As filed with the Securities and Exchange Commission on May 26, 2004
REGISTRATION NO. 0001290506
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CYGNI SYSTEMS CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada --------------- 20-0909393
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
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303-167 Bannatyne Avenue, Winnipeg, MB, R3B 0R4, Canada
Tel: (204) 295-8015
(Address and Telephone Number of Registrant's Principal Place of Business)
Corporate Creations Network Inc.
8275 South Eastern Avenue, Suite 200-47, Las Vegas. Nevada 89123
Tel: (800) 672-9110
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Kenneth H. Finkelstein
Attorney At Law
2200 - 1420 Fifth Avenue, Seattle, WA 98101
Tel: (206) 310-1344
Approximate Date of Proposed Sale to the Public: As soon as practicable from time to time after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant to Rule 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 any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
CALCULATION OF REGISTRATION FEE
Title of Proposed Maximum Proposed Maximum Amount of each Class Number of Offering Price Aggregate Offering Registration of Securities Shares to be Per Share Price (1) Fee(1) to be Registered Registered
Common Stock 2,000,000 $0.10 $200,000 $25.34
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act.
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 thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.
CYGNI SYSTEMS CORPORATION
No Minimum / 2,000,000 Common Shares
Offering Price: $0.10 per Share
Cygni Systems Corporation, offers for sale on a self underwritten, best efforts, no minimum, 2,000,000 common shares maximum at a price of $0.10 per share. There is no minimum number of common shares that we have to sell. Proceeds from the sale of common shares will be not be placed in an escrow account. Rather, proceeds will be held in our account. All funds received from the offering may be used immediately by us and there may not be any refunds. The offering will be for a period of 90 days from the effective date and may be extended for an additional 90 days in our sole discretion. This offering will end no later than 180 days from the date of this prospectus and may be terminated sooner in our sole discretion.
Investing in our securities involves some risk (see "RISK FACTORS", PAGE 6). The securities offered herein should not be purchased by any investor who cannot afford to sustain the complete loss of their investment.
Neither the Securities & Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a CRIMINAL OFFENSE.
This is our initial public offering. No public market currently exists for our shares. The common shares will be offered and sold by one of our officers, Mr. Kim Friesen, without any discounts or other commissions. An indeterminate number of shares may be sold through broker/dealers who are members of the National Association of Securities Dealers and who will be paid a maximum 10% commission on the sales they make. We currently have no agreements, arrangements, or understandings with any broker/dealers to sell our shares.
Price to Proceeds to
Public Company (1) (2)
Per Share $0.10 $0.10
Total Maximum $200,000 $200,000
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(1) Represents the maximum underwriting discounts and commissions we will pay if broker-dealers are used to sell the shares. We plan to have one of our officers offer and sell the shares. They will not receive any discounts or commissions. We do not have any agreements or understandings with any broker-dealers although we may, at our discretion, retain such to assist in the offer and sale of shares. In the event that we enter into such an agreement subsequent to the effective date of our registration statement, then we would file a post-effective amendment to our registration statement identifying the broker-dealer(s) and revising our plan of distribution to specify involvement of such broker-dealer(s). Any such agreement would be filed with the Securities and Exchange Commission as an exhibit to our registration statement.
(2) Proceeds to us are shown before deducting offering expenses payable by us estimated at $24,000, including legal and accounting fees and printing costs.
The date of this Prospectus is May 26, 2004.
TABLE OF CONTENTS
Page
Summary .................................................................. 5
Risk Factors.............................................................. 6
Use of Proceeds .......................................................... 12
Determination of Offering Price .......................................... 14
Dilution ................................................................. 14
Plan of Distribution ..................................................... 16
Legal Proceedings ........................................................ 17
Directors, Executive Officer, Promoters, and Control Persons ............. 17
Security Ownership of Certain Beneficial Owners and Management ........... 19
Description of Securities ................................................ 19
Interest of Named Experts and Counsel .................................... 20
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities ............................................... 20
Organization Within Last Five Years ...................................... 21
Description of Business .................................................. 21
Plan of Operations ....................................................... 24
Description of Property .................................................. 27
Certain Relationships and Related Transactions............................ 27
Market for Common Equity and Related Stockholder Matters ................. 27
Executive Compensation ................................................... 28
Financial Statements ..................................................... 28
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this prospectus. Each prospective investor is urged to read this prospectus in its entirety and particularly the information set forth in "RISK FACTORS" on page 6.
The Company
Our principal executive office is located 303-167 Bannatyne Avenue, Winnipeg, MB, R3B 0R4, Canada, telephone (204) 295-8015. We currently own one web site domain name, "http://www.cygnisystems.com". This web site has not yet been developed. However, we expect that this website will be developed within three months of the date of this prospectus, being May 26, 2004. It is intended that the Company's business will focus on: (1) development of online and network security management software; and (2) online and network security consulting services. Our products and services will be targeted to small business and individual consumers. Specifically, we expect that our business will be comprised of the following:
Research and development of software designed to enhance internet and
network security;
Sales and/or licensing of software;
Maintenance and customer support of software sold and/or licensed; and
Consulting services related to online and network security.
We are a Development Stage Company that, as of the date of this prospectus, being May 26, 2004, has not yet commenced business operations and has not generated any revenues from our intended operations (see page 21, Description of Business). Despite the fact that we have not yet commenced operations nor generated revenues, we do not intend to act as a blank-check company nor enter into a business combination during the next twelve months.
The Offering
Securities Offered: Maximum 2,000,000 shares of common stock, par value
$0.001
Offering price: $0.10 per share
Offering period: The shares are being offered for a period not to
exceed 90 unless extended by our board of directors for
an additional 90 days.
Net proceeds to our
company: $200,000
Use of proceeds: Payment of offering expenses, working capital, and
marketing. The proceeds raised from this offering will
not be used to pay any compensation to our officers nor
directors.
Number of shares
outstanding
before the offering: 4,000,000
Number of shares
outstanding
after the offering: 6,000,000
Summary of Selected
Financial Data: We are a Development Stage Company. From the date of
our inception on March 18, 2004, to April 30, 2004, we
have not generated any revenues nor earnings from
operations. As of April 30, 2004, our financial data
is as follows:
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Total Assets: $ 400 Total Liabilities: $ 696 Net Loss: $ 696 Shareholder Equity: $ (296) Net Tangible Book Value: $ (296) Net Tangible Book Value per Share: $ 0 |
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED BY OUR COMPANY INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO ALL OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, BEFORE MAKING AN INVESTMENT IN CYGNI SYSTEMS CORPORATION.
1. WE HAVE NO OPERATING HISTORY. WE EXPECT TO INCUR LOSSES FOR THE FORESEEABLE FUTURE. WE WILL GO OUT OF BUSINESS IF WE FAIL TO GENERATE SUFFICIENT REVENUE.
We do not have any operating history. We were founded on March 18, 2004, and from the date of inception to April 30, 2004, we had a net loss of $696. We expect to incur additional losses for the foreseeable future and will go out of business if we fail to generate sufficient revenue. Additional losses will result from costs and expenses related to:
_ Implementing our business model; _ Developing and marketing our products and services; _ Developing and maintaining our website; _ Securing and maintaining consumers; and _ Developing strategic distribution and reseller relationships.
In addition to the above, you should consider our prospects in light of the risks and difficulties often encountered by early development stage companies, such as: an unpredictable business environment; responding to competitive developments; difficulty of managing growth; continuing to upgrade and expand product offerings; and the effectiveness of our business model. If we do not effectively manage these risks, we will go out of business.
2. WE WILL NOT HAVE SUFFICIENT FUNDS TO BEGIN OPERATIONS IF WE DO NOT RAISE ANY FUNDS OR RAISE ONLY NOMINAL FUNDS. IF THIS WERE TO HAPPEN, YOU MAY SUFFER A LOSS EQUAL TO THE AMOUNT OF YOUR INVESTMENT.
It is possible that we will not raise any funds or that we will raise only nominal funds since there is no minimum number of shares that must be sold in this offering. If this were to happen, we would not have sufficient funds to begin operations and would need to seek additional funding in order to commence operations. In this situation, you may suffer a loss equal to the amount of your investment.
Based on our current operating plan, if the maximum number of shares are sold then we should have sufficient funds to satisfy our anticipated need for working capital and capital expenditures for the next ten to twelve months. Following this period of time, we may need additional capital. Note, however, that we may need to raise additional funds before expiration of the ten to twelve month period for the purpose of:
_ Additional product research and development; _ Responding to competitive pressures; _ Developing enhanced services and product functionality; and _ Funding expansion.
3. INVESTORS IN THIS OFFERING MAY SUFFER SUBSTANTIAL DILUTION OR A LOSS OF SENIORITY IN PREFERENCES AND PRIVILEGES IF WE NEED TO SEEK ADDITIONAL FUNDING, WHICH IS LIKELY GIVEN OUR LIMITED CAPITALIZATION EVEN AFTER THIS OFFERING.
If we need to raise additional capital for the purpose of implementing or continuing operations, then we would likely have to issue additional equity or convertible debt securities. The result being that investors in this offering may suffer substantial dilution of their ownership percentage. In addition, any new securities could have rights, preferences, and/or privileges senior to those of our common stock. Common stock will be issued to investors in this offering.
Currently, we do not have any commitments for additional financing. If additional financing were required, we cannot be certain that it would be available when and to the extent needed. As well, even if financing were available, we cannot be certain that it would available on acceptable terms.
4. OUR BUSINESS MAY FAIL IF WE CANNOT SUCCESSFULLY COMPETE AGAINST CURRENT AND FUTURE COMPETITORS.
Our business may fail if we cannot successfully compete against current and future competitors. The market for online and network security management software and online and network security consulting services is intensely competitive and is likely to remain so for the foreseeable future. Competition may result in price reductions, reduced revenue, reduced gross margins, and/or loss of market share, any of which would materially and adversely our business. There is no assurance that the Company will be able to establish its' own niche and thereafter maintain a competitive position against current and future competitors, especially those who have longer operating histories, greater brand recognition, and stronger financial, technical and marketing resources. As a result, these competitors may be positioned to adapt more quickly to new or emerging technologies, changes in customer needs, and/or allocate more resources to product and service marketing.
If these companies offered products and/or services that competed with the Companys products and/or services, then they may reduce retail price for the purpose of gaining greater market share. We would find it more difficult to compete in the event of a competitors price reduction of their products/services. There is no assurance that the Companys current and future competitors will not develop online and network security software that is more effective than the Companys future products or that the Companys products will not be rendered obsolete by such developments. If competitive pressures were too onerous, then our ability to generate revenue would suffer and our business would fail.
5. IF THE COMPANYS ANTICIPATED PRODUCT LINE DOES NOT KEEP PACE WITH TECHNOLOGICAL DEVELOPMENTS, THEN ITS' REVENUE WILL SUFFER AND IT MAY GO OUT OF BUSINESS.
The market for the Company's anticipated products is characterized by rapid technological advance and if the Companys anticipated product line does not keep pace with technological developments, then its' revenue will suffer and it may go out of business. The Company must
continually change and improve its anticipated products in response to changes in operating systems, application and networking software, computer and communications hardware, programming tools and computer language technology. The Companys possible success will depend upon its ability to develop products that adequately keep pace with technological developments.
6. SOFTWARE PROGRAM ERRORS MAY RESULT AN THIS MAY CAUSE CUSTOMER DISSATISFACTION AND, CONSEQUENTLY, LOST REVENUE.
Despite testing by the Company, software program errors may result and this may cause customer dissatisfaction and, consequently, lost revenue. Software programs intended to be offered by the Company may contain undetected errors when first released to market. The use of such product may result in disruption to a customers operating system and this may negatively affect the relationship between a customer and the Company. There is no assurance that errors will not be found in expected releases of the Companys software.
