantial amounts of our securities, including shares issued upon the
exercise of options or warrants, or the perception that such sales could occur,
could adversely affect prevailing market prices for the our securities.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2, including exhibits and schedules thereto,
under the Securities Act with respect to the securities sold in our IPO, and
subject to the reconfirmation offering made under this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all the information set forth in the registration statement and the
exhibits filed with it. For further information with respect to us and the
securities sold in our IPO, reference is made to the registration statement and
to the exhibits filed therewith. Statements contained in this prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. In each instance, we refer you to the copy of the
contracts, agreements and other documents filed as exhibits to the registration
statement, and these statements are deemed qualified in their entirety by
reference to the contract or document.
You may inspect, without charge, all or any portion of the registration
statement or any reports, statements or other information we file with the SEC
at the SEC's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549 and at the regional offices of the SEC
located at 233 Broadway, New York, New York 10007 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these documents
may also be obtained from the SEC's Public Reference Room at 450 Fifth Street,
NW, Room 1024, Washington, D.C. 20549 upon payment of the prescribed fees. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330.
In addition, registration statements and other filings with the SEC are
publicly available through its Electronic Data Gathering, Analysis and
Retrieval, or EDGAR, system, located at www.sec.gov. The registration statement,
including all exhibits and schedules and amendments, has been filed with the
commission through the EDGAR system.
We are subject to the reporting requirements of the Exchange Act and,
in accordance with these requirements, we have and will continue to file
reports, proxy statements and other information with the SEC. We intend to
furnish our stockholders with annual reports containing audited financial
statements and other periodic reports as we deem appropriate or as may be
required by law.
LEGAL PROCEEDINGS
We are not a party to nor are we aware of any existing, pending or
threatened lawsuits or other legal actions.
43
EXPERTS
Our audited financial statements as of December 31, 2002 and for the year
then ended included in this prospectus, and the registration statement of which
this prospectus is a part, have been included herein in reliance on the report
of Hein + Associates LLP, independent accountants, given on the authority of
such firm as an expert in accounting and auditing.
Our audited balance sheet as of December 31, 2001 not included in this
prospectus and the related statements of operations, stockholders equity and
cash flow for the period from inception (March 7, 2001) to December 31, 2001
included in this prospectus, and the registration statement of which this
prospectus is a part, have been included herein in reliance on the report of
Goldstein Golub Kessler LLP, independent accountants, given on the authority of
such firm as an expert in accounting and auditing.
Whitco's audited financial statements as of September 30, 2002 and for the
nine months then ended included in this prospectus, and the registration
statement of which this prospectus is a part, have been included herein in
reliance on the report of Hein + Associates LLP, independent accountants, given
on the authority of such firm as an expert in accounting and auditing.
Whitco's audited statements of income, partners' equity and cash flows for
the year ended December 31, 2001 included in this prospectus, and the
registration statement of which this prospectus is a part, have been included
herein in reliance on the report of Grant Thornton LLP, independent accountants,
given on the authority of such firm as an expert in accounting and auditing.
44
INDEX TO FINANCIAL STATEMENTS
Page
WENTWORTH III, INC.
--------------------
Independent Auditors' Report.........................................................................................F-1
Independent Auditors' Report.........................................................................................F-2
Balance Sheet - December 31, 2002....................................................................................F-3
Statement of Operations - For the Year Ended December 31, 2002 and for the Period from
March 7, 2001 (Date of Inception) to December 31, 2001 and 2002.................................................F-4
Statement of Changes in Stockholders' Equity - For the Period from March 7, 2001 (Date of Inception)
to December 31, 2002 and for the Year Ended December 31, 2002...................................................F-5
Statements of Cash Flows - For the Year Ended December 31, 2002 and For the Period from
March 7, 2001 (Date of Inception) to December 31, 2001 and 2002.................................................F-6
Notes to Financial Statements........................................................................................F-7
WHITCO COMPANY, L.L.P.
----------------------
Independent Auditor's Report. . . . . . . . ...................................................................... F-11
Report of Independent Certified Public Accountants. . ............................................................ F-12
Balance Sheets - December 31, 2002 (unaudited) and September 30, 2002. . . . . . . . ............................. F-13
Statements of Income - For the Three Months Ended December 31, 2002 and 2001 (unaudited),
Nine Months Ended September 30, 2002 and Year Ended December 31, 2001............................... ........ F-14
Statements of Partners' Equity - For the Year Ended December 31, 2001, For the Nine Months Ended
September 30, 2002, and For the Three Months Ended December 31, 2002 (unaudited) ............................ F-15
Statements of Cash Flows - For the Three Months Ended December 31, 2002 and 2001 (unaudited),
Nine Months Ended September 30, 2002 and Year Ended December 31, 2001........................................ F-16
Notes to Financial Statements..................................................................................... F-17
Unaudited Pro Forma Condensed Consolidated Financial Statements
----------------------------------------------------------------
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements ................................. F-26
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2002................................. F-27
Unaudited Pro Forma Condensed Consolidated Statements of Operations.............................................. F-28
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements......................................... F-29
45
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Wentworth III, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Wentworth III, Inc. (a
development stage company) (the "Company") as of December 31, 2002, and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wentworth III, Inc. as of
December 31, 2002 and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
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 has suffered operating losses since its
inception and has a working capital deficiency that raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
The financial statements of the Company for the period from March 7, 2001 (date
of inception) to December 31, 2001 were audited by other auditors, whose report
dated May 24, 2002, expressed an unqualified opinion on these financial
statements with an explanatory paragraph indicating substantial doubt as to the
Company's ability to continue as a going concern. We have audited the
combination in the accompanying statements of operations, stockholders' equity
and cash flows of the period from March 7, 2001 (inception) to December 31, 2001
into the period from March 7, 2001 to December 31, 2002. In our opinion, such
financial statements have been properly combined.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
February 5, 2003
F-1
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Wentworth III, Inc.
We have audited the accompanying balance sheet of Wentworth III, Inc. (a
development stage company) as of December 31, 2001 (not presented herein), and
the related statements of operations, stockholders' equity and cash flows for
the period from March 7, 2001 (date of inception) to December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wentworth III, Inc. as of
December 31, 2001 and the results of its operations, and its cash flows for the
period from March 7, 2001 (date of inception) to December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has suffered operating losses since its
inception and has a working capital deficiency that raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ GOLDSTEIN GOLUB KESSLER LLP
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
May 24, 2002
F-2
WENTWORTH III, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 2002
ASSETS
--------
CURRENT ASSETS:
Cash $ 2,125
--------------
Total current assets 2,125
CASH-RESTRICTED 45,000
DEFERRED TAX ASSET, net of valuation allowance of $7,371 -
--------------
TOTAL ASSETS $ 47,125
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 38,000
Due to officer 1,035
--------------
Total current liabilities 39,035
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; authorized 10,000,000 shares, none issued --
Common stock - $.01 par value; authorized 40,000,000 shares, 200,000
shares issued and outstanding 2,000
Additional paid-in capital 25,937
Deficit accumulated during the development stage (19,847)
--------------
Total stockholders' equity 8,090
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,125
==============
See accompanying notes to these financial statements.
