UNITED STATES
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, 2000.
___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
THE HERITAGE ORGANIZATION, INC.
(Name of small business issuer in its charter)
Colorado 84-1356383
(State or other jurisdiction (IRS Employer
incorporation) Identification No.)
5001 Spring Valley Road, Suite 800 East, Dallas, TX 75244
(Address of Principal Executive Offices) (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. _X_
State issuer's revenue for its most recent fiscal year: $ -0-
State the aggregate market value of the voting stock held by non-
affiliates 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_X_
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
May 31, 2000.
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. Restated and amended Articles
of Incorporation were filed on January 3, 2000, which changed the
name of the Company to The Heritage Organization, Inc., and on
March 1, 2000 the Company began trading under the symbol THOI.
As of the end of its fiscal year ending May 31, 2000, the
Company has not been able to reach 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. At the present time, no good prospects exist for the potential
business combination of the Company and 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.
The Company has not commenced any commercial operations. The
Company currently has no full-time employees and owns no real
estate.
As the business combination transaction with The Heritage
Organization, L.L.C. is not expected to occur, the Company intends
to 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.
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.
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 regarding business opportunities:
(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.
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 service 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, 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 companies desiring
to create a public market for their shares in order to enhance liquidity
for current shareholders, companies 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 companies 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 of assistance in that process. Companies 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 from registration, if any
are available, under applicable federal and state securities laws. In
some circumstances, however, 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 10KSB 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 reporting year which
ended May 31, 2000.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's shares have been approved for trading on the
OTC Bulletin Board since approximately April 15, 1998, but on
March 1, 2000, the trading symbol was changed from "BUFG" to
"THOI". 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 filed Restated and Amended Articles of
Incorporation on January 3, 2000. These Restated Articles provide
for a new class of stock, Class B Common Stock, which shall have
the same rights, preferences and limitations as the current Common
Stock, except that each share of Class B Common Stock shall have
10,000 votes per share. The holders of Class B Common Stock also
have the pre-emptive right to purchase, at their par value, additional
shares of Class B Common Stock in order to maintain the same
relative voting power in the Company upon the issuance of any
additional shares of Common Stock of the Company to any other
stockholder or upon the issuance of any shares of Common Stock of
the Company to any new stockholder. The authorization of the Class
B Voting Stock will have an effect on the holders of Common Stock
and Preferred Stock, in that the voting power of the holders of
Common Stock and Preferred Stock will be diluted because Preferred
Stock and Common Stock is only entitled to one vote per share. In
addition, the Restated Articles of Amendment provide that no
pre-emptive rights shall exist for the stockholders except that the
stockholders of Class B Common Stock shall have the pre-emptive
right to purchase, at their par value, additional shares of Class B
Common Stock in order to maintain the same relative voting power in
the Company upon the issuance of any additional shares of Common
Stock of the Company to any other stockholder or upon the issuance
of any shares of Common Stock of the Company to any new
stockholder.
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 amounts of $8,500 from its inside capitalization funds and $5,000
from a loan from a shareholder, 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, 2000, reflects a total asset value of $1,216.
Results of Operations
During the period from August 28, 1996 (inception) through
May 31, 2000, 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 ended May 31, 2000, the Company
incurred 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
For the fiscal year ended May 31, 2000, the Company expects
to continue its efforts to locate a suitable business acquisition
candidate and thereafter to complete a business acquisition transaction.
The Company anticipates incurring a loss for the fiscal year 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 does not expect to generate revenues until it completes a
business acquisition, and, depending upon the performance of the
acquired business, it may also continue to operate at a loss after
completion of a business combination.
Need for Additional Financing
The Company will require additional capital in order to meet
its cash needs for the next year, including the costs of compliance
with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended.
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."
ITEM 7. FINANCIAL STATEMENTS.
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
FINANCIAL STATEMENTS
May 31, 2000
Report of Independent Certified Public Accountants
Balance Sheet
Statements of Operations
Statement of Stockholders' Equity Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
The Board of Directors and Stockholders of The Heritage
Organization, Inc.
