SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended May 31, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___________ to_____________.
Commission File No.: 0-21955
M & A West, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-1356427
_____________________________________________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
583 San Mateo Ave.
San Bruno, CA 94066
______________________________________________
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code:
(978) 684-3600
Securities to be registered under Section 12(b) of the Act:
None.
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
OTCBB
(Name of each exchange on which registered)
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 is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. ___
The aggregate market value of voting Common Stock held by non-
affiliates of the Registrant was $40,241,250 as of May 28, 1999. The
Registrant does not have any outstanding non-voting equity.
On May 28, 1999, the Registrant had outstanding 11,000,000 shares
of voting Common Stock, $.001 par value.
(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 ____
(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.
This Report contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including
without limitation, those discussed in the "Factors that May Affect
Future Results" section of Item 7 of this Report. Such forward-
looking statements speak only as of the date on which they are made,
and the Company cautions readers not to place undue reliance on such
statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
M & A West, Inc. ("MAWI" or "the Company"), formerly
Buffalo Capital IV, Ltd., is a Colorado corporation which is engaged
in providing public relations consulting services primarily to public
companies and in the trading of equity securities for its own account
in Internet related companies. On May 12, 1999, M & A West, a
Nevada corporation, underwent a stock transfer and exchange with
Buffalo Capital IV, Ltd., a publicly traded shell company in a
transaction more fully described below whereby M & A West became
a wholly-owned subsidiary of Buffalo Capital IV, Ltd. Immediately
after the transaction, Buffalo Capital IV, Ltd. changed its name to M
& A West, Inc. All references to "the Company" in this report refer
to M & A West, Inc., the Nevada corporation, prior to May 12,
1999, and to the consolidated entity from May 12, 1999.
The Company develops, invests in, and operates Internet
technology related companies. The strategy of the Company includes
the internal development and operation of majority owned subsidiaries
within the M & A West family, as well as the investment in other
Internet companies either directly by the Company, or through other
venture capital arrangements. The Company strategy also envisions
and promotes opportunities for synergistic business relationships
among the Internet companies within its portfolio. The Company was
founded as a Nevada corporation in 1996 to provide guidance for
small public companies and other companies wishing to enter the
public markets to raise capital, raise awareness of their businesses and
effect strategic mergers, acquisition and other business combinations.
To provide clients with a complete package of services, the Company
formed its Corporations Division in 1997 for effective public market
strategies and quickly followed with an Internet Marketing Division
and Internet Technology Development Division.
The Company is actively seeking out business situations that
present unique opportunities in the realm of the Internet and electronic
business. The Company is looking to invest in other companies that
have a demonstrable potential for success as an Internet business.
The Company is able to bring talent in the areas of web commerce,
marketing, finance and business development in an effort to guide
those companies to success. The Company seeks companies that
compliment those in which it already has an investment so that these
companies can, together, form an electronic commerce community.
Interactive Marketing Industry
Direct marketing is undergoing rapid, fundamental change, as
customers' needs evolve and technology advances. Marketing
channels and media outlets are expanding in number and diversifying
in scope, and powerful database technologies are able to target both
broad markets and individual customers with ever-greater precision.
The emergence of the Internet into homes and offices has provided
direct marketers with a powerful new distribution mechanism -
interactive media. Interactive marketing is a subset of direct
marketing. It differentiates itself from traditional direct marketing
channels in that the consumer has flexibility and control over what is
being presented, when they view the products or services and which
types of products or services they are viewing.
In contrast to conventional media, the Internet offers
capabilities to target advertising to specific audiences, to measure the
popularity of content, to reach worldwide audiences cost-effectively
and to create innovative and interactive advertisements. By collecting
customer feedback and demographic information, advertisers can
direct highly customized marketing campaigns at prospective
customers much more rapidly than with conventional media. The
Company believes that advertisers will continue to seek to advertise
on Web sites that offer a high volume of traffic and feature flexible
advertisement programs capable of reaching targeted audiences.
Likewise, the Company believes that as advertisers increasingly
embrace the Internet as an advertising vehicle, their participation will
subsidize in part the creation and expansion of the information and
resources available on the Web which in turn is expected to stimulate
further traffic flow.
Interactive marketing provides direct marketers with the ability
to create electronic databases of customer information. Using this
information will enable direct marketers to develop more effective
advertising, make better decisions about distribution methods and
media selection and target customers more effectively. The dialogue
created between the marketer and the consumer permits marketers to
track advertisement interaction, anticipate consumer needs and make
changes immediately. It is expected that across scores of industries,
the relationship between marketers and consumers will soon be direct,
and one-to-one. When that day arrives, marketers will benefit from
this newfound ability to establish relationships with their customers.
Business Strategy
The Company's strategy is to increase its market share within
its respective market niche. The success factors include
understanding, developing and applying information to the Internet,
interactive media markets and data access and software tools;
narrowing market focus while establishing strategic alliances to
complement product and service offerings; and investing in strategic
Internet or interactive media investments or acquisitions.
With respect to the businesses of MAWI, the Company will
seek to expand its participation in the direct marketing of products and
services, Internet, interactive media industries and increase market
share. The key elements of the strategy include the continued of
enhancement and expansion of the Company's products and services.