F-3
WENTWORTH III, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE
FOR THE PERIOD PERIOD FROM
FROM MARCH 7, MARCH 7, 2001
FOR THE YEAR 2001 (DATE OF (DATE OF
ENDED DECEMBER INCEPTION) TO INCEPTION) TO
31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2002
----------------- ------------------ ------------------
INTEREST INCOME $ 25 $ 20 $ 45
OPERATING EXPENSES:
Professional fees 17,753 - 17,753
Other general and administrative expense 797 1,342 2,139
-------------- -------------- --------------
Total operating expenses 18,550 1,342 19,892
-------------- -------------- --------------
NET LOSS (18,525) (1,322) (19,847)
-------------- -------------- --------------
Net Loss Per Common Share $ (0.01) $ (0.01)
------------------------- ============= ==============
Weighted-Average Number of Shares Outstanding 200,000 150,000
--------------------------------------------- ============== ==============
See accompanying notes to these financial statements.
F-4
WENTWORTH III, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD MARCH 7, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2002
FOR THE YEAR ENDED DECEMBER 31, 2002
COMMON STOCK ADDITIONAL DEFICIT DURING
------------ ------------- PAID-IN THE DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
------------ ------------- -------------- -------------- --------------
Issuance of common stock for cash at $.05 per share 150,000 $ 1,500 $ 6,000 $ - $ 7,500
Net loss for the period from March 7, 2001 (date of
inception) to December 31, 2001 - - - (1,322) (1,322)
--------- ------------ --------------- ------------- -------------
BALANCE, December 31, 2001 150,000 1,500 6,000 (1,322) 6,178
Net proceeds from sale of common stock for cash
received in public offering at $1.00 per share 50,000 500 19,937 - 20,437
Net loss for the year ended December 31, 2002 - - - (18,525) (18,525)
--------- ------------ --------------- ------------- -------------
BALANCE, December 31, 2002 200,000 $ 2,000 $ 25,937 $ (19,847) $ 8,090
========= ============ =============== ============= =============
See accompanying notes to these financial statements.
F-5
WENTWORTH III, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE FOR THE
PERIOD FROM PERIOD FROM
MARCH 7, 2001 MARCH 7, 2001
FOR THE YEAR (DATE OF (DATE OF
ENDED DECEMBER INCEPTION) TO INCEPTION) TO
31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2002
----------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,525) $ (1,322) $ (19,847)
Adjustments to reconcile net loss to net cash used
in operating activities:
Changes in operating assets and liabilities:
Increase in accrued expenses 7,595 842 8,437
Increase in amount due to officer 1,035 - 1,035
-------------- -------------- --------------
Net cash used in operating activities (9,895) (480) (10,375)
CASH USED IN INVESTING ACTIVITY, increase in restricted
cash (45,000) - (45,000)
-------------- -------------- --------------
CASH PROVIDED BY FINANCING ACTIVITY, proceeds from the
issuance of common stock 50,000 7,500 57,500
-------------- -------------- --------------
INCREASE (DECREASE) IN CASH (4,895) 7,020 2,125
CASH, at beginning of period 7,020 - -
-------------- -------------- --------------
CASH, at end of period $ 2,125 $ 7,020 $ 2,125
============== ============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITY:
Expense accrued for offering costs $ 18,419 $ 11,144 $ 29,563
============== ============== ==============
See accompanying notes to these financial statements.
F-6
WENTWORTH III, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMNTS
1. ORGANIZATION AND OPERATIONS AND GOING CONCERN:
---------------------------------------------
Wentworth III, Inc. (the "Company") was incorporated in the State of
Delaware on March 7, 2001 for the purpose of raising capital that is
intended to be used in connection with a merger, acquisition or other
business combination with an operating business. On October 9, 2001, the
Company issued 150,000 shares of $.01 par value common stock for $.05
per share, a total of $7,500. During 2001, the Company filed a
registration statement on Form SB-2, under SEC Rule 419, which was
declared effective by the Securities and Exchange Commission on August
6, 2002. Under this registration statement on November 4, 2002, the
Company sold 50,000 shares of $.01 par value common stock in a public
offering for $1.00 per share for gross proceeds of $50,000. The Company
incurred $29,563 in expenses of the offering.
The Company is currently in the development stage. All activities of the
Company to date relate to its formation, its public offering and
subsequent public filings and to finding an acquisition target with
which to consummate a business combination.
The proceeds of the initial public offering as well as the related
securities purchased have been placed in an escrow account where they
will remain until the consummation of any business combination as
required by the Securities and Exchange Commission Rule 419. The Company
may withdraw only 10% of the funds as working capital in order to seek
acquisition opportunities or for other corporate purposes. The remaining
$45,000 has been shown as cash in escrow in the accompanying balance
sheet.
At the time the Company seeks stockholder approval of any potential
merger, acquisition or other business combination, the Company will
offer each of the initial investors the right, for a specific period of
time, to reconfirm their investments and remain investors or,
alternatively, to require the return of their funds, including interest
if any, from the escrow account. Any investor not making a decision
within the specific time period will automatically have their funds
returned plus interest. The Company cannot consummate any business
combination unless investors owning at least 80% of the funds reconfirm
their investments.
As a result of limited resources, the Company will, in all likelihood,
have the ability to effect only a single business combination.
Accordingly, the prospects for the Company's success will be entirely
dependent upon the future performance of a single business. Furthermore,
there is no assurance that the Company will be able to successfully
execute a business combination. If the Company does not complete a
merger, acquisition or other business combination meeting specified
criteria within 18 months of the date of the initial public offering,
the Company will return the $45,000 of funds in the escrow account, plus
interest, if any.
The financial instruments, which potentially subject the Company to
concentration of credit risk, consist of cash. The Company maintains
cash in an account with a financial institution in an amount which, at
times, may be in excess of the FDIC insured limit. The Company has not
experienced any losses on such account and does not believe it is
exposed to any significant risk with respect to cash.