7. THE COMPANYS ANTICIPATED SOFTWARE PROGRAMS WILL NOT BE ABLE TO PREVENT ALL BREACHES OF SECURITY.
The Companys anticipated software programs will not be able to prevent all breaches of security within a network and/or operating system. The processes and methodologies used by computer hackers to access or sabotage networks and intranets are ever changing and generally not recognized until launched against one or more targets. Generally, the Company will not be able to anticipate these processes and methodologies. In the event that a customers network and/or operating system suffers a security breach, the Companys product may be perceived as not being effective in ensuring protection. This may result in decreased demand for the Companys products and, consequently, lost revenue.
8. THE COMPANYS ANTICIPATED PROPRIETARY RIGHTS MAY BE PIRATED.
The Companys anticipated proprietary rights may be pirated. The Company expects to obtain appropriate copyrights, patents and/or trademarks for its anticipated software products for the purpose of securing protection of its proprietary rights. There can be no assurance that any copyright, patent and/or trademark applied for will in fact be granted. Even if granted, there can be no assurance that unauthorized parties will not wrongfully copy and engage in unauthorized use of the Companys products and/or information. Policing unauthorized use of the Companys products is extremely difficult and may be cost prohibitive. We would expect that software piracy will be a problem though we cannot accurately forecast the extent of any such potential problem. Related, the laws of countries other than the United States may not afford the same degree of protection to our property, or any protection at all, as compared to the United States.
9. WE WILL BE AT RISK OF PRODUCT LIABILITY CLAIMS WHICH, IF SUCCESSFUL, WOULD IMPAIR OUR OPERATING RESULTS AND/OR FORCE US TO GO OUT OF BUSINESS.
We will be at risk of product liability claims which, if successful, would impair our operating results and/or force us to go out of business. The Companys expected licensing of some or all of its products and provision of customer support for its products brings the risk of product liability claims and/or related claims. Though the Company expects to limit and/or exclude liability through utilization of agreements, disclaimers, and other written material to be delivered with its products, such limitations and/or exclusions may not be legally enforceable in all jurisdictions. The Company anticipates securing product liability insurance coverage for a certain financial amount that, subject to customary exclusions, will protect against claims resulting from failure of the Companys products
and/or services to perform the function or to serve the purpose intended. To the extent that any claims are not covered by such insurance, the Companys business, operating results and financial condition may be materially and adversely affected by a successful product liability claim.
10. THE COMPANY WILL BE SUBJECT TO RISK OF TARGETED ATTACKS BY COMPUTER HACKERS AND SUCH ATTACKS MAY NEGATIVELY AFFECT OUR OPERATING RESULTS.
The Company will be subject to risk of targeted attacks by computer hackers and such attacks may negatively affect our operating results. Upon expected commencement of operations, we anticipate being subject to attacks by computer hackers. The purpose of such attacks would likely be to breach the Companys internal network system for the purpose of obtaining sensitive data and information or creating viruses which would act to undermine functionality of our products. We cannot assure that the Company will be positioned to respond to such attacks in a timely or effective manner. Any failure to do so could damage our reputation, reduce product demand, and consequently result in lost revenue.
11. GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS MAY LIMIT OUR POTENTIAL REVENUE.
Government regulation of technology exports may limit our potential revenue. Certain governments have imposed restrictions on the import and export of certain technology. Our software products may be barred from entering certain jurisdictions or may require prior approval or authorization before being sold in such jurisdictions. There is no assurance that we would be able to secure such approval or authorization. If we are not permitted to license and/or sell our products in certain jurisdictions, then our revenue potential would suffer.
12. OUR OFFICERS AND DIRECTORS CURRENTLY OWN 100% OF OUR
OUTSTANDING SHARES OF COMMON STOCK. FOLLOWING COMPLETION
OF THIS OFFERING, CONTROL OF THE COMPANY WILL REMAIN WITH
MESSRS. FRIESEN AND MEAKIN.
SUCH CONCENTRATED CONTROL OF THE COMPANY MAY ADVERSELY
AFFECT THE PRICE OF OUR COMMON STOCK. AS WELL, OUR
OFFICERS AND DIRECTORS WILL BE ABLE TO ELECT ALL OF OUR
DIRECTORS, CONTROL OUR OPERATIONS, AND INHIBIT YOUR ABILITY
TO CAUSE A CHANGE IN THE COURSE OF THE COMPANYS OPERATIONS.
Our officers and directors, taken as a group, beneficially own 100 % of our outstanding common stock. Such concentrated control of the Company may adversely affect the price of our common stock. Even if we sell all 2,000,000 shares of common stock in this offering, Messrs. Friesen and Meakin will continue to own at least 4,000,000 shares and will control the Company. Consequently, following completion of this offering, regardless of the number of shares that we sell, Messrs. Friesen and Meakin will be able to elect all of our directors, control our operations, and inhibit your ability to cause a change in the course of the Companys operations. Our officers and directors may be able to exert significant influence, or even control, over matters requiring approval by our security holders, including the election of directors. Such concentrated control may also make it difficult for our shareholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into a different transaction which requires shareholder approval.
Our articles of incorporation do not provide for cumulative voting. Cumulative voting is a process that allows a shareholder to multiply the number of shares owned by the number of directors to be elected. The resulting number equals the total votes that a shareholder may cast for all of the directors. Those votes may be allocated in any manner to the directors being elected. Where cumulative voting is not allowed for, shareholders are not permitted to multiply the number of shares owned by the number of directors to be elected. Thus, the number of votes accorded to each shareholder is not increased. The result being that minority shareholders will not be in a position to elect a director. Rather, directors will be elected on the basis of votes cast by the majority shareholders.
13. SALES OF COMMON STOCK BY MESSRS. FRIESEN AND MEAKIN MAY CAUSE THE MARKET PRICE FOR THE COMMON STOCK TO DECREASE.
A total of 4,000,000 shares of common stock were issued to Messrs. Friesen and Meakin in consideration for cash payment. They are likely to sell a portion of their common stock if the market price increases above $0.10. If they do sell their common stock into the market, these sales may cause the market price of the common stock to decrease. However, all of the shares of common stock issued to Messrs. Friesen and Meakin are restricted securities as defined by Rule 144 of the Securities Act. This means that the common stock is eligible for sale subject to volume limitations, timing and manner of sale restrictions, and filing of notice requirements.
14. YOU WILL BE PROVIDING SUBSTANTIALLY ALL OF THE CASH FOR OUR OPERATIONS. AFTER PAYMENT OF COMMISSIONS, IF ANY, AND OFFERING EXPENSES, CASH RAISED THROUGH OUR OFFERING MAY THEN BE USED TO REPAY THE SUM OF $696 LOANED TO THE COMPANY BY MR. FRIESEN. IF WE CEASE OPERATIONS FOR ANY REASON, YOU MAY LOSE YOUR INVESTMENT WHILE MESSRS. FRIESEN AND MEAKIN MAY LOSE APPROXIMATELY $1,096.
Messrs. Friesen and Meakin, our only shareholders, will receive a substantial benefit from your investment. Messrs. Friesen and Meakin, together, have invested a total of $400 in our Company. As well, since inception, Mr. Friesen has incurred liabilities of $696 on behalf of the Company. The Company retains the discretion to repay the total of $696 contributed to the Company by Mr. Friesen from the proceeds raised through its offering. Such repayment could be made immediately after payment of commissions owing, if any, and offering expenses incurred. The sum of $696 is a non-interest bearing demand loan by Mr. Friesen to the Company. As of the date hereof, there has not been any repayment of this loan. There are not any documents setting forth the terms of the loan and the loan is not due on any specific date. You will be providing substantially all of the cash for our operations. As a result, if we cease operations for any reason, you may lose your investment while Messrs. Friesen and Meakin, together, may lose approximately $1,096.
15. THE LIMITED MARKET FOR OUR SHARES WILL MAKE OUR PRICE MORE VOLATILE. AS WELL, OUR STOCK IS HELD BY A SMALL NUMBER OF INVESTORS THUS REDUCING THE LIQUIDITY OF OUR STOCK AND THE LIKELIHOOD THAT ANY ACTIVE TRADING MARKET WILL DEVELOP.
The market for our common stock is limited and we cannot assure you that a larger market will ever be developed or maintained. Currently, our stock is not listed on any established trading system. The fact that most of our stock is held by a small number of investors further reduces the liquidity of our stock and the likelihood that any active trading market will develop. The market for
our common stock is likely to be volatile and many factors may affect the market. These include, for example:
_ Our success, or lack of success, in product development,
marketing our products and services, and developing our customer base;
_ Competition;
_ Government regulations; and
_ Fluctuation in operating results.
The stock markets generally have experienced, and will likely continue to experience, extreme price and volume fluctuation which have affected the market price of the shares of many small capital companies. These fluctuations have often been unrelated to the operating results of such companies. Such broad market fluctuations, as well as general economic and political conditions, may decrease the market price of our common stock in any market that develops.
16. LEGAL SERVICE AGAINST ONE OF THE COMPANY'S OFFICERS MAY BE DIFFICULT. IF LEGAL SERVICE CANNOT BE EFFECTED, THEN THAT OFFICER CANNOT BE MADE PARTY TO A LAWSUIT.
We are incorporated in the State of Nevada and maintain our registered office in Las Vegas, Nevada. Our registered office is authorized to accept service of all legal process upon the Company. Currently, Mr. Friesen, our director, president, chief financial officer, and principal accounting officer, and Ms. Meakin, our director, secretary, and treasurer, are both residents of Canada. Though it is possible, it may be difficult for a resident of a country other than Canada to serve Mr. Friesen and Ms. Meakin with legal process or other documentation. If legal service cannot be made as against either Mr. Friesen or Ms. Meakin, then they cannot be made a party to a lawsuit.
17. OUR AUDITORS HAVE DETERMINED THAT WE DO NOT HAVE SUFFICIENT WORKING CAPITAL NECESSARY TO BE SUCCESSFUL AND TO SERVICE OUR DEBT.
Following review of our financial statements, our auditors have determined that we do not have sufficient working capital necessary to be successful and to service our debt. As a result, our auditors have raised substantial doubt about our ability to continue as a going concern. According to our auditors, continuation of our Company as a going concern is dependent upon obtaining additional working capital.
18. WE HAVE NO EMPLOYEES AND ARE SIGNIFICANTLY DEPENDENT UPON OUR OFFICERS TO DEVELOP OUR BUSINESS. IF WE LOSE EITHER OF OUR OFFICERS OR IF OUR OFFICERS DO NOT ADEQUATELY DEVELOP OUR BUSINESS, THEN WE WILL GO OUT OF BUSINESS.
At the outset, our success will depend entirely on the ability of Messrs. Friesen and Meakin. We do not carry a key person life insurance policy on either Messrs. Friesen or Meakin. The loss of either Messrs. Friesen or Meakin could devastate our business. Although Mr. Friesen has several years of work experience in the field of information technology (see page 18) and believes that he will be able to successfully develop online and network security software and provide online and network security consulting services, his business experience is limited and neither he nor the Company can guarantee that such software will be successfully developed and/or that the Companys intended consulting services will generate revenue. Because of Mr. Friesens experience in the area of website development and information technology, the Company will rely primarily upon his expertise in these matters. We currently have no employees. We rely almost exclusively upon our
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officers to meet our needs. Both Mr. Friesen, our director, president, chief executive officer, chief financial officer, and principal accounting officer, and Ms. Meakin, our director, secretary, and treasurer, are engaged in work outside of the Company. This work limits the amount of time that each of them may devote to Company matters. Initially, it is anticipated that Mr. Friesen will devote approximately 10 hours per week to the Company, and Ms. Meakin will devote approximately 5 hours per week to the Company, with additional time being devoted to the Company once business operations are commenced. Mr. Friesens primary responsibilities with the Company will include software research and development and provision of consulting services while Ms. Meakin will be primarily responsible for marketing and administration matters.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. When used in this prospectus, the words expects, anticipates, estimates, intends and similar expressions are intended to identify forward looking statements. These statements include, but are not limited to, statements under the captions, Risk Factors, Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of Operations, Business and elsewhere in this prospectus.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The cautionary statements made in this prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this prospectus.
