SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
Cyberenergy, Inc.
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(Name of Small Business Issuer in Its Charter)
Nevada 88-0356064
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.
268 West 400 South, Suite 300 Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class to be so registered: Common Stock ($0.001 Par Value)
Name of Each Exchange on Which Each Class is to be Registered: N/A
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TABLE OF CONTENTS
PART I
Page No.
Item 1. Description of Business..........................................2
Item 2. Management's Discussion and Analysis or Plan of Operation.......12
Item 3. Description of Property.........................................13
Item 4. Security Ownership of Certain Beneficial Owners and Management..13
Item 5. Directors, Executive Officers, Promoters and Control Persons....14
Item 6. Executive Compensation..........................................17
Item 7. Certain Relationships and Related Transactions..................19
Item 8. Description of Securities.......................................19
PART II
Item 1. Market for Common Equity and Related Stockholder Matters .......20
Item 2. Legal Proceedings...............................................21
Item 3. Changes in and Disagreements with Accountants...................21
Item 4. Recent Sales of Unregistered Securities.........................21
Item 5. Indemnification of Directors and Officers.......................23
PART F/S
Consolidated Financial Statements - December 31, 1999 and 1998 and six months
ended June 30, 2000..........................................F-1 to F-9
PART III
Item 1. Index to Exhibits...............................................27
Signatures....................................................................28
Item 2. Description of Exhibits.........................................29
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
Cyberenergy, Inc. (the "Company") was formed as a Nevada corporation on February
15, 1996, for the purpose of specializing in Internet "virtual mall"
development. The Company was one of over 40 related companies whose plan was to
create a virtual mall with theme based stores to sell merchandise over the
Internet. The Company's former parent, CyberAmerica Corporation, a fully
reporting company under the Exchange Act of 1934, through its now defunct
subsidiary CyberMalls, Inc. was in the process of developing a specialized
search engine. This search engine was designed to assist consumers in the
purchase of products by narrowing the number of responses received when
searching for a specific product. However, due to a lack of necessary funding
CyberMalls, Inc.'s plans to create the search engine were discontinued.
Consequently, the plans to create a virtual mall with at least 40 theme based
stores with the 40 related companies including the Company's theme based virtual
store were abandoned. The Company became a "blank check" or "shell" company
during the last quarter of 1996 as a result of the inability of the Company's
then parent to sufficiently fund the Company's planned operations and is
currently seeking a business or businesses to acquire.
The Company is filing this registration statement on a voluntary basis since the
primary attraction of the Company as a merger partner or acquisition vehicle
will be its status as a reporting public company. It is the position of the
Office of Small Business of the Securities & Exchange Commission (per No Action
Letter, NASD Regulation, Inc., dated January 21, 2000) that Rule 144 is not
available for resale transactions involving securities sold by promoters and
affiliates of a blank check company, and that securities issued by a blank check
company to promoters and affiliates, and their transferees, can only be resold
through registration under the Securities Act. Therefore, the Company may only
be able to obtain a listing on the NASD OTC:BB after filing an appropriate
registration under the Securities Act of 1933 which would most likely occur
subsequent to the Company completing a business combination.
General
The Company is a "blank check" or "shell" corporation that seeks to identify and
complete a merger or acquisition with a private entity whose business presents
an opportunity for Company shareholders. The Company's management will review
and evaluate business ventures for possible mergers or acquisitions. The Company
has not yet entered into any agreement, nor does it have any commitment or
understanding to enter into or become engaged in a transaction, as of the date
of this filing(1). Further, the business objectives discussed herein are
extremely general and are not intended to restrict the discretion of the
Company's management.
A decision to participate in a specific business opportunity will be made based
upon a Company analysis of the quality of the prospective business opportunity's
management and personnel, asset base, the anticipated acceptability of business'
products or marketing concepts, the merit of a business plan, and numerous other
factors which are difficult, if not impossible, to analyze using any objective
criteria.
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(1)As of the filing date of the Form 10-SB, the Company has not entered in
to and is not negotiating a probable material transaction.
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The Company has no plans or arrangements proposed or under consideration for the
issuance or sale of additional securities, as of the date of filing this Form
10-SB ("the filing date"), prior to the identification of a business
opportunity. Consequently, management anticipates that it will initially be able
to participate in only one business opportunity, due primarily to the Company's
limited capital. The resultant lack of diversification should be considered a
substantial risk, as the Company will not be able to offset potential losses
from one venture against gains from another (See table, Part I, Item 5
"Directors, Executive Officers, Promoters, And Control Persons" p.14).
The Company has no plans to obtain lock-up agreements with the major
shareholders, Richard Surber and CyberAmerica Corporation (See table, Part I,
Item 4: "Security Ownership of Certain Beneficial Owners And Management" p.13).
Selection of a Business
The Company anticipates that potential business opportunities will be referred
from various sources, including its officers and directors, professional
advisors, securities broker-dealers, venture capitalists, persons involved in
the financial community, and others who may present unsolicited proposals. The
Company will not engage in any general solicitation or advertising for a
business opportunity, and will rely on the personal contacts of Richard Surber,
its sole officer and director and his affiliates, as well as indirect
associations with other business and professional people. Management's reliance
on "word of mouth" may limit the number of potential business opportunities
identified. While it is not presently anticipated that the Company will engage
unaffiliated professional firms specializing in business acquisitions or
reorganizations, such firms may be retained if management deems it in the best
interest of the Company. Finder's fees paid to professional acquisition firms
could involve one-time cash payments, payments based on a percentage of the
business opportunity's revenues or product sales volume, payments involving
issuance of securities (including those of the Company), or any combination of
these or other compensation arrangements. Consequently, the Company is unable to
predict the cost of utilizing such services. As of the filing date there have
been no discussions, agreements or understandings with any professional
advisors, financial consultants, broker-dealers or venture capitalists. The
Company's present intentions are to rely upon its president to effect those
services normally provided by professional advisors or financial consultants.
The Company will not restrict its search to any particular business, industry,
or geographical location. Management reserves the right to evaluate and enter
into any type of business in any location. In seeking a business venture, the
decision of management will not be controlled by an attempt to take advantage of
any anticipated or perceived appeal of a specific industry, management group,
product, or industry, but will be based on the business objective of seeking
long-term capital appreciation. The Company may participate in a newly organized
business venture or in a more established business. Participation in a new
business venture entails greater risks since, in many instances, management of
such a venture may not have a proven track record; the eventual market for such
venture's product or services will likely not be established; and the
profitability of the venture will be untested and impossible to accurately
forecast. Should the Company participate in a more established venture that is
experiencing financial difficulty, risks may stem from the Company's inability
to generate sufficient funds to manage or reverse the circumstances causing such
financial problems.
The analysis of new businesses will be undertaken by or under the supervision of
Richard Surber, the Company's sole officer and director. In analyzing
prospective businesses, Richard Surber will consider, to the extent applicable,
the available technical, financial and managerial resources of any given
business venture. Management will also consider the nature of present and
expected competition; potential advances in research
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and development or exploration; the potential for growth and expansion; the
likelihood of sustaining a profit within given time frames; the perceived public
recognition or acceptance of products, services, trade or service marks; name
identification; and other relevant factors. The Company anticipates that the
results of operations of a specific business venture may not necessarily be
indicative of the potential for future earnings, which may be impacted by a
change in marketing strategies, business expansion, modifying product emphasis,
changing or substantially augmenting management, and other factors.
The Company has no present intentions to hire any independent advisors or
consultants. The Company's president will act in these capacities. The Company
may pay finders a fee for finding merger, acquisition or business combination
candidates. No criteria will be used in determining who can act as a finder for
the Company, other than the Company will require such finder to have all the
necessary state and/or federal licenses to act in such capacity. The finder will
only be paid if the Company closes upon such transactions. All other terms of
services will be negotiated on an individual basis and have not been determined
as of yet. The Company to date has not contacted nor had any discussions with
any finders as of the date of this filing.
