U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
X____Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended May 31, 1999.
_____Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ____.
Commission File No: 0-21951
BUFFALO CAPITAL III, LTD.
(Name of small business in its charter)
Colorado 84-1356383
_______________________________________________________
(State or other jurisdiction (IRS Employer Identification
of Incorporation) No.)
5001 Spring Valley Road, Suite 800 East
_________________________________________________________
Address of Principal Executive Office (street and number)
Dallas, Texas 75244
___________________________________________________
City, State and Zip Code
Issuer's telephone number: (972) 991-0001
Securities to be registered under Section 12(b) of the Act:
Title of each class
N/A
Name of each exchange on which registered
N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 _X__ No ____
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of 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. ___
State issuer's revenue for its most recent fiscal year: $ -0-
State the aggregate market value of the voting stock held by
nonaffiliates computed by reference to the price at which the stock
was sold, or the average bid and asked priced of such stock, as of a
specified date within the past 60 days (See definition of affiliate in
Rule 12b-2): $ -0-
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates on
the basis of reasonable assumptions, if the assumptions are stated.
(Issuers involved in bankruptcy proceedings during the past five years)
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes____
No ____
(Applicable only to corporate registrants):
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 14,000,000 as of
July 22, 1999.
Documents incorporated by reference:
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g. Part I,
Part II, etc.) into which the document is incorporated: (1) any annual
report to security holders; (2) any proxy or information statement; and
(3) any prospectus filed pursuant to Rule 424(b) or (c) of the
Securities Act of 1933 ("Securities Act"). The listed documents should
be clearly described for identification purposes.
Transitional Small Business Disclosure Format (check one):
Yes____ No__X_
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
General.
The Company was incorporated under the laws of the State of
Colorado on August 28, 1996, and remains in the early developmental
and promotional stages. On May 4, 1999, a change in control of the
registrant occurred. On that date, Steadfast Investments, L.P., a
Texas limited partnership, and GMK Family Holdings, L.L.C., a
Delaware limited liability company, purchased a total of 12,740,000
newly issued shares of common stock from the Company for a
purchase price of $1,000. Steadfast Investments, L.P. and GMK
Family Holdings, L.L.C. acquired a controlling interest in the Company
in anticipation of a possible business combination transaction between
the Company and The Heritage Organization, L.L.C., or between the
Company and Steadfast Investments, L.P., the principal owner of The
Heritage Organization, L.L.C. The Heritage Organization, L.L.C., is
engaged in the business of providing consulting services to high net
worth individuals, families and businesses.
As of the end of its fiscal year ending May 31, 1999, the
Company is pursuing, but has not yet reached any agreement or
definitive understanding with any person concerning the business
combination transaction between the Company and The Heritage
Organization, L.L.C., or between the Company and Steadfast
Investments, L.P., the principal owner of The Heritage Organization,
L.L.C. or any other entity.
To date, the Company's only activities have been
organizational ones, directed at the raising of capital, and preliminary
efforts to seek one or more properties or businesses for acquisition,
such as The Heritage Organization, L.L.C. The Company has not
commenced any commercial operations. The Company currently has
no full-time employees and owns no real estate.
The Company's immediate business plan is to pursue this
possible business combination transaction. The predicted time frame
and methodology of this possible business combination transaction, as
of the date of this filing, has not been determined. The business
combination transaction is considered possible but not probable.
Should this transaction not occur, the Company shall continue with its
previous business plan to seek, investigate and possibly acquire one
or more properties or businesses. Such an acquisition may be made
by purchase, merger, exchange of stock, or otherwise and may
encompass assets or a business entity, such as a corporation, joint
venture, or partnership. The Company has very limited capital, and it
is unlikely that the Company will be able to take advantage of more
than one such business opportunity. The Company intends to seek
opportunities demonstrating the potential of long-term growth as
opposed to short-term earnings.
If the business combination transaction is not completed, it is
anticipated that the Company's officers and directors will continue to
initiate contacts with securities broker-dealers and other persons
engaged in other aspects of corporate finance to advise them of the
Company's existence and to determine if the companies or
businesses they represent have an interest in considering a merger or
acquisition with the Company. No assurance can be given that the
Company will be successful in finding or acquiring a desirable
business opportunity, given the limited funds that are expected to be
available for acquisitions, or that any acquisition that occurs will be on
terms that are favorable to the Company or its stockholders.
If this possible but not probable business combination
transaction is not completed, the Company's search for a candidate
for acquisition will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and
which are able to satisfy, or anticipate in the reasonably near future
being able to satisfy, the minimum asset requirements in order to
qualify shares for trading on NASDAQ or on an exchange such as the
American or Pacific Stock Exchange. (See "Investigation and
Selection of Business Opportunities.") The Company anticipates that
the business opportunities presented to it will (i) be recently organized
with no operating history, or a history of losses attributable to under-
capitalization or other factors; (ii) be experiencing financial or
operating difficulties; (iii) be in need of funds to develop a new product
or service or to expand into a new market; (iv) be relying upon an
untested product or marketing concept; or (v) have a combination of
the characteristics mentioned in (i) through (iv). The Company
intends to concentrate its acquisition efforts on properties or
businesses that it believes to be undervalued. Given the above
factors, investors should expect that any acquisition candidate may
have a history of losses or low profitability.