We have audited the accompanying balance sheet of The Heritage
Organization, Inc. (a development stage company) as of May 31,
2000, 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, 2000. 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 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 The Heritage
Organization, Inc. (a development stage company) as of May 31,
2000, 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, 2000, in conformity with generally accepted
accounting principles.
Comiskey & Company, P.C.
Denver, Colorado
July 30, 2000
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
BALANCE SHEET
May 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $1,216
Total current assets 1,216
TOTAL ASSETS $1,216
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 50
Notes payable - related party $ 5,000
Accrued interest - related party $ 392
Total current liabilities $ 5,442
OTHER LIABILITIES -
TOTAL LIABILITIES $ 5,442
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, 2000. 8,500
Additional paid-in capital 80,859
Deficit accumulated during the
development stage (93,585)
Total stockholders' equity (4,226)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,216
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
August 28, 1996 For the For the
(Inception) to year ended year ended
May 31, May 31, May 31,
2000 2000 1999
<S> <C> <C> <C>
REVENUES
Investment Income $ - $ - $ -
EXPENSES
Amortization 300 135 60
Bank charges 103 - 71
Consulting Fees 62,800 - -
Directors' fees 200 - -
Interest expense 392 392 -
Filing fee 180 100 25
Legal and accounting 24,806 3,137 11,061
Office Expense 2,554 597 696
Rent Expense 2,250 600 600
Total expenses 93,585 4,961 12,513
NET LOSS (93,585) (4,961) (12,513)
Accumulated deficit
Balance, beginning of period $ - (88,624) (76,111)
Balance, end of period (93,585) (93,585) (88,264)
NET LOSS PER SHARE (0.02) (0.01) (0.04)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,489,051 14,000,000 2,202,411
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996) to May 31, 2000
(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 $0
Common Stock issued for
services, August 1996
at $.0001 per share 2,400,000 0 240
Shares cancelled (2,280,000) 0 0
Rent and services provided
at no charge 0 0 60,210
Net loss for the period
ended May 31, 1997 0 0 0
Balance, May 31 1997 135,000 7,500 60,450
Shares Cancelled (12,000) 0 0
Shares issued in 10 for
1 stock split 1,107,000 0 0
Common Stock issued for
services, February 1998
at $.10 per share 30,000 0 3,000
Rent provided at no charge 0 0 600
Expenses paid by shareholders 0 0 4,536
Net loss for period ended May
31, 1998 0 0 0
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 0
Rent provided at no charge 0 0 600
Expenses paid by shareholders 0 0 11,073
Net loss for the period ended
May 31, 1999 0 0 0
Balance, May 31, 1999 14,000,000 8,500 80,259
Rent provided at no charge 0 0 600
Net loss for the period
ended May 31, 2000 0 0 0
Balance, May 31, 2000 14,000,000 $8,500 $80,859
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996) to May 31, 2000
(Page 2 of 2)
<TABLE>
<CAPTION>
Deficit accumulated
during the Total
development stockholders'
stage equity (deficit)
<S> <C> <C>
Common Stock issued for
cash and subscriptions,
receivable, August 1996
at $0.50 per share $ 0 $ 7,500
Common Stock issued for
services, August 1996
at $.0001 per share 0 240
Shares cancelled 0 0
Rent and services provided
at no charge 0 $ 60,210
Net loss for the period
ended May 31, 1997 (63,964) (63964)
Balance, May 31 1997 (63,964) (63,964)
Shares Cancelled 0 0
Shares issued in 10 for
1 stock split 0 0
Common Stock issued for
services, February 1998
at $.10 per share 0 3,000
Rent provided at no charge 0 600
Expenses paid by shareholders 0 4,536
Net loss for 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 0 1,000
Rent provided at no charge 0 600
Expenses paid by shareholders 0 11,073
Net loss for the period ended
May 31, 1999 (12,513) (12,513)
Balance, May 31, 1999 (88,624) 135
Rent provided at no charge 0 600
Net loss for the period
ended May 31, 2000 (4,961) (4,961)
Balance, May 31, 2000 $(93,585) $ (4,226)
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE HERITAGE ORGANIZATION, INC.