USE OF PROCEEDS
This offering is being made on a best efforts - no minimum basis. Since this is a no minimum offering, there is no assurance that we will raise any proceeds. The following table sets forth managements current estimate of the allocation of net proceeds expected to be received from this offering. Actual expenditures may vary from these estimates. Pending such uses, we will invest the net proceeds in investment-grade, short-term, interest bearing securities.
If Maximum
of 2,000,000 If 1,500,000 If 1,000,000 If 500,000
Shares Shares Shares Shares
sold(1) sold(2) sold(3) sold(4)
Total Proceeds: $200,000 $150,000 $100,000 $50,000
Net Proceeds available $200,000 150,000 100,000 50,000
from Offering:
Use of Net Proceeds:
Offering Expenses(5)(6) 24,000 24,000 24,000 24,000
Filing Fees
Debt Payments(7) 696 696 696 696
Equipment 30,000 25,000 15,000 6,000
Marketing(8) 30,000 25,000 15,000 2,500
Working Capital(9) 115,304 75,304 45,304 16,804
Total Use of Net
Proceeds: $200,000 150,000 100,000 50,000
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(1) Assuming that the maximum of 2,000,000 shares are sold, we anticipate that the resulting net proceeds may satisfy our funding requirements for approximately 10 to 12 months. This statement is based on a comparative review of the net proceeds as against our projected costs for those items listed under Use of Net Proceeds, above, i.e., Equipment, Marketing, and Working Capital (see page 24, Plan of Operations, for additional details). We cannot guarantee that our cash requirements will be satisfied during this time period. Should our cash requirements exceed our net proceeds during the subject time period, then we will have to raise additional funds in order to continue our business. Thus, it is possible that we will need to raise additional funds during the next twelve months otherwise our business may fail.
(2) Assuming that 1,500,000 shares are sold, we anticipate that the resulting net proceeds may satisfy our funding requirements for approximately 8 to 10 months. This statement is based on a comparative review of the net proceeds as against our projected costs for those items listed under Use of Net Proceeds, above, i.e., Equipment, Marketing, and Working Capital (see page 24, Plan of Operations, for additional details). We cannot guarantee that our cash requirements will be satisfied during this time period. Should our cash requirements exceed our net proceeds during the subject time period, then we will have to raise additional funds in order to continue our business. Thus, it is possible that we will need to raise additional funds during the next twelve months otherwise our business may fail.
(3) Assuming that 1,000,000 shares are sold, we anticipate that the resulting net proceeds may satisfy our funding requirements for approximately 6 to 8 months. This statement is based on a comparative review of the net proceeds as against our projected costs for those items listed under Use of Net Proceeds, above, i.e., Equipment, Marketing, and Working Capital (see page 24, Plan of Operations, for additional details). We cannot guarantee that our cash requirements will be satisfied during this time period. Should our cash requirements exceed our net proceeds during the subject time period, then we will have to raise additional funds in order to continue our business. Thus, it is possible that we will need to raise additional funds during the next twelve months otherwise our business may fail.
(4) Assuming that 500,000 shares are sold, we anticipate that the resulting net proceeds may satisfy our funding requirements for approximately 4 to 6 months. This statement is based on a comparative review of the net proceeds as against our projected costs for those items listed under Use of Net Proceeds, above, i.e., Equipment, Marketing, and Working Capital (see page 24, Plan of Operations, for additional details). We cannot guarantee that our cash requirements will be satisfied during this time period. Should our cash requirements exceed our net proceeds during the subject time period, then we will have to raise additional funds in order to continue our business. Thus, it is possible that we will need to raise additional funds during the next twelve months otherwise our business may fail.
(5) We plan to have Mr. Friesen, our President, sell shares in our Company. Mr. Friesen will not receive any commissions or discounts. We do not have any agreements, arrangements or understandings with any broker/dealers to offer or sell our shares.
(6) Legal expenses of $15,000 are one component of our Offering Expenses. Currently, there has not been any payment made toward legal expenses. For the purpose of this section, Use of Proceeds, we have included legal expenses under Offering Expenses and have not included legal expenses under the heading Debt Payments. The Company will make use of offering proceeds to pay its legal expenses and other offering expenses.
(7) Our balance sheet shows accounts payable of $696. This sum of $696 refers to a non-interest bearing demand loan by Mr. Friesen to the Company. From this sum of $696, Mr. Friesen paid for, on behalf of the Company: company registration, incorporation, Nevada State filing fees, and purchase of the Company's domain name. There are not any documents setting forth the terms of
the loan and the loan is not due on any specific date. Any repayment to Mr. Friesen in respect of the above-noted loan would be made after payment of offering expenses.
(8) Owing to his expertise (see page 18), Mr. Friesen, our president, will be responsible for developing our website. Mr. Friesen will not be paid any fees for development of our website.
(9) A significant portion of the proceeds are allocated to working capital. Specifically, we expect that the working capital portion of the proceeds will be used to pay expenses such as employee wages, product research and development costs, and administrative costs (see page 24, Plan of Operations, for additional details). The principal reasons for this offering are (a) to raise sufficient funds that will enable us to commence business operations; and (b) to pay for our start up expenses. None of the working capital nor any other proceeds raised from this offering will be used to pay a salary to Mr. Friesen nor Ms. Meakin.
DETERMINATION OF OFFERING PRICE
As no underwriter has been retained to offer our securities, the offering price of our shares was not determined by negotiation with an underwriter as is customary in underwritten public offerings. Rather, we arbitrarily selected the offering price. There is no relationship between the offering price of the shares and our assets, earnings, book value, net worth or other economic or recognized criteria or future value of our shares.
DILUTION
Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the offering price of the shares being offered. Dilution of the value of the shares that you purchase is also a result of the lower book value of the shares held by our existing shareholders.
As of the date of this offering, we had 4,000,000 common shares issued and outstanding and a net tangible book value of $(296) or $0.00 per share. These 4,000,000 shares are owned equally by our two directors/officers. The price paid for each of these 4,000,000 shares was $.001 cents per share. For comparison sake, the price per share to be paid by investors pursuant to this offering will be $.10 cents per share.
The proceeds from the sale of shares will vary depending on the total number of shares sold.
Upon completion of this offering, if all 2,000,000 shares (or 100%) offered hereunder are sold, there would be a total of 6,000,000 common shares issued and outstanding. If the maximum 2,000,000 shares are sold, then the net proceeds after deducting offering expenses of $24,000 will be $176,000. The net offering proceeds taken together with the net tangible book value would amount to a total net tangible book value of $175,704. Our net tangible book value divided by the number of shares outstanding results in a per share book value of $0.03. Thus, shareholders who purchase shares in this offering will incur an immediate dilution in book value of their shares of $.07 or approximately 70% and our existing shareholders would receive an increase in book value of approximately $0.03 per share without any additional investment on their part.
Upon completion of this offering, if 1,500,000 shares (or 75%) offered hereunder are sold, there would be a total of 5,500,000 common shares issued and outstanding. If 1,500,000 shares are sold, then the net proceeds after deducting offering expenses of $24,000 will be $126,000. The net offering proceeds taken together with the net tangible book value would amount to a total net
tangible book value of $125,704. Our net tangible book value divided by the number of shares outstanding results in a per share book value of $0.02. Thus, shareholders who purchase shares in this offering will incur an immediate dilution in book value of their shares of $.08 or approximately 80% and our existing shareholders would receive an increase in book value of approximately $0.02 per share without any additional investment on their part.
Upon completion of this offering, if 1,000,000 shares (or 50%) offered hereunder are sold, there would be a total of 5,000,000 common shares issued and outstanding. If 1,000,000 shares are sold, then the net proceeds after deducting offering expenses of $24,000 will be $76,000. The net offering proceeds taken together with the net tangible book value would amount to a total net tangible book value of $75,704. Our net tangible book value divided by the number of shares outstanding results in a per share book value of $0.015. Thus, shareholders who purchase shares in this offering will incur an immediate dilution in book value of their shares of $.085 or approximately 85% and our existing shareholders would receive an increase in book value of approximately $0.015 per share without any additional investment on their part.
Upon completion of this offering, if 500,000 shares (or 25%) offered hereunder are sold, there would be a total of 4,500,000 common shares issued and outstanding. If 500,000 shares are sold, then the net proceeds after deducting offering expenses of $24,000 will be $26,000. The net offering proceeds taken together with the net tangible book value would amount to a total net tangible book value of $25,704. Our net tangible book value divided by the number of shares outstanding results in a per share book value of $0.01. Thus, shareholders who purchase shares in this offering will incur an immediate dilution in book value of their shares of $.09 or approximately 90% and our existing shareholders would receive an increase in book value of approximately $0.01 per share without any additional investment on their part.
The following information compares the differences of your investment in our shares with the investment of our existing shareholders:
Existing Shareholders Price per share .................................. $0.001 Net tangible book value per share before offering .. $(296) Net tangible book value per share after offering assuming 100% of shares (i.e., 200,000) are sold ... $175,704 Increase to current shareholders in net tangible book value per share after offering ................ $0.03 Capital Contributions .............................. $400 Total number of shares after offering held by all investors ...................................... 6,000,000 Number of shares outstanding before the offering ... 4,000,000 Number of shares outstanding after the offering held by existing shareholders ...................... 4,000,000 Percentage of ownership after the offering ......... 66.67% Purchasers of Shares in this Offering if all Shares sold Price per share .................................. $0.10 Dilution per share ................................. $0.07 Capital contributions .............................. $200,000 Total number of shares after offering held by all investors....................................... 6,000,000 Number of shares after offering held by public investors .......................................... 2,000,000 Percentage of ownership after the offering ......... 33.33% Purchasers of Shares in this Offering if 75% of Shares sold Price per share .................................. $0.10 Dilution per share ................................. $0.08 Capital contributions .............................. $150,000 Total number of shares after offering held by all investors....................................... 5,500,000 Number of shares after offering held by public investors .......................................... 1,500,000 Percentage of ownership after the offering ......... 27.54% |
Purchasers of Shares in this Offering if 50% of Shares sold
Price per share .................................. $0.10 Dilution per share ................................. $0.085 Capital contributions .............................. $100,000 Total number of shares after offering held by all investors....................................... 5,000,000 Number of shares after offering held by public investors .......................................... 1,000,000 Percentage of ownership after the offering ......... 20.00% Purchasers of Shares in this Offering if 25% of Shares sold Price per share .................................. $0.10 Dilution per share ................................. $0.09 Capital contributions .............................. $50,000 Total number of shares after offering held by all investors....................................... 4,500,000 Number of shares after offering held by public investors .......................................... 500,000 Percentage of ownership after the offering ......... 11.11% |
PLAN OF DISTRIBUTION
Currently, we plan to sell the shares in this offering through Mr. Kim Friesen, our director, president, chief executive office, chief financial officer, and principal accounting officer. Mr. Friesen will not receive any commission from the sale of any shares. Mr. Friesen will not register as a broker/dealer under Section 15 of the Securities Exchange Act of 1934 (the Act) in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuers securities and not be deemed to be a broker-dealer. These conditions are as follows:
The person is not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation;
The person is not compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;
The person is not, at the time of their participation, an associated person of a broker-dealer; and
The person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Act in that he (a) primarily performs, or is intended to primarily perform at the end of the offering, substantial duties for or on behalf of the Issuer other than in connection with transactions in securities; and (b) is not a broker-dealer, or an associated person of a broker-dealer, within the preceding twelve (12) months; and (c) does not participate in selling and offering of securities for any Issuer more than once every twelve (12) months other than in reliance on paragraphs (a)(4)(i) or (a) (4) (iii) of the Act.