The Company does not propose to restrict its search for
investment opportunities to any particular geographical area or
industry, and may, therefore, engage in essentially any business, to
the extent of its limited resources. This includes industries such as
service, finance, natural resources, manufacturing, high technology,
product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of the Company's registration of its
securities under the Securities Exchange Act of 1934, any entity which
has an interest in being acquired by the Company is expected to be
an entity that desires to become a public company as a result of the
transaction. In connection with such an acquisition, it is highly likely
that an amount of stock constituting control of the Company would be
issued by the Company or purchased from the Company's current
principal shareholders by the target entity or its controlling
shareholders.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and
directors, its other stockholders, professional advisors such as
attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may
present unsolicited proposals. The Company has no plans,
understandings, agreements, or commitments with any individual for
such person to act as a finder of opportunities for the Company.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis of
the quality of the other company's management and personnel, the
anticipated acceptability of new products or marketing concepts, the
merit of technological changes, and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria. In many instances, it is anticipated that the
historical operations of a specific firm may not necessarily be
indicative of the potential for the future because of the possible need
to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment
management, or make other changes. Because of the lack of training
or experience of the Company's management, the Company will be
dependent upon the owners of a business opportunity to identify such
problems and to implement, or be primarily responsible for the
implementation of, required changes. Because the Company may
participate in a business opportunity with a newly organized firm or
with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because
management in many instances will not have proved its abilities or
effectiveness, the eventual market for such company's products or
services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not permit
the Company to offset potential losses from one business opportunity
against profits from another, and should be considered an adverse
factor affecting any decision to purchase the Company's securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the
Company's management to complete acquisitions without submitting
any proposal to the stockholders for their consideration. Company
management does not generally anticipate that it will provide holders
of the Company's securities with financial statements, or any other
documentation, concerning a target company or its business prior to
any merger or acquisition. In some instances, however, the proposed
participation in a business opportunity may be submitted to the
stockholders for their consideration, either voluntarily by Company
management which elects to seek the stockholders' advice and
consent, or because state law so requires.
The analysis of business opportunities will be undertaken by or
under the supervision of the Company's executive officers and
directors. Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and in that
event, might pay a finder's fee. Since Company management has no
current plans to use any outside consultants or advisors to assist in
the investigation and selection of business opportunities, no policies
have been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such consultants or advisors, the
services to be provided, the term of service, or regarding the total
amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company
agrees to pay would be paid in stock and not in cash. Otherwise, the
Company anticipates that it will consider, among other things, the
following factors:
(a) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(b) Competitive position as compared to other companies of
similar size and experience within the industry segment as well as
within the industry as a whole;
(c) Strength and diversity of existing management, or
management prospects that are scheduled for recruitment;
(d) Capital requirements and anticipated availability of
required funds, to be provided from operations, through the sale of
additional securities, through joint ventures or similar arrangements, or
from other sources;
(e) The cost of participation by the Company as compared to
the perceived tangible and intangible values and potential;
(f) The extent to which the business opportunity can be
advanced;
(g) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(h) The accessibility of required management expertise,
personnel, raw materials, services, professional assistance, and other
required items; and
(i) Whether the financial condition of the business opportunity
would be, or would have a significant prospect in the foreseeable
future to become, such as to permit the securities of the Company,
following the business combination, to qualify to be listed on an
exchange or on a national automated securities quotation system,
such as NASDAQ, so as to permit the trading of such securities to be
exempt from the requirements of Rule 15c2-6 recently adopted by the
Securities and Exchange Commission. See "Risk Factors - The
Company - Regulation of Penny Stocks."
In regard to the last criterion listed above, the current
standards for NASDAQ listing include, among other things, the
requirements that the issuer of the securities that are sought to be
listed have net tangible assets of at least $4,000,000, or a market
capitalization of at least $50,000,000, or net income in its latest fiscal
year of not less than $750,000. Many, and perhaps most, of the
business opportunities that might be potential candidates for a
combination with the Company would not satisfy the NASDAQ listing
criteria. To the extent that the Company seeks potential NASDAQ
listing, therefore, the range of business opportunities that are available
for evaluation and potential acquisition by the Company would be
significantly limited.
In applying the criteria listed above, no one of which will be
controlling, management will attempt to analyze all factors appropriate
to the opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at
various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize
that, because of the Company's limited capital available for
investigation and management's limited experience in business
analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a
business opportunity and it has not established any deadline for
completion of a transaction. It expects, however, that the process of
seeking candidates, analysis of specific proposals and the selection of
a business opportunity may require several additional months or more.
Prior to making a decision to participate in a business
opportunity, the Company will generally request that it be provided
with written materials regarding the business opportunity containing
such items as a description of product, service and company history;
management resumes; financial information; available projections, with
related assumptions upon which they are based; an explanation of
proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and
proposed forms of compensation to management; a description of
transactions between such company and its affiliates during relevant
periods; a description of present and required facilities; an analysis of
risks and competitive conditions; a financial plan of operation and
estimated capital requirements; audited financial statements or an
indication that audited statements will be available within sixty (60)
days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's
executive officers and directors may meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain
information provided, check references of management and key
personnel, and take other reasonable investigative measures, to the
extent of the Company's limited financial resources and management
expertise.
Company management believes that various types of potential
merger or acquisition candidates might find a business combination
with the Company to be attractive. These include acquisition
candidates desiring to create a public market for their shares in order
to enhance liquidity for current shareholders, acquisition candidates
which have long-term plans for raising equity capital through the
public sale of securities and believe that the possible prior existence
of a public market for their securities would be beneficial, and
acquisition candidates which plan to acquire additional assets through
issuance of securities rather than for cash, and believe that the
possibility of development of a public market for their securities will be
assistance in that process. Acquisition candidates which have a need
for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive
alternative.
