FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended: September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from_________________to
Commission file number 0-13215
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JNS MARKETING, INC.
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(Name of small business issuer in its charter)
Colorado 84-0940146
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
C/O Schlueter & Associates, P.C.
1050 17th Street, Suite 1700
Denver, Colorado 80265
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(Address of principal executive offices)
Issuer's telephone number: (303) 292-3883
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Securities registered under Section 12(b) of the Exchange Act: None
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Securities registered under Section 12(g) of the Exchange Act:Common Stock,
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no par value
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes No X
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $0
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As of September 30, 1998, 22,436 shares of the Company's Common Stock, no par
value per share, were held by non-affiliates. There is no trading market for the
Company's Common Stock.
The number of shares of Common Stock of the registrant outstanding as of
September 30, 1998, were 251,822. Documents incorporated by reference None
TABLE OF CONTENTS
PART I PAGE
1
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
SIGNATURES
PART I
Item 1 - Description of Business
Background
JNS Marketing, Inc. (the "Company") was incorporated on July 15, 1983
under the laws of the State of Colorado. The Company engaged from inception
through the fiscal year ended September 30, 1988 in the business of searching
for and obtaining, on a buy out basis or a right-to-market basis, products which
were to be sold to the general public primarily through the television media.
Since 1989, the Company has not engaged in any business nor had any revenues.
The Company's sole business from 1989 to the present has been to seek to acquire
assets of or an interest in a company or venture actively engaged in a business
generating revenues or having immediate prospects of generating revenues.
In May 1994, the Company entered into a Plan and Agreement of
Reorganization with Cedar Pacific Golf Properties ("CPGP"), a Nevada
corporation, pursuant to which the Company issued an aggregate of 229,386 (after
giving effect to the 100 to 1 reverse split effective March 9, 1999) shares of
its Common Stock in exchange for 100% of the issued and outstanding shares of
common stock of CPGP. It was intended that CPGP would exercise an option to
acquire approximately 821 acres of land near Stockton, California, and that the
Company would develop the land into a golf course and planned residential
community. However, certain conditions to which the Plan and Agreement of
Reorganization was subject were not fulfilled, and in 1997 the Company, CPGP and
CPGP's previous stockholders agreed to rescind the transactions contemplated
therein, including the issuance of the 229,386 (after giving effect to the 100
to 1 reverse split effective March 9, 1999) shares of the Company's Common Stock
and the transfer of the CPGP stock to the Company.
In July 1997, the Company entered into a Stock Purchase Agreement with
certain individuals (collectively, the "Purchasers") pursuant to which the
Company issued 229,386 shares (after giving effect to the 100 to 1 reverse split
effective March 9, 1999) of its Common Stock to the Purchasers for a total of
$70,000.
The Company's Articles of Incorporation, as amended, entitle it to
transact any lawful business or businesses for which corporations may be
incorporated pursuant to the Colorado Corporation Code. The Company can be
defined as a "shell" company, who's sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. Any business
combination or transaction will likely result in a significant issuance of
shares and substantial dilution to present stockholders of the Company.
The proposed business activities described herein classify the Company
as a "blank check" company. Many states have enacted statutes, rules and
regulations limiting the sale of securities of "blank check" companies in their
respective jurisdictions. In order to comply with these various limitations,
management does not intend to undertake any efforts to sell any additional
securities of the Company, either debt or equity, or cause a market to develop
in the Company's securities until such time as the Company has successfully
implemented its business plan described herein.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of a
corporation which is registered under the Securities Exchange Act of 1934 (the
oExchange Acto). The Company will not restrict its search to any specific
business, industry or geographical location and the Company may participate in a
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business venture of virtually any kind or nature. This discussion of the
proposed business is purposefully general and is not meant to be restrictive of
the Company's virtually unlimited discretion to search for and enter into
potential business opportunities. Management anticipates that it may be able to
participate in only one potential business venture because the Company has
nominal assets and limited financial resources. See "Financial Statements." This
lack of diversification should be considered a substantial risk to shareholders
of the Company because it will not permit the Company to offset potential losses
from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all shareholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes that the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8-Ks, 10-Qs or 10-KSBs, agreements and related
reports and documents. The Exchange Act specifically requires that any merger or
acquisition candidate comply with all applicable reporting requirements, which
include providing audited financial statements to be included within the
numerous filings relevant to complying with the Exchange Act. Nevertheless, the
officers and directors of the Company have not conducted market research and are
not aware of statistical data which would support the perceived benefits of a
merger or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officers and directors of the Company, none of
whom is a professional business analyst. Management intends to concentrate on
identifying preliminary prospective business opportunities which may be brought
to its attention through present associations of the Company's officers and
directors, or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition or acceptance of products, services or trades;
name identification; and other relevant factors. Officers and directors of the
Company will meet personally with management and key personnel of the business
opportunity as part of their investigation. To the extent possible, the Company
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intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained within a reasonable period of
time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated that
any outside consultants or advisors, other than the Company's legal counsel and
accountants, will be utilized by the Company to effectuate its business purposes
described herein. However, if the Company does retain such an outside consultant
or advisor, any cash fee earned by such party will need to be paid by the
prospective merger/acquisition candidate, as the Company has no cash assets with
which to pay such obligation. There have been no contracts or agreements with
any outside consultants and none are anticipated in the future.
The Company will not restrict its search to any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation or which is in essentially any stage of its
corporate life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded or may
seek other perceived advantages which the Company may offer.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has no
capital with which to pay these anticipated expenses, present management of the
Company will pay these charges with their personal funds, as interest free loans
to the Company. However, the only opportunity which management has to have these
loans repaid will be from a prospective merger or acquisition candidate.
Management has agreed among themselves that the repayment of any loans made on
behalf of the Company will not impede, or be made conditional in any manner, on
consummation of a proposed transaction.