The Company's president anticipates acting on the Company's behalf in
encouraging a broker dealer to act as the Company's market maker. No fee will be
paid to him for acting on the Company's behalf regarding this matter. The
Company does not intend to hire any consultants, advisors or others to act in
this capacity. No preliminary discussions or understandings have occurred or
have been made with any market maker. The Company anticipates that it will
engage in such discussions with Olsen Payne & Company subsequent to this Form
10SB clearing comments by the Securities & Exchange Commission which may be
before or after an acquisition or merger. However, there is a greater
probability than not that such discussions will be immaterial until such time as
an acquisition or merger candidate is found and a legal opinion is obtained
directing the Company to file a registration statement or a valid exemption from
registration is found regarding the trading status of such shares which may be
used to create a public market in light of the Securities & Exchange
Commission's position regarding shell companies' ability to rely on various
exemptions from registration.
The Company's officers and directors have used the services of Hudson Consulting
Group, Inc. and/or Canton Financial Services Corporation, both of which are
subsidiary companies of CyberAmerica Corporation a beneficial holder of the
Company's common stock. All of the above mentioned entities and their personnel
have been used by Richard Surber as either advisors or consultants because of
Richard Surber's position with CyberAmerica Corporation as its president and
director. Irrespective of Mr. Surber's relationship or use of the above
mentioned entities, it is the Company's present intention to rely on the
expertise of Richard Surber as its advisor and/or consultant. It is probable
that the Company will rely on the clerical and accounting services of Hudson
Consulting Group, Inc. The Company may pay a fee to persons who find a potential
acquisition or merger candidate for the Company. The probability that the fee
will be paid to Richard Surber, Hudson Consulting, Group, Inc. or Canton
Financial Services Corporation is slightly greater than for any other person who
may solicit the Company for a merger, acquisition or business combination.
Richard Surber usually uses the services of Olsen Payne & Company as his broker
dealer. There is greater than a 50% chance that the Company may retain the
services of Olsen Payne & Company.
The Company will analyze all relevant factors and make a determination based on
a composite of available information, without reliance on any single factor. The
period within which the Company will decide to participate in a given business
venture cannot be predicted and will depend on certain factors, including the
time
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involved in identifying businesses, the time required for the Company to
complete its analysis of such businesses, the time required to prepare
appropriate documentation to effect a merger or acquisition, and other
circumstances.
Acquisition of a Business
The implementing of a structure that will effect any given business transaction,
may cause the Company to become party to a merger, consolidation, purchase and
sale of assets, purchase or sale of stock, or other reorganization involving
another corporation, joint venture, partnership or licensee. The exact structure
of the anticipated business transaction cannot yet be determined.
Notwithstanding the above, the Company does not intend to participate in a
business through the purchase of minority stock positions. In other words, the
Company does not intend to merely buy non controlling interests in other
businesses. Rather, its current focus is to acquire a controlling interest in a
business. Upon the completion of a transaction, it is likely that the Company's
present management will no longer control Company affairs. Further, a majority
or all of the Company's present directors may, as part of the terms of a
prospective business transaction, resign and be replaced by new directors
without a vote of the Company's shareholders.
In connection with the Company's merger or acquisition of a business venture,
the present shareholders of the Company, including Richard Surber, sole officer
and director, may, as a negotiated part of the transaction, sell a portion or
all of the Company's Common Stock held by them at a significant premium over
their original investment in the Company. If the Company's current shareholders
sell their stock as part of a merger/acquisition, they may decide to sell a
controlling interest (i.e., over 50%) of the Company to the other entity
(including such other entity's shareholders and affiliates) which participates
in the merger/acquisition. The other entity might only buy shares from Richard
Surber and/or CyberAmerica Corporation, or it might only buy enough shares to
obtain a controlling interest in the Company. However, there is no degree of
certainty that the other entity will buy any of the Company's shares, whether
from Richard Surber or any other shareholder. Conversely, it is possible the
other entity may offer to buy out all or most of the shareholders' stock at
prices comparable to those offered to Richard Surber or CyberAmerica
Corporation. It is possible that the entity may pay a higher price for shares
belonging to insider shareholders than for shares belonging to non-insider
shareholders. Although the Company's insiders have no present intentions to buy
shares from other insiders, it is a possibility that insiders could buy shares
from other insiders. Management does not intend to actively negotiate for or
otherwise require the purchase of all or any portion of its stock as a condition
to or in connection with any proposed merger or acquisition. Although the
Company's present shareholders did not acquire their shares of Common Stock with
a view towards any subsequent sale in connection with a business reorganization,
it is not unusual for affiliates of the entity participating in the
reorganization to negotiate to purchase shares held by the present shareholders.
This is done in order to reduce the amount of shares held by persons no longer
affiliated with the Company and thereby reduce the potential adverse impact on
the public market in the Company's common stock that could result from
substantial sales of such shares after the business reorganization. Public
investors will not receive any portion of the premium that may be paid in the
foregoing circumstances. Furthermore, the Company's shareholders may not be
afforded an opportunity to approve or consent to any particular stock buy-out
transaction.
In the event sales of shares by present shareholders of the Company, including
Richard Surber, are a negotiated part of a future merger or acquisition, a
conflict of interest may arise since Richard Surber will be negotiating for the
merger or acquisition on behalf of the Company and for the sale of their shares
for their own respective accounts. Where a business opportunity is well suited
for merger or acquisition by the Company, but affiliates of the prospective
business opportunity impose a condition that management sell its shares at a
price which is
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unacceptable to them, management may not sacrifice its financial interest for
the Company to complete the transaction. Where the business opportunity is not
well suited, but the price offered management for its shares is high, management
may be inclined to effect the acquisition in order to realize a substantial gain
on its shares in the Company. Management has not adopted any policy for
resolving the foregoing potential conflicts, should they arise, and does not
intend to obtain an independent appraisal to determine whether any price that
may be offered for its shares is fair. Shareholders must rely, instead, on the
obligation of management to fulfill its fiduciary duty under state law to act in
the best interests of the Company and its shareholders.
Although the terms of any registration rights and the number of securities, if
any, which may be registered cannot be determined at this time, it may be
expected that any registration of securities by the Company would entail
substantial expense to the Company.
It is the position of the Office of Small Business of the Securities & Exchange
Commission (per No Action Letter, NASD Regulation, Inc., dated January 21, 2000)
that Rule 144 is not available for resale transactions involving securities sold
by promoters and affiliates of a blank check company, and their transferees, and
anyone else who has been issued securities from a blank check company, and that
securities issued by a blank check company to promoters and affiliates, and
their transferees, can only be resold through registration under the Securities
Act. Upon consummation of a merger, the Company may decide to file the necessary
and appropriate registration statements to register the shares of promoters and
affiliates and their transferees. In addition, the promoters or affiliates of
blank check companies, as well as their transferees, are deemed to be
"underwriters" of the securities issued both before and after any business
combination.
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 such market.
