U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT
For the Fiscal Year Ended December 31, 1996
Commission File No. 33-27439FW
Goung Hei Investment Co., Ltd.
------------------------------
(Formerly Potentialistics, Inc.)
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
Delaware 16910 Dallas Parkway, Suite 100, Dallas, TX 75248 75-2254391
(State or Other Jurisdiction (Address of Principal Executive Office, (I.R.S. Employer
of incorporation or organization) including Zip Code) Identification No.)
</TABLE>
(972) 248-1922
(Registrant's telephone number, including area code)
Securities Registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on which Registered
None
Securities Registered Under Section 12(g) of the Exchange Act: Common Stock,
0.00001 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No X
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were: $-0-.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 23, 1999 was $58,239 (computed by reference to the
average bid and asked prices of such stock as of September 23, 1999 as reported
on the OTC Bulletin Board.
The number of shares outstanding of the registrant's common stock as of
September 23, 1999 was 1,682,345
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
PART I
Item 1. Description of Business.
General
Potentialistics, Inc. (the "Company") was incorporated on October 12,
1988 under the laws of the State of Delaware, as a wholly-owned subsidiary of
Texas American Group, Inc., a publicly-owned corporation (TAG). TAG caused the
company to register 1,585,733 shares of its initial 25,000,000 shares pre
reverse split issued and outstanding shares of common stock with the Securities
and Exchange Commission on Form S-18. TAG then distributed the registered shares
to TAG shareholders. The Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's shareholders will benefit.
In June 1996, the Company changed its corporate name to Goung Hei
Investment Co., Ltd. in anticipation of an acquisition of a construction company
based in Taiwan. This transaction was never consummated.
The Company's majority shareholder has continued to maintain the
corporate status of the Company and provides all nominal working capital support
on the Company's behalf. Due to the Company's lack of operating assets, its
continuance is fully dependent upon the majority shareholder's continuing
support. The majority shareholder intends to continue the funding of nominal
necessary expenses to sustain the corporate entity.
The company is considered in the development stage and, as such, has
generated no significant operating revenues and has incurred cumulative
operating losses of approximately $5,300.
It is the intention of the management to bring its SEC periodic
reporting to date in order that the Company might be potentially attractive to a
private business that has interest in becoming a publicly-held company, without
the expense and time delay involved in distributing its securities to the
public.
Proposed Business
The Company intends to locate and combine with an existing,
privately-held company, which is profitable, or, in management's view, has
growth potential, irrespective of the industry in which it is engaged. However,
the Company does not intend to combine with a private company, which may be
deemed to be an investment company subject to the Investment Company Act of
1940. A combination may be structured as a merger, consolidation, exchange of
the Company's common stock for stock or assets or any other form which will
result in the combined enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company
anticipates that it will have, aside from carrying on its search for a
combination partner, no business activities, and, thus, will have no source of
revenue. Should the Company incur any significant liabilities prior to a
combination with a private company, it may not be able to satisfy such
liabilities as are incurred.
2
<PAGE>
If the Company's management pursues one or more combination
opportunities beyond the preliminary negotiations stage and those negotiations
are subsequently terminated, it is foreseeable that such efforts will exhaust
the Company's ability to continue to seek such combination opportunities before
any successful combination can be consummated. In that event, the Company's
common stock will become worthless and holders of the Company's common stock
will receive a nominal distribution, if any, upon the Company's liquidation and
dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management
intends to consider only combination candidates which are profitable or, in
management's view, have growth potential. The Company's management does not
intend to pursue any combination proposal beyond the preliminary negotiation
stage with any combination candidate which does not furnish the Company with
audited financial statements for at least its most recent fiscal year and
unaudited financial statements for interim periods subsequent to the date of
such audited financial statements, or is in a position to provide such financial
statements in a timely manner. The Company will, if necessary funds are
available, engage attorneys and/or accountants in its efforts to investigate a
combination candidate and to consummate a business combination. The Company may
require payment of fees by such combination candidate to fund the investigation
of such candidate. In the event such a combination candidate is engaged in a
high technology business, the Company may also obtain reports from independent
organizations of recognized standing covering the technology being developed
and/or used by the candidate. The Company's limited financial resources may make
the acquisition of such reports difficult or even impossible to obtain and,
thus, there can be no assurance that the Company will have sufficient funds to
obtain such reports when considering combination proposals or candidates. To the
extent the Company is unable to obtain the advice or reports from experts, the
risks of any combined enterprise's being unsuccessful will be enhanced.