F-7
WENTWORTH III, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMNTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the use of estimates by management. Actual results could differ from
these estimates.
The Company does not believe that any recently issued but
not-yet-effective accounting standards will have a material effect on
the Company's financial position, results of operations or cash flows.
2. GOING CONCERN:
-------------
The Company has no revenue to date and has incurred operating losses of
$19,847 since inception. Since inception, the Company has been dependent
upon the receipt of capital investment or other financing to fund its
continuing activities. The Company has not identified any business
combination and therefore, cannot ascertain with any degree of certainty
the capital requirements for any particular transaction. In addition,
the Company is dependent upon certain related parties to provide
continued funding and capital resources. The accompanying financial
statements have been presented on the basis of the continuation of the
Company as a going concern and do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Deferred Offering Costs - Deferred offering costs, which were being
-----------------------
incurred in anticipation of the Company filing a Rule 419 registration
statement, were deferred until the sale of common shares. On November 4,
2002, when the offering closed, these costs were charged to additional
paid in capital.
Income Taxes - The Company accounts for income taxes in accordance with
------------
the Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which requires the recognition of deferred tax
liabilities and assets at currently enacted tax rates for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. A valuation allowance is recognized
to reduce the net deferred tax asset to an amount that is more likely
than not to be realized. The tax provision shown on the accompanying
statement of operations is zero since the deferred tax asset generated
from the net operating loss is offset in its entirety by a valuation
allowance. State minimum taxes are expensed as incurred.
Cash and Cash Equivalents and Restricted Cash - Cash and cash
---------------------------------------------
equivalents, if any, include all highly liquid debt instruments with an
original maturity of three months or less at the date of purchase.
Restricted cash represents the proceeds of the Rule 419 common stock
offering, which are limited as to their use pursuant to this Rule (see
Note 1).
F-8
WENTWORTH III, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMNTS
Fair Value of Financial Instruments - Cash and current liabilities are
-----------------------------------
recorded in the financial statements at cost, which approximates fair
market value because of the short-term maturity of those instruments.
Net Income (Loss) Per Share - Basic earnings per share (EPS) is
---------------------------
calculated by dividing the income or loss available to common
shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company currently has no
dilutive securities and as such, basic and diluted earnings per share
are the same for all periods presented.
Comprehensive Income (Loss) - Comprehensive income is defined as all
---------------------------
changes in stockholders' equity (deficit), exclusive of transactions
with owners, such as capital investments. Comprehensive income includes
net income or loss, changes in certain assets and liabilities that are
reported directly in equity such as translation adjustments on
investments in foreign subsidiaries and unrealized gains (losses) on
available-for-sale securities. During the year ended December 31, 2002
and for the period from March 7, 2001 (inception) to December 31, 2001,
the Company's comprehensive loss was the same as its net loss.
4. STOCKHOLDERS' EQUITY:
--------------------
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of stock. They are divided into 10,000,000 shares of
preferred stock and 40,000,000 shares of common stock. At December 31,
2002, none of the preferred stock has been issued. However, such
preferred shares may later be issued in such series with whatever
preferences as may be determined by the Board of Directors.
During the year ended December 31, 2002, the Company completed the sale
of 50,000 shares of common stock at $1.00 in an initial public offering
(IPO). Offering costs associated with IPO totaled $29,563. Prior to the
IPO, the Company sold 150,000 shares of common stock for $7,500 in a
private placement. At December 31, 2002, 200,000 shares of the common
stock have been issued. In addition, the Company will, in all
likelihood, issue a substantial number of additional shares in
connection with a merger, acquisition or business combination. To the
extent that additional shares of common stock are issued, dilution to
the interest of the Company's current stockholders will occur.
5. INCOME TAXES:
------------
The Company has a net operating loss carryforward of approximately
$20,000 available to offset taxable income through the years 2021 and
2022.
F-9
WENTWORTH III, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMNTS
The Company recorded a deferred income tax asset for the tax effect of
net operating loss carryforwards and temporary differences, aggregating
$7,371, against which the Company has recorded a full valuation
allowance in recognition of the uncertainty regarding the ultimate
amount of income tax benefits to be derived. The change in the valuation
allowance for the period ended December 31, 2001 to December 31, 2002 is
$6,922.
December 31,
2002
-------------
Start up costs $ 123
Net operating loss carryforwards 7,248
Valuation allowance (7,371)
-------------
$ -
=============
The difference between income taxes computed at the statutory federal
rate of 34% and the provision for income taxes relates to the following:
Percent of
Pretax Amount
-----------------
Provision at federal statutory rate 34%
Increase in valuation allowance (34)
---
0%
===
6. SUBSEQUENT EVENT:
----------------
On February 12, 2003, the Wentworth board of directors unanimously
approved and executed an agreement to merge with Whitco Company, LLP
("Whitco"), a privately held Texas-based manufacturer and marketer of
outdoor lighting pole structures. Assuming all of the escrow
holders elect to reconfirm their investment in us, we believe that the
fair value of Whitco represents at least 80% of the offering proceeds of
$50,000 realized from our offering. Whitco's management and board will
assume significant majority control of the Company through a merger
structure whereby Whitco will become a wholly-owned subsidiary of
Wentworth. Wentworth will thereafter change its name to Catalyst
Lighting Group.
Timothy J. Keating, the son of Kevin R. Keating, the Company's
President, is the Managing Member of, and holds approximately an 87%
interest in, Keating Investments, LLC ("KI"). There is currently no
signed agreement between KI and the Company. However, KI has been
engaged by and is representing Whitco Company LLP as its investment
banker. Given the limited cash resources of Wentworth III, management
of the Company anticipates that any fees to be paid to KI will be paid
either through the issuance of equity of Wentworth III or through the
cash resources of Whitco Company LLP or a combination of both.
F-10
INDEPENDENT AUDITOR'S REPORT
To the Partners
Whitco Company, LLP
Hutchinson, Kansas
We have audited the accompanying balance sheet of Whitco Company, LLP as of
September 30, 2002, and the related statements of income, partners' equity, and
cash flows for the nine months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whitco Company, LLP as of
September 30, 2002 and the results of its operations and its cash flows for the
nine months then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
December 20, 2002
See accompanying notes to these financial statements.
F-11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Partners
WHITCO COMPANY, LLP
We have audited the accompanying statements of income, partners' equity and cash
flows of Whitco Company, LLP for the year ended December 31, 2001. These
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on our audit.