Mr. Friesen is not subject to disqualification, is not being compensated in connection with his participation in the offering by the payment of commission or any other remuneration based either directly or indirectly on transactions in securities, and he has not been and is not currently a broker-dealer nor associated with a broker-dealer. Mr. Friesen has not, during the last twelve months, and will not, during the next twelve months, offer or sell securities for any other Issuer other than in reliance on paragraphs (a)(4)(i) or (a) (4) (iii) of the Act.
In the past, we have received unsolicited indications of interest in Cygni Systems Corporation from individuals familiar with us. Mr. Friesen will arrange for delivery of a prospectus to these individuals and to others whom he believes may be interested in purchasing all or a part of this offering.
LEGAL PROCEEDINGS
To our knowledge, neither us, nor any of our officers or directors is a party to any material legal proceeding or litigation and such persons know of no material legal proceeding or contemplated or threatened litigation and none of our officers or directors have been found by any court of competent jurisdiction to have violated any federal or state securities or commodities law. There are no judgments, orders, or decrees against us or our officers or directors that limit in any manner our involvement or that of our officers or directors in any type of business, securities or banking activities. None of our officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office. None of our officers or directors has been involved in any capacity in any bankruptcy petition.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
The following sets forth our directors, executive officers, promoters and control persons, their ages, and all offices and positions held. Directors are elected for a period of one year and thereafter serve until their successor is duly elected by the shareholders. Officers and other employees serve at the will of the Board of Directors.
Name Age Term Served as Position with the Company
Director/Officer
Kim Friesen(1) 34 March, 2004 President/Chief Executive
Officer/Chief Financial Officer/
Principal Accounting Officer/
Director
|
Andrea Meakin(1) 29 March, 2004 Secretary / Treasurer / Director
(1) Kim Friesen and Andrea Meakin are spouses of each other.
The above individuals will serve as officers and directors. A brief description of their background and business experience follows:
Kim Friesen. Mr. Friesen has more than 11 years experience in the field of information technology (IT). From 1993 through 1996, he was employed with Centra Gas Manitoba as a systems analyst and technical database administrator where, among other matters, he was responsible for implementing Microsoft SNA Server, EDA/SQL gateway to Supra database via NT and OS/2 servers, writing JCL scripts, and mainframe 24x7 database administration of production Cincom Supra database on MVS. From 1996 through 1998, Mr. Friesen worked on a contractual basis for Air Canada where his position was Senior PeopleSoft Technical Analyst and his responsibilities included: lead technical resource for development teams; database management; developing and implementing coding standards; debugging and performance tuning applications and databases; PeopleSoft finance and human resources implementation; supporting role with 150 person team using 16 databases on Oracle 7.3.x, AIX. From 1999-2001, Mr. Friesen worked on a contractual basis for Boeing (Canada) where his position was Senior PeopleSoft Technical Analyst / Oracle DBA, and his responsibilities included: designing employee self service and user security architecture; developing web based employee self service components using ASP on IIS; developing web coding standards and procedures; developing and modifying SQR programs and PeopleSoft objects; PeopleSoft HRMS 7.5 support; applying People Tools upgrades, tax upgrades, and application updates. From 1999-2000, Mr. Friesen worked on a contractual basis for Split Ends Co. as a web developer where he developed retail point of sale application using Zope, a Python based web application server, and MySQL database server; developed Linux platform and client interface with HTML forms, JavaScript, and Zope DTML server scripting language. From 2002 to 2003, Mr. Friesen worked on a contractual basis for BCS Inc. as a web developer where he designed and developed: a web based compensation management and employee information system; complete online system using MySQL and Python based Webware application server; and implemented PDF reporting system in Python using ReportLab PDF Generation libraries. Since 2002, Mr. Friesen has worked on a contractual basis for Enbridge Inc., where his position is Senior PeopleSoft Technical Analyst / Oracle DBA, and his responsibilities include: leading technical support staff through installation and configuration of PeopleSoft v8.0 environment on Oracle 8.1.7, Solaris; designing database conversion strategy and developing conversion programs; converting DB/2 (MVS) PeopleSoft v7.02 database to Oracle (UNIX) PeopleSoft v8.1 database; writing DB/2 JCL export and SQL* Loader import scripts; tuning PeopleSoft Web and Application Server performance; implementing PeopleSoft ePerformance, ePay, eBenefits, Time & Labor, and internet enabled Employee Self Service; and securing and load testing server architecture. Mr. Friesen holds a Bachelor of Science degree, Computer Science major, from the University of Manitoba, Canada, that he earned in 1993. In 2000, Mr. Friesen achieved the designation of Oracle8 Certified Professional DBA. Since 2003, he has been a member of the Association for Computing Machinery. Mr. Friesen devotes approximately 10 hours per week to Cygni Systems Corporation and will devote additional time as required. Mr. Friesen is not an officer or director of any other reporting company.
Andrea Meakin. Ms. Meakin is a speech-language pathologist by profession. From 1999 to 2000, Ms. Meakin worked as a speech-language pathologist at the Manitoba Development Center, Riverview Health Center, Middlechurch Home of Winnipeg, and Fred Douglas Lodge. At these institutions, her responsibilities included assessing, treating, and consulting with individuals with communication and swallowing disorders. Since 2000, Ms. Meakin has been employed as a speech-language pathologist with Seven Oaks General Hospital in Winnipeg, Manitoba, Canada, where she is responsible for diagnosing, treating, and providing management services for individuals who suffer various impairments including: difficulty swallowing, speech, language, hearing, voice or cognition. As well, since 2000, Ms. Meakin has been in private practice, as a sole proprietor, providing speech-language pathology services. Ms. Meakin holds a Bachelor of Arts in Communication Sciences and Disorders that she earned in 1997 from the University of North Dakota and a Master of Science in Speech-Language Pathology that she earned in 1999 from Northern Arizona University. Ms. Meakin maintains membership in the Manitoba Speech and Hearing Association and the American Speech, Language and Hearing Association. She currently devotes approximately 5 hours per week to Cygni
-18
Systems Corporation and will devote additional time as required. Ms. Meakin is not an officer or director of any other reporting company.
The Company does not currently have any standing audit, nominating, or compensation committees of the Board, or committees performing similar functions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The term beneficial owner refers to both the power of investment,
i.e., the right to buy and sell, and rights of ownership, i.e., the right
to receive distributions from the Company and proceeds from sales of the
shares. As these rights or shares may be held by more than one person,
each person who has a beneficial ownership interest in shares is deemed
to be the beneficial owners of the same shares because there is shared
power of investment or shared rights of ownership.
Amount of
Beneficial % of Shares
Name and Address Ownership(1) Before Offering
Kim Friesen(2) 2,000,000 50%
303-167 Bannatyne Avenue
Winnipeg, MB
R3B 0R4 Canada
Andrea Meakin(2) 2,000,000 50%
303-167 Bannatyne Avenue
Winnipeg, MB
|
R3B 0R4 Canada
All officers and directors 4,000,000 100% as a group (2 persons)
TOTAL: 4,000,000 100%
(1) Security ownership of both of the beneficial owners was
determined on March 18, 2004.
(2) Kim Friesen and Andrea Meakin are spouses of each other.
DESCRIPTION OF THE SECURITIES
Description of Common Stock. We are currently authorized to issue 100,000,000 shares of $0.001 par value common stock. All shares when issued, will be fully paid and non-assessable. All shares are equal to each other with respect to liquidation and dividend rights. Holders of voting shares are entitled to one vote for each share that they own at any shareholders' meeting.
Holders of shares of common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available. Upon liquidation, holders of shares of common stock are entitled to participate pro-rata in a distribution of assets available for such distribution to shareholders. There are no conversion, pre-emptive, or other subscription rights or privileges with respect to any shares.
Reference is made to our Articles of Incorporation and Bylaws for a more
complete description of the rights and liabilities of holders of
common stock. Our shares do not have cumulative voting rights:
this means that the holders of more the 50% of the shares voting for each
election of directors may elect all of the directors if they choose to do
so. In such event, the holders of the remaining shares aggregating less
than 50% will not be able to elect any directors.
Following completion of this offering, we will not be required to provide you with an annual report and we will not voluntarily send an annual report to you. We will be required to file reports with the Securities and Exchange Commission under section 15(d) of the Securities Act. The reports will be filed electronically. The common reports that we will be required to file are known as Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any materials we file with the SEC at their Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov. that contains reports, proxy and information statements, and will contain copies of the reports that we file electronically.
Transfer Agent. Pacific Stock Transfer Company, 500 East Warm
Springs Road, Suite 240, Las Vegas, Nevada, 89119, telephone
(702) 361-3033, will act as the transfer agent and registrar for
our outstanding securities upon completion of this offering.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named herein was or is a promoter, underwriter, voting trustee, director, officer or employee of Cygni Systems Corporation.
Legal Matters. Certain legal matters will be passed upon for us by Kenneth H. Finkelstein, Attorney At Law, 2200-1420 Fifth Avenue, Seattle, Washington, 98101.
Accounting Matters. The financial statements included in this prospectus and elsewhere in the registration statement have been audited by Malone & Bailey, PLLC, located in Houston, Texas, as set forth in their report, and are included herein in reliance upon the authority of the stated firm as experts in accounting and auditing in rendering such reports.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
In accordance with our Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Act) may be permitted to directors, officers, and controlling persons for 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 any 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 defence 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 of 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.
ORGANIZATION WITHIN THE LAST FIVE YEARS
We are a start-up company and have no operating history. We anticipate making all arrangements necessary to commence operations as soon as practicable once funds from this offering are made available.
DESCRIPTION OF BUSINESS
COMPANY HISTORY
Cygni Systems Corporation was formed as a Nevada State corporation on March 18, 2004. Our principal executive office is located at 303-167 Bannatyne Avenue, Winnipeg, MB, R3B 0R4, Canada. Our telephone number is (204) 295-8015. Our website, which is not currently active, is located at http://www.cygnisystems.com. We expect our website to be developed within three months of the date of this prospectus, being May 26, 2004.
Our Strategy
It is intended that our business will be focused on developing online and network security management software and online and network security consulting services. Our products and services will be targeted to small business and individual consumers. Specifically, we expect that our business will be comprised of the following:
_ Research and development of software designed to enhance internet
and network security;
_ Sales and/or licensing of software;
_ Maintenance and customer support of software sold and/or licensed; and
_ Consulting services related to online and network security.
Overview
The Company is in the development stage and has not yet commenced operations nor generated any revenue. However, the Company intends to execute its business plan as set forth in this section, Description of Business, and more specifically on page 24, Plan of Operations. It is not the Companys intention to engage in a merger or acquisition with an unidentified company or companies, or other entity or person or to enter into a business combination within the next 12 months. Thus, despite being a company is issuing penny stock, we do not fall within the definition of a blank check company as that term is defined in Section (a)(2) of Rule 419, Securities Act of 1933. Briefly, a blank check company is defined as (i) a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity of person'; and (ii) is issuing penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act of 1934.
Kim Friesen, our president, chief executive officer, chief financial officer, principal accounting officer, and director, has been directly involved, in one or more capacities, with the information technology industry for the past 11 years (see page 18). He has significant knowledge of, and experience with, computer network systems, the internet, applications, and software. Mr. Friesen will be primarily responsible for developing network security management software, providing network security consulting services, and attracting customers for both the anticipated software products and consulting services. Andrea Meakin, our Secretary, Treasurer, and Director will assume responsibility for Company administrative matters (see page 18). The Company expects to generate revenue through sales and/or licensing of software products that it intends to create and provision of network security consulting services. (see page 22).
Target Market
We intend to provide products and services to a diverse range of individual consumers and businesses residing in different countries but sharing a common concern, being information protection. Our target geographical markets will be those countries that are most computer literate and those countries where computer literacy evidences good growth prospects such as, for example: the United States, Canada, Western European countries, Finland, Sweden, Denmark, Australia, Japan, China, Taiwan, and India, among others.