Company's management expects that in connection with any acquisition or
merger transaction, that the Management of Company will be transferred to the
new controlling shareholders. Company's management will require a declaration
from any such company or controlling shareholders, that they have not been
convicted in any criminal proceedings or are named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses), nor have
been subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining them from, or otherwise limiting the engagement in any
type of business practice; or engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of Federal or State securities laws.
3
<PAGE>
Item 2. Description of Property.
The Company has no properties.
Item 3. Legal Proceedings.
The Company is not a party to any material pending nor is it aware of
any threatened legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to securities holders during the year ended
December 31, 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of September 23, 1999 was $58,239 (computed by reference to
the average bid and asked prices of such stock as of September 23, 1999, as
reported on the OTC Bulletin Board.
The number of shares outstanding of the registrant's common stock as of
September 23, 1999 was 1,682,345 shares.
Dividend Policy
The Company has never paid any dividends on its common stock and does
not have any current plan to pay any dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and Plan of
Operation.
4
<PAGE>
Discussion of Financial Condition
The Company currently has no revenues, no operations and owns no
assets. The Company will remain illiquid until such time as a business
combination transaction occurs, if ever. No prediction of the future financial
condition of the Company can be made.
The Company's independent auditor, S.W. Hatfield, CPA expressed,
in its opinion on the Company's audited financial statements, substantial doubt
about the Company's ability to continue as a going concern. Reference is made to
the financial statements of the Company included elsewhere herein, and,
specifically, to the Independent Auditor's Report and Note A in the financial
statements of the Company.
Plan of Business
General. The Company intends to locate and combine with an existing,
privately-held company, which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. However, the
Company does not intend to combine with a private company, which may be deemed
to be an investment company subject to the Investment Company Act of 1940.
A combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company
anticipates that it will have, aside from carrying on its search for a
combination partner, no business activities, and, thus, will have no source of
revenue. Should the Company incur any significant liabilities prior to a
combination with a private company, it may not be able to satisfy such
liabilities as are incurred.
If the Company's management pursues one or more combination
opportunities beyond the preliminary negotiations stage and those negotiations
are subsequently terminated, it is foreseeable that such efforts will exhaust
the Company's ability to continue to seek such combination opportunities before
any successful combination can be consummated. In that event, the Company's
common stock will become worthless and holders of the Company's common stock
will receive a nominal distribution, if any, upon the Company's liquidation and
dissolution.
Combination Suitability Standards. In its pursuit for a combination
partner, the Company's management intends to consider only combination
candidates which are profitable or, in management's view, have growth potential.
The Company's management does not intend to pursue any combination proposal
beyond the preliminary negotiation stage with any combination candidate which
does not furnish the Company with audited financial statements for at least its
most recent fiscal year and unaudited financial statements for interim periods
subsequent to the date of such audited financial statements, or is in a position
to provide such financial statements in a timely manner. The Company will, if
necessary funds are available, engage attorneys and/or accountants in its
efforts to investigate a combination candidate and to consummate a business
combination. The Company may require payment of fees by such combination
candidate to fund the investigation of such candidate. In the event such a
combination candidate is engaged in a high technology business, the Company may
also obtain reports from independent organizations of recognized standing
covering the technology being developed and/or used by the candidate. The
Company's limited financial resources may make the acquisition of such reports
difficult or even impossible to obtain and, thus, there can be no assurance that
the Company will have sufficient funds to obtain such reports when considering
combination proposals or candidates. To the extent the Company is unable to
obtain the advice or reports from experts, the risks of any combined
enterprise's being unsuccessful will be enhanced.
5
<PAGE>
Company's management expects that in connection with any acquisition or
merger transaction, that the Management of Company will be transferred to the
new controlling shareholders. Company's management will require a declaration
from any such company or controlling shareholders, that they have not been
convicted in any criminal proceedings or are named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses), nor have
been subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining them from, or otherwise limiting the engagement in any
type of business practice; or engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of Federal or State securities laws.
<TABLE>
Item 7. Financial Statements.
Page
<S> <C>
Report of Independent Certified Public Accountants F-3
Balance Sheets as of December 31, 1996, 1995 and 1994 F-4
Statementof Operations F-5 for the years ended December 31, 1996, 1995 and 1994
and for the period from October 12, 1988 (date of inception) through
December 31, 1996
Statement of Changes in Shareholders' Equity F-6
for the period October 12, 1988 (date of inception)
to December 31, 1996
Statementof Cash Flows F-8 for the years ended December 31, 1996, 1995 and 1994
and for the period from October 12, 1988 (date of inception) through
December 31, 1996
Notes to Financial Statement F-9
</TABLE>
6
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The following table sets forth the officers and directors of the Company.