The Articles of Incorporation of the Company provide that the Company
may indemnify officers and/or directors of the Company for liabilities, which
can include liabilities arising under the securities laws. Therefore, assets of
the Company could be used or attached to satisfy any liabilities subject to such
indemnification.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any applicable
state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has successfully consummated a merger or acquisition and the Company is no
longer considered a "shell" company. Until such time as this occurs, the Company
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will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future, if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition, negotiations with target
company management are expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then-shareholders. If required to so do under
relevant law, management of the Company will seek shareholder approval of a
proposed merger or acquisition via a Proxy Statement. However, such approval
would be assured where management supports such a business transaction because
management presently controls sufficient shares of the Company to effectuate a
positive vote on the proposed transaction. Further, a prospective transaction
may be structured so that shareholder approval is not required, and such a
transaction may be effectuated by the Board of Directors without shareholder
approval.
The Company will participate in a business opportunity only after
the negotiation and execution of appropriate written agreements. Although the
terms of such agreements cannot be predicted, generally such agreements will
require some specific representations and warranties by all of the parties
thereto, will specify certain events of default, will detail the terms of
closing and the conditions which must be satisfied by each of the parties prior
to and after such closing, will outline the manner of bearing costs, including
costs associated with the Company's attorneys and accountants, will set forth
remedies on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the Exchange Act.
Included in these requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included in
its annual report on Form 10-KSB (or 10-K, as applicable). If such audited
financial statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the candidate to be acquired in the closing
documents, the closing documents will provide that the proposed transaction will
be voidable, at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse the Company for all costs associated with
the proposed transaction.
Competition
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial resources
and limited management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's competitors.
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Employees
The Company has no full time employees. The Company's president,
treasurer and secretary have agreed to allocate a portion of their time to the
activities of the Company, without compensation. These officers anticipate that
the business plan of the Company can be implemented by their devoting
approximately 20 hours per month to the business affairs of the Company and,
consequently, conflicts of interest may arise with respect to the limited time
commitment by such officers. See Item 9, "Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act."
Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading or selling the securities of such business. However, the Company does
not intend to engage primarily in such activities. Specifically, the Company
intends to conduct its activities so as to avoid being classified as an
oinvestment companyo under the Investment Company Act of 1940 (the oInvestment
Acto), and therefore avoid application of the costly and restrictive
registration and other provisions of the Investment Act and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act provides the definition of an
oinvestment companyo which includes an entity that engages or holds itself out
as being engaged primarily in the business of investing, reinvesting or trading
in securities, or that engages or proposes to engage in the business of
investing, reinvesting, owning, holding or trading oinvestment securitieso
(defined as all securities other than government securities, securities of
majority-owned subsidiaries and certain other securities) the value of which
exceeds 40% of the value of its total assets (excluding government securities,
cash or cash items). The Company intends to implement its business plan in a
manner that will result in the availability of this exception from the
definition of oinvestment company.o Consequently, the Company's participation
in a business or opportunity through the purchase and sale of investment
securities will be limited. In order to avoid classification as an investment
company, the Company will search for, analyze and acquire or participate in a
business opportunity by use of a method that does not involve the acquisition,
ownership or holding of investment securities.
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The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, which regulation has the purported purpose of protecting
purchasers of investment company securities. Since the Company will not register
as an investment company, its shareholders will not be afforded these purported
protections.
The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from application
of the Investment Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a otransiento investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time-consuming and costly, or even prohibitive, given the Company's
limited resources.
Certain Risks
The Company's business is subject to numerous risk factors, including
the following:
No Operating History or Revenue and Minimal Assets. The Company has had
no operating history nor any revenues or earnings from operations. The Company
has no significant assets or financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a profitable business
opportunity. There is no assurance that the Company can identify such a business
opportunity and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance that
the Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well-financed
entities, including venture capital firms, are active in mergers and
acquisitions of companies which may be desirable target candidates for the
Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. Moreover, the Company will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction; No Standards
for Business Combination. The Company has no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with or
acquisition of, a private or public entity. There can be no assurance that the
Company will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance that the Company will be able
to negotiate a business combination on terms favorable to the Company. The
Company has not established a specific length of operating history or a
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specified level of earnings, assets, net worth or other criteria which it will
require a target business opportunity to have achieved, and without which the
Company would not consider a business combination in any form with such business
opportunity. Accordingly, the Company may enter into a business combination with
a business opportunity having no significant operating history, losses, limited
or no potential for earnings, limited assets, negative net worth or other
negative characteristics.
Continued Management Control; Limited Time Availability. While seeking a
business combination, management anticipates devoting up to 20 hours per month
to the business of the Company. None of the Company's officers has entered into
a written employment agreement with the Company and none is expected to do so in
the foreseeable future. The Company has not obtained key man life insurance on
any of its officers or directors. Notwithstanding the combined limited
experience and time commitment of management, loss of the services of any of
these individuals would adversely affect development of the Company's business
and its likelihood of continuing operations. See Item 9, "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act."
Conflicts of Interest - General. Certain of the officers and directors
of the Company are directors and/or principal shareholders of other blank check
companies and, therefore, could face conflicts of interest with respect to
potential acquisitions. In addition, officers and directors of the Company may
in the future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other blank check
companies with which the Company's officers and directors are affiliated both
desire to take advantage of a potential business opportunity, then the Board of
Directors has agreed that said opportunity should be available to each such
company in the order in which such companies registered or became current in the
filing of annual reports under the Exchange Act subsequent to January 1, 1997.
See Item 9, "Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act - Conflicts of Interest."
Reporting Requirements May Delay or Preclude Acquisition. Sections 13
and 15(d) of the Exchange Act require companies subject thereto to provide
certain information about significant acquisitions, including certified
financial statements for the company acquired, covering one, two or three years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target entities to prepare such statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable.