Within the United States and Canada, we do not need to pursue nor satisfy any special licensing or regulatory requirements before establishing or delivering our intended services other than requisite business licenses. However, our software products and/or consulting services may be barred from entering certain jurisdictions or may require prior approval or authorization before being sold in such jurisdictions. There is no assurance that we would be able to secure such approval or authorization. If new government regulations, laws, or licensing requirements are passed, in any jurisdiction that would cause us to restrict or eliminate delivery of any of our intended products and/or services, then our business would suffer. For example, if we were required to obtain a government issued license for the purpose of providing network security consulting services, then we could not guarantee that we would qualify for such license. If such a licensing requirement existed, and we were not able to qualify, then our business would suffer. Presently, to the best of our knowledge, no such regulations, laws, or licensing requirements exist or are likely to be implemented in the near future in countries with a democratic political system, that would reasonably be expected to have a material impact on or sales, revenues, or income from our business operations.
Marketing
We expect to utilize several different marketing activities in our attempt to make our products and services known to the consumer. These marketing activities will be designed to inform potential consumers, distributors and value added resellers about the benefits of using our products and services and will include the following: development and distribution of marketing literature; direct mail and email; participation at industry trade shows, product/technology conferences, and seminars; advertising; maintenance and promotion of our web site; and public relations.
Potential Revenue Streams
We intend to target four potential revenue streams in the operation of our proposed business:
_ Software sales direct from the company to the consumer;
_ Software sales through third party distributors and/or value
added resellers;
_ Software licensing direct from the company to the consumer; and
_ Network security consulting services direct from the company to the consumer which will be charged on a fixed fee or per hour basis.
It is expected that the Company would be entitled only to a certain share of sale proceeds generated through third party distributors and value added resellers. As of the date of this prospectus, being May 26, 2004, the Company has not entered into any agreements with any third party distributors and/or value added resellers.
Product Development
Owing to the knowledge and experience of our president, Mr. Kim Friesen, with information technology matters (see page 18), he will be responsible for leading the research and development of our anticipated software products. For the purpose of delivering cutting edge software products to the consumer, we expect to provide product security updates, as needed, that are based upon our evaluation of existing or potential network vulnerabilities or threats. For those consumers who license our products, these updates will be included in the licensing cost. For buyers of our products, updates will be free for the first year subsequent to purchase date. Upon expiration of the first year, updates may be obtained upon payment of a nominal fee. Similarly, product enhancements, such as new features and/or refined functionality, will be included in the licensing fee. For buyers who wish to obtain product enhancements, a nominal fee will be charged following the first year subsequent to purchase date. We expect that our products will be compatible with operating systems such Microsoft Windows, Linux, and Apple and that product installation will be seamless.
Technology and Systems
Owing to the knowledge and experience of our president, Mr. Kim Friesen, with information technology matters (see page 18), he will be responsible for developing our website and implementing appropriate software and technologies. Where possible, we may purchase or lease commercially available licensed technologies since this would be more cost effective than developing our own technologies. It is intended that our systems will have capacity expansion capabilities to support future growth.
Customer Technical Support
It is our intention to provide excellent customer service and technical support. We believe that this is essential for the purpose of achieving optimum sales and/or licensing. We intend to provide telephone and email support to all customers worldwide. Initially, however, we will be positioned to accommodate only English speaking consumers. It is anticipated that, if and when we are established in non-English speaking countries, we will then arrange for customer support availability in the local dialect.
Commencing Operations
As of the date of filing this registration statement, being May 26, 2004, we have not entered into any agreements with any third parties who may be involved in the operation of our business. We are not likely to pursue any business relationships with third parties until after the expiration of this offering. To be clear, such business relationships would not include a business combination and it is not our intention to seek a business combination within the next 12 months.
Competition
The market for online and network security management software and online and network security consulting services is intensely competitive and is likely to remain so for the foreseeable future. Competition may result in price reductions, reduced revenue, reduced gross margins, and/or loss of market share, any of which would materially and adversely our business. There is no assurance that the Company will be able to establish its' own niche and thereafter maintain a competitive position against current and future competitors, especially those who have longer operating histories, greater brand recognition, and stronger financial, technical and marketing resources. As a result, these competitors may be positioned to adapt more quickly to new or emerging technologies, changes in customer needs, and/or allocate more resources to product and service marketing.
Employees
Mr. Friesen is currently working approximately 10 hours per week and Ms. Meakin is currently working approximately 5 hours per week on behalf of the Company. As required, Mr. Friesen and Ms. Meakin will devote additional time. Currently, we do not have any employees and Messrs. Friesen and Meakin do not have employment agreements with us. We expect that additional personnel will be hired as demand for our services increases. We anticipate needing to hire up to four individuals within the next twelve months, including two information technology research and development individuals, one secretary/receptionist, and one accountant/bookkeeper.
PLAN OF OPERATIONS
Our plan of operations for the next twelve months is to raise funds through this offering. A principal use of the offering proceeds will be to provide working capital required upon commencement of operations until such time as sufficient revenues are generated to cover operating expenses. These funds will also be applied towards payment of start up expenses. Upon completion of this offering and within the twelve (12) month period thereafter, we expect that proceeds raised from this offering will be our only source of funding.
We expect that funds raised from this offering will pay for anticipated expenses within the time period stated herebove. Assuming that we raise the maximum proceeds from this offering, we anticipate incurring the following expenses (see page 12, Forward-Looking Statements):
Offering expenses ($24,000); debt repayment ($696); computer equipment lease and/or purchase ($30,000); marketing ($30,000) which is expected to include advertising, travel, trade show expenses, marketing material, and website maintenance; working capital ($115,304) which is expected to include accounting fees, legal fees, transfer agent, personnel, utilities, general and administrative.
It is anticipated that our operations will commence in November, 2004. Note, however, that the commencement date of operations is dependent upon the date that we complete our offering since proceeds raised from this offering will be our only source of funding at the outset of operations. Thus, should the closing of our offering be delayed past November, 2004, then our operations would not likely commence until a later date. Assuming that our plans are successfully implemented, then we would expect that revenues will be generated within 90 days after the date that we commence operations. Most likely, initial revenue would be generated from network security consulting services rather than product sales. We cannot at this time provide an accurate estimate of when our first software products will be completed and marketed for sale. This is dependent on the speed with which we are able to develop our products. As we have not yet commenced active business
operations, we have not achieved any of our business objectives nor have we generated any revenue and there is no guarantee that we will be successful in generating revenue. Our business objectives include the following:
Within 90 days of the date of this prospectus, being May 26, 2004, we expect our website to be operational. Mr. Kim Friesen, our president, will be responsible for creating and developing our website given his knowledge and experience (see page 18). It is expected that any development costs incurred would be nominal and Mr. Friesen would advance these costs to the Company as a non-interest bearing loan. The Company would then be responsible for repaying such loan to Mr. Friesen from the anticipated offering proceeds. In the event that we may need to retain a third party to host and maintain the website, then we expect that costs for such would be minimal, i.e., approximately $50 per month. Mr. Friesen would advance these costs to the Company as a non-interest bearing loan. The Company would then be responsible for repaying such loan to Mr. Friesen from the anticipated offering proceeds.
Within 90 days of completion of this offering, we expect to finalize our marketing plans (see page 22). This will include publication and distribution of our marketing literature, implementation of advertising plans which will include direct mail and email promotion, arranging for website listings, and attendance at appropriate industry trade shows, seminars, and conferences. Initially, we do not expect to utilize the services of a public relations entity although this will be reconsidered in the event that our internal marketing does not yield desired results. The costs of implementing our marketing plans would be financed from net proceeds raised in our offering. In the event that we raise less than the maximum amount from this offering, then the amount of funds allocated for marketing activity would be reduced (see Marketing expenditures page 26). Less funds available for marketing activity could negatively affect our ability to generate product sales and consulting revenue thus negatively affecting our ability to generate revenue.
Within three to six months of completion of this offering, we anticipate attracting customers to our network security consulting services. This will be a responsibility undertaken by Mr. Friesen. As well, Mr. Friesen will be principally responsible for provision of such consulting services. As of the date of this prospectus, being May 26, 2004, the Company has not been retained to provide consulting services. In the event that we raise less than the maximum amount from this offering, then the amount of funds allocated for marketing activity would be reduced (see Marketing expenditures page 26). Less funds available for marketing activity could negatively affect our ability to attract clientele who would utilize our consulting services thus reducing or eliminating potential revenue sources.
Within six to twelve months of completion of this offering, we anticipate developing software products designed to enhance internet and network security. Research and development of such products will be the responsibility of Mr. Friesen and other, if any, information technology personnel retained by the Company. As of the date of this prospectus, being May 26, 2004, the Company has not developed any software products. In the event that we raise less than the maximum amount from this offering, then the amount of funds allocated for working capital would be reduced (see Working Capital expenditures page 26). Less funds available for working capital could negatively affect our ability to retain qualified information technology personnel thus increasing the amount of time it takes to develop software products and, consequently, increasing the amount of time it takes to bring a product to market and delaying potential revenue sources. Alternatively, if product development takes too much time, then we may not have sufficient funds required to continue our business. In such event, our business would fail.
Within eight to twelve months of completion of this offering, we anticipate entering agreements with third party distributors and value added resellers who would sell our software
products. Execution of any such agreements would be dependent on whether we complete development of our software products. If we do not complete development of software products then no such agreements will be executed and revenue will not be derived from third party sales. Costs incurred would potentially include communication and travel costs, as they relate to consummating agreements, and legal costs incurred for preparing and/or reviewing written agreements. In the event that we raise less than the maximum amount from this offering, then the amount of funds allocated for legal, communication, and travel costs would have to be reduced (see Working Capital expenditures page 26). Less funds available for travel and/or legal costs could prevent us from concluding distribution agreements thus reducing or eliminating potential revenue sources;
Within twelve months of completion of this offering, hiring and training employees. Specifically, we anticipate hiring one secretary/receptionist at a monthly cost of approximately $750, one accountant/bookkeeper at a monthly cost of approximately $500, two research and development information technology individuals who would assist Mr. Friesen with development of software products and would be paid a monthly fee of $1500 each with an agreed upon bonus payable, when proceeds permit, upon completion of each new software product. In the event that we raise less than the maximum amount from this offering, then the amount of funds allocated for hiring and training employees would have to be reduced (see Working Capital expenditures page 26). With fewer or no employees, our officers/directors would be responsible for all aspects of our operations. This would likely limit our revenue potential since more time would be devoted to corporate and administrative matters rather than attracting clientele to the consulting side of the business and developing software products. The result being that our operations would be scaled down since our officers/directors would be responsible for more aspects of our operations.
Since we are in the initial stages of developing our business, there is no assurance that there will be sufficient demand for our services to allow us to operate profitably. Our auditors have determined that we do not have sufficient working capital necessary to be successful and to service our debt. As a result, our auditors have raised substantial doubt about our ability to continue as a going concern. If we are not successful at creating demand for our services, then it is not likely that we will generate sufficient revenues from services to operate profitably. We expect to address the concerns raised by our auditor by: generating revenue through the provision of network security consulting services and through software product sales and/or licensing. Initially, we anticipate that the primary income generator will be consulting services. We expect that software product development will take at least 6 to 12 months and, once developed, further delay will be encountered before revenue is generated from sales and/or licensing as we will have to properly market the product. If we are not successful in creating demand for our consulting services, and if we are not successful in developing software product, then we are not likely to generate any revenue.
The period of time during which we may be able to satisfy our cash requirements depends on the net proceeds raised in our offering (see page 12, Use of Proceeds). Note that we cannot, and do not, guarantee that our cash requirements will be satisfied during the stated time periods. Should our cash requirements exceed our net proceeds during the subject time period, then we will have to raise additional funds in order to continue operation of our business. Thus, it is possible that we will need to raise additional funds during the next twelve months otherwise our business may fail.