While the actual terms of a transaction to which the Company may be a party
cannot be determined at this time, it may be expected that the parties to any
business transaction will find it desirable to structure the merger or
acquisition as a so-called "tax-free" event under sections 351 or 368(a) of the
Internal Revenue Code of 1986 (the "Code"). In order to obtain tax-free
treatment under section 351 of the Code, it would 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. Section
368(a)(1) of the Code provides for tax-free treatment of certain business
reorganizations between corporate entities where one corporation is merged with
or acquires the securities or assets of another corporation. Generally, the
Company expects to be the acquiring corporation in such a business
reorganization, and the tax-free status of the transaction will not depend on
the issuance of any specific amount of the Company's voting securities under
Section 368. The acquiring corporation will issue securities in such an amount
that the shareholders of the acquired corporation will hold 50% or more of the
voting stock of the surviving entity. Consequently, there is a substantial
possibility that the shareholders of the Company immediately prior to the
transaction would retain less than 50% of the issued and outstanding shares of
the surviving entity. Therefore, regardless of the form of the business
acquisition, it may be anticipated that stockholders immediately prior to the
transaction will experience a significant reduction in their percentage of
ownership in the Company.
Notwithstanding the fact that the Company is technically the merging or
acquiring entity in the foregoing circumstances, generally accepted accounting
principles will ordinarily require that such transaction be accounted for as if
the Company had been acquired by the other entity owning the business and,
therefore, will not permit a write-up in the carrying value of the assets of the
other company.
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The manner in which the Company participates in a business will depend on the
nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be determined at this time, generally such agreements will
require 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 such closing,
will outline the manner of bearing costs if the transaction is not closed, will
set forth remedies on default, and will include miscellaneous other terms.
Operation of Business After Acquisition
The Company's operation following its merger or acquisition of a business will
be dependent on the nature of the business and the interest acquired. The
Company is unable to determine at this time whether the Company will be in
control of the business or whether present management will be in control of the
Company following the acquisition. It may be expected that the business will
present various risks, which cannot be predicted at the present time.
Government Regulation
It is impossible to anticipate government regulations, if any, to which the
Company may be subject until it has acquired an interest in a business. The use
of assets to conduct a business which the Company may acquire could subject it
to environmental, public health and safety, land use, trade, or other
governmental regulations and state or local taxation. In selecting a business in
which to acquire an interest, management will endeavor to ascertain, to the
extent of the limited resources of the Company, the effects of such government
regulation on the prospective business of the Company. In certain circumstances,
however, such as the acquisition of an interest in a new or start-up business
activity, it may not be possible to predict with any degree of accuracy the
impact of government regulation. The inability to ascertain the effect of
government regulation on a prospective business activity will make the
acquisition of an interest in such business a higher risk.
Competition
The Company will be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by virtue
of their stronger financial resources and prior experience in business. There is
no assurance that the Company will be successful in obtaining suitable business
opportunities.
Employees
The Company is a development stage company and currently has no employees.
Executive officers will devote only such time to the affairs of the Company as
they deem appropriate, which is estimated to be approximately 5 hours per month.
Management of the Company expects to use consultants, attorneys, and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is identifying and evaluating businesses. The need for employees
and their availability will be addressed in connection with a decision whether
or not to acquire or participate in a specific business venture.
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RISK FACTORS
No Operating History, Revenue And Assets
The Company has no operating history nor any revenues or earnings from
operations. The Company has little or no tangible assets or financial resources.
The Company will, in all likelihood, continue to 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 or 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 business and numerous other factors
presently beyond the Company's control.
Lack of Sufficient Operating Capital
The Company is a "blank check" or shell corporation and therefore has no
guarantee that it will be able to obtain the funds necessary to continue as a
going concern. The nominal amount of capital contributed thus far by the major
shareholders (See table, Part I, Item 4: "Security Ownership of Certain
Beneficial Owners And Management") has been used exclusively for organizational
purposes and there is no guarantee that funding will be available from these
sources in the future. Management has no plans to obtain additional financing
from outside sources. There is no obligation or commitment from any shareholder
to provide further capital to ensure the Company continues as a going concern.
However, it is anticipated that the major shareholders will continue to support
the Company in the form of loans in amounts sufficient to cover operating costs
and professional expertise as needed to keep the Company current with its
reporting requirements.
State Blue Sky Registration; Restricted Resales Of The Securities
Transferability of the shares of Common Stock of the Company is very limited
because a significant number of states have enacted regulations pursuant to
their securities or so-called "blue sky" laws restricting or, in many instances,
prohibiting, the initial sale and subsequent resale of securities of "blank
check" companies such as the Company within that state. In addition, many
states, while not specifically prohibiting or restricting "blank check"
companies, would not register the securities of the Company for sale or resale
in their states. Because of these regulations, the Company currently has no plan
to register any securities of the Company with any state. To ensure that any
state laws are not violated through the resales of the securities of the
Company, the Company will refuse to register the transfer of any securities of
the Company, to residents of any state, which prohibit such resale or if no
exemption is available for such resale. It is not anticipated that a secondary
trading market for the Company's securities will develop in any state until the
completion of a business combination, if at all. It is the position of the
Office of Small Business of the Securities & Exchange Commission (per No Action
Letter, NASD Regulation, Inc., dated January 21, 2000) that Rule 144 is not
available for resale transactions
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involving securities sold by promoters and affiliates of a blank check company,
and that securities issued by a blank check company to promoters and affiliates,
and their transferees, can only be resold through registration under the
Securities Act.
The Company's stock was issued pursuant to the State of Utah's Uniform
Securities Act ss.61-1-14(1)(j), which provides for a self executing exemption
for securities issued under a benefit plan covering officers, directors, and
employees. Consultants would be covered under ss.61-1-14(2)(n), the limited
offering exemption, which is also self executing. The future resale of
securities by shareholders is under the scope of ss. 61-1-14(2)(b) relating to a
manual exemption such as a listing in Standard & Poor's or (2)(c) relating to
sales through a registered broker dealer. No filing is needed under (b) or (c).
No shares were issued in any state which prohibits the issuance of shares in a
blank check company; no shares were issued to any individuals outside of the
State of Utah, excepting issuances made to offshore investors.
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, joint ventures and acquisitions of small private
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 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 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 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, Richard Surber, President of the Company
anticipates devoting up to five hours per month to the business of the Company.
Richard Surber will be the only individual responsible for conducting the day to
day operations of the company including searches, evaluations, and negotiations
with potential merger or acquisition candidates. The Company has not entered
into any written employment agreement with Richard Surber and is not expected to
do so in the foreseeable future. The Company has not obtained key man life
insurance on Richard Surber. The loss of the services of Richard Surber would
adversely affect development of the Company's business and its likelihood of
continuing operations.
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Conflicts Of Interest - General
Richard Surber may participate in business ventures which could be deemed to
compete directly with the Company. Richard Surber is serving as officer and
director of a number of other "blank check" companies (See table, Part I, Item 5
"Directors, Executive Officers, Promoters, And Control Persons" p.14).
Additional conflicts of interest and non-arms length transactions may also arise
in the future in the event Richard Surber or the Company's future officers or
directors are involved in the management of any firm with which the Company
transacts business.
In the event an affiliate finds an acquisition, merger or business combination
candidate the Company may pay up to 9.9% of the value of such transaction to
that person or entity irrespective of whether such person or entity is an
affiliate or non affiliate of the Company. The Company has no present intentions
to pay any financial advisors whether affiliates or non affiliates for acting as
financial advisors in any capacity other than as a finder for the Company. There
are no present circumstances that the Company currently anticipates where the
Company would pay an affiliate for acting as financial advisors other than as a
finder, as discussed above. However, the Company may agree to register shares
currently held by affiliates pursuant to an available registration statement in
the event a merger, acquisition, or business combination candidate is found. The
Company may register such shares irrespective of whether the candidate is found
by an affiliate or non affiliate, which could be at the expense of the Company.
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 business
strategy 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.
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 with which the Company merges 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 Securities Exchange
Act of 1934, 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
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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 Shares
will, in all likelihood, result in shareholders of a private company obtaining a
controlling interest in the Company. Any such business combination may require
Richard Surber to sell or transfer all or a portion of the Company's Common
Shares held by them, or resign as sole officer and director of the Company. The
resulting change in control of the Company could result in the removal of
Richard Surber and a corresponding reduction in or elimination of his
participation in the future affairs of the Company.