Lack of Market Research or Marketing Organization. The Company has
neither conducted, nor have others made available to it, results of market
research indicating that market demand exists for the transactions contemplated
by the Company. Moreover, the Company does not have, and does not plan to
establish, a marketing organization. Even in the event demand is identified for
a merger or acquisition contemplated by the Company, there is no assurance the
Company will be successful in completing any such business combination.
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Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, the Company's activities
may be limited to those engaged in by the business opportunity or opportunities
which the Company merges with or acquires. The Company's inability to diversify
its activities into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
Regulation. Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940, insofar as the Company will not be
engaged in the business of investing or trading in securities. In the event the
Company engages in business combinations which result in the Company holding
passive investment interests in a number of entities, the Company could be
subject to regulation under the Investment Company Act of 1940. In such event,
the Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The Company has
obtained no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company to material
adverse consequences.
Probable Change in Control and Management. A business combination
involving the issuance of the Company's Common Stock will, in all likelihood,
result in shareholders of a private company obtaining a controlling interest in
the Company. Any such business combination may require management of the Company
to sell or transfer all or a portion of the Company's Common Stock held by them,
or resign as members of the Board of Directors of the Company. The resulting
change in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination.
The Company's primary plan of operation is based upon a business combination
with a private concern which, in all likelihood, would result in the Company
issuing securities to shareholders of any such private company. The issuance of
previously authorized and unissued shares of Common Stock of the Company would
result in a reduction in the percentage of shares owned by present and
prospective shareholders of the Company and may result in a change in control or
management of the Company.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public trading
market for its shares. A business opportunity may attempt to avoid what it deems
to be adverse consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
be incurred in such an offering, loss of voting control to public shareholders
and the inability or unwillingness to comply with various federal and state laws
enacted for the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.
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Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential business
opportunity must provide audited financial statements for review, for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses associated with
preparing audited financial statements.
Item 2 - Description of Property
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The Company has no properties and at this time has no agreements to
acquire any properties. The Company intends to attempt to acquire assets or a
business in exchange for its securities which assets or business is determined
to be desirable for its objectives.
The Company operates from its offices at 1050 17th Street, Suite 1700,
Denver, Colorado 80265, which is the office of Henry F. Schlueter, an officer
and director of the Company. This space is provided to the Company on a rent
free basis and it is anticipated that this arrangement will remain until such
time as the Company successfully consummates a merger or acquisition. Management
believes that this space will meet the Company's needs for the foreseeable
future.
Item 3 - Legal Proceedings
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The Company is not a party to any legal proceedings, nor does management
believe that any such proceedings are contemplated.
Item 4 - Submission of Matters to a Vote of Security Holders
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No matters were submitted by the Company to a vote of the Company's
shareholders through the solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5 - Market for Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------
There is no trading market for the Company's Common Stock at present
and there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities and management does not intend to initiate any such
discussions until such time as the Company has consummated a merger or
acquisition. There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
Market Price
The Company's Common Stock is not quoted at the present time.
Effective August 11, 1993, the Securities and Exchange Commission (the
"Commission") adopted Rule 15g-9, which established the definition of a "penny
stock," for purposes relevant to the Company, as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and (ii) that the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
-9-
In order to be included in NASDAQ's SmallCap Market, a company must
satisfy the requirements described below. A company must meet one or more of the
following three requirements: (i) net tangible assets of $4 million ($2 million
for continued inclusion); (ii) have a market capitalization of $50 million ($35
million for continued inclusion); or (iii) have net income (in the latest fiscal
year or two of the last three fiscal years) of $750,000 ($500,000 for continued
inclusion). In addition, a company must also satisfy the following requirements:
(i) 1 million shares in the public float (500,000 for continued inclusion); (ii)
$5 million of market value of the public float ($1 million for continued
inclusion); (iii) a minimum bid price of $4 ($1 for continued inclusion); (iv)
three market makers (two for continued inclusion); (v) 300 (round lot)
shareholders; (vi) an operating history of one year or market capitalization of
$50 million; and (vii) certain corporate governance standards.
Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate which will allow the Company's securities
to be traded without the aforesaid limitations. However, there can be no
assurance that, upon a successful merger or acquisition, the Company will
qualify its securities for listing on NASDAQ or some other national exchange, or
be able to maintain the maintenance criteria necessary to insure continued
listing. The failure of the Company to qualify its securities or to meet the
relevant maintenance criteria after such qualification in the future may result
in the discontinuance of the inclusion of the Company's securities on a
national exchange. In such event, trading, if any, in the Company's securities
may then continue in the non-NASDAQ over-the-counter market. As a result, a
shareholder may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.
Holders
There are approximately 134 record holders of the Company's Common
Stock. An aggregate of 248,040 shares of the issued and outstanding shares of
the Company's Common Stock are "restricted" securities.
As of the date of filing this report, 248,040 of the issued and
outstanding shares of the Company's Common Stock were eligible for sale under
Rule 144 promulgated under the Securities Act of 1933 (the "Securities Act"),
subject to certain limitations included in said Rule. In general, under Rule
144, a person (or persons whose shares are aggregated), who has satisfied a one
year holding period, under certain circumstances, may sell within any three
month period a number of shares which does not exceed the greater of one percent
-10-
of the then outstanding shares of Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity limitation
by a person who has satisfied a two year holding period and who is not, and has
not been for the preceding three months, an affiliate of the Company.
Dividends
The Company has not paid any dividends to date, and has no plans to do
so in the immediate future.