Assuming that the maximum of 2,000,000 shares are sold, we
anticipate that the resulting net proceeds of $200,000 may satisfy
our funding requirements for approximately 10 to 12 months. These
proceeds would allow us to cover the cost of our equipment ($30,000
- see page 24), marketing ($30,000 - see page 24), working
capital ($115,304 - see page 24), offering expenses ($24,000 - see
page 12), and debt repayment ($696 - see page 12). Assuming that
1,500,000 shares are sold, we anticipate that the resulting net
proceeds of $150,000 may satisfy our funding requirements for
approximately 8 to 10 months. Except for offering expenses (24,000)
and debt
repayment ($696), these proceeds would cause us to reduce
our expenditures as follows: equipment ($25,000), marketing
($25,000), and working capital ($75,304). Assuming that 1,000,000
shares are sold, we anticipate that the resulting net proceeds of
$100,000 may satisfy our funding requirements for approximately 6
to 8 months. Except for offering expenses (24,000) and debt repayment
($696), these proceeds would cause us to reduce our expenditures
as follows: equipment ($15,000), marketing ($15,000), and working
capital ($45,304). Assuming that 500,000 shares are sold, we
anticipate that the resulting net proceeds of $50,000 may satisfy
our funding requirements for approximately 4 to 6 months. Except
for offering expenses (24,000) and debt repayment ($696), these
proceeds would cause us to reduce our expenditures as follows:
equipment ($6,000), marketing ($2,500), and working capital ($16,804).
DESCRIPTION OF PROPERTY
Our principal office is located at 303-167 Bannatyne
Avenue, Winnipeg, MB, R3B 0R4, Canada. Our telephone number is
(204) 295-8015. We lease our office under a one year verbal, not
written, lease agreement that expires March, 2005. Our monthly
rental payment is $-0-. Currently, no debt has accrued on account
of rent payments owing.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have issued shares to the following officers, directors, promoters, and beneficial owners of more than 5% of our outstanding securities.
Number Consideration Relationship Date of
Name of Shares Given to Company Issuance
Kim Friesen(1) 2,000,000 $200 Director / President 03/18/2004
Chief Executive Officer
Chief Financial Officer
Principal Accounting
Officer
Andrea Meakin(1) 2,000,000 $200 Director / Secretary 03/18/2004
Treasurer
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(1) Kim Friesen and Andrea Meakin are spouses of each other.
The sum of $696 set forth on our Balance Sheet (see page 30) refers to a non-interest bearing demand loan given by Mr. Friesen to the Company. As of the date hereof, there has not been any repayment of this loan. There are not any documents setting forth the terms of the loan and the loan is not due on any specific date.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Currently, our securities are not traded publicly. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of shares may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resales. Furthermore, the shares are not marginable and it is not likely that a lending institution would accept our common stock as collateral for a loan.
Pursuant to this registration statement, we propose to publicly
offer up to a total of 2,000,000 shares of common stock on a best
efforts, no minimum, 2,000,000 shares maximum, basis. To date, none
of our outstanding shares of common stock are subject to outstanding
options, warrants to purchase, or securities convertible into common
stock. We have not agreed to register shares of common stock held by
existing security holders for resale. We currently have 2 shareholders.
These shareholders are Messrs. Friesen and Meakin. All of the shares
issued to Messrs. Friesen and Meakin, being a total of 4,000,000 common
shares, are restricted securities as defined by Rule 144 of the
Securities Act. This means that the common stock is eligible for sale
subject to volume limitations, timing and manner of sale restrictions,
and filing of notice requirements. In general, under Rule 144 as
currently in effect, a person who has beneficially owned shares of a companys
common stock for at least one year is entitled to sell within any
three month period a number of shares that does not exceed the greater
of: (a) one per cent of the number of shares of the companys common stock
then outstanding which, in our case, will equal 40,000 shares as of the date
of this prospectus, being May 21, 2004, (however, the shares held by Messrs.
Friesen and Meakin were issued on March 18, 2004, thus any sales could not
take place until after March 18, 2005); or (b) the average weekly trading
volume of the company's common stock during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale. Under Rule
144(k), a person who is not one of the company's affiliates at any time
during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled
to sell shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
EXECUTIVE COMPENSATION
To date we have no employees other than our officers. Neither our officers nor directors have been paid any compensation. We currently have no formal employment agreements or other contractual arrangements with our officers, directors, nor anyone else regarding the commitment of time or the payment of salaries or other compensation. None of the proceeds raised from this offering will be used to pay a salary to our officers or directors.
FINANCIAL STATEMENTS
{THIS SPACE INTENTIONALLY LEFT BLANK}
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Cygni Systems Corporation
Winnipeg, Canada
We have audited the accompanying balance sheet of Cygni Systems Corporation as of April 30, 2004 and the related statements of operations, stockholders equity and cash flows for period from inception (March 18, 2004) through April 30, 2004. These financial statements are the responsibility of Cygni management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cygni Systems Corporation as of April 30, 2004 and the results of its operations and cash flows for the initial period then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Cygni will continue as a going concern. As discussed in Note 3 to the financial statements, Cygni has no operations and has a working capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MALONE & BAILEY, PLLC
www.malone-bailey.com
Houston, Texas
May 20, 2004
CYGNI SYSTEMS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
April 30, 2004
ASSETS
Cash $400 CURRENT LIABILITIES Loans payable-related party $696 |
STOCKHOLDERS' DEFICIT
Common stock, 100,000,000 shares authorized at $0.001 par value; 4,000,000 shares issued and outstanding 400 Deficit accumulated during development stage (696) Total Stockholders' Deficit (296) Total Liabilities and Stockholders' Deficit $400 |
See accompanying significant accounting policies and notes to financial statements.
CYGNI SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period March 18, 2004, (date of inception) to April 30, 2004
General and administrative expenses $ 696 NET LOSS $(696) NET LOSS PER COMMON SHARE Basic and diluted $(.00) AVERAGE OUTSTANDING SHARES Basic and diluted 4,000,000 |
See accompanying significant accounting policies and notes to financial statements.
CYGNI SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period March 18, 2004, (date of inception) to April 30, 2004
Common Stock Accumulated
Shares Amount Deficit Totals
Issuance of Common Stock
to founders for cash at
$.001 on March 18, 2004 4,000,000 400 $ 400
Net loss - - (696) (696)
Balance April 30, 2004 4,000,000 $400 $(696) $(296)
|
See accompanying significant accounting policies and notes to financial statements.
CYGNI SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period March 18, 2004, (date of inception) to April 30, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(696)
CASH FLOWS FROM INVESTING
ACTIVITIES -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 400
Proceeds from loans payable-related party 696
Net Cash Flows from Financing Activities 1,096
Increase in Cash and Cash as of April 30, 2004 $ 400
|
See accompanying significant accounting policies and notes to financial statements.
CYGNI SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Cygni Systems Corporation was incorporated in Nevada on March 18, 2004. Cygni was organized for the purpose of undertaking design, development, and sales of online and network security software as well as provision of online and network security consulting services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the
weighted average number of shares actually outstanding. Diluted net income
(loss) per share amounts are computed using the weighted average number of
common shares and common equivalent shares outstanding as if shares had
been issued on the exercise of any common share rights unless the exercise
becomes antidilutive and then only the basic per share amounts are shown
in the report.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Statement of Cash Flows
For the purposes of the statement of cash flows, Cygni considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Income Taxes
Cygni utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such benefits will not be realized.
On April 30, 2004, the Company had net operating losses available for carry forward of $696. The tax benefit of $237 from the carry forwards have been fully offset by a valuation reserve because the use of the future tax benefit is undeterminable since the Company has no operations. The loss carryover will expire in 2024.
Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
3. GOING CONCERN
Cygni does not have the working capital necessary to be successfully operate its business and to service its debt. This raises substantial doubt about is ability to continue as a going concern. Continuation of Cygni as a going concern is dependent upon obtaining additional working capital. The management of Cygni has developed a strategy which it believes will accomplish this objective through additional loans from officers and equity funding that will enable Cygni to operate for the coming year.
4. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers-directors have acquired all of the outstanding capital stock and have made demand loans to Cygni of $696.
5. MANAGEMENT DISCLOSURE
The accompanying balance sheet of Cygni Systems Corporation, (development stage company) at April 30, 2004, and the related statements of operations for the two months ended April 30, 2004, have been prepared by the Companys management in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal and recurring nature.
Operating results for the period ended April 30, 2004, are not necessarily indicative of the results that can be expected for the year ending March 31, 2005.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
NOTE: Until 90 days from the effective date, or such shorter period as the Securities & Exchange Commission may specify, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to the dealers' obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, bylaws, contracts or other arrangements under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against any liability which they may incur in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides that each corporation shall have the following powers:
1. A corporation may 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, except an action by or in the right of the corporation, by reason of the fact that he 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 him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his 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, does not, of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may 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 he 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 amounts paid in settlement and attorneys fees actually and reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction, determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys fees, actually and reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel,
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
5. The certificate or articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders of disinterested directors or otherwise, for either an action in his official capacity or an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts
or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.
7. The registrants Articles of Incorporation limit liability of its Officers and Directors to the full extent permitted by the Nevada Business Corporation Act.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses we will pay in connection with the offering described in this registration statement:
Amount SEC Registration fee (1) $ 25.34 Blue Sky fees and expenses $ 2,500.00 Printing and shipping expenses $ 1,500.00 Accounting fees and expenses $ 4,000.00 Legal Fees (1) $ 15,000.00 Transfer and Miscellaneous expenses $ 974.66 Total: $ 24,000.00 |
(1) All expenses, except SEC registration fee and legal fees, are estimated.
RECENT SALES OF UNREGISTERED SECURITIES
On March 18, 2004, 2,000,000 restricted common shares were issued to our President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, and Director, Kim Friesen, in exchange for consideration of $200. The shares were issued without registration under the Securities Act of 1933 in reliance on an exemption from registration provided by Section 4(2) of the Securities Act. No general solicitation was made in connection with the offer or sale of these securities.
On March 18, 2004, 2,000,000 restricted common shares were issued to our Secretary, Treasurer, and Director, Andrea Meakin in exchange for consideration of $200. The shares were issued without registration under the Securities Act of 1933 in reliance on an exemption from registration provided by Section 4(2) of the Securities Act. No general solicitation was made in connection with the offer or sale of these securities.
EXHIBIT INDEX
SEC
Reference Exhibit no. Document Location
3 3.01 Articles of Incorporation Attached
3 3.02 By-Laws Attached
5 5.01 Opinion on Legality Attached
23 23.01 Consent of Auditor Attached
23 23.02 Consent of Counsel Attached to
Exhibit 5.01
99 99.01 Specimen Subscription
Agreement Attached
|
UNDERTAKINGS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registration hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to its Articles of Incorporation or provisions of the Nevada Business Corporations Act, or otherwise, we have 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 registrant 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, we will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question, whether or not such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
We hereby undertake to:
(1) File, during any period in which we offer or sell securities, a post-effective amendment to this registration statement to:
(a) Include any prospectus required by section 10(a)(3) of the Securities Act;
(b) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(c) Include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act treat each post-effective amendment as a new registration statement of the securities offered and the offering of the securities at that time to be the initial bona fide offering.
(3) File a post effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 Registration Statement to be signed on its behalf by the undersigned on May 26, 2004.
Cygni Systems Corporation
By: /s/ Kim Friesen
Kim Friesen
President, Chief Executive Officer,
Chief Financial Officer, Principal
Accounting Officer, and a member
of the Board of Directors
By: /s/ Andrea Meakin
Andrea Meakin
Secretary, Treasurer, and a
member of the Board of Directors
|
END OF DOCUMENT
DEAN HELLER
Secretary of State
206 North Carson Street
Carson City, Nevada 89701-4299
(775) 684 5708
Website: secretaryofstate.biz
Articles of Incorporation
(Pursuant to NRS 78)
Filed # C6912-04
March 18, 2004
STATE OF NEVADA
(Above space is for office use only)
1. Name of Corporation: Cygni Systems Corporation
2. Resident Agent Name and Street Address:(must be a Nevada
address where process may be served)
Corporate Creations Network Inc.