Potential 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, depending on the terms of merger or acquisition,
may result in the Company issuing securities to shareholders of any such private
company. The issuance of previously authorized and unissued Common Shares of the
Company would result in reduction in 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 adverse
consequences may include, but are not limited to, time delays of the
registration process, the significant expenses incurred in a public offering,
loss of voting control to public shareholders.
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 a transaction.
Requirement Of Audited Financial Statements May Disqualify Business
Opportunities
Section 13 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), require companies subject thereto to provide certain information about
significant acquisitions, including audited 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 preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects that do
not have or
11
<PAGE>
are unable to obtain the required audited financial statements may not be
appropriate for acquisition so long as the reporting requirements of the 1934
Act are applicable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
The Company's plan of operation for the coming year, as discussed above, is to
identify and acquire a favorable business opportunity. The Company does not plan
to limit its options to any particular industry, but will evaluate each
opportunity on its merits. The Company anticipates that its owners, affiliates,
and consultants will provide it with sufficient capital to continue operations
until the end of the year 2000, but there can be no assurance that this
expectation will be fully realized.
Results of Operations
The Company had no revenue from continuing operations from inception through
period ended June 30, 2000.
General and administrative expenses for the period ended December 31, 1999 were
$20,898. General and administrative expenses for 1999 consisted of expenses to
keep the Company in good corporate standing, fees to Transfer Agents, and
minimal expenses for office and bank account administration.
The Company had a net loss of $20,898 for the period ended December 31, 1999.
The Company's net loss for fiscal 1999 was attributable to general and
administrative expenses.
The Company does not expect to generate any meaningful revenue or incur
operating expenses unless and until it acquires an interest in an operating
company.
Liquidity and Capital Resources
As of the filing date the Company had no major assets. The Company is currently
authorized to issue 100,000,000 shares of common stock, of which 5,542,000
shares are issued and outstanding, and 5,000,000 shares of preferred stock, none
of which is outstanding as of May 18, 2000. Management is hopeful that becoming
a reporting company will increase the number of prospective business ventures
that may be available to the Company. Management believes that the Company has
sufficient resources to meet the anticipated needs of the Company's operations
through at least the calendar year ending December 31, 2000. The Company
anticipates that its major shareholders will contribute sufficient funds to
satisfy the cash needs of the Company through calendar year ending December 31,
2000. However, there can be no assurances to that effect, as the Company has no
revenues and the Company's need for capital may change dramatically if it
acquires an interest in a business opportunity during that period. Further, the
Company has no plans to raise additional capital through private placements or
public registration of its securities until a merger or acquisition candidate is
identified. However, it is the position of the Office of Small Business of the
Securities & Exchange Commission (per No Action Letter, NASD Regulation, Inc.,
dated January 21, 2000) that Rule 144 is not available for resale transactions
involving securities sold by promoters and affiliates of a blank check company,
and their transferees, and anyone else who has been issued securities from a
blank check company, and that securities issued by a blank check company to
promoters and affiliates, and their transferees, can only be resold through
registration under the Securities Act. Upon consummation of a merger, the
Company may decide to file the necessary and appropriate registration statements
to register the affiliates' shares. In addition, the promoters or affiliates of
blank check companies, as well as their transferees, are deemed to be
"underwriters" of the securities issued both before and after any business
combination.
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<PAGE>
The Company projects that its operating requirements will not exceed $15,000
over the next twelve months. If no acquisition candidate is found for the
Company during this time, CyberAmerica Corporation will loan the Company
sufficient funds to cover these costs over the next twelve months. Richard
Surber will provide his expertise in preparing the necessary documentation to
keep the Company current with its reporting requirements with the Securities &
Exchange Commission and those costs will accrue on the Company's balance sheet.
In the event that a merger or acquisition occurs over the next twelve months,
the target company will be responsible for paying these costs back to the major
shareholders, or the major shareholders may waive these costs depending on the
nature of the acquisition or merger transaction.
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently maintains its offices at 268 West 400 South, Suite 300,
Salt Lake City, Utah 84101. The building is owned by Canton's Commercial Carpet
Corporation, a majority owned subsidiary of CyberAmerica Corporation which is a
substantial shareholder of the Company. The Company pays no rent for the use of
this address. The Company does not believe that it will need to maintain an
office at any time in the foreseeable future in order to carry out the plan of
operation described herein.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the filing date, the number and percentage
of outstanding shares of common stock which, according to the information
supplied to the Company, were beneficially owned by (i) each current director of
the Company, (ii) each current executive officer of the Company, (iii) all
current directors and executive officers of the Company as a group, and (iv)
each person who, to the knowledge of the Company, is the beneficial owner of
more than 5% of the Company's outstanding common stock. Except as otherwise
indicated, the persons named in the table below have sole voting and dispositive
power with respect to all shares beneficially owned, subject to community
property laws (where applicable).
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent of Class
Ownership Beneficial Ownership
<S> <C> <C> <C>
Common Stock Richard Surber, President
268 W. 400 S. 4,000,000(2) 72.2%
Salt Lake City, Utah 84101
Common Stock CyberAmerica Corporation 2,000,000(3) 36.1%
268 W. 400 S.
Salt Lake City, Utah 84101
Common Stock All Executive Officers and Directors 4,000,000 72.2%
as a Group
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
--------
(2) Richard D. Surber is the President and CEO of CyberAmerica Corporation
and therefore has voting power over the 2,000,000 shares held by CyberAmerica
Corporation. Mr. Surber personally owns 2,000,000 additional shares of the
Company's stock.
(3) Richard D. Surber is the president and CEO of CyberAmerica Corporation
and therefore has voting power over the 2,000,000 shares held by CyberAmerica
Corporation. Mr. Surber personally owns 2,000,000 additional shares of the
Company's stock.
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<PAGE>
The following person constitutes the Company's sole Executive Officer and
Director as of the filing date:
Name Age Position
---- --- --------
Richard D. Surber 27 President and Director
No other person is expected to make a significant contribution to the Company
who is not an executive officer or director of the Company.
All executive officers are elected by the Board and hold office until the next
Annual Meeting of stockholders and until their successors are elected and
qualify.
Richard D. Surber, 27, graduated from the University of Utah with a Bachelor of
Science degree in Finance and then with a Juris Doctorate with an emphasis in
corporate law, including securities, taxation, and bankruptcy. He serves, or has
served, as an officer and director of the following public companies:
CyberAmerica Corporation, a holding company whose subsidiaries invest in real
estate and provide financial consulting services (president and director from
1992 to the present); Chattown.com Network, Inc. (f/k/a Vaxcel, Inc.), which is
unrelated to the Company (president and director from June, 1999 to April 10,
2000); Kelly's Coffee, Group, Inc., a shell company whose plan is to acquire an
unidentified company (president and director from May, 1999 to the present);
Innovative Property Development Corporation ("IPDC"), n/k/a China Mall USA.com,
Inc., a former subsidiary of CyberAmerica Corporation, which currently is a
non-reporting Chinese Internet company (president and director 1992 to June,
1999); Eurotronics Corporation, f/k/a Hamilton Exploration, Inc., a shell
company which is currently unrelated to the Company (president and director
1994-1996), and whose post-1996 operations if any are not known; Area Investment
Development Company, which was a shell company unrelated to the Company
(president and director 1994-1996), and which has recently acquired an Internet
company whose content revolves around religious events; Youthline USA, Inc.,
f/k/a Ult-i-Med Health Centers, Inc., a non- reporting shell company that
acquired an educational company which distributes education newspapers to
children in grades K-12 (secretary and director from April 6, 1999 to July
29,1999); Premier Brands, Inc., a shell company (president and director April,
1998 - September, 1998); and Golden Opportunity Development Corporation, a
wholly owned subsidiary of CyberAmerica Corporation, (president and director
from September, 1999 to present) whose operations consist of operating a 134
room hotel in Baton Rouge, Louisiana; Power Exploration, Inc., an oil and gas
company (director from January 28, 2000 to June 23, 2000). Mr. Surber is also
the President and a Director of several private shell companies that intend to
become fully reporting public companies. Mr. Surber began his one-year term as
the Company's President and Director on December 15, 1999.