fka 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, May 31, May 31,
2000 2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (93,585) (4,961) (12,513)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization 300 135 60
Rent expense 2,250 600 600
Expenses paid by shareholders 15,609 - 11,073
Stock issued for directors' fees 59,960 - -
Stock issued for consulting fees 3,040 - -
Increase (decrease) in accounts payable
- related party 50 50 (323)
Increase in notes payable
- related party 5,000 5,000 -
Increase in accrued interest 392 392 -
Net cash used by operating
activities (6,984) 1,216 (1,103)
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 1,216 1,216 (103)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - - 103
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,216 $ 1,216 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE HERITAGE ORGANIZATION, INC.
fka Buffalo Capital III, Ltd.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company
The Heritage Organization, Inc. (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 were
being amortized over a sixty-month period. These costs were fully
expensed as of December 31, 1999 under the requirements of
SOP-98-5.
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.
Consideration of Other Comprehensive Income Items
SFAF 130 Reporting Comprehensive Income, requires companies to
present comprehensive income (consisting primarily of net income
plus other direct equity changes and credits) and its components as
part of the basic financial statements. For the year ended May 31,
2000, the Company's financial statements do not contain any changes
in equity that are required to be reported separately in comprehensive
income.
2. STOCKHOLDERS' EQUITY
Common Stock
As of May 31, 2000, 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 was purchased
for $4,130 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.
Note Payable
The Company has an unsecured note payable to a shareholder. The
note totals $5,000 plus accrued interest at 10% and is due August 18,
2000. Interest of $392 was included in operations for the year ended
May 31, 2000.
4. INCOME TAXES
The Company has federal net operating loss carryforwards of
approximately $93,100 expiring in the years 2012, 2013, 2019 and
2020. The tax benefit of these net operating losses, which totals
approximately $18,000, 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, 2000, the valuation allowance increased by
approximately $900.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
During the years ended May 31, 2000 and 1999, the Company
recorded amortization of the organization costs of $135 and $60.
Similarly, the Company recorded rent expense for the years ended
May 31, 2000 and 1999 of $50 per month for totals of $600 and
$600.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
The Company has had no change in, nor 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>
Positions Held
Name Age and Tenure
<S> <C> <C>
Gary M. Kornman 56 Chairman of Board
of Directors since May 1999
W. Ralph Canada, Jr. 45 President & Director
since May 1999
Vickie A. Walker 41 Treasurer & Director
since May 1999
Secretary since October 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, 2000.
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., a
Delaware corporation (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, and an 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 a 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 Kornman & Associates, Inc. in
June, 1977.
Ms. Walker supervises an accounting staff comprised of two CPA's
and four 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.
Compliance With Section 16(a) of the Exchange Act.
To the best knowledge and belief of the Company, all persons have
complied with the filing requirements of Section 16(a) of the
Exchange Act.
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.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS.
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>
<S> <C> <C>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
Steadfast Investments, L.P. 11,083,800 79.17%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244
GMK Family Holdings, L.L.C. 1,656,200 11.83%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244
James T. Edwards 1,249,600 8.93%
209 Cargile Lane
Nashville, TN 37205
</TABLE>
Mr. Gary M. Kornman 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.
(b) 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>
<S> <C> <C>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
Gary M. Kornman 12,740,000 91%
Suite 800, East Tower
5001 Spring Valley Road
Dallas, Texas 75244
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
All directors and executive
officers (3 persons) 12,740,000 91%
</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.
Exhibit No. Document
3.1 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).
3.2 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
(b) There have been no reports on Form 8-K filed for the
annual reporting period ended May 31, 2000.
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.
THE HERITAGE ORGANIZATION, INC.
By: /s/ ________________
Gary M. Kornman (Chairman of Board of Directors)
Date: August 28, 2000
By: /s/ ________________
W. Ralph Canada, Jr. (President & Director)
Date: August 28, 2000
By: /s/ ________________
Vickie A. Walker (Secretary-Treasurer & Director)
Date: August 28, 2000
