Our Company
We were originally incorporated on March 20, 2006 in Nevada, as Pacific Syndicated Resources, Inc. We were an exploration stage company that was set up to engage in the exploration of mineral properties. On November 5, 2007, we completed a reverse merger with a private Delaware corporation, Znomics, Inc. ("Znomics Delaware"), originally incorporated in 2000 and operational in 2001. As a result of that transaction, we changed our name to Znomics, Inc. (“the Company”) and began to pursue drug discovery and medical research as our sole business.
During 2009, the Company determined that given the current financing environment it was unable to attract sufficient capital to continue operations. As a result, on April 13, 2009, the Company’s board of directors determined that it was in the Company’s and its shareholders’ best interests to terminate its operations and pursue the sale of its assets and the sale of the Company’s corporate shell to an entity interested in merging with a public company. On May 1, 2009, after obtaining shareholder approval, the Company sold substantially all of the Company’s assets and announced that it intended to pursue the sale of the Company to an entity interested in merging with a public company.
On February 10, 2010, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with nine individuals and entities (the “Purchasers”), pursuant to which the Company issued 40,811,886 shares of common stock (the “Shares”) for total consideration of $125,000 or $0.0031 per share, paid in cash upon issuance of the Shares. Certain of the Purchasers have been elected as directors and officers of the Company. The Stock Purchase Agreement and related transactions were approved by the Company’s Board of Directors and stockholders who owned a majority of the outstanding shares of Company common stock prior to the issuance of the Shares.
The Company continues to focus its efforts on seeking a business opportunity. The Company intends to attempt to locate and negotiate with a business entity for the merger of that target company into the Company. In certain instances, a target company may wish to become a subsidiary of the Company or may wish to contribute assets to the Company rather than merge. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company will provide a method for a private company to become a public reporting company whose securities are qualified for trading in the United States secondary market.
Description of Business
We are currently voluntarily reporting in accordance with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Pursuant to Rule 12b-2 of the Exchange Act, the Company qualifies as a "shell company" because it has no or nominal assets (other than cash) and no or nominal operations. We have had no material business operations since April 13, 2009. We are currently seeking and investigating potential assets, property or businesses to acquire, and intend to commence operations in the future through the acquisition of a "going concern." These types of transactions are customarily referred to as "reverse" reorganizations or mergers in which the acquired company's shareholders become controlling shareholders in the acquiring company and the acquiring company becomes the successor to the business operations of the acquired company. We are unable to predict the time as to when and if we may actually participate in any specific business endeavor.
We are not currently engaged in any substantive business activity except the search for potential assets, property or businesses to acquire, and we have no current plans to engage in any other activity in the foreseeable future unless and until we complete any such acquisition. We do not intend to restrict our search for business opportunities to any particular business or industry, and the areas in which we will seek out business opportunities or acquisitions, reorganizations or mergers may include, but will not be limited to, the fields of high technology, adult for profit education, manufacturing, service, communications, transportation, and all medically related fields, among others. We recognize that the number of suitable potential business ventures that may be available to us may be extremely limited, and may be restricted as to acquisitions, reorganizations and mergers with businesses or entities that desire to avoid what such entities may deem to be the adverse factors related to an initial public offering ("IPO") as a method of going public. The most prevalent of these factors include substantial time requirements, legal and accounting costs, the inability to obtain necessary financing or an underwriter who is willing to publicly offer and sell shares, the lack of or the inability to obtain the required financial statements for such an undertaking, state limitations on the amount of dilution to public investors in comparison to the stockholders of any such entities, along with other conditions or requirements imposed by various federal and state securities laws, rules and regulations and federal and state agencies that implement such laws, rules and regulations.
The Securities and Exchange Commission (the "SEC") requires shell companies that are subject to the Exchange Act reporting requirements to file a Form 8-K upon completion of mergers or other acquisition transactions, in order to disclose all information about an acquired company that would have been required to have been filed had any such company filed a Form 10 Registration Statement with the SEC, including the required audited, interim and proforma financial statements, within four business days of the closing of any such transaction. In addition, Rule 144 of the Securities Act of 1933 (the "Securities Act") limits the resale of most securities of shell companies, including those that the Company would issue in any acquisition, reorganization or merger, until one year after the filing of such information. National securities exchanges may impose additional listing requirements on companies that have gone public by combining with a public shell. These factors may eliminate many of the perceived advantages of these types of going public transactions. Regulations governing shell companies also deny the use of “short form” registration statements, such as Form S-3 and Form S-8 and limit the use of these Forms to a reorganized shell company until the expiration of certain time periods after such entity is no longer considered to be a shell company. These prohibitions could further restrict opportunities for us to acquire companies that may already have registration rights agreements or stock option plans in place. If a potential target has numerous employees who would receive Company securities in a business combination, there may be no exemption from registration for the issuance of such securities, thereby necessitating the filing of a registration statement with the SEC to complete any such reorganization, and incurring the time and expense that are normally avoided by reverse reorganizations or mergers.
Management intends to consider a number of factors prior to making any decision as to whether to participate in any specific business endeavor, none of which may be determinative or provide any assurance of success. These may include, but will not be limited to, as applicable: an analysis of the quality of the particular business or entity's management and personnel; the anticipated acceptability of any new products or marketing concepts that any such business or company may have; the merits of any such business' or company's technological changes; the present financial condition, projected growth potential and available technical, financial and managerial resources of any such business or company; working capital, history of operations and future prospects; the nature of present and expected competition; the quality and experience of any such business' or company's management services and the depth of management; the business' or the company's potential for further research, development or exploration; risk factors specifically related to the business' or company's operations; the potential for growth, expansion and profit of the business or company; the perceived public recognition or acceptance of the company's or the business' products, services, trademarks and name identification; and numerous other factors which are difficult, if not impossible, to properly or accurately quantify or analyze, let alone describe or identify, without referring to specific objective criteria of an identified business or company.