Recent Sales of Unregistered Securities
In May 1994, the Company entered into a Plan and Agreement of
Reorganization (the "Plan") with Cedar Pacific Golf Properties ("CPGP"), a
Nevada corporation. Pursuant to the Plan, the Company issued an aggregate of
229,386 (after giving effect to the 100 to 1 reverse split effective March 9,
1999) shares of its Common Stock to the six stockholders of CPGP in exchange for
100% of the issued and outstanding shares of common stock of CPGP. The Plan was
subject to the fulfillment of certain conditions which were not met. As a
result, in July 1997, the Plan was rescinded, all shares of the Company's Common
Stock previously issued to the stockholders of CPGP were returned to the Company
and canceled and all shares of CPGP previously transferred to the Company were
returned to the original holders thereof.
In July 1997, the Company entered into a Stock Purchase Agreement (the
"Agreement") pursuant to which it issued and sold an aggregate of 229,386
(aftergiving effect to the 100 to 1 reverse split effective March 9, 1999)
shares of its Common Stock to five persons for a total of $70,000.
No underwriter, broker or dealer, in its capacity as such, was involved
in any of the above sales of the Company's unregistered securities, and no
underwriting discounts, commissions or brokerage fees were paid with respect to
such transactions.
The Company considers that the above transactions are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, (the "Securities Act") pursuant to the exemptions under Sections 4(2)
and 3(b) of the Securities Act as sales of securities not involving a public
offering. Management of the Company has represented that the persons who paid
cash for their securities in the foregoing transactions possessed material
information concerning the Company and were in a position to obtain from the
Company information necessary to verify such information. All such persons were
offered the opportunity to obtain information from the Company in order to
evaluate the merits and risks of the proposed investment. In addition, all such
persons were informed that they were obtaining "restricted securities" as
defined in Rule 144 under the Securities Act, that such shares cannot be
transferred without appropriate registration or exemption therefrom, that they
must bear the economic risk of the investment for an indefinite period of time
and that the Company would restrict the transfer of the securities in accordance
with such restrictions. In addition, each certificate representing shares
purchased in the above transactions bears the standard restrictive legend.
-11-
Item 6 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
Plan of Operation
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. As of the date of
this report, the Company has no plans, arrangements, understandings or
commitments with respect to any potential merger or acquisition, nor is the
Company engaged in negotiations with respect to such matter. For a complete
description of the Company's plan of operation, see Item 1, "Description of
Business."
If required to so do under relevant law, management of the Company will
seek shareholder approval of a proposed merger or acquisition via a Proxy
Statement. However, such approval would be assured where management supports
such a business transaction because management presently controls sufficient
shares of the Company to effectuate a positive vote on the proposed transaction.
Further, a prospective transaction may be structured so that shareholder
approval is not required, and such a transaction may be effectuated by the Board
of Directors without shareholder approval. While any disclosure which may be
provided to shareholders may include audited financial statements of such a
target entity, there is no assurance that such audited financial statements will
be available. The Board of Directors does intend to obtain certain assurances of
value of the target entity assets prior to consummating such a transaction, with
further assurances that an audited statement would be provided within 60 days
after closing of such a transaction. Closing documents relative thereto will
include representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
Year 2000 Issues
"Year 2000 problems" result primarily from the inability of some
computer software to properly store, recall or use data after December 31, 1999.
These problems may affect may computers and other devices that contain
oembeddedo computer chips. The Company's operations, however, do not rely
extensively on information technology ("IT") systems. The IT software and
hardware systems the Company operates are all publicly available, pre-packaged
systems that are readily replaceable with other functionally similar systems.
Accordingly, the Company does not believe that it will be materially affected by
Year 2000 problems in its IT software and hardware systems.
The Company relies on non-IT systems that may suffer from Year 2000
problems including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil field
operators and utilities. In light of the Company's substantially reduced
operations, the Company does not believe that such non-IT systems or third-party
Year 2000 problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the
Company's IT and non-IT systems or third-parties.
-12-
Item 7 - Financial Statements
- -----------------------------
The response to this item is submitted as a separate section of this
report beginning on page F-1.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
- --------------------
On April 9, 1999, the Company filed a report on Form 8-K with the
Securities and Exchange Commission relating to a change in auditors. The Form
8-K disclosed that effective March 18, 1999, the Company dismissed the
accounting firm of Levine Hughes & Mithuen Inc., Englewood, Colorado, as its
principal independent accountant. The Company's financial statements for the
fiscal year ended September 30, 1997, were prepared assuming that the Company
will continue as a going concern.
On March 18, 1999, the Company engaged James E. Scheifley & Associates,
P.C., Denver, Colorado, as its new principal independent accountant to audit the
Company's financial statements. Neither the Company nor anyone on its behalf
consulted James E. Scheifley & Associates, P.C. regarding the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
- --------------------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Set forth below is certain information concerning the directors and
executive officers of the Company as of the date of filing this report.
Name Age Position
---- --- --------
David Gregarek 44 President and Director
Frederick R. Huttner 53 Treasurer and Director
Henry F. Schlueter 47 Secretary and Director
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified. Each of
the Company's officers and directors devotes only such time as is available to
the business of the Company. There are no family relationships between any
directors or executive officers of the Company.
David J. Gregarek has served as President and director of the Company
since August 6, 1997. Mr. Gregarek is President and a director of Centennial
Bankshares, an Exchange Act reporting company. Mr. Gregarek only devotes such
time as is available to the business of the Company. Mr. Gregarek also has
served on the Boards of Directors of the following blank check companies:
Bellview Capital Corporation ("Bellview") conducted its initial public
-----------------------------
offering in August 1986 and raised gross proceeds of $150,000 through the sale
of 15,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and one warrant to purchase common stock. On February 27, 1987,
Bellview acquired the assets of Associated Ancillary Service, Inc., and changed
its name to Medical Ancillary Services, Inc. Mr. Gregarek served as a director
of Medical Ancillary Services, Inc. until his resignation in August 1987.
Medical Ancillary Services, Inc. is not an Exchange Act reporting company.