Form of Acquisition.
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and
desires of the Company and the promoters of the opportunity and,
upon the basis of that review and the relative negotiating strength of
the Company and such promoters, the legal structure or method
deemed by management to be suitable will be selected. Such
structure may include, but is not limited to leases, purchase and sale
agreements, licenses, joint ventures and other contractual
arrangements. The Company may act directly or indirectly through an
interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of
business organization. In addition, the present management and
stockholders of the Company may not have control of a majority of the
voting shares of the Company following a reorganization transaction.
As part of such a transaction, the Company's directors may resign and
new directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an
acquisition is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the
stockholders of the acquired company of up to 80% of the common
stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under
the Internal Revenue Code, the Company's stockholders in such
circumstances would retain in the aggregate 20% or less of the total
issued and outstanding shares. This could result in substantial
additional dilution in the equity of those who were stockholders of the
Company prior to such reorganization. Any such issuance of
additional shares might also be done simultaneously with a sale or
transfer of shares representing a controlling interest in the Company
by the current officers, directors and principal shareholders. (See
"Description of Business - General").
It is anticipated that any securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available,
from registration under applicable federal and state securities laws. In
some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain
conditions or at specified times thereafter. The issuance of
substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may
have a depressive effect upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by
all of the parties thereto, specify certain events of default, detail the
terms of closing and the conditions which must be satisfied by each of
the parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it will enter
into a letter of intent with the management, principals or owners of a
prospective business opportunity prior to signing a binding agreement.
Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind either the Company or the business
opportunity to consummate the transaction. Execution of a letter of
intent will by no means indicate that consummation of an acquisition is
probable. Neither the Company nor the business opportunity will be
bound to consummate the acquisition unless and until a definitive
agreement concerning the acquisition as described in the preceding
paragraph is executed. Even after a definitive agreement is executed,
it is possible that the acquisition would not be consummated should
either party elect to exercise any right provided in the agreement to
terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
Competition.
The Company expects to encounter substantial competition in
its efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and
corporations, venture capital affiliates of large industrial and financial
companies, small investment companies, and wealthy individuals.
Many of these entities will have significantly greater experience,
resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will experience
competition from other public "blind pool" companies, many of which
may have more funds available than does the Company.
Administrative Offices.
The Company currently maintains a mailing address at 5001
Spring Valley Road, Suite 800E, Dallas, Texas 75244, which is the
office address of its President. The Company's telephone number
there is (972) 991- 0001. Other than this mailing address, the
Company does not currently maintain any other office facilities, and
does not anticipate the need for maintaining office facilities at any time
in the foreseeable future until a business combination transaction
occurs. The Company pays no rent or other fees for the use of this
mailing address.
Employees.
The Company is a development stage company and currently
has no employees. 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
seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with
the decision whether or not to acquire or participate in specific
business opportunities. No remuneration will be paid to the
Company's officers except as set forth under "Executive
Compensation" and under "Certain Relationships and Related
Transactions".
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. Except for historical matters,
the matters discussed in this Form 10-KSB are forward-looking
statements based on current expectations, and involve risks and
uncertainties. Forward-looking statements include, but are not limited
to, statements under the following headings:
(i) "Description of Business - General" - the general
description of the Company's plan to seek a merger or acquisition
candidate, and the types of business opportunities that may be
pursued.
(ii) "Description of Business - Investigation and Selection of
Business Opportunities" - the steps which may be taken to investigate
prospective business opportunities, and the factors which may be
used in selecting a business opportunity.
(iii) "Description of Business - Form of Acquisition" - the
manner in which the Company may participate in a business
acquisition.
The Company wishes to caution the reader that there are
many uncertainties and unknown factors which could affect its ability
to carry out its business plan in the manner described herein.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently maintains a mailing address at 5001
Spring Valley Road, Suite 800 East, Dallas, Texas 75244, which is the
address of its President. The Company pays no rent for the use of
this mailing address, however, for financial statement purposes, the
Company is accruing $50 per month as additional paid-in capital for
this use. 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 its
plan of operations described herein. The Company's telephone
number is (972) 991-0001.
The Company currently has no investments in real estate, real
estate mortgages, or real estate securities, and does not anticipate
making any such investments in the future. However, the policy of the
Company with respect to investment in real estate assets could be
changed in the future without a vote of security holders.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings,
and no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of
record or beneficial owner of more than five percent (5.0%) of the
securities of the Company, or any associate of any such director,
officer or security holder is a party adverse to the Company or has a
material interest adverse to the Company in reference to pending
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of
the Company during the fourth quarter of the fiscal year which ended
May 31, 1999.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Although the Company's shares have been approved for
trading on the OTC Bulletin Board since approximately April 15, 1998,
under the trading symbol "BUFG," no actual trading of such shares
has occurred and no bid or asked prices have been posted. It is not
anticipated that any actual trading activity will occur until the Company
has completed a merger or acquisition transaction. The Company's
securities are currently held of record by a total of approximately 56
persons.
The Company issued 12,740,000 shares of common stock in
May 1999. Steadfast Investments, L.P., purchased 11,083,800 of the
Shares for a purchase price of $870, and GMK Family Holdings, LLC,
purchased 1,656,200 of the Shares for a purchase price of $130. The
Company paid no commissions or other fees in conjunction with this
share issuance. The shares were offered and sold in a private
placement made in reliance upon exemptions from registration under
Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder.