The SEC reporting shell companies of which Richard Surber is serving as Officer
and Director are listed in the following table:
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<PAGE>
<TABLE>
<CAPTION>
CORPORATION NAME FORM TYPE FILE NUMBER DATE OF FILING
<S> <C> <C> <C>
Alexandria Holdings, Inc. 10-SB 000-29325 February 3, 2000
(Comments) 10-SB/A-1 April 17, 2000
10-SB/A-2 June 27, 2000
10-SB/A-3 July 28, 2000
10-SB/A-4 August 16, 2000
10-QSB (3/31/00) May 12, 2000
10-QSB (6/30/00) August 9, 2000
Aswan Investments, Inc. 10-SB 000-29321 February 3, 2000
(Comments) 10-SB/A-1 April 17, 2000
10-SB/A-2 June 27, 2000
10-SB/A-3 July 28, 2000
10-SB/A-4 August 16, 2000
10-QSB (3/31/00) May 12, 2000
10-QSB (6/30/00) August 9, 2000
Cairo Acquisitions, Inc. 10-SB 000-29323 February 3, 2000
(Comments) 10-SB/A-1 April 17, 2000
10-SB/A-2 June 27, 2000
10-SB/A-3 July 28, 2000
10-SB/A-4 August 16, 2000
10-QSB (3/31/00) May 12, 2000
10-QSB (6/30/00) August 9, 2000
Cyberbotanical, Inc. 10-SB 000-29383 February 8, 2000
(Cleared SEC comments 10-SB/A-1 February 15, 2000
July 19, 2000) 10-SB/A-2 April 7, 2000
10-SB/A-3 May 18, 2000
10-SB/A-4 June 23, 2000
10-SB/A-5 July 11, 2000
10-SB/A-6 July 18, 2000
10-SB/A-7 July 18, 2000
10-QSB (3/31/00) May 15, 2000
10-QSB (6/30/00) July 31, 2000
Cyberboy, Inc. 10-SB 000-29505 February 15, 2000
(Comments) 10-SB/A-1 July 20,2000
10-SB/A-2 August 18, 2000
10-QSB (3/31/00) May 15, 2000
10-QSB (6/30/00) July 31, 2000
Cybercosmetics, Inc. 10-SB 000-29601 February 18, 2000
(Comments) 10-SB/A-1 July 20,2000
10-SB/A-2 August 18, 2000
10-QSB (3/31/00) May 15, 2000
10-QSB (6/30/00) July 31, 2000
15
<PAGE>
Cyberexcellence, Inc. 10-SB 000-29605 February 18, 2000
10-SB/A-1 July 20,2000
10-SB/A-2 August 18, 2000
10-QSB (3/31/00) May 15, 2000
10-QSB (6/30/00) July 31, 2000
Cyber Soccer, Inc. 10-SB 000-29635 February 22, 2000
10-SB/A-1 July 20,2000
10-SB/A-2 August 18, 2000
10-QSB (3/31/00) May 15, 2000
10-QSB (6/30/00) July 31, 2000
</TABLE>
None of the companies listed in the table above has engaged in an acquisition or
merger as of the filing date of this Form 10-SB.
Richard Surber intends to file additional Forms 10-SB with the SEC for shell
companies of which he is sole officer and director.
The corporations for which Richard Surber may be filing Forms 10-SB are listed
in the table below. All corporations are organized under the laws of the State
of Nevada. There is currently no timetable for the 10-SB filings for these
companies.
CORPORATION NAME FORM TYPE
Cybereye, Inc 10-SB
Cyber Fishing, Inc 10-SB
Cybergate, Inc 10-SB
Cyberlead, Inc 10-SB
Cyberlife, Inc 10-SB
Cyber Oil, Inc 10-SB
Cyber Skiing, Inc 10-SB
Cyber Tennis, Inc 10-SB
Cybertyme, Inc 10-SB
Cyberwholesale, Inc 10-SB
Cyber Wrestling, Inc 10-SB
Cyberwrite, Inc 10-SB
16
<PAGE>
Conflicts Of Interest
Richard Surber is associated with other firms involved in a range of business
activities. Consequently, there are potential inherent conflicts of interest in
his acting as sole Officer and Director of the Company. Insofar as Richard
Surber is engaged in other business activities, it is anticipated that he will
devote only a relatively minor amount of time to the Company's affairs.
Richard Surber is and may in the future become a shareholder, officer or
director of other companies that may be formed for the purpose of engaging in
business activities similar to those conducted by the Company. Accordingly,
additional direct conflicts of interest may arise in the future with respect to
Richard Surber acting on behalf of the Company or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities which
come to the attention of Richard Surber in the performance of his duties or
otherwise. The Company does not currently have a right of first refusal
pertaining to opportunities that come to Richard Surber's attention insofar as
such opportunities may relate to the Company's proposed business operations.
Richard Surber is, so long as he is sole Officer or Director of the Company,
subject to the restriction that all opportunities contemplated by the Company's
plan of operation which come to his attention, either in the performance of his
duties or in any other manner, will be considered opportunities of, and made
available to the Company and the companies that he is affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of Richard Surber. If the Company or the companies in which Richard
Surber is affiliated with both desire to take advantage of an opportunity, then
he would abstain from negotiating and voting upon the opportunity. However,
Richard Surber may still take advantage of an opportunity 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. There is no
order of preference or priority over the other shell companies to proceed with a
proposed transaction with a target business. The Company will consider retaining
an independent director to vote on such matters, if necessary, before such
transactions are consummated, in the event of a conflict of interest.
Richard Surber, President of the Company, will be compensated in the form of
shares of common stock of the Company upon completion of an acquisition or
merger. It is possible that such compensation may become a factor in
negotiations and present a conflict of interest. Richard Surber will use his
best efforts to equitably resolve any conflicts that might arise during
negotiations for an acquisition or merger. There are no agreements or
understandings for Richard Surber to resign at the request of another person.
Richard Surber is not acting on behalf of, nor will he act at the direction of
any other person, except at the time of an acquisition or merger and at the
request of the controlling persons of the acquisition or merger candidate. The
Company expects that the controlling persons of an acquisition or merger
candidate would ask the current Officer and Director to resign at the time of
the acquisition or merger as any such transaction would change control of the
Company.
There are no current plans, proposals, arrangements or understandings with
respect to the issuance of additional securities by the Company prior to the
merger with or acquisition of a business or businesses.
ITEM 6. EXECUTIVE COMPENSATION
No cash compensation was paid to Richard Surber during the fiscal years ended
December 31, 1998 or 1999. No cash compensation has been paid to Richard Surber
since the beginning of 2000, and it is not expected any such compensation will
be paid during the remainder of 2000. The Company, as of the filing date, has
issued
17
<PAGE>
Richard Surber a total of 2,000,000 Shares for his services to the Company
valued at $2,000. The Company in 1996 also issued CyberAmerica Corporation
2,000,000 shares for the organizational cost of the Company valued at $2,000.