-13-
Clearview Capital Corporation ("Clearview") conducted its initial public
-----------------------------
offering in June 1987 and raised gross proceeds of $200,000 through the sale of
20,000,000 units at $0.01 per unit, with each unit consisting of one share of
common stock and two warrants to purchase common stock. Effective January 19,
1988, Clearview merged with Arriba Fajita, Inc., the operator of four
restaurants in Austin, Texas, and changed its name to Arriba Fajita Holdings,
Inc. Mr. Gregarek resigned from the Board of Directors of Arriba Fajita
Holdings, Inc. in June 1988. Arriba Fajita Holdings, Inc. is not an Exchange Act
reporting company.
Ferrari Capital, Ltd. ("Ferrari") conducted its initial public offering
----------------------
in 1987 or early 1988 and raised gross proceeds of $125,000 through the sale of
12,500,000 units at $0.01 per unit, each unit consisting of one share of common
stock and one warrant to purchase common stock. Mr. Gregarek resigned from the
Board of Directors of Ferrari in 1989. Ferrari was administratively dissolved by
the Colorado Secretary of State in January 1993.
Parkway Capital Corporation ("Parkway") conducted its initial public
-----------------------------
offering in February 1988 and raised gross proceeds of $200,000 through the sale
of 20,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and two warrants to purchase common stock. In March 1994, Mr.
Gregarek sold 19,160,000 shares of Parkway for a price of $0.001 per share, or
$19,491, thereby effecting a change in control of Parkway, and resigned from its
Board of Directors. In October 1994, Parkway was merged into QCS Corporation,
which currently trades on the Nasdaq Bulletin Board under the symbol QCSC.
Maui Capital Corporation ("Maui") conducted its initial public offering
------------------------
in May 1989 and raised gross proceeds of $250,000 through the sale of 50,000,000
units at $0.005 per unit, with each unit consisting of one share of common stock
and one warrant to purchase common stock. In September 1995, Maui, through a
wholly owned subsidiary, merged with Charter Communications International, Inc.
and Mr. Gregarek resigned from its Board of Directors. In January 1996, Maui
acquired 90% of the stock of Phoenix DataNet, Inc. ("PDN"). In March 1996, Maui
merged with Phoenix Data Systems, Inc. ("Phoenix"), the former parent of PDN,
and in conjunction with that merger, Maui acquired the remaining 10% of the
stock of PDN. In May 1996, Maui changed its name to Charter Communications
International, Inc. ("Charter") which currently trades on the Nasdaq Bulletin
Board under the symbol PCOM.
Aurora Acquisitions, Inc.("Aurora")filed a registration statement under
-------------------------
the Securities Act of 1933, as amended, in 1992 in order to register units of
its securities for issuance and sale; however, the registration statement was
abandoned in 1993 and none of the units were issued or sold. Mr. Gregarek was
one of the initial shareholders and investors in Aurora. Mr. Gregarek offered to
attempt to register Aurora under the Securities Exchange Act of 1934, to find an
appropriate candidate for a reverse acquisition, to obtain counsel for the
company and to assemble a new management team for the company. Mr. Gregarek was
appointed to the board of directors of Aurora in January 1996. As of the date of
filing this Annual Report, no acquisition candidate has been identified. Aurora
has been an Exchange Act reporting company since 1996.
Frederick R. Huttner has served as Treasurer and a director of the
Company since August 6, 1997. From February 1987 until his resignation in
October 1992, Mr. Huttner was a director of Parkway Capital Corporation, another
blank check company. Since 1981, Mr. Huttner has been the President and sole
shareholder of Huttner and Company, which provides consulting services to
emerging businesses. From 1992 to 1994, he also served as the controller for
Orange Broussards School. Mr. Huttner received his Bachelor of Arts degree in
accounting from New York University and is a member of the American Institute of
Certified Public Accountants. Mr. Huttner is a director of Applied Voice
Recognition, Inc., an Exchange Act reporting company.
-14-
Henry F. Schlueter has served as Secretary and a director of the Company
since August 6, 1997. Since 1992, Mr. Schlueter has been the managing director
of Schlueter & Associates, P.C., a law firm, practicing in the areas of
securities, mergers and acquisitions, finance and corporate law. From 1989 to
1991, prior to establishing Schlueter & Associates, P.C., Mr. Schlueter was a
partner in the Denver, Colorado office of Kutak Rock (formerly Kutak, Rock &
Campbell), and from 1984 to 1989, he was a partner in the Denver office of
Nelson & Harding. Mr. Schlueter is a member of the American Institute of
Certified Public Accountants, the Colorado Society of CPA's, the Colorado and
Denver Bar Associations and the Wyoming State Bar. Mr. Schlueter received his
law degree from the University of Wyoming College of Law in 1978.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that the Company's officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten percent
stockholders are required by regulation to furnish to the Company copies of all
Section 16(s) forms they file.
Based solely on its review of the copies of such forms received by, or
written representations from certain reporting persons, the Company believes
that during its fiscal year ended September 30, 1998, all such filing
requirements applicable to its officers, directors, and greater than ten percent
beneficial owners were compiled with.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
Certain of the officers and directors of the Company are directors and
principal shareholders in other blank check companies, and officers and
directors of the Company may in the future become shareholders, officers or
directors of other companies which may be formed for the purpose of engaging in
business activities similar to those conducted by the Company. Accordingly,
direct conflicts of interest may arise in the future with respect to such
individuals acting on behalf of the Company or other entities. Conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's proposed business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their attention,
either in the performance of their duties or in any other manner, will be
considered opportunities of, and be made available to the Company and the
companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
If the Company and the companies with which the officers and directors are
affiliated both desire to take advantage of an opportunity, then the Board of
Directors has agreed that said opportunity should be available to each such
company in the order in which such companies registered or became current in the
filing of annual reports under the Exchange Act subsequent to January 1, 1997.