We conducted our audit 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 statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statements referred to above present fairly, in all material
respects, the results of operations and cash flows of Whitco Company, LLP for
the year ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Wichita, Kansas
January 31, 2002
F-12
WHITCO COMPANY, LLP
BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
2002 2002
----------------- -----------------
(unaudited)
ASSETS
CURRENT ASSETS:
Trade receivables, less allowance for doubtful accounts of $53,924 and $54,442 $ 1,780,197 $ 2,280,109
Inventories 1,060,143 852,033
Prepaid expenses and other 44,460 20,029
-------------- --------------
Total current assets 2,884,800 3,152,171
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $60,759
and $51,991 136,219 133,875
OTHER ASSETS:
Goodwill, net of accumulated amortization of $330,151 and $330,151 2,971,362 2,971,362
Other 15,792 17,810
-------------- --------------
Total other assets 2,987,154 2,989,172
-------------- --------------
$ 6,008,173 $ 6,275,218
============== ==============
LIABILITIES AND PARTNERS' EQUITY
-----------------------------------
CURRENT LIABILITIES:
Revolving note payable $ 1,172,105 $ 1,087,025
Current maturities of long-term debt 257,646 257,646
Accounts payable 1,210,521 1,250,935
Other accrued liabilities 486,985 703,543
-------------- --------------
Total current liabilities 3,127,257 3,299,149
-------------- --------------
LONG-TERM DEBT, less current maturities:
Related party 446,000 446,000
Other 1,363,413 1,392,572
-------------- --------------
TOTAL LONG-TERM DEBT $ 1,809,413 $ 1,838,572
PARTNERS' EQUITY 1,071,503 1,137,497
-------------- --------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 6,008,173 $ 6,275,218
============== ==============
See accompanying notes to these financial statements.
F-13
WHITCO COMPANY, LLP
STATEMENTS OF INCOME
NINE
THREE MONTHS MONTHS
THREE MONTHS ENDED ENDED YEAR ENDED
ENDED DECEMBER DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
31, 2002 2001 2002 2001
----------------- ----------------- ---------------- -----------------
(unaudited) (unaudited)
SALES $ 3,282,406 $ 3,637,142 $ 10,243,036 $ 11,784,438
COST OF SALES 2,172,735 2,366,098 7,169,790 7,887,188
-------------- -------------- -------------- ---------------
GROSS MARGIN ON SALES 1,109,671 1,271,044 3,073,246 3,897,250
OTHER OPERATING COSTS AND EXPENSES:
General, selling and administrative expenses 1,104,146 961,863 2,700,835 3,053,662
Amortization of goodwill - 57,449 - 229,797
-------------- -------------- -------------- ---------------
1,104,146 1,019,312 2,700,835 3,283,459
-------------- -------------- -------------- ---------------
INCOME FROM OPERATIONS 5,525 251,732 372,411 613,791
OTHER EXPENSE:
Interest expense 71,519 71,048 224,677 292,138
-------------- -------------- -------------- ---------------
NET INCOME (LOSS) $ (65,994) $ 180,684 $ 147,734 $ 321,653
============== ============== ============== ===============
PRO FORMA INCOME TAXES AND NET INCOME (Loss): (unaudited)
---------------------------------------------
INCOME (LOSS) BEFORE PRO FORMA INCOME TAXES $ (65,994) $ 180,684 $ 147,734 $ 321,653
PRO FORMA INCOME TAXES 22,838 (68,412) (58,062) (123,122)
-------------- -------------- -------------- ---------------
PRO FORMA NET INCOME (LOSS) $ (43,156) $ 112,272 $ 89,672 $ 198,531
============== ============== ============== ===============
See accompanying notes to these financial statements.
F-14
WHITCO COMPANY, LLP
STATEMENTS OF PARTNERS' EQUITY
For the Year Ended December 31, 2001,
For the Nine Months Ended September 30, 2002, and
For the Three Months Ended December 31, 2002 (Unaudited)
PARTNERS' RETAINED PARTNERS'
UNITS CONTRIBUTIONS EARNINGS EQUITY
------------- ----------------- ----------------- ------------------
BALANCE, January 1, 2001 1,200 $ 1,200,000 $ 306,711 $ 1,506,711
Partners' distributions - - (293,600) (293,600)
Net income - - 321,653 321,653
---------- --------------- --------------- ---------------
BALANCE, December 31, 2001 1,200 1,200,000 334,764 1,534,764
Sale of partnership interest 436 655,000 - 655,000
Redemption of partners' interest (800) (1,200,000) - (1,200,000)
Net income - - 147,734 147,734
---------- --------------- --------------- ---------------
BALANCE, September 30, 2002 836 655,000 482,498 1,137,498
Net (loss) (unaudited) - - (65,994) (65,994)
---------- --------------- --------------- ---------------
BALANCE, December 31, 2002 (unaudited) 836 $ 655,000 $ 416,504 $ 1,071,504
========== =============== =============== ===============
See accompanying notes to these financial statements.
F-15
WHITCO COMPANY, LLP
STATEMENTS OF CASH FLOWS
THREE MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2002 2001 2002 2001
---------------- ---------------- -------------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) $ (65,994) $ 180,683 $ 147,734 $321,653
Adjustments to reconcile net income (Loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,107 62,910 31,182 249,415
Allowance for bad debt - - 32,406 9,048
Change in operating assets and liabilities:
Trade receivables 499,912 (255,508) (813,817) (2,989)
Inventories (208,110) 381,750 34,068 (190,183)
Prepaid expenses and other (24,431) 4,109 21,938 (14,849)
Other assets 2,018 -
Accounts payable (40,414) (201,153) 720,595 (219,257)
Other accrued liabilities (225,808) 197,347 223,004 174,631
-------------- -------------- ------------- -----------
Net cash provided by (used in) operating activities (57,720) 370,138 397,110 327,469
-------------- -------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (7,451) (6,078) (74,307) (26,934)
-------------- -------------- ------------- -----------
Net cash used in investing activities (7,451) (6,078) (74,307) (26,934)
-------------- -------------- ------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving note payable 85,080 (346,436) (99,276) 213,565
Proceeds from issuance of long-term debt - - 546,000 -
Payments on short-term and long-term notes payable (19,909) (17,624) (224,527) (228,644)
Sale of partnership interest - - 655,000 -
Partners' distributions - - - (293,600)
Redemption of partners' interest - - (1,200,000) -
-------------- -------------- ------------- -----------
Net cash provided by (used in) financing activities 65,171 (364,060) (322,803) (308,679)
-------------- -------------- ------------- -----------
Net Change in Cash - - - (8,144)
------------------
CASH, at beginning of period - - - 8,144
-------------- -------------- ------------- -----------
CASH, at end of period $ - $ - $ - $ -
============== ============== ============= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 71,519 $ 71,048 $ 240,692 $ 290,089
============== ============== ============= ===========
See accompanying notes to these financial statements.