8275 South Eastern Avenue, #200-47
Las Vegas NV 89123
3. Shares: (number of shares corporation authorized to issue) Number of shares with par value 100,000,000 Par value: $.001 Number of shares without par value: 0
4. Name & Address of Board of Directors/Trustees: (attach additional page there is more than 3 directors/trustees)
1. Kim Friesen, 2200-1420 Fifth Avenue, Seattle, WA, 98101 2. Andrea Meakin, 2200-1420 Fifth Avenue, Seattle, WA, 98101
5. Purpose: Thc purpose of this corporation shall be:
All lawful business purposes.
6. Names, Address and Signature of Incorporator (attach additional page there is more than 1 incorporator) Elena S. Davila of Corporate Creations International Inc., 941 Fourth Street #200 Miami Beach FL 33139
/s/ Elena S. Davila 7. Certificate of Acceptance of Appointment of Resident Agent: I hereby accept appointment as Resident Agent for the above named corporation. /s/ Elena S. Davila Authorized Signature of R.A. or On Behalf of R.A. Company 3/16/2004 Date |
BYLAWS
OF
CYGNI SYSTEMS CORPORATION
TABLE OF CONTENTS
ARTICLE I: OFFICE .......................................... 1
Section 1: Office ............................. 1
ARTICLE II: DIRECTORS ...................................... 1
Section 1. Function ................................ 1
Section 2. Compensation ............................ 1
Section 3. Presumption of Assent ................... 1
Section 4. Number .................................. 1
Section 5. Election and Term ....................... 1
Section 6. Vacancies ................................ 1
Section 7. Removal of Directors..................... 2
Section 8. Resignation ............................. 2
Section 9. Quorum and Voting ....................... 2
Section 10. Chairman ................................ 2
Section 11. Executive and Other Committees ......... 2
Section 12. Place of Meeting ........................ 2
Section 13. Time, Notice and Call of Meetings ....... 2
Section 14. Action By Written Consent ............... 3
ARTICLE III: MEETINGS OF SHAREHOLDERS ....................... 3
Section 1. Annual Meeting ........................... 3
Section 2. Special Meeting .......................... 3
Section 3. Place .................................... 3
Section 4. Notice ................................... 3
Section 5. Shareholder Quorum ....................... 4
Section 6. Shareholder Voting ....................... 4
Section 7. Proxies .................................. 4
Section 8. Validation ............................... 4
Section 9. Conduct of Business By Written Consent ... 4
ARTICLE IV: OFFICERS ......................................... 4
Section 1. Officers; Election; Resignation; Vacancies . 4
Section 2. Powers and Duties of Officers .............. 5
Section 3. Removal of Officers ....................... 5
Section 4. Salaries ................................... 5
Section 5. Bank Accounts and Loans .................... 5
Section 6. Agreements ................................. 5
ARTICLE V: DISTRIBUTIONS ...................................... 5
ARTICLE VI: CORPORATE RECORDS ................................. 6
Section 1. Corporate Records .......................... 6
Section 2. Shareholders' Inspection Rights ............ 6
Section 3. Financial Statements for Shareholders ...... 7
Section 4. Other Reports to Shareholders .............. 7
ARTICLE VII: STOCK CERTIFICATES ................................7
Section 1. Issuance ................................... 7
Section 2. Registered Shareholders .................... 8
Section 3. Transfer of Shares ......................... 8
Section 4. Transfer Agent and Registrar ............... 8
Section 5. Lost, Stolen or Destroyed Certificates ..... 8
ARTICLE VIII: INDEMNIFICATION ................................. 8
Section 1. Right to Indemnification ................... 8
Section 2. Advances ................................... 9
Section 3. Savings Clause ............................. 9
ARTICLE IX: AMENDMENT ......................................... 9
ARTICLE X: DIVIDENDS .......................................... 9
ARTICLE XI: FISCAL YEAR ....................................... 9
ARTICLE XII: CORPORATE SEAL ................................... 9
-3-
BYLAWS
OF
CYGNI SYSTEMS CORPORATION
|
ARTICLE I. OFFICE
Section 1. Office. The principal office of the Corporation outside the State of Nevada shall be located at 303-167 Bannatyne Avenue, Winnipeg, Manitoba, R3B 0R4, Canada. The Corporation may maintain other offices, either within or outside of the State of Nevada, as the Board of Directors may from time to time determine.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or
under the authority of the Board of Directors. The business and affairs of
the Corporation shall be managed under the direction of the Board of Directors.
Directors must be natural persons who are at least 18 years of age but need
not be shareholders of the Corporation nor residents of the State of Nevada.
Section 2. Compensation. The shareholders shall have authority to fix the compensation of directors. Unless specifically authorized by a resolution of the shareholders, the directors shall serve in such capacity without compensation.
Section 3. Presumption of Assent. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he objects at the beginning of the meeting (or promptly upon arriving) to the holding of the meeting or transacting the specified business at the meeting, or if the director votes against the action taken or abstains from voting because of an asserted conflict of interest.
Section 4. Number. The Corporation shall have at least two
(2) and not more than seven (7) directors. The number of directors
may be increased or decreased from time to time by the Board of Directors.
Section 5. Election and Term. At each annual meeting of shareholders, the shareholders shall elect directors to hold office until the next annual meeting or until their earlier resignation, removal from office or death. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, may be filled by the shareholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders. If there are no remaining directors, the vacancy shall be filled by the shareholders.
Section 7. Removal of Directors. At a meeting of shareholders, any director or the entire Board of Directors may be removed, with or without cause, provided the notice of the meeting states that one of the purposes of the meeting is the removal of the director. A director may be removed only if the number of votes cast to remove him exceeds the number of votes cast against removal.
Section 8. Resignation. A director may resign at any time by delivering written notification thereof to the President or Secretary of the Corporation. The resignation shall be effective upon its acceptance by the Board of Directors provided that if the Board of Directors has not acted on the resignation within 10 days from the date of its delivery, then the resignation shall be deemed to be effective upon the 10th day following delivery.
Section 9. Quorum and Voting. A majority of the number of directors fixed by these Bylaws shall constitute a quorum for the transaction of business. The act of a majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Section 10. Chairman. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members a Chairman who shall preside at all meetings of the Board of Directors.
Section 11. Executive and Other Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members one or more committees each of which must have at least two members. Each committee shall have the authority set forth in the resolution designating the committee.
Section 12. Place of Meeting. Regular and special meetings of the Board of Directors shall be held at the principal place of business of the Corporation or at another place designated by the person or persons giving notice or otherwise calling the meeting.
Section 13. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held without notice at the time and on the date designated by resolution of the Board of Directors. Written notice of the time, date and place of special meetings of the Board of Directors shall be given to each director by mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to a director who signs a
waiver of notice either before or after the meeting. Attendance of a director at a meeting constitutes a waiver of notice of that meeting and waiver of all objections to the place of the meeting, the time of the meeting, and the manner in which it has been called or convened, unless a director objects to the transaction of business (promptly upon arrival at the meeting) because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors must be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of an adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors. Meetings of the Board of Directors may be called by the President or the Chairman of the Board of Directors. Members of the Board of Directors and any committee of the Board may participate in a meeting by telephone conference or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation by these means constitutes presence in person at a meeting.
Section 14. Action By Written Consent. Any action required or permitted to be taken at a meeting of directors may be taken without a meeting if a consent in writing setting forth the action to be taken and signed by all of the directors is filed in the minutes of the proceedings of the Board. The action taken shall be deemed effective when the last director signs the consent, unless the consent specifies otherwise.
ARTICLE III. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the corporation for the election of officers and for such other business as may properly come before the meeting shall be held at such place as set forth in compliance with these bylaws. The meeting shall be held on the 1st day of March of each year beginning with the year 2005 at 10:00 a.m. If this day is a legal holiday, then the meeting shall be held on the next business day.
Section 2. Special Meeting. Special meetings of the shareholders shall be held when directed by the President or when requested in writing by shareholders holding at least 10% of the Corporation's stock having the right and entitled to vote at such meeting. A meeting requested by shareholders shall be called by the President for a date not less than 10 nor more than 60 days after the request is made. Only business within the purposes described in the meeting notice may be conducted at a special shareholders' meeting.
Section 3. Place. Meetings of the shareholders will be held at the principal place of business of the Corporation or at such other place as is designated by the Board of Directors.
Section 4. Notice. A written notice of each meeting of shareholders shall be mailed to each shareholder having the right and entitled to vote at the meeting at the address as it appears on the records of the Corporation. The meeting notice shall be mailed not less than 10 nor more than 60 days before the date set for the meeting. The record date for determining shareholders entitled to vote at the meeting will be the close of business on the day before the notice is sent. The notice shall state the time and place the meeting is to be held. A notice of a special meeting shall also state the purposes of the meeting. A notice of meeting shall be sufficient for that meeting and any adjournment of it. If a shareholder transfers any shares after the notice is sent, it shall not be necessary to notify the transferee. All shareholders may waive notice of a meeting at any time.
Section 5. Shareholder Quorum. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Any number of shareholders, even if less than a quorum, may adjourn the meeting without further notice until a quorum is obtained.
Section 6. Shareholder Voting. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. An alphabetical list of all shareholders who are entitled to notice of a shareholders' meeting along with their addresses and the number of shares held by each shall be produced at a shareholders' meeting upon the request of any shareholder.
Section 7. Proxies. A shareholder entitled to vote at any meeting of shareholders or any adjournment thereof may vote in person or by proxy executed in writing and signed by the shareholder or his attorney-in-fact. The appointment of proxy will be effective when received by the Corporation's officer or agent authorized to tabulate votes. No proxy shall be valid more than 11 months after the date of its execution unless a longer term is expressly stated in the proxy.
Section 8. Validation. If shareholders who hold a majority of the voting stock entitled to vote at a meeting are present at the meeting, and sign a written consent to the meeting on the record, the acts of the meeting shall be valid, even if the meeting was not legally called and noticed.
Section 9. Conduct of Business By Written Consent. Any action of the shareholders may be taken without a meeting if written consents, setting forth the action taken, are signed by at least a majority of shares entitled to vote and are delivered to the officer or agent of the Corporation having custody of the Corporation's records within 60 days after the date that the earliest written consent was delivered. Within 10 days after obtaining an authorization of an action by written consent, notice shall be given to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action. If the action creates dissenters' rights, the notice shall
contain a clear statement of the right of dissenting shareholders to be paid the fair value oftheir shares upon compliance with and as provided for by the state law governing corporations.
ARTICLE IV. OFFICERS
Section 1. Officers; Election; Resignation; Vacancies. The Corporation shall have the officers and assistant officers that the Board of Directors appoint from time to time provided that the Corporation shall have a President and a Secretary at all times and that two or more offices may be held by the same person, including the offices of President and Secretary. Officers may also be directors and/or shareholders of the Corporation. Except as otherwise provided in an employment agreement which the Corporation has with an officer, each officer shall serve until a successor is chosen by the directors at a regular or special meeting of the directors or until removed. Officers and agents shall be chosen, serve for the terms, and have the duties determined by the directors. Any officer may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt, unless the notice specifies a later date. If the resignation is effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date provided the successor officer does not take office until the future effective date. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.
Section 2. Powers and Duties of Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors.
Section 3. Removal of Officers. An officer or agent or member of a committee elected or appointed by the Board of Directors may be removed by the Board with or without cause whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer, agent or member of a committee shall not of itself create contract rights. Any officer, if appointed by another officer, may be removed by that officer.
Section 4. Salaries. The Board of Directors may cause the Corporation to enter into employment agreements with any officer of the Corporation. Unless provided for in an employment agreement between the Corporation and an officer, all officers of the Corporation serve in their capacities without compensation. No officer shall be prevented from receiving any salary or compensation by reason of the fact that he is also a director of the Corporation.