All directors may still individually take advantage of opportunities if the
Company should decline to do so. Except as set forth above, the Company has not
adopted any other conflict of interest policy with respect to such transactions.
The Company's Board of Directors has adopted a policy that the Company
will not seek a merger with, or acquisition of, any entity in which any officer
or director serves as an officer or director or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
-15-
Item 10 - Executive Compensation
- --------------------------------
None of the Company's officers and/or directors receives any
compensation for their respective services rendered to the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. As of the date of filing this report,
the Company has no funds available to pay officers or directors. Further, none
of the officers or directors is accruing any compensation pursuant to any
agreement with the Company.
It is possible that, after the Company successfully consummates a merger
or acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted Common Stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
Item 11 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1998 (adjusted to
reflect the 1:100 reverse stock split) by (i) each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock; (ii) each of the Company's executive officers and directors; and (iii)
all executive officers and directors as a group. Except as noted, each person or
entity has sole voting and sole investment power with respect to the shares
shown.
-16-
Name and Address Shares Beneficially Owned
of Beneficial Owner Number Percent
------------------- ------ -------
Henry F. Schlueter 57,347 22.7%
1050 17th Street, #1700
Denver, Colorado 80265
David Gregarek 57,347 22.7%
P.O. Box 518
Littleton, Colorado 80160
Frederick R. Huttner(1) 57,347 22.7%
651 Bering Drive #2002
Houston, Texas 77057
Jerrold D. Burden 57,347 22.7%
6970 S. Holly Circle #105
Englewood, Colorado 80021
Officers and Directors 172,041 68.3%
as a Group (3 persons)
- ---------------------------------
(1) Includes 39,323 (adjusted for the 1:100 reverse stock split) shares which
are held of record by the Frederick R. Huttner-SEP.
Change of Control
Messrs. Burden, Gregarek, Huttner (including Mr. Huttner's SEP), and
Schlueter (collectively the "Sellers") have entered into an agreement under
which each of them will sell 56,250 shares of the Common Stock to Mr. Walter
Galdenzi. Under the agreement, the 225,000 (post reverse stock split) shares of
stock will be sold to Mr. Galdenzi for $125,000, subject to the Sellers
satisfying several conditions, including among others, the requirement that the
Sellers pay most of the Company's outstanding liabilities and that all reports
required to be filed with the Securities and Exchange Commission under the
Exchange Act are filed. Mr. Galdenzi's money is in escrow pending the closing
which is anticipated to occur on or about May 6, 1999. Following the closing, it
is anticipated that Mr. Galdenzi will take appropriate steps to change the Board
of Directors of the Company, and that Mr. Galdenzi will pursue the same business
plan and objectives as have been pursued by the current management and
controlling shareholders of the Company. Mr. Galdenzi will be acquiring 89.34%
of the Company's issued and outstanding shares of common stock.
Item 12 - Certain Relationships and Related Transactions
- --------------------------------------------------------
Effective July 2, 1997, the Company entered into a Stock Purchase
Agreement with David Gregarek, the President of the Company, Frederick R.
Huttner, the Treasurer of the Company, Henry F. Schlueter, the Secretary of the
Company, and one other individual (collectively, the "Purchasers") pursuant to
which the Company issued 229,386 (after giving effect to the 100 to 1 reverse
split effective March 9, 1999) shares of its Common Stock to the Purchasers. In
consideration for the shares, the Purchasers paid the Company the amount of
$65,000 in cash and assumed certain liabilities of the Company to the extent of
$5,000. As a result of this transaction, the Purchasers acquired 91% of the
issued and outstanding shares of Common Stock of the Company, thereby effecting
a change in control of the Company.
-17-
Schlueter & Associates, P.C., the law firm of which Henry F. Schlueter,
the Company's Secretary and director, is managing director, is currently
providing legal services to the Company. That firm may provide such services in
the future and may receive compensation therefor from the Company.
Item 13 - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) No Exhibits are filed with this Annual Report.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with respect to a change in
auditors on April 9, 1999.
-18-
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JNS MARKETING, INC.
Date: 5/4/99 By: /s/ David Gregarek
------ ------------------
David Gregarek, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: 5/4/99 By: /s/ David Gregarek
------ ----------------------------------------
David Gregarek, President and Director
Date: 5/4/99 /s/ Frederick R. Huttner
------ -----------------------------------------
Frederick R. Huttner, Treasurer and Director
Date: 5/4/99 /s/ Henry F. Schlueter
------ -----------------------------------------
Henry F. Schlueter, Secretary and Director
-19-
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
JNS Marketing, Inc.
We have audited the balance sheet of JNS Marketing, Inc. as of September 30,
1998, and the related statements of operations, changes in stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of JNS Marketing, Inc. as of
September 30, 1998, and the results of its operations and cash flows for the
year then ended, in conformity with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
March 24, 1999
JNS Marketing, Inc.
(A Development Stage Company)
Balance Sheet
September 30, 1998
ASSETS
------
Current assets: 1998
-----
Cash $3,246
Total current assets 3,246
$3,246
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Accounts payable $300
Accounts payable - related party 3,915
Total current liabilities 4,215
Stockholder advances 9,250
Commitments and contingencies
Stockholders' equity:
Common stock, no par value,
50,000,000 shares authorized, 251,822 shares
issued and outstanding 932,372
(Deficit) accumulated during
development stage (942,591)
(10,219)
$3,246
See accompanying notes to financial statements.
JNS Marketing, Inc.