F-16
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
SUMMARY OF ACCOUNTING POLICIES:
-------------------------------
Nature of Operations - Whitco Company, LLP (the Company) was formed as a
---------------------
Texas limited liability partnership on June 27, 2000. The Company, located
in Fort Worth, Texas, sells sports and area lighting poles to distributors
throughout the United States of America.
Inventories - Inventories are stated at the lower of cost or market,
-----------
determined under the first-in, first-out method.
Property and Equipment - Property and equipment are stated at cost.
------------------------
Depreciation and amortization of property and equipment is provided using
the modified straight-line method over the following estimated useful
lives:
Vehicles and office furniture and equipment 5 years
Maintenance, repairs and renewals which neither materially add to the value
of property and equipment nor appreciably prolong its life are charged to
operations as incurred. Gains or losses on disposals of property and
equipment are included in income.
Impairment of Long-Lived Assets - Management of the Company assesses
-----------------------------------
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. If the net
carrying value exceeds the net cash flows, then impairment will be
recognized to reduce the carrying value to the estimated fair value.
Goodwill - During fiscal 2001, the Company amortized goodwill using a
--------
fifteen-year life. Beginning January 1, 2002, the Company adopted Statement
of Financial Accounting Standards No. 142 (SFAS 142) "Goodwill and Other
Intangible Assets," and as a result ceased amortizing goodwill. The Company
tests goodwill for impairment annually or on an interim basis if an event
or circumstance occurs between the annual tests that may indicate
impairment of goodwill. Impairment of goodwill will be recognized in
operating results in the period it is identified. Had the Company recorded
amortization expense during the three months ended December 31, 2002 and
the nine months ended September 30, 2002, unaudited pro forma net income
(loss) would have been approximately $(79,000) and $(25,000), respectively.
Income Taxes - The Company has been organized as a limited liability
-------------
partnership. Accordingly, no provision for income taxes has been provided
for in the financial statements since taxable income of the Company is
required to be reported by the respective partners on their income tax
returns. However, the Company has included unaudited estimated pro forma
income taxes and the resulting pro forma net income (loss) in the
statements of income. Pro forma income taxes (tax refund) were estimated
using the effective Federal and state tax rates, as if the Company was a
C-Corporation.
F-17
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
Concentrations of Credit Risk - Financial instruments which potentially
------------------------------
subject the Company to concentrations of credit risk consist primarily of
trade receivables. The Company grants credit to distributors of sports and
area lighting poles located throughout the United States of America.
Collateral is generally not required for the Company's trade receivables.
Use of Estimates - In preparing financial statements in conformity with
----------------
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents - For purposes of the statements of cash flows, the
-----------------
Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents. There were no cash equivalents at
September 30, 2002 or December 31, 2002.
Revenue Recognition - The Company recognizes revenue in accordance with SEC
-------------------
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101), as amended by SAB 101A and 101B. SAB 101 requires
that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred or
services rendered; (3) the fee is fixed and determinable; and (4)
collectibility is reasonably assured. Company product is made to customer
or industry specifications at an agreed upon price as typically specified
in the customer purchase order. Title passes to the customer at the point
of shipment along with all the risks and rewards of ownership. Customers
receive a one-year product warranty for defects in materials and
workmanship providing repair or replacement or refund of purchase price.
The Company provides an accrual as a reserve for potential warranty costs,
which historically have not been significant.
Stock-Based Compensation - The Company accounts for partnership
--------------------------
interest-based compensation for employees using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. Accordingly,
compensation cost for partnership options granted to employees is measured
as the excess, if any, of the market price of the partnership interest at
the measurement date (generally, the date of grant) over the amount an
employee must pay to acquire the partnership interest.
In October 1995, the Financial Accounting Standards Board issued a new
statement titled Accounting for Stock-Based Compensation (SFAS No. 123).
SFAS No. 123 requires that options, warrants, and similar instruments which
are granted to non-employees for goods and services be recorded at fair
value on the grant date. Fair value is generally determined under an option
pricing model using the criteria set forth in SFAS No. 123. The Company did
not adopt SFAS No. 123 to account for partnership interest-based
compensation for employees but is subject to the pro forma disclosure
requirements.
F-18
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
Interim Financial Information - The accompanying interim financial
--------------------------------
information as of December 31, 2002 and for the periods ended December 31,
2002 and 2001 has been taken from the Company's books and records without
audit. However, in the opinion of management, such information includes all
adjustments (consisting only of normal recurring accruals) necessary to
fairly present the financial position as of December 31, 2002 and results
of operations of the Company for the periods ended December 31, 2002 and
2001.
Impact of Recently Issued Accounting Pronouncements - In August 2001, the
-----------------------------------------------------
FASB issued Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations (SFAS 143). This statement establishes
standards of accounting for asset retirement obligations arising from the
acquisition, construction, or development and/or the normal operation of a
long-lived asset. SFAS 143 is effective for fiscal years beginning after
June 15, 2002. Management does not believe that the adoption of SFAS 143
will have a material effect of the financial statements.
In April 2002, the FASB approved for issuance Statements of Financial
Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44 and
64, Amendment of SFAS 13, and Technical Corrections" ("SFAS 145"). SFAS 145
rescinds previous accounting guidance, which required all gains and losses
from extinguishment of debt be classified as an extraordinary item. Under
SFAS 145 classification of debt extinguishment depends on the facts and
circumstances of the transaction. SFAS 145 is effective for fiscal years
beginning after May 15, 2002 and adoption is not expected to have a
material effect on the Company's financial position or results of its
operations.
In July 2002, the FASB issued Statements of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
(SFAS 146). SFAS 146 requires companies to recognize costs associated with
exit or disposal activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. Examples of costs covered by
SFAS 146 include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued operation,
plant closing, or other exit or disposal activity. SFAS 146 is to be
applied prospectively to exit or disposal activities initiated after
December 31, 2002. The adoption of SFAS 146 is not expected to have a
material effect on the Company's financial position or results of its
operations.
In August 2002, the FASB issued Statements of Financial Accounting
Standards No. 147, "Acquisitions of Certain Financial Institutions" (SFAS
147). SFAS 147 requires financial institutions to follow the guidance in
SFAS 141 and SFAS 142 for business combinations and goodwill and intangible
assets, as opposed to the previously applied accounting literature. This
statement also amends SFAS 144 to include in its scope long-term customer
relationship intangible assets of financial institutions. The provisions of
SFAS 147 do not apply to the Company.