No dividends have been declared or paid on the Company's
securities, and it is not anticipated that any dividends will be declared
or paid in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity other than the receipt of proceeds in
the amount of $8,500 from its inside capitalization funds, and the
expenditure of such funds in furtherance of the Company's business
plan, including primarily expenditure of funds to pay legal and
accounting expenses. Consequently, the Company's balance sheet
for the fiscal year ended May 31, 1999, reflects a total asset value of
$135.
Results of Operations.
During the period from August 28, 1996 (inception) through
May 31, 1999, the Company has engaged in no significant operations
other than organizational activities, acquisition of capital, preparation
and filing of the registration of its securities under the Securities
Exchange Act of 1934, as amended, compliance with its periodical
reporting requirements, and efforts to locate a suitable merger or
acquisition candidate. No revenues were received by the Company
during this period.
For the fiscal year ending May 31, 1999, the Company
anticipates incurring a loss as a result of expenses associated with
compliance with the reporting requirements of the Securities Exchange
Act of 1934, and expenses associated with locating and evaluating
acquisition candidates. The Company anticipates that until a business
combination is completed with an acquisition candidate, it will not
generate revenues. It may also continue to operate at a loss after
completing a business combination, depending upon the performance
of the acquired business.
Plan of Operations.
The Company's plan of operations for the next twelve months
is to pursue a possible business combination. The immediate plan is
to pursue a possible business combination with The Heritage
Organization, LLC, or with Steadfast Investments, L.P., the principal
owner of The Heritage Organization, LLC. The predicted time frame
and methodology of this possible business combination transaction
has not yet been determined and, as of the date of this filing, the
transaction is considered possible, but not probable.
In the event the foregoing transaction does not occur, the
Company plans to continue with its previous activity of seeking,
investigating and possibly acquiring one or more properties or
businesses. In such event, the Company intends to seek business
opportunities demonstrating the potential for long-term growth, and will
not restrict itself to any particular geographic area or industry. The
form of any such potential acquisition has not been determined.
The Company will require additional capital in order to meet its
cash needs for the next year, including payment of the costs
associated with compliance with its continuing reporting requirements
under the Securities Exchange Act of 1934, as amended, and the
costs associated with pursuing a possible business combination. The
amount of additional capital which will be required has not been
determined.
No specific commitments to provide additional funds have been
made by management or other stockholders, and the Company has
no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the
location of a merger or acquisition candidate. Accordingly, there can
be no assurance that any additional funds will be available to the
Company to allow it to cover its expenses. Notwithstanding the
foregoing, to the extent that additional funds are required, the
Company anticipates receiving such funds in the form of
advancements from current shareholders without issuance of
additional shares or other securities, or through the private placement
of restricted securities rather than through a public offering. The
Company does not currently contemplate making a Regulation S
offering.
The Company may also seek to compensate providers of
services by issuances of stock in lieu of cash. For information as to
the Company's policy in regard to payment for consulting services,
see "Certain Relationships and Transactions."
Year 2000 issues are not currently material to the Company's
business, operations or financial condition, and the Company does not
currently anticipate that it will incur any material expenses to
remediate Year 2000 issues it may encounter. However, Year 2000
issues may become material to the Company following its completion
of a business combination transaction. In that event, the Company
will be required to adopt a plan and a budget for addressing such
issues.
ITEM 7. FINANCIAL STATEMENTS.
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
<TABLE>
<CAPTION>
Item Page
<S> <C>
Report of Independent Certified 17
Public Accountant
Balance Sheet 18
Statement of Operations 19
Statement of Stockholders'
Equity (Deficit) 22
Statements of Cash Flows 24
Notes to Financial Statements 26
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Buffalo Capital III, Ltd.
We have audited the accompanying balance sheet of Buffalo
Capital III, Ltd. (a development stage company) as of May 31, 1999,
and the related statement of loss and accumulated deficit, cash flows,
and stockholders' equity for each of the two years then ended, and for
the period from inception (August 28, 1996) to May 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 audits.
We conducted our audits 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 Buffalo
Capital III, Ltd. (a development stage company) as of May 31, 1999,
and the results of its operations and its cash flows for the two years
then ended, and for the period from inception (August 28, 1996) to
May 31, 1999, in conformity with generally accepted accounting
principles.
Comiskey & Company, P.C.