(A Development Stage Company)
Statements of Operations
For The Years Ended September 30, 1998 and 1997
And For the Period From Inception (July 15, 1983) to September 30, 1998
Period From
Year Ended Year Ended Inception To
September 30, September 30, September 30,
1998 1997 1999
Operating revenue $ - $ - $ 24,175
Operating expenses 1,119 - 1,119
Operating expenses -
related party 11,238 2,092 664,954
(Loss) from operations (12,357) (2,092) (641,898)
Other income and expense:
Interest income - - 166,403
Interest expense - - (68,108)
Other - - (398,988)
- - (300,693)
(Loss) before income taxes (12,357) (2,092) (942,591)
Provision for income taxes - - -
Net (loss) $(12,357) $(2,092) $(942,591)
Per share information:
Basic and diluted (loss)
per common share $ (0.05) $ (0.01) $ (12.26)
Weighted average shares
outstanding 251,822 251,822 76,884
See accompanying notes to financial statements.
JNS Marketing, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
And For the Period From Inception (July 15, 1983) to September 30, 1998
Deficit
Accumulated
Common Stock During Develop-
Shares Amount ment Stage Total
ACTIVITY
Issuance of stock for cash
at $6.67 per share in 1984 15,000 $10,000 $ - $ 10,000
Net (loss) for 1984 (96,110) $(96,110)
Issuance of stock for cash
at $100.00 per share in 1985 2,833 283,320 - 283,320
Expenses of offering (72,133) - (72,133)
Issuance of stock for partnership
share at $291.60 per share
in 1985 60 17,500 - 17,500
Issuance of stock for Tri-Party
agreement at $300.00 per share
in 1985 2,000 600,000 - 600,000
Issuance of stock for principal
reduction of note payable at
$120.00 per share in 1985 167 20,000 - 20,000
Net (loss) for 1985 (238,550) (238,550)
Issuance of stock for services
at $36.00 per share in 1986 250 9,000 - 9,000
Issuance of stock for purchase of
inventory at $300.00 per share
in 1986 250 75,000 - 75,000
Net (loss) for 1986 (71,792) (71,792)
Cancellation of common stock
issuance at $300.00 per share
in 1987 (250) (75,000) - (75,000)
Net (loss) for 1987 (90,820) (90,820)
Issuance of stock for services
at $25.00 per share in 1988 400 10,000 - 10,000
Issuance of additional common
stock pursuant to prior
agreements in 1998 1,727 - - -
Net (loss) for 1988 (391,533) (391,533)
Net (loss) for 1989 (28,287) (28,287)
Net (loss) for 1990 (865) (865)
Net (loss) for 1991 (779) (779)
Net (loss) for 1992 (675) (675)
Net income for 1993 15,551 15,551
Sale of common stock at
$.15 in 1994 229,386 34,550 - 34,550
Net (loss) for 1994 (15,734) (15,734)
Net (loss) for 1995 (6,774) (6,774)
Net (loss) for 1996 - - (1,774) (1,774)
Balance September 30, 1996 251,822 912,237 (928,142) (15,905)
Issuance of common stock at
$.30 in 1997 229,386 70,000 - 70,000
Redemption and cancellation
of common stock pursuant to
recission agreement (229,386) (49,865) - (49,865)
Net (loss) for 1997 - - (2,092) (2,092)
Balance, September 30, 1997 251,822 932,372 (930,234) 2,138
Net (loss) for 1998 - - (12,357) (12,357)
Balance, September 30, 1998 251,822 $932,372 $(942,591) $(10,219)
See accompanying notes to financial statements.
JNS Marketing, Inc.
(A Development Stage Company)
Statement of Cash Flows
And For the Period From Inception (July 15, 1983) to September 30, 1998
Period From
Year Ended Year Ended Inception To
September September September
30, 1998 30, 1997 30, 1998
Net income (loss) $(12,357) $ (2,092) $(942,591)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 98,818
Stock issued for services and inventory 19,000
Forgiveness of indebtedness (110,791)
Loss on investments 476,583
Bad debts 20,000
Abandonment of partnership interest 18,600
Change in assets and liabilities:
Increase (decrease) in accounts payable 4,215 (15,905) 4,215
Total adjustments 4,215 (15,905) 526,425
Net cash provided by (used in)
operating activities (8,142) (17,997) (416,166)
Cash flows from financing activities:
Proceeds from notes payable -- 146,290
Advances from shareholders 9,250 9,250
Repayment of notes payable -- (12,000)
Common stock sold for cash 70,000 325,737
Payment for cancellation of stock -- (49,865) (49,865)
Net cash provided by (used in)
financing activities 9,250 20,135 419,412
Increase (decrease) in cash 1,108 2,138 3,246
Cash and cash equivalents,
beginning of period 2,138 -- --
Cash and cash equivalents,
end of period $ 3,246 $ 2,138 $ 3,246
See accompanying notes to financial statements.
JNS Marketing, Inc.
(A Development Stage Company)
Statement of Cash Flows
And For the Period From Inception (July 15, 1983) to September 30, 1998
Period From
Year Ended Year Ended Inception To
September 30, September 30, September 30,
1998 1997 1998
Supplemental cash flow information:
Cash paid for interest $- $- $68,108
Cash paid for income taxes $- $- $-
See accompanying notes to financial statements.
JNS Marketing, Inc.
Notes to Financial Statements
September 30, 1998
Note 1. Organization and Summary of Significant Accounting Policies.
The Company was incorporated in Colorado on July 15, 1983. The Company is in its
development stage and to date its activities have been limited to organization
and capital formation. The Company was organized to search for and obtain, on a
buyout basis or a right-to-market basis, products which will be sold to the
general public primarily through the television media; and to engage in any
activity or business not in conflict with the laws of the State of Colorado or
of the United States of America.
During March 1999, the Company effected a 1 share for 100 shares reverse stock
split. All share and per share amounts in the foregoing financial statements and
the accompanying notes have been restated to give effect to the reverse stock
split.