There is currently no policy in place that prevents the Company from
compensating Richard Surber or any future officer, director or affiliate in the
form of the Company's shares of common stock or other non-cash compensation. The
Company has no current plans to compensate any of the aforementioned entities in
this manner in the foreseeable future. However, the Company may agree to
register the shares pursuant to an appropriate registration statement on or
after the Company effects a merger or acquisition.
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of the company during the years 1997 to 1999. The following
table provides summary information for each of the last three fiscal years
concerning cash and non-cash compensation paid or accrued by Richard Surber, the
Company's chief executive officer for the past three years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Year Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options/ payouts Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
Richard Surber, 1999 - - - $2000 - - -
President 1998 - - - - - - -
1997 - - - - - - -
---------------- ------- ------------ ---------- ----------------- ------------ -------------- ----------- -----------------
</TABLE>
The Company has no agreement or understanding, express or implied, with any
officer, director or principal stockholder, or their affiliates or associates,
regarding employment with the Company or compensation for services. The Company
has no plan, agreement, or understanding, express or implied, with any officer,
director or principal stockholder, or their affiliates or associates, regarding
the issuance to such persons of any shares of the Company's authorized and
unissued common stock. There is no understanding between the Company and any of
its present stockholders regarding the sale of a portion or all of the common
stock currently held by them in connection with any future participation by the
Company in a business. There are no other plans, understandings, or arrangements
whereby Richard Surber or any of the Company's principal stockholders, or any of
their affiliates or associates, would receive funds, stock, or other assets in
connection with the Company's participation in a business. No advances have been
made or contemplated by the Company to Richard Surber or any of its principal
stockholders, or any of their affiliates or associates.
There is no policy that prevents management from adopting a plan or agreement in
the future that would provide for cash or stock based compensation for services
rendered to the Company. Upon the merger or acquisition of a business, it is
possible that current management will resign and be replaced by persons
associated with the business acquired, particularly if the Company participates
in a business by effecting a stock exchange, merger, or consolidation. In the
event that Richard Surber remains after effecting a business acquisition, his
time commitment and compensation will likely be adjusted based on the nature and
location of such business and the services required, which cannot now be
foreseen.
Compensation of Directors
Currently there are no plans to compensate the Director of the Company for his
services.
18
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1999, the Company issued 2,006,000 shares of Common Stock to
Richard Surber (2,000,000) and Wayne Newton (5,000), Allan Merrill (500) and
Kevin Schillo (500), valued at par ($0.001) for services rendered pursuant to
Rule 701 of the Securities Act of 1933. Mr. Surber is the President and Director
of the Company and Wayne Newton was the Controller of CyberAmerica Corporation,
a 36.1% shareholder and former parent of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 100,000,000 shares of common stock, par value
$0.001 per share, of which 5,542,000 shares are issued and outstanding as of the
filing date. The Company is also authorized to issue 5,000,000 shares of
preferred stock, par value $0.001 per share, of which none is issued and
outstanding as of the filing date. Holders of both the common and preferred
stock are entitled to one vote per share on each matter submitted to a vote at
any meeting of stockholders. Neither the holders of common stock nor of
preferred stock have cumulative voting rights. The Company's Board of Directors
has authority, without action by the Company's stockholders, to issue all or any
portion of the authorized but unissued shares of common stock, which would
reduce the percentage ownership in the Company of its stockholders and which may
dilute the book value of the common stock. Likewise, the Company's Board of
Directors has authority, without action by the holders of preferred stock, to
issue all or any portion of the authorized but unissued shares of preferred
stock so long as such shares are on a parity with or junior to the rights of the
preferred stock, which would reduce the percentage ownership of the preferred
stockholders and which may dilute the book value of the stock.
Holders of either the Company's common or preferred stock have no pre-emptive
rights to acquire additional shares of stock. The common stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of common stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. Additional
rights, if any, for holders of preferred stock, in the event of liquidation are
yet to be determined by the Board of Directors.
Holders of the common stock are entitled to receive such dividends as the Board
of Directors may from time to time declare out of funds legally available for
the payment of dividends. The rights of holders of the preferred stock to
receive dividends, if any, are yet to be determined by the Board of Directors.
The Company has not paid dividends on either its common stock or its preferred
stock, and it does not anticipate that it will pay dividends in the foreseeable
future.
Dividend, Voting and Preemption Rights
The Company has two classes of authorized shares: $0.001 par value common stock
and $0.001 par value preferred stock. Holders of common stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available. The rights of holders of preferred stock, if any, to
receive a dividend, are yet to be determined by the Board of Directors. The
Company has not paid dividends on either its common stock or its preferred
stock, and it does not anticipate that it will pay dividends in the foreseeable
future. For more information on the Company's dividend policy, see "Part II.
Item 1, Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters."
Holders of the Company's common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the security holders. The
rights of holders of preferred stock, if any, to vote on all matters
19
<PAGE>
submitted to a vote of the security holders is yet to be determined by the Board
of Directors. The holders of common stock are not entitled to cumulative voting
rights.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
The Company currently has no public trading market. The Company intends to file
a Form 15c-(2)(11) in an effort to obtain a listing on the NASD over the counter
bulletin board to create a public market upon final approval by the SEC of this
Form 10SB becoming effective. Management believes that the creation of a public
trading market for the Company's securities would make the Company a more
attractive acquisition or merger candidate. However, there is no guarantee that
the Company will obtain a listing on the NASD over the counter bulletin board or
that a public market for the Company' securities will develop or, if such a
market does develop, that it will continue, even if a listing on the NASD over
the counter bulletin board is obtained. It is the position of the Office of
Small Business of the Securities & Exchange Commission (per No Action Letter,
NASD Regulation, Inc., dated January 21, 2000) that Rule 144 is not available
for resale transactions involving securities sold by promoters and affiliates of
a blank check company, and their transferees, and anyone else who has been
issued securities from a blank check company, and that securities issued by a
blank check company to promoters and affiliates, and their transferees, can only
be resold through registration under the Securities Act. The Company may only be
able to obtain a listing on the NASD OTC:BB after filing an appropriate
registration under the Securities Act of 1933 which would most likely occur
subsequent to the Company completing a business combination. In addition, the
promoters or affiliates of blank check companies, as well as their transferees,
are deemed to be "underwriters" of the securities issued both before and after
any business combination.
On December 15, 1999 the Company's common stock underwent a 2-for-1 forward
split.
Record Holders
As of May 18, 2000 there were eighty three (83) shareholders of record holding a
total of 5,542,000 shares of Common Stock. The holders of the Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Holders of the Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock.
Dividends
The Company has not declared any dividends since inception and does not
anticipate paying any dividends in the foreseeable future. The payment of
dividends is within the discretion of the Board of Directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its Common Stock other than those generally imposed
by applicable state law.
Penny Stock
Until the Company's shares qualify for inclusion in the NASDAQ system, the
trading of the Company's securities, if any, will be in the over-the-counter
markets which are commonly referred to as the "pink sheets"
20
<PAGE>
or on the OTC Bulletin Board. As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of the
securities offered.
Effective August 11, 1993, the Securities and Exchange 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) 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) 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 offering 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.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no disagreements with its independent accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On April 9, 1996, the Company issued 1,000,000 shares of Common Stock to
CyberAmerica Corporation at par value ($0.001) for a total of $1,000. The
Company relied on exemptions provided by Section 4(2) of the Securities Act of
1933, as amended. The Company made this offering based on the following factors:
(1) the issuance was an isolated private transaction by the Company which did
not involve a public offering; (2) there was only one offeree who was a
consultant to the Company; (3) the offeree did not resell the stock but
continued to hold it for at least two years; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offeree and the Company (these shares were
subject to a 2 for 1 forward split on December 15, 1999).