Denver, Colorado
July 30, 1999
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
BALANCE SHEET
May 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS -
CURRENT ASSETS -
Total current assets -
OTHER ASSETS
Organizational costs
(net of amortization) 135
TOTAL ASSETS 135
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Total current liabilities -
STOCKHOLDERS' EQUITY
Preferred stock, no par value,
10,000,000 shares authorized;
no shares issued and outstanding -
Common stock, no par value;
100,000,000 shares authorized;
14,000,000 shares issued and
outstanding at May 31,1999 8,500
Additional paid-in capital 80,259
Deficit accumulated during the
development stage (88,624)
Total stockholders' equity 135
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 135
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from For the For the
August 28, 1996 year year
(Inception) to ended ended
May 31, 1999 May 31, 1999 May 31, 1998
<S> <C> <C> <C>
REVENUES
Investment Income - - -
EXPENSES
Amortization 165 60 60
Bank charges 103 71 32
Consulting Fees 62,800 - 3,000
Directors' fees 200 - -
Filing Fee 80 25 -
Legal and accounting 21,669 11,061 7,197
Office Expense 1,957 696 1,258
Rent Expense 1,650 600 600
Total expenses 88,624 12,513 12,147
NET LOSS (88,624) (12,513) (12,147)
Accumulated deficit
Balance,
beginning of period - (76,111) (63,964)
Balance,
end of period (88,624) (88,624) (76,111)
NET LOSS PER SHARE (0.09) (0.04) (0.15)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 1,021,913 2,202,411 507,205
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996) to May 31, 1999 (Page 1 of 2)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-in
shares Amount Capital
<S> <C> <C> <C>
Common stock issued for
cash and subscriptions,
receivable, August 1996
at $0.50 per share 15,000 7,500 -
Common stock issued for
services, August 1996
at $.0001 per share 2,400,000 - 240
Shares cancelled (2,280,000) - -
Rent and services provided
at no charge - - 60,210
Net loss for the period
ended May 31, 1997 - - -
Balance, May 31, 1997 135,000 7,500 60,450
Shares cancelled (12,000) - -
Share issued in 10 for 1
stock split 1,107,000 - -
Common stock issued for
services, February 1998
at $.10 per share 30,000 - 3,000
Rent provided at no charge - - 600
Expenses paid by shareholders - - 4,536
Net loss for the period
ended May 31, 1998 - - -
Balance May 31, 1998 1,260,000 7,500 68,586
Common stock issued for
cash, May 1999
at $0.00008 per share 12,740,000 1,000 -
Rent provided at no charge - - 600
Expenses paid by shareholders - - 11,073
Net loss for the period
ended May 31, 1998 - - -
14,000,000 8,500 80,259
</TABLE>
The accompanying notes are an integral part of the financial statements.
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996)
to May 31, 1999 (Page 2 of 2)
<TABLE>
<CAPTION>
Deficit
accumulated
during the Total
development stockholder
stage equity
<S> <C> <C>
Common stock issued for
cash and subscriptions,
receivable, August 1996
at $0.50 per share - 7,500
Common stock issued for
services, August 1996
at $.0001 per share - 240
Shares cancelled - -
Rent and services
provided at no charge - 60,210
Net loss for the period
ended May 31, 1997 (63,964) (63,964)
Balance, May 31, 1997 (63,964) 3,986
Shares cancelled - -
Share issued in 10 for 1
stock split - -
Common stock issued for
services, February 1998
at $.10 per share - 3,000
Rent provided at no charge - 600
Expenses paid by shareholders - 4,536
Net loss for the period
ended May 31, 1998 (12,147) (12,147)
Balance May 31, 1998 (76,111) (25)
Common stock issued for
cash, May 1999
at $0.00008 per share - 1,000
Rent provided at no charge - 600
Expenses paid by shareholders - 11,073
Net loss for the period
ended May 31, 1999 (12,513) (12,513)
(89,624) 135
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
August 28, 1996 For the For the
(Inception) to year ended year ended
May 31, 1999 May 31, 1999 May 31, 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (88,624) (12,513) (12,147)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization 165 60 60
Rent expense 1,650 600 600
Expenses paid
by shareholders 15,609 11,073 4,536
Stock issued for
directors' fees 59,960 - -
Stock issued for
consulting fees 3,040 - 3,000
Increase (decrease) in
accounts payable -
related party - (323) 323
Net cash used by
operating activities (8,200) (1,103) (3,628)
CASH FLOWS FROM INVESTING ACTIVITIES:
Organization costs (300) - -
Net cash used by
investing activities (300) - -
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 8,500 1,000 -
Net cash provided by
financing activities 8,500 1,000 -
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS - (103) (3,628)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 103 3,731
CASH AND CASH EQUIVALENTS,
END OF PERIOD - - 103
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
BUFFALO CAPITAL III, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the period from inception (August 28, 1996) to
May 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company.
Buffalo Capital III, Ltd. (a development stage company) (the
"Company") was incorporated under the laws of the State of Colorado
on August 28, 1996. The initial registered office of the Company is
4750 Table Mesa Drive, Boulder, Colorado 80301. The principal
office of the Company has moved to 5001 Spring Valley Road, Suite
800 East, Dallas, Texas 75244.
The Company is a new enterprise in the development stage as
defined by Statement No. 7 of the Financial Accounting Standards
Board and has not engaged in any business other than organizational
efforts. It has no full-time employees and owns no real property. The
Company intends to operate as a capital market access corporation
by registering with the U.S. Securities and Exchange Commission
under the Securities Exchange Act of 1934. After this, the Company
intends to seek to acquire one or more existing businesses which
have existing management, through merger or acquisition.
Management of the Company will have virtually unlimited discretion in
determining the business activities in which the Company might
engage.
Accounting Method.
The Company records income and expenses on the accrual
method.
Fiscal year.
The Company maintains a May 31 fiscal year end for financial
reporting purposes, and an August 31 fiscal year end for tax reporting
purposes.
Organization costs.
Costs to incorporate the Company have been capitalized and
will be amortized over a sixty-month period.
Loss per share.
Loss per share was computed using the weighted number of
shares outstanding during the period.
Statement of cash flows.
For the purpose of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Use of estimates.
The preparation of the Company's financial statements in
conformity with generally accepted accounting principals requires the
Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Values of Financial Instruments.
Unless otherwise indicated, the fair value of all reported assets
and liabilities which represent financial instruments (none of which are
held for trading purposes) approximate the carrying values of such
amounts.
Stock Basis.