Loss per share:
---------------
Basic Earnings per Share ("EPS") is computed by dividing net income available to
common stockholders by the weighted average number of common stock shares
outstanding during the year. Diluted EPS is computed by dividing net income
available to common stockholders by the weighted-average number of common stock
shares outstanding during the year plus potential dilutive instruments such as
stock options and warrants. The effect of stock options on diluted EPS is
determined through the application of the treasury stock method, whereby
proceeds received by the Company based on assumed exercises are hypothetically
used to repurchase the Company's common stock at the average market price during
the period. Loss per share is unchanged on a diluted basis since the assumed
exercise of common stock equivalents would have an anti-dilutive effect.
Cash:
-----
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Estimates:
----------
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates
Fair value of financial instruments
-----------------------------------
The Company's short-term financial instruments consist of cash and cash
equivalents and accounts payable. The carrying amounts of these financial
instruments approximates fair value because of their short-term maturities.
Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of cash.
During the year the Company did not maintain cash deposits at financial
institutions in excess of the $100,000 limit covered by the Federal Deposit
Insurance Corporation. The Company does not hold or issue financial instruments
for trading purposes nor does it hold or issue interest rate or leveraged
derivative financial instruments
Stock-based Compensation
------------------------
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996. Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plans using the
intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to
Employees. No stock based compensation was paid by the Company during the years
ended September 30, 1998 and 1997, respectively.
New Accounting Pronouncements
- -----------------------------
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all
items that are to be recognized under accounting standards as components of
comprehensive income to be reported in the financial statements. The statement
is effective for all periods beginning after December 15, 1997 and
reclassification financial statements for earlier periods will be required for
comparative purposes. To date, the Company has not engaged in transactions which
would result in any significant difference between its reported net loss and
comprehensive net loss as defined in the statement.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
authoritative guidance on when internal-use software costs should be capitalized
and when these costs should be expensed as incurred.
Effective in 1998, the Company adopted SOP 98-1, however the Company has not
incurred costs to date which would require evaluation in accordance with the
SOP.
Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The adoption of SFAS 131 did not affect results of
operations or financial position. To date, the Company has not operated in its
one planned business activity.
Effective December 31, 1998, the Company adopted the provisions of SFAS No. 132,
Employers' Disclosures about Pensions and Other Post-retirement Benefits ("SFAS
132"). SFAS 132 supersedes the disclosure requirements in SFAS No. 87,
Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for
Post-retirement Benefits Other Than Pensions. The overall objective of SFAS 132
is to improve and standardize disclosures about pensions and other
post-retirement benefits and to make the required information more
understandable. The adoption of SFAS 132 did not affect results of operations or
financial position.
The Company has not initiated benefit plans to date which would require
disclosure under the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
is required to be adopted in years beginning after June 15, 1999. SFAS 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The Company has not yet
determined what the effect of SFAS 133 will be on earnings and the financial
position of the Company, however it believes that it has not to date engaged in
significant transactions encompassed by the statement.
Note 2. Income taxes
The Company has adopted the flow-through method of accounting for tax credits.
Under this method, the current provision for income taxes is reduced by the
amount of the credits applied against tax otherwise payable. No provision for
income taxes was required at September 30, 1998 and 1997 due to losses from
operations. The Company has recognized net losses of $12,357 and $2,092 for
fiscal years 1998 and 1997 respectively, and accumulated net losses from
inception (July 15, 1983) to date of $942,591, which expire at varying dates
between the years 2001 and 2011. There were no previous earnings to which losses
may be carried back and there are no recorded income tax deferrals to be
eliminated. The Company had taxable income of $15,551 at September 30, 1993
which resulted in income tax recognition of $2,333. The income tax was
eliminated in full by recognition of the tax benefit of the Company's prior
years accumulated net operating loss. The deferred tax asset resulting from the
operating loss carry forward described above is estimated to be approximately
$320,500 has been fully reserved. The reserve increased by approximately $4,200
and $700 during the years ended September 30, 1998 and 1997 respectively.
Note 3. Agreement and plan of reorganization
On or about May 22, 1994 the Company entered into a plan of reorganization (the
"Agreement") with Cedar Pacific Golf Properties ("CPGP"), a Nevada corporation
whereby the Company acquired 100% of the issued and outstanding stock of CPGP
and $34,550 in exchange for 229,386 shares of the Company's no par value common
stock. This Agreement was subsequently rescinded July 2, 1997 (See Note 4).
Note 4. Stockholders' Equity.
During the periods covered by these financial statements the Company issued
certain of its securities in reliance upon an exemption from registration with
the Securities and Exchange Commission. Although the Company believes that the
sales did not involve a public offering and that it did comply with the
exemptions from registration, it could be liable for rescission of said sales if
such exemption was found not to apply. The Company has not received a request
for rescission of shares nor does it believe that it is probable that its
shareholders would pursue rescission nor prevail if such action were undertaken
Recission agreement
- -------------------
On July 2, 1997, the Company entered into a recission agreement with CPGP Group
in which CPGP relinquished control of the Company by returning 229,386 shares of
the Company stock acquired pursuant to the Plan of reorganization discussed in
Note 4. CPGP received $49,865 for the redemption and cancellation of the shares.
Stock purchase agreement
- ------------------------
On July 2, 1997, the Company entered into stock purchase agreement in which
several individuals purchased 229,386 newly-issued shares of the Company's no
par common stock for $70,000. Control of the Company changed as a result of this
transaction.
Note 5. Related party transactions
During the year ended September 30, 1998, an individual who is an officer and
significant shareholder of the Company paid an aggregate of $11,238 in general
and administrative expenses in behalf of the Company of which $3,915 remained
unpaid at that date The individual also provides office services for the Company
without charge.
During the year ended September 30, 1998, four of the Company's principal
shareholders made working capital advances to the Company in the amount of
$9,250. The advances are non interest bearing and are due on demand, however
they are not expected to be repaid currently.