Section 5. Bank Accounts and Loans. The Corporation shall have accounts with financial institutions as determined by the Board of Directors and the Board of Directors, in their discretion, may delegate authority to one or more officers to transact business on any such bank
account. Any loan, advance, mortgage, pledge, hypothecation, or otherwise must be specifically authorized by the Board of Directors.
Section 6. Agreements. The Board of Directors may authorize one or more officers to enter into any agreement or execute or deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or limited to specific circumstances.
ARTICLE V. DISTRIBUTIONS
The Board of Directors may, from time to time, declare distributions to its shareholders in cash, property, or its own shares, unless the distribution would cause (i) the Corporation to be unable to pay its debts as they become due in the usual course of business, or (ii) the Corporation's assets to be less than its liabilities plus the amount necessary, if the Corporation were dissolved at the time of the distribution, to satisfy the preferential rights of shareholders whose rights are superior to those receiving the distribution. The shareholders and the Corporation may enter into an agreement requiring the distribution of corporate profits, subject to the provisions of law.
ARTICLE VI. CORPORATE RECORDS
Section 1. Corporate Records. The corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time. The Corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors on behalf of the Corporation. The Corporation shall maintain accurate accounting records and a record of its shareholders in a form that permits preparation of a list of the names and addresses of all shareholders in alphabetical order by class of shares showing the number and series of shares held by each.
The Corporation shall keep a copy of its articles or restated articles of incorporation and all amendments to them currently in effect; these Bylaws or restated Bylaws and all amendments currently in effect; resolutions adopted by the Board of Directors creating one or more classes or series of shares and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding; the minutes of all shareholders' meetings and records of all actions taken by shareholders without a meeting for the past three years; written communications to all shareholders generally or all shareholders of a class of series within the past three years, including the financial statements furnished for the last three years; a list of names and business street addresses of its current directors and officers; and its most recent annual report delivered to the Department of State.
Section 2. Shareholders' Inspection Rights. A shareholder is entitled to inspect and
copy, during regular business hours at a reasonable location specified by the Corporation, any books and records of the Corporation. The shareholder must give the Corporation written notice of this demand at least five business days before the date on which he wishes to inspect and copy the record(s). The demand must be made in good faith and for a proper purpose. The shareholder must describe with reasonable particularity the purpose and the records he desires to inspect, and the records must be directly connected with this purpose. This Section does not affect the right of a shareholder to inspect and copy the shareholders' list described in this Article if the shareholder is in litigation with the Corporation. In such a case, the shareholder shall have the same rights as any other litigant to compel the production of corporate records for examination.
The Corporation may deny any demand for inspection if the demand was made for an improper purpose, or if the demanding shareholder has within the two years preceding his demand, sold or offered for sale any list of shareholders of the Corporation or of any other corporation, had aided or abetted any person in procuring any list of shareholders for that purpose, or has improperly used any information secured through any prior examination of the records of this Corporation or any other corporation.
Section 3. Financial Statements for Shareholders. Unless modified by resolution of the shareholders within 120 days after the close of each fiscal year, the Corporation shall furnish its shareholders with annual financial statements which may be consolidated or combined statements of the Corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flows for that year. If financial statements are prepared for the Corporation on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public accountant, his report must accompany them. If not, the statements must be accompanied by a statement of the President or the person responsible for the Corporation's accounting records stating his reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation and describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year. The Corporation shall mail the annual financial statements to each shareholder within 120 days after the close of each fiscal year or within such additional time thereafter as is reasonably necessary to enable the Corporation to prepare its financial statements. Thereafter, on written request from a shareholder who was not mailed the statements, the Corporation shall mail him the latest annual financial statements.
Section 4. Other Reports to Shareholders. If the Corporation indemnifies or advances expenses to any director, officer, employee or agent otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the Corporation,
the Corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next annual shareholders' meeting, or prior to the meeting if the indemnification or advance occurs after the giving of the notice but prior to the time the annual meeting is held. This report shall include a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation.
If the Corporation issues or authorizes the issuance of shares for promises to render services in the future, the Corporation shall report in writing to the shareholders the number of shares authorized or issued, and the consideration received by the corporation, with or before the notice of the next shareholders meeting.
ARTICLE VII. STOCK CERTIFICATES
Section 1. Issuance. The shares of the Corporation shall be represented by certificates prepared by the Board of Directors. Each certificate issued shall be signed by the President and the Secretary (or the Treasurer) and sealed withthe seal of the Corporation or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or one of its employees. All certificates shall be consecutively numbered or otherwise identified.
Section 2. Registered Shareholders. No certificate shall be issued for any share until the share is fully paid. The capital stock of the Corporation shall be issued for such consideration, but not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. In the absence of fraud, the determination by the Board of Directors as to the value of any property or services received in full or partial payment of shares shall be conclusive. The Corporation shall be entitled to treat the holder of record of shares as the holder in fact and, except as otherwise provided by law, shall not be bound to recognize any equitable or other claim to or interest in the shares. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation.
Section 3. Transfer of Shares. Shares of the Corporation shall be transferred on its books only after the surrender to the Corporation of the share certificates duly endorsed by the holder of record or attorney-in-fact. If the surrendered certificates are cancelled, new certificates shall be issued to the person entitled to them, and the transaction recorded on the books of the Corporation.
Section 4. Transfer Agent and Registrar. The Board of Directors shall have the power to appoint one or more transfer agents and registrars for the transfer and registration of certificates of stock of any class and may require that stock certificates be countersigned and registered by one or more such transfer agents and registrars.
Section 5. Lost, Stolen or Destroyed Certificates. If a shareholder claims to have lost or destroyed a certificate of shares issued by the Corporation, a new certificate shall be issued upon the delivery to the Corporation of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and, at the discretion of the Board of Directors, upon the deposit of a bond or other indemnity as the Board reasonably requires.
ARTICLE VIII. INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation hereby indemnifies each person (including the heirs, executors, administrators, or estate of such person) who is or was a director or officer of the Corporation to the fullest extent permitted or authorized by current or future legislation or judicial or administrative decision against all fines, liabilities, costs and expenses, including attorneys' fees, arising out of his or her status as a director, officer, agent, employee or representative. The foregoing right of indemnification shall not be exclusive of other rights to which those seeking an indemnification may be entitled. The Corporation may maintain insurance, at its expense, to protect itself and all officers and directors against fines, liabilities, costs and expenses, whether or not the Corporation would have the legal power to indemnify them directly against such liability.
Section 2. Advances. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Section 1 of this Article in defending a civil or criminal proceeding shall be paid by the Corporation in advance of the final disposition thereof upon receipt of an undertaking to repay all amounts advanced if it is ultimately determined that the person is not entitled to be indemnified by the Corporation as authorized by this Article, and upon satisfaction of other conditions required by current or future legislation.
Section 3. Savings Clause. If this Article or any portion of it is invalidated on any ground by a court of competent jurisdiction, the Corporation nevertheless indemnifies each person described in Section 1 of this Article to the fullest extent permitted by all portions of this Article that have not been invalidated and to the fullest extent permitted by law.
ARTICLE IX. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws adopted, by a majority vote of the directors or by a vote of the shareholders holding a majority of the shares.
ARTICLE X. DIVIDENDS
In their discretion, the Board of Directors may at any regular or special meeting declare dividends payable out of the unreserved and unrestricted earned surplus of the Corporation and any such dividend shall be disbursed in accordance with Nevada Revised Statutes Section 78.288
through 78.300.
ARTICLE XI. FISCAL YEAR
The fiscal year of the Corporation shall be March 31 and may be varied by resolution of the Board of Directors.
ARTICLE XII. CORPORATE SEAL
The corporate seal may be used by causing it or a facsimile thereof to be impressed , affixed, reproduced, or otherwise.
I certify that these are the Bylaws adopted by the Board of Directors of the Corporation on this 18th day of March, 2004.
/s/Andrea Meakin Andrea Meakin Secretary |
Kenneth H. Finkelstein
Attorney At Law
1420 5th Avenue
Suite 2200
Seattle, WA
98101
Tel: (206) 310-1344 Fax: (206) 374-8176 khfinkelstein@yahoo.com
May 26, 2004
Board of Directors
Cygni Systems Corporation
303-167 Bannatyne Avenue
Winnipeg, Manitoba
R3B 0R4 Canada
Re: Opinion and Consent of Counsel with respect to Registration Statement on Form SB-2 on behalf of Cygni Systems Corporation (the "Company")
Sirs:
You have requested the opinion and consent of this law firm, as counsel, with respect to the proposed issuance and public distribution of certain securities of the Company pursuant to the filing of a registration statement on Form SB-2 with the United States Securities and Exchange Commission.
The proposed offering and public distribution relates to a best efforts, no minimum, 2,000,000 maximum offering of shares to be sold to the public at a price of $0.10 per share. Each offered share has a par value of $0.001. It is our opinion that the shares sold, when issued in accordance with the terms and conditions set forth in the registration statement, are duly authorized, validly issued, fully paid and non-assessable shares of common stock of the Company in accordance with the corporate laws of the State of Nevada.
We hereby consent to be named by the Company in the registration statement and prospectus included therein. We also consent to the Company filing this legal opinion as an exhibit to the registration statement.
Yours truly,
Kenneth H. Finkelstein
Attorney At Law
KHF/ab
SUBSCRIPTION AGREEMENT
CYGNI SYSTEMS CORPORATION
(A Nevada Corporation)
303 - 167 Bannatyne Avenue, Winnipeg, MB, R3B 0R4, Canada
The prospective purchaser who is signing below hereby tenders this Purchase Offer and applies for the purchase of the number of shares of common stock, $.001 par value, set forth below, in Cygni Systems Corporation, (hereafter "Corporation") at a price of $0.10 per share and encloses a check, bank draft, or wire transfer of funds, payable to "Cygni Systems Corporation" in the amount set forth below for the stated number of shares. The prospective purchaser understands that these funds will be held by the Corporation for a period of up to 90 days (or an additional 90 days, if so extended by the Corporation, for a total of 180 days), from the date of the Prospectus. The prospective purchaser further understands that these funds may not be returned to the prospective purchaser. The prospective purchaser hereby acknowledges receipt of a copy of the Prospectus. The prospective purchaser further hereby represents and warrants as follows:
1. The prospective purchaser, if a person, is at least 21 years of age and, whether or not a person, has adequate means of providing for his current needs and personal or other contingencies and has no need for liquidity in his investments.
2. The prospective purchaser understands that this purchase offer does not become a purchase agreement unless payment submitted with the purchase offer is promptly paid by the bank upon which it is drawn and until the offer is accepted by a duly authorized officer or agent of the Corporation. The Corporation may accept or reject any or all of the offer.
3. The prospective purchaser hereby acknowledges and agrees that he/she is not entitled to cancel, terminate, or revoke this purchase offer or any agreements of the prospective purchaser hereunder and that the purchase agreements shall survive death, disability, or transfer of control of the prospective purchaser.
MAKE CHECK PAYABLE TO: CYGNI SYSTEMS CORPORATION
Executed this day of ,2004, at .
Dollar Amount of Purchase Offer: $ Number of Shares of Purchase Offer:
Address Signature of Purchaser
Address Print SURNAME of Purchaser
City / State Print FIRST name and initials of
Purchaser
Country / Zip Code Taxpayer Identification or
Social Security Number
|
Accepted By: CYGNI SYSTEMS CORPORATION
By:
Title:
Date:
To the Board of Directors
Cygni Systems Corporation
Winnipeg, Canada
We hereby consent to your incorporation in this Form SB-2 Registration Statement of our report dated May 20, 2004 for the period from inception (March 18, 2004) through April 30, 2004, and to our being named as an expert.
Malone & Bailey, PLLC
www.malone-bailey.com
Houston, Texas
May 27, 2004