Shares of common stock issued for other than cash have been
assigned amounts equivalent to the fair value of the service or assets
received in exchange.
2. STOCKHOLDERS' EQUITY
Common Stock.
As of May 31, 1999, 14,000,000 shares of the Company's no
par value common stock were issued and outstanding. Of these
shares, 11,083,800 were purchased for $870 cash on May 4, 1999 by
Steadfast Investments, L.P.. Another 1,656,200 shares were
purchased for $130 cash on May 4, 1999 by GMK Family Holdings,
L.L.C.
Effective May 4, 1999 pursuant to the transfer in ownership of
12,740,000 shares of common stock, all Class A and Class B warrants
were cancelled as per agreement.
For the year ended May 31, 1997, 2,280,000 shares of the
Company's common stock were cancelled.
For the year ended May 31, 1998, an additional 12,000 shares
of the Company's common stock were cancelled.
Effective subsequent to the cancellation of these shares, the Company
had a 10-for-1 forward stock split. All share and per share amounts
have been restated to reflect the stock split.
Preferred Stock.
The Company's Certificate of Incorporation authorizes the
issuance of 10,000,000 shares of preferred stock, no par value per
share. The Board of Directors of the Company is authorized to issue
preferred stock from time to time in series and is further authorized to
establish such series, to fix and determine the variations in the relative
rights and preferences as between the series and to allow for the
conversion of preferred stock into common stock. No preferred stock
has been issued by the Company.
3. RELATED PARTY TRANSACTIONS.
Rent is being provided to the Company at no charge. For
purposes of financial statements, the Company is accruing $50 per
month as additional paid-in capital for this use.
Effective May 4, 1999 control of the Company changed through
the issuance of 12,740,000 shares of common stock and as a result,
former shareholders of the Company agreed to pay expenses of the
Company totaling $11,073 directly related to the transaction.
4. INCOME TAXES.
The Company has Federal net operating loss carryforwards of
approximately $88,600 expiring in the years 2012, 2013 and 2019.
The tax benefit of these net operating losses, which totals
approximately $17,100, has been offset by a full allowance for
realization. This carryforward may be limited under IRC Section 381,
upon the consummation of a business combination. For the period
ended May 31, 1999, the valuation allowance increased by
approximately $2,400.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES.
During the years ended May 31, 1999 and 1998, the Company
recorded amortization of the organization costs of $60 and $60.
Similarly, the Company recorded rent expense for the years
ended May 31, 1999 and 1998 of $50 per month for a total of $600
and $600.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company has had no change in, or disagreements with,
its principal independent accountant since the date of inception.
Part III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT.
The directors and executive officers currently serving the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions Held
and Tenure
<S> <C> <C>
Gary M. Kornman 55 Chairman of Board
of Directors since May 1999
W. Ralph Canada, Jr. 43 President and Director
since May 1999
Vickie A. Walker 40 Treasurer and Director
since May 1999
Terry O. Reid 45 Secretary and Director
since May 1999
</TABLE>
The directors named above will serve until the next annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding
between any of the directors or officers of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer.
The directors and officers will devote their time to the
Company's affairs on an "as needed" basis, which, depending on the
circumstances, could amount to as little as two hours per month, or
more than forty hours per month, but more than likely will fall within
the range of five to ten hours per month.
There are no family relationships between any of the directors
or officers of the Company.
The Company's board of directors has not held any formal
meetings during the fiscal year ending May 31, 1999.
Biographical Information.
Gary M. Kornman
Mr. Kornman has been Chief Executive Officer of The Heritage
Organization, L.L.C., since March, 1995. He currently serves as Chief
Executive Officer of The Heritage Organization, Inc. (since 1986), and
President and CEO of Kornman & Associates, Inc. (since 1975). He
was President and CEO of The Planning Group, Inc. from 1970
through 1975. The Heritage Organization, L.L.C., provides counseling
services to some of America's wealthiest families. Mr. Kornman is
also the sole shareholder, officer and director of many other
corporations.
Mr. Kornman earned a Bachelor of Arts from Vanderbilt
University in 1965 with concentrations in Business/Economics and
Psychology and was a National Merit Scholar. In 1969 he received
his Doctor of Jurisprudence from the University of Alabama School of
Law and received the American Jurisprudence Award in Estate
Planning, the American Jurisprudence Award in Contracts and the
American Jurisprudence Award in Evidence.
He is admitted to practice before the Bar of the State of Alabama, and
is a member of the American Bar Association Section of Taxation and
Section of Trust, Real Property and Probate.
W. Ralph Canada, Jr.
Mr. Canada has served as President of The Heritage
Organization, L.L.C., since March, 1995. He currently serves as
President of Heritage Investments, L.L.C. and Heritage Securities
Corporation, Vice President of the U.S. National Foundation For Anti-
Aging & Survival Research and The Institute For Anti-Aging &
Survival, Inc.
From 1987 through 1994, Mr. Canada was a Partner in the
Dallas office of the law firm of Hopkins & Sutter, where he served as
Head of the Litigation Section from 1991 through 1994. He was a
Partner in the Dallas office of the Stinson, Mag & Fizzell law firm, and
Head of Litigation Section there from April, 1985 to October, 1987.
From February, 1984 to March, 1985, he was Partner in the Rentzel,
Wise & Robertson law firm. He was Associate in the Litigation
Section of Johnson & Swanson from June, 1979, to January, 1984.
Each of the above-referenced firms were located in Dallas, Texas.