In December 2002, the FASB issued Statements of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation - Transition
and Disclosure - an amendment of FASB Statement 123" (SFAS 123). For
entities that change their accounting for stock-based compensation from the
intrinsic method to the fair value method under SFAS 123, the fair value
method is to be applied prospectively to those awards granted after the
beginning of the period of adoption (the prospective method). The amendment
F-19
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
permits two additional transition methods for adoption of the fair value
method. In addition to the prospective method, the entity can choose to
either (i) restate all periods presented (retroactive restatement method)
or (ii) recognize compensation cost from the beginning of the fiscal year
of adoption as if the fair value method had been used to account for awards
(modified prospective method). For fiscal years beginning December 15,
2003, the prospective method will no longer be allowed. The Company
currently accounts for its stock-based compensation using the intrinsic
value method as proscribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options, therefore, it does not intend to
adopt the transition requirements as specified in SFAS 148. The Company has
adopted the new SFAS 148 disclosure requirements of SFAS 148 in these
financial statements.
INVENTORIES:
------------
Inventories are comprised of the following:
December 31, September 30,
2002 2002
------------------- ------------------
(unaudited)
Raw materials $ 786,755 $ 580,060
Work in process 250,001 271,973
Finished goods 23,387 -
----------------- -----------------
$ 1,060,143 $ 852,033
================= =================
REVOLVING NOTE PAYABLE:
-----------------------
The Company has a revolving credit agreement with a bank which bears
interest at the bank's prime rate plus 1.50% (totaling 6.25% and 6.25% at
December 31, 2002 and September 30, 2002) which enables the Company to
borrow up to the lesser of $2,000,000 or the aggregate of 80% of eligible
accounts receivable and 50% of eligible inventory as defined by the
agreement. Borrowings outstanding on the revolving loan were $1,017,082 and
$1,087,025 at December 31, 2002 and September 30, 2002, respectively.
Borrowings under the revolving credit agreement are collateralized by
essentially all assets of the Company including accounts receivable and
inventory. The agreement requires the Company to maintain certain financial
covenants which include tangible net worth, cash flow coverage and debt
ratios as defined in the agreement. As of September 30, 2002, the Company
was not in compliance with certain financial covenants, whereby enabling
the lender to call the note on demand. The lender is aware of this
non-compliance and the Company does not believe its lender will initiate
any action which would be detrimental to the Company's liquidity situation.
The agreement also limits the amount of additional third-party borrowings
the Company can obtain and the amount of distributions the Company can pay
partners. The agreement is subject to annual review by the lender who has
the right to terminate or change any of the terms and conditions of the
agreement.
F-20
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
LONG-TERM DEBT:
Long-term debt at year end consists of the following:
December 31, September 30,
2002 2002
--------------- ----------------
(unaudited)
Noninterest-bearing note payable to an individual, discounted at 6.3%
(unamortized discount of $66,259 and $75,509 at December 31, 2002 and
September 30, 2002), payable in annual installments of $217,851 (a). $568,793 $578,043
Noninterest-bearing note payable to an individual, discounted at 6.22%
(unamortized discount of $16,834 and $20,207 at December 31, 2002 and
September 30, 2002, respectively), payable in monthly installments of
$7,375(a) 202,266 222,175
Note payable to an individual with indirect ownership in the partnership,
note was assigned to a nonrelated limited partnership effective December
27, 2001, principal due July 31, 2005, interest payable monthly at a
fixed rate of 15% (b) 700,000 700,000
Note payable to a family member of a partner, principal due July 31, 2005,
interest payable monthly at a fixed rate of 15% (b) 50,000 50,000
Subordinated note payable to a partner, due April 30, 2004, rate 15%,
unsecured. 250,000 250,000
Subordinated note payable to a partner, due April 30, 2007, rate 15%,
unsecured. 20,000 20,000
Subordinated note payable to a partner, due April 30, 2007, rate 15%,
unsecured. 76,000 76,000
Subordinated note payable to a partner, due April 30, 2007, rate 15%,
unsecured. 50,000 50,000
Subordinated note payable to an individual, due April 30, 2007, rate 15%,
unsecured. 150,000 150,000
------------- ---------------
2,067,059 2,096,218
Less current maturities (257,646) (257,646)
------------- ---------------
$ 1,809,413 $ 1,838,572
============= ===============
F-21
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
(a) Notes are collateralized by all assets of the Company. The security
interest in inventory and accounts receivable is subordinated to the
revolving bank note and the security interest in all assets is
subordinated to notes marked as (b).
(b) Notes are collateralized by all assets of the Company but are
subordinated to the revolving bank note.
Aggregate annual maturities of long-term debt at September 30, 2002 are
as follows:
2003 $ 257,646
2004 523,133
2005 1,019,439
2006 -
2007 296,000
---------------
$ 2,096,218
During the three months ended December 31, 2002 and 2001, the nine months
ended September 30, 2002 and the year ended December 31, 2001, the Company
had $16,725, $0, $27,875 and $0, respectively, of interest expense on notes
due to related parties.
SIGNIFICANT CONCENTRATIONS:
--------------------------
During the nine months ended September 30, 2002 and the year ended December
31, 2001, 45% and 85% of the Company's material and assembly purchases of
lighting poles were from two vendors. Although there are multiple vendors
with which the Company could enter into agreements, the deterioration or
cessation of either relationship could have a material adverse effect, at
least temporarily, on the Company as it attempts to negotiate agreements
with other manufactures of lighting poles. Accounts payable to these two
vendors were $711,862 and $308,362 as of September 30, 2002 and December
31, 2002, respectively.
PARTNERSHIP OPTIONS:
-------------------
Partnership Option Plans - In June 2000, the partners began issuing options
------------------------
for the purchase of partnership units to certain key employees.
Approximately 241 units have been issued through December 31, 2002.