On December 31, 1999, the Company completed a private placement of 1,536,000
shares of Common Stock to 78 non-U.S. persons at a purchase price of $0.01 per
share. The Company relied on exemptions provided by Regulation S of the
Securities Act of 1933, as amended, for the issuance of the 1,536,000 shares of
Common Stock to these non-U.S. persons. It is the position of the Office of
Small Business of the Securities & Exchange Commission (per No Action Letter,
NASD Regulation, Inc., dated January 21, 2000) that Rule 144 is not
21
<PAGE>
available for resale transactions involving securities sold by promoters and
affiliates of a blank check company, and their transferees, and anyone else who
has been issued securities from a blank check company, and that securities
issued by a blank check company to promoters and affiliates, and their
transferees, can only be resold through registration under the Securities Act.
On December 31, 1999, the Company issued 2,006,000 shares of Common Stock to
Richard Surber (2,000,000), Wayne Newton (5,000), Allan Merrill (500) and Kevin
Schillo (500), valued at par ($0.001) for services rendered pursuant to Rule 701
of the Securities Act of 1933. The Company relied on the following facts in
determining that Rule 701 was available: (a) the shares were issued pursuant to
a written compensatory benefit plan issued by the Company, (b) the individuals
listed rendered bonafide services not in connection with the offer or sale of
securities in capital raising transaction, (c) the shares were issued pursuant
to a written contract relating to the issuance of shares paid as compensation
for services rendered, and (d) the amount of shares offered and sold in reliance
on Rule 701 did not exceed $500,000 and all securities sold in the last 12
months have not exceeded $5,000,000. It is the position of the Office of Small
Business of the Securities & Exchange Commission (per No Action Letter, NASD
Regulation, Inc., dated January 21, 2000) that Rule 144 is not available for
resale transactions involving securities sold by promoters and affiliates of a
blank check company, and their transferees, and anyone else who has been issued
securities from a blank check company, and that securities issued by a blank
check company to promoters and affiliates, and their transferees, can only be
resold through registration under the Securities Act.
All stock certificates issued exhibit restrictive legends in accordance with the
rules and regulations of the Securities Act of 1933 as described below. However,
it is the position of the Office of Small Business of the Securities & Exchange
Commission (per No Action Letter, NASD Regulation, Inc., dated January 21, 2000)
that Rule 144 is not available for resale transactions involving securities sold
by promoters and affiliates of a blank check company, and their transferees, and
anyone else who has been issued securities from a blank check company, and that
securities issued by a blank check company to promoters and affiliates, and
their transferees, can only be resold through registration under the Securities
Act.
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 of the then outstanding 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.
It is the position of the Office of Small Business of the Securities & Exchange
Commission (per No Action Letter, NASD Regulation, Inc., dated January 21, 2000)
that Rule 144 is not available for resale transactions involving securities sold
by promoters and affiliates of a blank check company, and their transferees, and
anyone else who has been issued securities from a blank check company, and that
securities issued by a blank check company to promoters and affiliates, and
their transferees, can only be resold through registration under the Securities
Act.
Regulation S provides generally that any offer or sale that occurs outside of
the United States is exempt from the registration requirements of the Securities
Act of 1933, provided that certain conditions are met. Regulation S has two safe
harbors. One safe harbor applies to offers and sales by issuers, securities
professionals involved in the distribution process pursuant to contract, their
respective affiliates, and persons acting on behalf of any of the foregoing (the
"issuer safe harbor"), and the other applies to resales by persons other than
the issuer, securities professionals involved in the distribution process
pursuant to contract, their respective affiliates (except
22
<PAGE>
certain officers and directors), and persons acting on behalf of any of the
forgoing (the "resale safe harbor"). An offer, sale or resale of securities that
satisfied all conditions of the applicable safe harbor is deemed to be outside
the United States as required by Regulation S. The distribution compliance
period for shares sold in reliance on Regulation S is one year.
The Company has complied with the requirements of Regulation S by having no
directed selling efforts made in the United States, by selling only to buyers
who were outside the United States at the time the buy orders originated,
ensuring that each person is a non-U.S. person with address in a foreign country
and having each person make representation to the Company certifying that he or
she is not a U.S. person and is not acquiring the Securities for the account or
benefit of a U.S. person other than persons who purchased Securities in
transactions exempt from the registration requirements of the Securities Act;
and also agrees only to sell the Securities in accordance with the registration
provisions of the Securities Act or an exemption therefrom, or in accordance
with the provisions of the Regulation.
The Company has obligations to ensure that any state laws are not violated
through the sale and resale of its securities. Richard Surber, President of the
Company, understood and agreed that the securities of the Company issued to him
are unregistered and restricted securities and may not be sold, transferred or
otherwise disposed of unless registered or qualified under applicable state
securities laws or an exemption therefrom is available.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws and section 78.751 of the Nevada Revised Statutes provide
for indemnification of the Company's officers and directors in certain
situations where they might otherwise personally incur liability, judgments,
penalties, fines and expenses in connection with a proceeding or lawsuit to
which they might become parties because of their position with the Company.
Section 78.751. Indemnification of officers, directors, employees and agents;
advancements of expenses, states the following:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation
23
<PAGE>
to procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation. Indemnification may not be made for any
claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the
case, the person is fairly and reasonable entitled to indemnity for such
expenses as the court deems proper.
3. To the extent that a director, officer, employe or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors wh were not parties to the
act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must
be paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses to
which corporate personnel other than directors or officers may be entitled
under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
24
<PAGE>
an action in his official capacity or an action in another capacity
while holding his office, except that indemnification, unless ordered
by a court pursuant to subsection 5, may not be made to or on behalf
of any director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
To the extent that indemnification may be related to liability arising under the
Securities Act, the Securities and Exchange Commission takes the position that
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
PART F/S
The Company's audited financial statements since inception for the fiscal year
ended December 31, 1999 are attached hereto as F-1 through F-9. Also included
are financial statements for the six month period ended June 30, 2000.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
25
<PAGE>
CYBERENERGY, INC.
(A Development Stage Company)
Financial Statements
December 31, 1999 (audited) and June 30, 2000 (unaudited)
26
<PAGE>
CYBERENERGY, INC.
(A Development Stage Company)
Index to Financial Statements
Page
Independent Auditors' Report...............................................F-2
Balance Sheet..............................................................F-3
Statement of Operations ................................................F-4
Statement of Stockholders' Equity..........................................F-5
Statement of Cash Flows....................................................F-6
Notes to Financial Statements..............................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders' and
Board of Directors of
CyberEnergy, Inc.
We have audited the accompanying balance sheet of CyberEnergy, Inc. (a
development stage company), as of December 31, 1999 and the related statements
of operations and stockholders' equity, and cash flows for the period from
December 15, 1999 (date of inception) to December 31, 1999. 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 CyberEnergy, Inc. (a
development stage company), as of December 31, 1999 and the results of its
operations and its cash flows for the period from December 15, 1999 (date of
inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's revenue generating activities are not in
place and the Company has incurred a loss. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters also are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Tanner + Co.
Salt Lake City, Utah
February 19, 2000
F-2
<PAGE>
<TABLE>
CYBERENERGY, INC.
(A Development Stage Company)
Balance Sheet for periods ending
June 30, 2000 and December 31, 1999
<CAPTION>
June 30, December 31,
2000 1999
---------------- -----------------
Assets (Unaudited) (Audited)
------
<S> <C> <C>
Cash & cash equivalents $ 13,349 $ -
Stock subscription receivable - 15,360
---------------- --------------
Total Current Assets 13,349 15,360
---------------- --------------
Total Assets $ 13,349 $ 15,360
Liabilities and Stockholders' Equity
Current liabilities - accounts payable $ 838 $ 838
---------------- --------------
Total Current Liabilities 838 838
---------------- --------------
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value, 100,000,000 shares
authorized, 5,542,000 shares issued and outstanding 5,542 5,542
Additional paid-in capital 30,878 30,878
Accumulated deficit (23,909) (21,898)
---------------- --------------
Total stockholders' equity 12,511 14,522
---------------- --------------
Total liabilities and stockholders' equity $ 13,349 $ 15,360
</TABLE>
See accompanying notes to Financial Statements
F-3
<PAGE>
<TABLE>
CYBERENERGY, INC.