Mr. Canada received a Bachelor of Arts degree with Major in
History in 1976 from the University of Texas at Austin, graduating with
Highest Honors. At the University of Texas he was a member of Phi
Beta Kappa and Phi Eta Sigma. He received a Doctor of
Jurisprudence, Cum Laude, from Harvard Law School in 1979. He
was Editor-in-Chief of the Harvard Environmental Law Review.
Mr. Canada is a member of the American Bar Association and
the Dallas Bar Association. He is admitted to practice before the Bar
in the State of Texas, and is admitted to practice before the United
States Court of Appeals for the Fifth Circuit and the United States
District Courts for the Northern, Eastern, Western and Southern
Districts of Texas.
Vickie A. Walker.
Ms. Walker has been Secretary-Treasurer and Chief Financial
Officer of The Heritage Organization, L.L.C., since March, 1995. She
currently serves as Secretary-Treasurer and Chief Financial Officer of
The Heritage Organization, Inc., as Secretary-Treasurer and Chief
Financial Officer of Kornman & Associates, Inc., as Treasurer of the
U.S. National Foundation For Anti-Aging & Survival Research, and as
Treasurer of The Institute for Anti-Aging & Survival, Inc. Ms. Walker
began her affiliations with the Kornman & Associates, Inc. in June,
1977.
Ms. Walker supervises an accounting staff comprised of three
CPA's and five staff accountants. In addition to her normal finance
and accounting duties, she coordinates Contract Drafting and
Negotiations, Legal Entities Formation, and Licensing and Filings. Ms.
Walker serves on a number of mission critical committees of The
Heritage Organization, L.L.C., including Employee Management and
Benefits, Aviation and Transportation, and Procurement and Budget.
She is Chairperson for the Executive Management Committee.
Terry Oliver Reid.
Ms. Reid has been Vice President of Administration for The
Heritage Organization, L.L.C. since 1995. She is concurrently
Secretary, Treasurer and Executive Representative for Heritage
Investments, L.L.C. and Heritage Securities Corporation, Vice
President of The Heritage Organization, Inc., Vice President of
Kornman & Associates, Inc., Secretary of the U.S. National
Foundation For Anti- Aging & Survival Research and Secretary of The
Institute for Anti-Aging & Survival, Inc.
From June, 1980 to May, 1982, Ms. Reid was a Revenue
Accountant for Saxon Oil Company. In 1982, she was invited to join
the Intergovernmental Affairs staff at The White House under
President Reagan. She worked under Vice President George Bush in
1983 on his Domestic Policy staff. In 1984 she served as Budget
Director for the Administration Division of Reagan-Bush 84 Campaign
at the national headquarters. Upon her return to Dallas in 1985, she
worked for Ben Brown, CPA, preparing tax returns. From 1986
through 1989 she was Financial and Administrative Manager for
Laurey Peat & Associates, a public relations agency. In 1990 she was
appointed as Assistant to the United States Ambassador to Zimbabwe
under President Bush. In 1991 she joined The Heritage Organization,
Inc., as Assistant to the Chairman and was promoted to Vice
President of Administration in 1994.
Ms. Reid holds a Bachelor of Accountancy degree from the
University of Oklahoma with a minor in Petroleum Land Management.
Compliance With Section 16(a) of the Exchange Act.
Gary M. Kornman, Vickie A. Walker, W. Ralph Canada and
Terry O. Reid were each required to file an Initial Statement of
Beneficial Ownership of Securities on Form 3 at the time of the Stock
Purchase Agreement (May 4, 1999). To the best knowledge and
belief of the Company, none of such persons made a timely filing of
Form 3. None of such persons was required to file a report on Form
5 for the fiscal year ended May 31, 1999. The Company believes that
as of the date of this report on Form 10-KSB, each of such persons
had fulfilled all filing requirements as to Forms 3, 4 and 5, for the
fiscal year ended May 31, 1999.
The Company has been advised that as of the date of filing of
this report on Form 10-KSB, each of the former officers, directors, and
10% shareholders of the Company has complted a report on Form 5
for the fiscal year ended May 31, 1999, and has mailed the report to
the SEC for filing. Each of such reports lists a transaction (the
disposition of shares) which should have been reported on Form 4
during the fiscal year, but which was not reported. Each of such
reports also reflects that the reporting person is no longer subject to
Section 16 of the Securities Exchange Act of 1934. The reports on
Form 5, when filed, will have been filed late.
ITEM 10. EXECUTIVE COMPENSATION.
No officer or director received any remuneration from the
Company during the fiscal year. Until the Company acquires
additional capital, it is not intended that any officer or director will
receive compensation from the Company other than reimbursement
for out-of-pocket expenses incurred on behalf of the Company. See
"Certain Relationships and Related Transactions." The Company has
no stock option, retirement, pension, or profit-sharing programs for the
benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in
the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth, as of the end of the Company's
most recent fiscal year, the number of shares of Common Stock
owned of record and beneficially by persons who hold 5.0% or more
of the outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
<S> <C> <C>
Steadfast
Investments, L.P. 11,083,800 79.17%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244 <F1>
GMK Family
Holdings, L.L.C. 1,656,200 11.83%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244 <F1>
James T. Edwards 1,249,600 8.9257%
209 Cargile Lane
Nashville, TN 37205
____________
<FN>
<F1>Mr. Gary M. Kornman may be deemed to be the beneficial owner of all
shares owned of record by Steadfast Investments, L.P., and by GMK Family
Holdings, L.L.C.