F-22
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
Following is a summary of partnership option activity:
Range of Weighted
Employee Exercise Prices Average
Options --------------------------- Exercise
Outstanding Low High Price
------------- ----------- ---------- -----------
Balances, December 31, 2001 300 $ 1,000 $ 1,000 $ 1,000
Granted 146 2,887 2,887 2,887
Exercised - - - -
Terminated/Canceled (240) 1,000 2,887 1,348
------------- ---------- --------- -----------
Balances, September 30, 2002 206 1,000 2,887 1,931
Granted (unaudited) 35 2,887 2,887 2,887
Exercised (unaudited) - - - -
Terminated/Canceled (unaudited) - - - -
------------ ---------- --------- -----------
Balances, December 31, 2002 (unaudited) 241 $ 1,000 2,887 $ 2,070
============ ========== ========= ===========
Vested options (unaudited) 118 $ 1,000 $ 2,887 $ 1,216
============ ========== ========= ===========
If not previously exercised, options expire as follows:
Weighted
Average
Year Ending Number of Exercise
September 30, Shares Price
------------ ------------------- ------------------
2011 127 $ 1,327
2012 22 2,887
2013 92 2,887
------------
241
============
F-23
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
Pro forma Stock-Based Compensation Disclosures - SFAS No. 123 requires the
----------------------------------------------
Company to provide pro forma information regarding net income as if
compensation costs for the Company's partnership option plans and other
partnership interest awards had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. The Company estimates the
fair value of each partnership award at the grant date by using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
December 31, September 30, December 31,
2002 2002 2001
------------------ ------------------ ----------
(unaudited)
Dividend yield 0% 0% 0%
Volatility 0% 0% 0%
Risk free interest rate 3.83% 3.61% 4.55%
Expected life 10 years 10 years 10 years
Under the accounting provisions of SFAS No. 123, there was no effect to the
Company's net income for the nine months ended September 30, 2002 and the
year ended December 31, 2001.
RELATED PARTY TRANSACTIONS:
--------------------------
During the three months ended December 31, 2002 and 2001, the nine months
ended September 30, 2002 and for the year ended December 31, 2001, the
Company paid $12,000, $12,000, $24,000 and $12,000, respectively, for
accounting and administrative services to an entity related through common
ownership.
During the three months ended December 31, 2002 and 2001, the nine months
ended September 30, 2002 and the year ended December 31, 2001, the Company
had sales of $95,841, $124,699, $266,580, and $679,527, respectively, to an
entity whose principal owner is the brother of an employee of the Company.
Accounts receivable from this related entity were $17,254 and $36,661 at
December 31, 2001 and 2000, respectively.
See Note 4 for other related party transactions.
F-24
WHITCO COMPANY, LLP
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to September 30, 2002 is Unaudited)
COMMITMENTS:
-------------
The Company leases a facility and equipment under operating leases expiring
at various dates through 2005.
The future minimum payments required under these operating leases are as
follows:
Year Ending
September 30,
--------------
2003 $ 40,166
2004 6,783
2005 2,220
--------------
$ 49,169
==============
Rent expense for the three months ended December 31, 2002 and 2001, the
nine months ended September 30, 2002 and the year ended December 31, 2001,
was $10,042, $13,881, $39,364 and $55,525, respectively.
SUBSEQUENT EVENTS:
------------------
Subsequent to December 31, 2002, the Company entered into an acquisition
agreement with Wentworth III, Inc. Among other items, the acquisition is
contingent upon shareholder/partner approval of the Company and Wentworth
III. For financial statement purposes, the Company will be considered the
acquiring company. For legal purposes, however, Wentworth III will remain
the surviving entity, therefore, the combined entity will retain Wentworth
III, Inc.'s capital structure and all the partnerships' units will be
converted into common stock of Wentworth III, Inc.
Subsequent to December 31, 2002, $376,000 of notes payable that were
outstanding at December 31, 2002, were converted into 56.82 partnership
units of the Company.
F-25
PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
In February 2003, Whitco Company ("WC") entered into a reverse acquisition
agreement with Wentworth III, Inc. ("Wentworth"), a registered blank check
company. Wentworth's assets and liabilities were nominal at the date of the
agreement. The transaction is to be accounted for as a reverse merger
acquisition, which results in a recapitalization of WC in as much as it is
deemed to be the acquiring entity for accounting purposes.
The accompanying unaudited pro forma combining, condensed balance sheet combines
the balance sheet of WC as of December 31, 2002 with the balance sheet of
Wentworth. As a condition to the merger, certain noteholders converted $376,000
of notes that were outstanding at December 31, 2002 into partnership units which
are to be exchanged into Wentworth common stock.
The accompanying unaudited pro forma combining, condensed statements of
operations combine the operations of WC and Wentworth for the twelve months
ended December 31, 2002, as if the acquisition and conversion of notes was
completed as of the beginning of the period presented under the purchase method
of accounting.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the merger been consummated at the
beginning of the periods indicated.
The unaudited pro forma combined, condensed financial statements should be read
in conjunction with the historical financial statements and notes thereto,
included elsewhere in this document.
F-26
WHITCO COMPANY, LLP
WENTWORTH III, INC.
PRO FORMA
COMBINING, CONDENSED BALANCE SHEET
(unaudited)
WHITCO WENTWORTH
COMPANY, LLP III, INC.
DECEMBER 31, DECEMBER PRO FORMA
2002 31, 2002 MERGER COMBINED
-------------- ------------- ------------- ----------------
ASSETS
----------
CURRENT ASSETS:
Cash $ - $ 47,125 $ - $ 47,125
Trade receivables 1,780,197 - 1,780,197
Inventory 1,060,143 - - 1,060,143
Prepaid expenses and other 44,460 - - 44,460
------------- ------------ ----------- -------------
Total current assets 2,884,800 47,125 - 2,931,925
PROPERTY AND EQUIPMENT, net 136,219 - - 136,219
OTHER ASSETS
Goodwill 2,971,362 - - 2,971,362
Other 15,792 - - 15,792
------------- ------------ ----------- -------------
TOTAL ASSETS $ 6,008,173 $ 47,125 $ - $ 6,055,298
============= ============ =========== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
----------------------
CURRENT LIABILITIES:
Revolving note payable $ 1,172,105 - $ - $ 1,172,105
Current portion of notes payable: 257,646 - - 257,646
Other current liabilities 1,697,506 39,035 (b) 141,500 1,878,041
------------- ------------ ----------- -------------
Total current liabilities 3,127,257 39,035 141,500 3,307,792
LONG-TERM OBLIGATIONS, net of current portion 1,809,413 - (a)(376,000) 1,433,413
------------- ------------ ----------- -------------
TOTAL LIABILITIES 4,936,670 39,035 (234,500) 4,741,205
STOCKHOLDERS' EQUITY 1,071,503 8,090 (a) 376,000 1,314,093
(b) 388,000
(b)(388,000)
(b)(141,500)
------------- ------------ ----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,008,173 $ 47,125 $ - $ 6,055,298
============= ============ =========== =============
F-27
WHITCO COMPANY, LLP
WENTWORTH III, INC.
