ZLND in trouble with SEC- from the S-1 filed 03/29/00
THE SECURITIES AND EXCHANGE COMMISSION IS INVESTIGATING THE PROPRIETY OF THE ORGANIZATION AND SOLICITATION OF INTERESTS IN GENERAL PARTNERSHIPS TO WHICH WE SOLD FRANCHISES, WHICH INVESTIGATION COULD HARM OUR REPUTATION OR RESULT IN DAMAGES OR OTHER SANCTIONS BEING ASSESSED AGAINST US.
Between October 1998 and March 2000, we sold franchises to ten general partnerships organized by VentureLink Capital Corporation, a company that is not affiliated with us. We currently provide, for a fee and at the election of each
partnership, the services of a general manager. We understand that these VentureLink general partnerships raised approximately $21 million from the sale of general partnership interests.
In March 1999, we received subpoenas from the Securities and Exchange Commission, or SEC, seeking testimony from John Veenstra, our Chairman and Chief
Executive Officer, and a Vice President of Corporate Development, and production of documents relating to, among other things, our franchise program and our relationship with VentureLink. After our initial response to the subpoenas, we were advised that no further action was required at that time. In February 2000, we received a new document subpoena to which we have responded. It is our
understanding that the SEC is conducting a fact-finding
investigation into, among other things, the circumstances surrounding the organization of the general partnerships, their structure, operations and membership, the solicitation of investments in the general partnerships and the subsequent conversion of these partnerships to limited liability companies and the relationship between VentureLink and ourselves. The ongoing investigation has also included inquiry into other general partnerships to which we have sold franchises, any stock ownership in our company by VentureLink principals or affiliates, as well as inquiry into the nature of our operations in general. We have been advised that the investigation is broad in scope, and continuing. We are cooperating with the investigation fully. We believe that the investigation pertains to (but may not be limited to) possible violations of the securities
laws arising from the offering and sales of the general partnership interests.
We entered into a contract with VentureLink in October 1998, which was renewed in October 1999 for one year, pursuant to which we agreed to sell franchises to partnerships to be formed by VentureLink. In January 2000 we
negotiated a termination and release of our contract with VentureLink, effective March 31, 2000.
We cannot predict the outcome of the SEC investigation, the scope of the investigation, its conclusions or when it might be completed. If the SEC asserts and successfully prosecutes a claim against us or any of our personnel for our involvement with VentureLink or for any other aspect of our operations, we could be liable for substantial damages and penalties and could be subjected to injunctive remedies as well. In addition, any purchasers of these general
partnership interests could make claims against us for alleged violations of the securities laws, and investors may seek judicial remedy. Finally, if we or any of our personnel are named as defendants in any such action or are publicly
identified by the SEC as being associated with other persons who are charged with violating the securities laws, our reputation would likely be harmed and the defense of such actions would divert our management's attention from the
operation of our business. |