Name Position Age
- ---- -------- ---
Kevin B. Halter, Jr. President and Director 38
Kevin B. Halter Vice President and Director 63
Set forth below is a description of the background of the President and director
of the Company.
Kevin B. Halter, Jr. currently serves as President and Director of the Company.
Mr. Halter has served as Vice President, Secretary and a director of Millennia,
Inc. since January 1994. He is also President of Securities Transfer
Corporation, a registered stock transfer company, a position he has held since
1987. Mr. Halter has served as Vice President and Secretary of Halter Capital
Corporation since 1987. Mr. Halter is the son of Kevin B. Halter.
Kevin B. Halter currently serves as Vice President and Director of the Company.
Mr. Halter has served as President, Chief Executive Officer and Chairman of the
Board of Millennia, Inc. since June 1994. He also served as Vice Chairman of the
Board of Millennia, Inc. from January 1994 until June 1994. In addition, Mr.
Halter has served as Chairman of the Board and Chief Executive Officer of Halter
Capital Corporation, a privately-held investment and consulting company, since
1987, and as its President since June 1995. Mr. Halter is the father of Kevin B.
Halter, Jr.
7
<PAGE>
Item 10. Executive Compensation.
The Company's management is not currently compensated for
services provided to the Company, and no compensation has been accrued and none
is expected to be accrued in the future.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the names and addresses of each of the
persons known by the Company to own beneficially 10% or more of the common stock
of the Company, as well as the common stock ownership of each of the officers
and directors of the Company.
<TABLE>
Name and Address Number of Shares Percentage of Ownership (1)
<S> <C> <C>
Halter Capital Corporation 1,485,146 88.9%
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Kevin B. Halter. 20,619 (less than 1%)
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Kevin B. Halter, Jr. 12,207 (less than 1%)
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Securities Transfer Corporation 15,070 (less than 1%)
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
All officers and directors as a 32,826 (less than 1%)
Group (2 persons)
</TABLE>
** Halter Capital Corporation, Kevin B. Halter and Kevin B. Halter, Jr., shall
all act collectively as owners of the Company. Securities Transfer
Corporation is 100% owned by the KL Halter Family Partnership. Kevin B.
Halter has no ownership rights in said partnership.
Item 12. Certain Relationships and Related Transactions.
The Company's President, Kevin B. Halter, Jr., has agreed to provide funds to
the Company sufficient to cover the Company expenses relating to its SEC
periodic reporting and other minor corporate expenses.
Item 13. Exhibits and Reports on Form 8-K.
Exhibits
None.
Reports on Form 8-K
No Current Report on Form 8-K was filed during the year ended December 31, 1996.
The Company intends to file a Current Report on Form 8-K with respect to a
change in the Company's independent auditor in the near future.
8
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: September 23, 1999
Goung Hei Investment Co., Ltd.
By: /s/ Kevin B. Halter, Jr.
------------------------
Kevin B. Halter, Jr.
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Kevin B. Halter, Jr. September 23, 1999
- ------------------------
Kevin B. Halter, Jr.
President and Director
/s/ Kevin B. Halter, Jr. September 23, 1999
- ------------------------
Kevin B. Halter
Vice President and Director
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Exchange Act by Non-reporting Issuers.
As of the date of this Annual Report on Form 10-KSB, no annual report
or proxy material has been sent to security holders of the Company. It is
anticipated that an annual report and proxy material will be furnished to
security holders subsequent to the filing of this Annual Report on Form 10-KSB.
<PAGE>
GOUNG HEI
INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
Financial Statements
and
Auditor's Report
December 31, 1996, 1995 and 1994
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
CONTENTS
Page
<S> <C>
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets as of December 31, 1996, 1995 and 1994 F-4
Statements of Operations
for the years ended December 31, 1996, 1995 and 1994 and for the period
from October 12, 1988 (date of inception)
through December 31, 1996 F-5
Statement of Changes in Shareholders' Equity
for the period October 12, 1989 (date of inception)
to December 31, 1996 F-6
Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 and for the period
from October 12, 1988 (date of inception)
through December 31, 1996 F-8
Notes to Financial Statements F-9
</TABLE>
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Goung Hei Investment Co., Ltd.
(formerly Potentialistics, Inc.)
We have audited the accompanying balance sheets of Goung Hei Investment Co.,
Ltd. (formerly Potentialistics, Inc.) (a Delaware corporation and a development
stage enterprise) as of December 31, 1996, 1995 and 1994 and the related
statements of operations, changes in shareholders' equity and cash flows for
each of the years then ended and for the period October 12, 1988 (date of
inception) through December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Goung Hei Investment Co., Inc.