(A Development Stage Company)
Statement of Operations
December 15, 1999 (Date of Inception) to December 31, 1999
and
Six months ended June 30, 2000
<CAPTION>
Six months Inception to
ended December Cumulative
June 30, 2000 31, 1999 to Date
---------------- ---------------- ----------------
(Unaudited) (Audited)
<S> <C> <C> <C>
Revenues $ - - $ -
General and administrative costs 2,011 $ 20,898 22,909
---------------- - ------------- ----------------
Income / (Loss) before income taxes (2,011) (20,898) (22,909)
Provision for income taxes - - -
---------------- - ------------- ----------------
Net Income / (Loss) $ (2,011) $ (20,898) $ (22,909)
================= ============= =================
Income / (Loss) per common share - basic and diluted $ - $ (0.01) $ -
================= ============= =================
Weighted average common shares - basic and diluted 5,542,000 2,236,000 5,277,520
================= ============= =================
</TABLE>
See accompanying notes to Financial Statements
F-4
<PAGE>
<TABLE>
CYBERENERGY, INC.
(A Developmental Stage Company)
Statement of Stockholders' Equity
December 15, 1999 (Date of Inception) to June 30, 2000
<CAPTION>
Preferred Stock Common Stock Additional
---------------------------------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 15, 1999
(date of inception) - $ - 1,000,000 $ 1,000 $ $ (1,000) $ -
Stock Split - - 1,000,000 1,000 (1,000) - -
Issuance of common stock for:
Services - - 2,006,000 2,006 18,054 - 20,060
Stock subscription receivable - - 1,536,000 1,536 13,824 - 15,360
Net Loss for period - - - - - (20,898) (20,898)
---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance at December 31, 1999 - $ - 5,542,000 $ 5,542 $ 30,878 $ (21,898) $ 14,522
========== ========== ========== =========== =========== ============ ===========
Net Loss for period (unaudited) - - - - - (2,011) (2,011)
---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance at June 30, 2000 (unaudited) - $ - 5,542,000 $ 5,542 $ 30,878 $ (23,909) $ 12,511
========== ========== ========== =========== =========== ============ ===========
</TABLE>
See accompanying notes to Financial Statements
F-5
<PAGE>
<TABLE>
CYBERENERGY, INC.
(A Development Stage Company)
Statement of Cash Flows
December 15, 1999 (Date of Inception) to December 31, 1999
and
Six Months Ended June 30, 2000
<CAPTION>
Six Months Inception to
Ended December Cumulative
June 30, 2000 31, 1999 to Date
---------------- -------------- ---------------
(Unaudited) (Audited)
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (2,011) $ (20,898) $ (22,909)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Decrease in stock subscription receivable 15,360 - 15,360
Stock compensation expense - 20,060 20,060
Increase in accounts payable - 838 838
---------------- -------------- ---------------
Net cash provided by operating activities 13,349 - 13,349
---------------- -------------- ---------------
Cash flows from investing activities - - -
---------------- -------------- ---------------
Cash flows from financing activities - - -
---------------- -------------- ---------------
Net increase in cash 13,349 - 13,349
Cash, beginning of period - - -
---------------- -------------- ---------------
Cash, end of period $ 13,349 $ - $ 13,349
================ ============== ===============
</TABLE>
See accompanying notes to Financial Statements
F-6
<PAGE>
CYBERENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
The Company was organized under the laws of the State of Nevada on February 15,
1996 and had no significant operations or activity until December 15, 1999 (date
of inception). The Company proposes to seek business ventures which will allow
for long-term growth. Further, the Company is considered a development stage
company as defined in SFAS No. 7 and has not, thus far, commenced planned
principal operations.
Unaudited Financial Statements
The unaudited financial statements include the accounts of the Company and
include all adjustments (consisting of normal recurring items), which are, in
the opinion of management, necessary to present fairly the financial position as
of June 30, 2000 and the results of operations and cash flows for the six months
ended June 30, 2000. The results of operations for the six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the
entire year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting, principally related
to net operating loss carryforwards.
Earnings Per Share
The computation of basic earnings per common share is based on the weighted
average number of shares outstanding during the period.
The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the period plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the period. The Company does not have any stock options or warrants
outstanding at December 31, 1999.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>
CYBERENERGY, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
2. Going Concern
As of December 31, 1999, the Company's revenue generating activities are not in
place, and the Company has incurred a loss for the period then ended. These
factors raise substantial doubt about the Company's ability to continue as a
going concern.
Management intends to seek additional funding through business ventures. There
can be no assurance that such funds will be available to the Company, or
available on terms of acceptable to the Company.
3. Income Taxes
The difference between income taxes at statutory rates and the amount presented
in the financial statements is a result of an increase in the valuation
allowance to offset the deferred tax asset related to the net operating loss
carryforward.
The Company has net operating loss carryforwards of approximately $20,000, which
begin to expire in the year 2019. The amount of net operating loss carryforward
that can be used in any one year will be limited by significant changes in the
ownership of the Company and by the applicable tax laws which are in effect at
the time such carryforwards can be utilized.
4. Supplemental Cash Flow Information
No amounts were paid for interest or income taxes during the period ended
December 31, 1999 or June 30, 2000.
The Company issued common stock in exchange for services valued at $20,060 and a
stock subscription receivable of $15,360. The stock subscription receivable was
collected subsequent to December 31, 1999.
5. Common Stock Split
On December 15, 1999, the Company's Board of Directors approved a 2-for-1 common
stock split. All per share information and number of common shares have been
retroactively adjusted to reflect this common stock split in the accompanying
financial statements.
6. Stock Plan
The company has adopted a benefit plan (the Plan). Under the Plan, the Company
may issue shares of the Company's common stock and/or grant options to acquire
the Company's common stock from time to time to employees, directors, officers,
consultants or advisors of the Company on the terms and conditions set forth in
the Plan. In addition, at the discretion of the Board of Directors, stock may
from time to time be granted unedr this Plan to other individuals, including
consultants or advisors, who contribute to the success of the Company but are
not employees of the Company.
F-8
<PAGE>
7. Recent Accounting Pronouncements
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statements No. 133." SFAS 133 establishes accounting and reporting standards of
all derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. SFAS 133 is now effective
for fiscal years beginning after June 15, 2000. The Company believes that the
adoption of SFAS 133 will not have any material effect on the financial
statements of the Company.
F-9
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the Description of
Exhibits beginning on page 28 of this Form 10-SB under "Item 2. Description
of Exhibits".
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27
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized, this 30th day of August, 2000.
CYBERENERGY, INC.
/s/ Richard D Surber
--------------------------
Name: Richard D. Surber
Title: President/CEO and Director
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28
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS.
Exhib. Page
No. No. Description
3(i) 30 Articles of Incorporation of Cyberenergy, Inc., a Nevada
corporation, filed with the State of Nevada on February 15,
1996.
3(i) 33 Amendment to the Articles of Incorporation of Cyberenergy,
Inc., a Nevada corporation, filed with the State of Nevada
on December 15, 1999.
3(ii) 34 By-laws of the Company adopted on December 31, 1999
4 45 Employee Benefit Plan adopted on December 14 , 1999.
23 48 Consent of Independent Certified Public Accountant
27 * Financial Data Schedule "CE".
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
29