Regardless, the results of operations of any specific entity may not necessarily be indicative of what may occur in the future, by reason of changing market strategies, plant or product expansion, changes in product emphasis, future management personnel and changes in innumerable other factors.
Management will attempt to meet personally with management and key personnel of the entity providing any potential business opportunity afforded to us, visit and inspect material facilities, obtain independent analysis or verification of information provided and gathered, check references of management and key personnel and conduct other reasonably prudent measures calculated to ensure a reasonably thorough review of any particular business opportunity; however, due to time constraints of management, these activities may be limited.
We are unable to predict the time as to when and if we may actually participate in any specific business endeavor. We anticipate that proposed business ventures will be made available to us through personal contacts of directors, executive officers and principal stockholders, professional advisors, broker dealers in securities, venture capital personnel and others who may present unsolicited proposals. In certain cases, we may agree to pay a finder's fee or to otherwise compensate the persons who submit a potential business endeavor in which we eventually participate. Such persons may include our directors, executive officers and beneficial owners of our securities or their affiliates. In this event, such fees may become a factor in negotiations regarding any potential venture and, accordingly, may present a conflict of interest for such individuals. Management does not presently intend to acquire or merge with any business enterprise in which any current officer or director has a prior ownership interest.
The Company has retained Cherry Tree & Associates, LLC (“Cherry Tree & Associates”) as its exclusive financial advisor for the purpose of identifying an acquisition or business combination with an operating business, pursuant to an Engagement Agreement dated February 10, 2010 and amended March 27, 2013 (the “Engagement Agreement”). Cherry Tree & Associates is an investment banking firm located in Minneapolis, Minnesota that is affiliated with certain of the Purchasers. Specifically, Tony J. Christianson and Gordon F. Stofer, who each directly and indirectly beneficially own 35.9% of the Company’s fully diluted capital stock. Messrs. Christianson and Stofer, who are directors of the Company and serve as Chairman and Chief Executive Officer, respectively, together own 100% of the equity of Cherry Tree & Associates. David G. Latzke, who is the Chief Financial Officer of the Company, is an employee of Cherry Tree & Associates and certain affiliated entities. The Company will pay Cherry Tree & Associates a completion fee of 1% of the consideration it obtains in any transaction that is contemplated by the Engagement Agreement. The Engagement Agreement, as amended, expires on the earlier of February 10, 2016 or termination by either party, provided that Cherry Tree & Associates remains entitled to a completion fee under certain circumstances if the Company consummates a contemplated transaction within twelve months after termination of the Engagement Agreement.
Management may actively negotiate or otherwise consent to the purchase of all or any portion of their shares of common stock as a condition to, or in connection with, a proposed reorganization, merger or acquisition. It is not anticipated that any such opportunity will be afforded to other stockholders or that such other stockholders will be afforded the opportunity to approve or consent to any particular stock buy-out transaction. In the event that the purchase of common stock held by management is a factor in negotiations regarding any potential acquisition or merger by us, it may also present a conflict of interest for such individuals. We have no present arrangements or understandings respecting any of these types of opportunities.
Status of Products and Services
None; not applicable.
Competitive Business Conditions and Smaller Reporting Company's Competitive Position in the Industry and Methods of Competition
Management believes that there are numerous shell companies engaged in endeavors similar to those engaged in by us; many of these companies have substantial current assets and cash reserves. Competitors also include thousands of other publicly-held companies whose business operations have proven unsuccessful, and whose only viable business opportunity is that of providing a publicly-held vehicle through which a private entity may have access to the public capital markets via a reverse reorganization or merger. There is no reasonable way to predict our competitive position or that of any other entity in these endeavors; however, we, having limited assets and no cash reserves, will be at a competitive disadvantage in competing with entities that have significant cash resources.
Sources and Availability of Raw Materials and Names of Principal Suppliers
None; not applicable.
Dependence on One or a Few Major Customers
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
None; not applicable.
Governmental Regulations and Approvals
We currently have no business operations and produce no products nor provide any services and therefore, we are not presently subject to any governmental regulation or approval requirements. However, in the event that we complete a reorganization, merger or acquisition transaction with an entity that is engaged in business operations or provides products or services, we will become subject to all governmental regulations and approval requirements to which the reorganized, merged or acquired entity is subject or may become subject.
Research and Development
None; not applicable.
Smaller Reporting Company
We are voluntarily reporting in accordance with the requirements of Section 15 of the Exchange Act. In addition, we are also subject to the disclosure requirements of Regulation S-K of the SEC, as a "smaller reporting company." That designation relieves us of some of the informational requirements of Regulation S-K.
Sarbanes/Oxley Act
The Sarbanes Oxley Act of 2002 ("Sarbanes Oxley") created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members' appointment, compensation and oversight of the work of public companies' auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act requires significant legal and accounting expenditures. As a voluntarily reporting filer we are not subject to Sarbanes Oxley and we are not subject to having our independent accountants audit our conclusions about internal controls.
Exchange Act Reporting Requirements
As a voluntarily reporting filer we are not subject to the Exchange Act reporting requirements, however, we do file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities Exchange Commission on a regular basis as if we were subject to such requirements. In addtion, we disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.
Cost and Effects of Compliance with Environmental Laws
Our current business operations are not subject to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial condition or result in a material compliance cost; however, we will become subject to all such governmental requirements to which the reorganized, merged or acquired entity is subject or may become subject.
Employees
As of December 31, 2012, we had no paid employees.