(formerly Potentialistics, Inc.) (a development stage enterprise) as of December
31, 1996, 1995 and 1994, and the results of its operations and its cash flows
for each of the years then ended and for the period October 12, 1988 (date of
inception) through December 31, 1996, 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 A to the
financial statements, the Company is dependent upon its majority shareholder to
maintain the corporate status of the Company and to provide all nominal working
capital support on the Company's behalf. Because of the Company's lack of
operating assets, its continuance is fully dependent upon the majority
shareholder's continuing support. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The majority
shareholder intends to continue the funding of nominal necessary expenses to
sustain the corporate entity. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
S. W. HATFIELD, CPA
Dallas, Texas
September 8, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
BALANCE SHEETS
December 31, 1996, 1995 and 1994
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
ASSETS
Cash in bank $ -- $ -- $ --
Organization costs, net of accumulated
amortization of approximately $133,
respectively -- -- --
------- ------- -------
TOTAL ASSETS $ -- $ -- $ --
======= ======= =======
LIABILITIES $ -- $ -- $ --
------- ------- -------
SHAREHOLDERS' EQUITY Preferred stock - $0.00001 par value
10,000,000 shares authorized; none
issued and outstanding -- -- --
Common stock - $0.00001 par value
50,000,000 shares authorized
1,693,163, 1,669,734 and 1,669,734
issued and outstanding, respectively 17 17 17
Additional paid-in capital 5,270 2,927 2,927
Deficit accumulated during
the development stage (5,287) (2,944) (2,944)
------- ------- -------
Total shareholders' equity -- -- --
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ -- $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
STATEMENTS OF OPERATIONS
Years ended December 31, 1996, 1995 and 1994
and the period October 12, 1988 (date of inception)
through December 31, 1996
Period from
October 12, 1988
(date of inception)
Year ended Year ended Year ended through
December 31, December 31, December 31, December 31,
1996 1995 1994 1996
----------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ --
----------- ---------- ---------- -----------
EXPENSES
Rent and management fees -- -- -- 1,100
Other expenses 2,343 -- -- 4,054
Amortization of
organization costs -- -- -- 133
----------- ---------- ---------- -----------
Total expenses 2,343 -- -- 5,287
----------- ---------- ---------- -----------
NET LOSS $ (2,343) $ -- $ -- $ (5,287)
=========== ========== ========== ===========
Net loss per weighted-average
share of common stock
outstanding nil nil nil nil
=== === === ===
Weighted-average number
of shares of common
stock outstanding 1,682,345 1,669,734 1,669,734 1,671,247
=========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1996, 1995 and 1994
and the period October 12, 1988 (date of inception)
through December 31, 1996
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of stock at formation 25,000,000 $ 250 $ -- $ -- $ 250
Effect of 15 for 1 reverse
stock split on June 7, 1996,
including rounding of
fractional shares (23,330,487) (233) 233 -- --
----------- ----------- ----------- ----------- -----------
Balance at formation,
restated 1,669,513 17 233 -- 250
Capital contributed to
support development -- -- 600 -- 600
Net loss for the period -- -- -- (606) (606)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1988 1,669,513 17 833 (606) 244
Issuance of common stock
for cash to support
development 221 -- 2,082 -- 2,082
Net loss for the year -- -- -- (569) (569)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1989 1,669,734 17 2,915 (1,175) 1,757
Capital contributed to
support development -- -- 12 -- 12
Net loss for the year -- -- -- (1,697) (1,697)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1990 1,669,734 17 2,927 (2,872) 72
Net loss for the year -- -- -- (28) (28)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1991 1,669,734 $ 17 $ 2,927 $ (2,900) $ 44
=========== =========== =========== =========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1996, 1995 and 1994
and the period October 12, 1988 (date of inception)
through December 31, 1996
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1991 1,669,734 $ 17 $ 2,927 $ (2,900) $ 44
Net loss for the year -- -- -- (28) (28)
--------- --------- --------- --------- ---------
Balances at
December 31, 1992 1,669,734 17 2,927 (2,928) 16
Net loss for the year -- -- -- (16) (16)
--------- --------- --------- --------- ---------
Balances at
December 31, 1993 1,669,734 17 2,927 (2,944) --
Net loss for the year -- -- -- -- --
--------- --------- --------- --------- ---------
Balances at
December 31, 1994 1,669,734 17 2,927 (2,944) --
Net loss for the year -- -- -- -- --
--------- --------- --------- --------- ---------
Balances at
December 31, 1995 1,669,734 17 2,927 (2,944) --
Common stock issued for
reorganization expenses 23,429 -- 2,343 -- 2,343