PRO FORMA
COMBINING, CONDENSED STATEMENT OF OPERATIONS
(unaudited)
WHITCO WHITCO
COMPANY, LLP WHITCO COMPANY, LLP WENTWORTH
FOR THE NINE COMPANY, LLP FOR THE III, INC.
MONTHS FOR THE THREE TWELVE MONTHS FOR THE YEAR
ENDED MONTHS ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
2002 2002 2002 2002 ADJUSTMENTS COMBINED
-------------- --------------- --------------- --------------- --------------- ---------------
NET SALES $ 10,243,036 $ 3,282,406 $ 13,525,442 $ - $ - $ 13,525,442
COST OF SALES 7,169,790 2,172,735 9,342,525 - - 9,342,525
------------ ------------- ------------- ------------- ------------ ---------------
GROSS PROFIT 3,073,246 1,109,671 4,182,917 - - 4,182,917
OPERATING EXPENSE 2,700,835 1,104,146 3,804,981 18,550 - 3,823,531
------------ ------------- ------------- ------------- ------------ ---------------
LOSS FROM OPERATIONS 372,411 5,525 377,936 (18,550) - 359,386
OTHER INCOME (EXPENSE) (224,677) (71,519) (296,196) 25 (a) 14,100 (811,571)
(b)(388,000)
(b)(141,500)
-------------- --------------- --------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
PRO FORMA INCOME TAXES 147,734 (65,994) 81,740 (18,525) (515,400) (452,185)
PRO FORMA INCOME TAXES (58,062) 22,838 (35,224) 6,873 19,121 (9,230)
------------ ------------- ------------- ------------- ------------ ---------------
NET INCOME (LOSS) $ 89,672 $ (43,156) $ 46,516 $ (11,652) $ (496,279) $ (461,415)
============ ============= ============= ============= ============ ===============
BASIC AND DILUTED NET
LOSS PER SHARE $ - $ - $ (.14)
============= ============ ===============
COMMON STOCK OUTSTANDING 200,000 (c)3,191,368 3,391,368
============= ============ ===============
F-28
WHITCO COMPANY, LLP
WENTWORTH III, INC.
PRO FORMA NOTES TO COMBINING, CONDENSED FINANCIAL INFORMATION
(a) To reflect the conversion of $376,000 of notes payable that were
outstanding as of December 31, 2002 into partnership units that will
be exchanged into shares of Wentworth common stock, and to reflect the
reduction of the related interest expense, totaling $14,100 for the
twelve months ended December 31, 2002.
(b) To reflect expenses related to the merger, which are primarily related
to investment banker, legal and accounting fees. The Company estimates
it will incur $529,250 of merger expenses. $141,250 will be paid in
cash and the remainder in common stock valued at $388,000.
(c) To reflect the issuance of 3,191,368 shares in conjunction with the
acquisition.
F-29
We have not authorized any dealer, salesperson or other person to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus
does not constitute an offer to sell or buy any securities in any jurisdiction
where it is unlawful to do so. The information contained in this prospectus is
current only as of its date.
Until May 20, 2003 (90 days from the date of this prospectus), all dealers
effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to a
dealer's obligation to deliver a prospectus when acting as an underwriter and
with respect to an unsold allotment or subscription.
50,000 Shares
Wentworth III, Inc.
______ __, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The following certificate of incorporation and statute provisions are the only
charter and statute provisions, by-laws, contracts or other arrangements known
to the registrant that insure or indemnify a controlling person, director or
officer of the registrant in any manner against liability which he or she may
incur in his or her capacity as such.
Article SEVENTH of the registrant's certificate of Incorporation
provides that:
No director shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be liable to
the extent provided by applicable law, (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article Seventh shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director prior
to such amendment.
Section 145 of the Delaware General Corporation Law ("GCL"), provides
that:
(a) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
II-1
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall include,
in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
II-2
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
Item 25. Other Expenses of Issuance and Distribution.
Type of Expense Amount of Anticipated Expense
--------------- -----------------------------
Legal fees......................................... $ 25,000.00*
Accounting fees.................................... 10,000.00*
Printing costs..................................... 500.00*
Transfer agent fee................................. 250.00
Miscellaneous fees and expenses.................... 250.00*
-------------
Total expenses................................ $ 36,000.00
=============
----------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
None.
Item 27. Exhibits and Financial Statement Schedules.
EXHIBITS
Item 27.
** 3.1 Certificate of Incorporation
** 3.2 By-Laws
** 4.1 Specimen Certificate of Common Stock
** 4.2 Escrow Agreement
** 4.3 Form of Subscription Agreement
** 5.1 Opinion of Willkie Farr & Gallagher
* 10.1 Securities Exchange Agreement, dated as of February 12, 2003
by Wentworth III, Inc. and Whitco Company, L.L.P.
* 23.1 Consent of Hein & Associates LLP
* 23.2 Consent of Hein & Associates LLP
* 23.3 Consent of Grant Thornton LLP
* 23.4 Consent of Goldstein Golub Kessler LLP
--------------------------
* Filed with this amendment.
** Previously filed.
II-3
Item 28. Undertakings.
The registrant hereby undertakes:
(1) For determining liability under the Act, to treat each post-effective
amendment (including those that contain a form of prospectus) as a new
registration statement for the securities offered, and the offering of the
securities at that time to be the initial bona fide offering of those
securities.
(2) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies it has reasonable grounds to believe that it meets all of
the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of Denver,
State of Colorado on February 20, 2003.
Wentworth III, Inc.
By: /s/ Kevin R. Keating
--------------------------------------
Kevin R. Keating, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Signature Title Date
/s/ Kevin R. Keating President, Chief Financial Officer, Director February 20, 2003
--------------------
Kevin R. Keating
/s/ Spencer I. Browne Secretary, Director February 20, 2003
--------------------
Spencer I. Browne
EXHIBIT INDEX
Exhibit
Number Description
** 3.1 Certificate of Incorporation
** 3.2 By-Laws
** 4.1 Specimen Certificate of Common Stock
** 4.2 Escrow Agreement
** 4.3 Form of Subscription Agreement
** 5.1 Opinion of Willkie Farr & Gallagher
* 10.1 Securities Exchange Agreement, dated as of
February 12, 2003 by Wentworth III, Inc.
and Whitco Company, L.L.P.
* 23.1 Consent of Hein & Associates LLP
* 23.2 Consent of Hein & Associates LLP
* 23.3 Consent of Grant Thornton LLP
* 23.4 Consent of Goldstein Golub Kessler LLP
--------------------------
* Filed with this amendment.
** Previously filed.