</FN>
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth, as of the end of the Company's
most recent fiscal year, the number of shares of Common Stock
owned of record and beneficially by executive officers and directors of
the outstanding Common Stock of the Company. Also included are
the shares held by all executive officers and directors as a group.
The person listed is an officer, a director, or both, of the
Company.
<TABLE>
<CAPTION>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
<S> <C> <C>
Gary M. Kornman 12,740,000 91%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244 <F1>
W. Ralph Canada, Jr. 0 0%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244
Vickie A. Walker 0 0%
1683 S. Walker Road
Pleasant View, Tennessee 37146
Terry O. Reid 0 0%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244
All directors and executive
officers (4 persons) 12,740,000 91%
<FN>
<F1>Mr. Gary M. Kornman may be deemed to be the beneficial owner of all
shares owned of record by Steadfast Investments, L.P., and GMK Family
Holdings, L.L.C.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
Indemnification of Officers and Directors.
As permitted by Colorado law, the Company's Articles of
Incorporation provide that the Company will indemnify its directors and
officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of
their being or having been Company directors or officers unless, in
any such action, they are adjudged to have acted with gross
negligence or willful misconduct. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
Exclusion of Liability.
Pursuant to the Colorado Corporation Code, the Company's
Articles of Incorporation exclude personal liability for its directors for
monetary damages based upon any violation of their fiduciary duties
as directors, except as to liability for any breach of the duty of loyalty,
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of Section
7-5-114 of the Colorado Corporation Code, or any transaction from
which a director receives an improper personal benefit. This
exclusion of liability does not limit any right which a director may have
to be indemnified and does not affect any director's liability under
federal or applicable state securities laws.
Conflicts of Interest.
None of the officers of the Company will devote more than a
portion of his time to the affairs of the Company. There will be
occasions when the time requirements of the Company's business
conflict with the demands of the officers' other business and
investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be
obtained upon terms favorable to the Company.
Each of the Company's officers and directors also are officers,
directors, or both of several other companies, however these entities
are not anticipated to be in direct competition with the Company for
available opportunities. The former officers, directors and principal
shareholders of the Company were parties to a Stock Purchase
Agreement dated April 23, 1999, pursuant to which each of them
agreed to sell all of his stock in the Company at a price of
approximately $0.2681 per share. The sale of shares pursuant to the
Stock Purchase Agreement was contingent upon the prior closing by
the Company under the Stock Subscription Agreement.
Each of the former officers, directors and principal
shareholders acquired their shares in the Company for services
valued at the equivalent of $0.05 per share. Accordingly, each of
them realized a substantial profit from the sale of Shares under the
terms of the Stock Purchase Agreement.
Company management, and the other principal shareholders of
the Company, may actively negotiate or otherwise consent to the
purchase of a portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium may be paid by the purchaser
in conjunction with any sale of shares by officers, directors or affiliates
of the Company which is made as a condition to, or in connection
with, a proposed merger or acquisition transaction. The fact that a
substantial premium may be paid to Company officers, directors and
affiliates to acquire their shares creates a conflict of interest for them
and may compromise their state law fiduciary duties to the Company's
other shareholders. In making any such sale, Company officers,
directors and affiliates may consider their own personal pecuniary
benefit rather than the best interests of the Company and the
Company's other shareholders, and the other shareholders are not
expected to be afforded the opportunity to approve or consent to any
particular buy-out transaction involving shares held by members of
Company management.
Mr. Gary M. Kornman is a director and officer of the Company
and may be deemed to be the beneficial owner of all shares
purchased by Steadfast Investments, L.P., and by GMK Family
Holdings, L.L.C.
There are no familial relationships between any of the directors
or officers of the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Exhibits listed below are filed as part of this Annual
Report.
<TABLE>
<CAPTION>
Exhibit No. Document
<S> <C>
3.(i) Articles of Incorporation (incorporated by reference from
Registration Statement on Form 10-SB/A filed with the Securities and
Exchange Commission on January 10, 1997).
3.(ii) Bylaws (incorporated by reference from Registration
Statement on Form 10-SB/A filed with the Securities and Exchange
Commission on January 10, 1997).
27. Financial Data Schedule
99.1 Stock Subscription Agreement (incorporated by
reference from Form 8-K filed with the Securities and Exchange
Commission on May 4, 1999).
</TABLE>
(b) On May 6, 1999, a Form 8-K was filed by the Company
with the Securities and Exchange Commission which stated (in. Item
1. - Changes In Control Of Registrant) that on May 4, 1999, a change
in control of the registrant occurred. On that date, Steadfast
Investments, L.P., a Texas limited partnership, and GMK Family
Holdings, L.L.C., a Delaware limited liability company, purchased a
total of 12,740,000 newly issued shares of common stock from the
Company for a purchase price of $1,000 pursuant to a Stock
Subscription Agreement. This Stock Subscription Agreement was
included as an exhibit (in Item 7. - Financial Statements And
Exhibits).
Signatures
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.
BUFFALO CAPITAL III, LTD.
By: /s/ ________________
Gary M. Kornman
(Chairman of Board of Directors)
Date: August 27, 1999
By: /s/ ________________
W. Ralph Canada, Jr.
(President & Director)
Date: August 27, 1999
By: /s/ ________________
Terry O. Reid
(Secretary & Director)
Date: August 27, 1999
By: /s/ ________________
Vickie A. Walker
(Treasurer & Director)
Date: August 27, 1999
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<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-31-1999
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