Net loss for the year -- -- -- (2,343) (2,343)
--------- --------- --------- --------- ---------
Balances at
December 31, 1996 1,693,163 $ 17 $ 5,270 $ (5,287) $ --
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
and the period October 12, 1988 (date of inception)
through December 31, 1996
Period from
October 12, 1988
(date of inception)
Year ended Year ended Year ended through
December 31, December 31, December 31, December 31,
1996 1995 1994 1996
------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss for the period $ (2,343) $ -- $ -- $(5,287)
Adjustments to reconcile
net loss to net cash
provided by operating
activities
Common stock issued for
reorganization expenses 2,343 -- -- 2,343
Payment of
organization costs -- -- -- (133)
Amortization of
organization costs -- -- -- 133
---------- ------ ------ -------
Net cash used in operating activities -- -- -- (2,944)
---------- ------ ------ -------
CASH FLOWS FROM
INVESTING ACTIVITIES -- -- -- --
---------- ------ ------ -------
CASH FLOWS FROM
FINANCING ACTIVITIES
Initial sale of common stock -- -- -- 250
Capital contributed to
support development -- -- -- 2,694
---------- ------ ------ -------
Net cash used in financing activities -- -- -- 2,944
---------- ------ ------ -------
DECREASE IN CASH -- -- -- --
Cash at beginning of period -- -- -- --
---------- ------ ------ -------
Cash at end of period $ -- $ -- $ -- $ --
========== ====== ====== =======
SUPPLEMENTAL DISCLOSURE OF
INTEREST AND INCOME TAXES PAID
Interest paid for the period $ -- $ -- $ -- $ --
========== ====== ====== =======
Income taxes paid for the period $ -- $ -- $ -- $ --
========== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Potentialistics, Inc. (Company) was incorporated on October 12, 1988, under the
laws of the State of Delaware, as a wholly-owned subsidiary of Texas American
Group, Inc., a publicly-owned corporation (TAG). TAG caused the Company to
register 1,585,733 shares of its initial 25,000,000 issued and outstanding
shares of common stock with the Securities and Exchange Commission on Form S-18.
TAG then distributed the registered shares to TAG shareholders. The Company has
had no substantial operations or substantial assets since inception. The
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's shareholders will benefit.
In June 1996, the Company changed its corporate name to Goung Hei Investment
Co., Ltd. in anticipation of a acquisition of a construction company based in
Taiwan. This transaction was never consummated.
The Company's majority shareholder has continued to maintain the corporate
status of the Company and provides all nominal working capital support on the
Company's behalf. Because of the Company's lack of operating assets, its
continuance is fully dependent upon the majority shareholder's continuing
support. The majority shareholder intends to continue the funding of nominal
necessary expenses to sustain the corporate entity.
The Company is considered in the development stage and, as such, has generated
no significant operating revenues and has incurred cumulative operating losses
of approximately $5,300.
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.
NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Organization costs
Organization costs were amortized using the straight-line basis over a five
year period.
3. Income taxes
The Company files its own separate federal income tax return. The Company
has no net operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods.
F-9
<PAGE>
GOUNG HEI INVESTMENT CO., LTD.
(formerly Potentialistics, Inc.)
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4. Loss per share
Loss per share is computed by dividing the net loss by the weighted-average
number of shares of common stock and common stock equivalents, if any,
outstanding during the year/period.
NOTE C - RELATED PARTY TRANSACTIONS
For the period October 12, 1988 (date of inception) through December 31, 1989,
TAG provided office space and management services to the Company for a monthly
fee. Total expenses under this arrangement aggregated $1,100 for the cumulative
period.
NOTE D - COMMON STOCK TRANSACTIONS
On June 7, 1996, the Company's Board of Directors approved a one (1) for fifteen
(15) reverse stock split in anticipation of a merger transaction which did not
consummate. The effect of this action is reflected in the accompanying financial
statements as of the first day of the first period presented.
In September 1989, the Company issued 221 reverse split shares of the Company's
restricted, unregistered common stock to its majority shareholder for cash of
approximately $2,082. The proceeds were used to support general corporate
expenses.
In June 1996, the Company issued 23,429 reverse split shares of the Company's
restricted, unregistered common stock to it's majority shareholder for payments
made on the Company's behalf, valued at approximately $2,300, for various
charges and fees related to the then proposed merger transaction which was not
consummated.
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