The Company has invested significant resources in new subsidiaries or
investments which seek to capitalize on opportunities surrounding the
growth of the Internet and the interactive marketing industry. The
Company intends to continue to pursue the growth in development of
its technologies and services, and continue to introduce its products
commercially. Additionally, the Company intends to continue to
evaluate new opportunities to further its investment in direct
marketing strategies and also to seek out opportunities to realize
significant shareholder value through the sale of selected investments
or technologies, or through having separate subsidiaries sell a
minority interest to outsiders.
Sales and Marketing
The Company markets its products and services through a
marketing staff using both telemarketing and direct sales. The
Company maintains separate marketing staffs for each product and
service area, enabling the marketing personnel to develop strong
customer relationships and expertise in their respective areas. The
Company has established direct sales forces experienced in the
advertising business to address the new and evolving requirements of
the Internet advertising market. The Company believes that an
experienced sales staff is critical to initiating and maintaining
relationships with advertisers and advertising agencies and therefore
has hired a significant portion of its Internet advertising sales force
from the advertising industry. The Company advertises its products
and services through direct mail, space advertising, Internet banners,
directory listings, trade shows and Company sponsored user groups.
In addition, in certain instances, the Company has complemented the
activities of its direct sales force by retaining advertising sales
agencies, to serve as sales representatives on a commission basis.
The Company attends numerous trade shows in the Internet,
high technology, direct marketing, mutual fund, book, and library
markets, while further supplementing its sales efforts with space
advertising and product and services listings in appropriate directories.
In addition, the Company sponsors user group meetings for its mutual
fund clients and major list participants in the InfoBuyers List
database, where products and services are highlighted.
The Company also conducts numerous mailings of list
catalogs, flyers, newsletters and other product information throughout
the year to primarily book, magazine, journal, newsletter and software
publishers and resellers, seminar companies, professional associations,
business supply catalogers, consumer electronic, high technology and
financial service organizations.
Competition
MAWI's Internet investments compete in the electronic
technology and Internet service arenas which are comprised of
numerous small and large companies providing different and new
technologies, all with varying applications. The market for Internet
products and services is highly competitive. In addition, the
Company expects the market for Internet advertising, to the extent it
further develops, to be intensely competitive. Although the Company
believes that the diverse segments of the Internet market will provide
opportunities for more than one supplier of products and services
similar to those of the Company, it is possible that a single supplier
may dominate one or more market segments. The Company believes
the principal competitive factors in this market are name recognition,
performance, ease of use, variety of value-added services,
functionality and features and quality of support. MAWI's products
and services are being developed predominantly for direct marketing
applications, on the Internet or through interactive media.
Competitors would include a wide variety of companies and
organizations, including Internet software, content, service and
technology companies, telecommunication companies, cable
companies and equipment/technology suppliers. In the future, the
Company may encounter competition from providers of Web browser
software and other Internet products and services that incorporate
competing features in to their offerings. Many of the Company's
existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical and
marketing resources than the Company.
The Company may also be affected by competition from
licensees of its products and technology. There can be no assurance
that the Company's competitors will not develop Internet products and
services that are superior to those of the Company or that achieve
greater market acceptance than the Company's offerings. Moreover,
a number of the Company's current advertising customers, licensees
and partners have also established relationships with certain of the
Company's competitors and future advertising customers, licensees
and partners may establish similar relationships. The Company may
also compete with online services and other Web site operators as
well as traditional off-line media such as print and television for a
share of advertisers' total advertising budgets. There can be no
assurance that the Company will be able to compete successfully
against its current or future competitors or that competition will not
have a material adverse effect on the Company's business, results of
operations and financial condition.
Intellectual Property Rights
The Company regards its software technologies, databases and
database management software as proprietary. The Company depends
on trade secrets for protection of its software. It has entered into
confidentiality agreements with its management and key employees
with respect to this software, and limits access to, and distribution of
this, and other proprietary information.
Employees
As of May 31, 1999, the Company employed a total of 10
persons on a full-time basis. In addition, depending on client
demand, the Company contracts persons on a temporary, part-time
basis. None of the Company's employees are represented by a labor
union. The Company believes that its relations with its employees are
good.
Significant Customers
The Company's significant customers include Auto Trade
Center (AUTC) and Starnet Communications (SNMM). The
Company has provided investor relations for said customers, but has
been paid in full as of May 31, 1999. To this effect, the Company
does not rely on the future business of these companies.
ITEM 2. - PROPERTIES
The Company leases approximately 2,800 sq. ft. of its
administrative, sales and operations space in San Bruno, California,
under a lease which expires in the year 2000. This lease is with Scott
Kelly, President and CEO of M & A West and is considered a related
party transaction. Nevertheless, the Company had attempted to
determine the fair market rental rate for the lease of the property and
has made an independent determination that its lease payment is at or
below prevailing market conditions in San Bruno, California. Said
lease payment is $1,811 per month. In addition, the Company leases
certain space on a month-to-month basis from Sal Censoprano, its
Secretary and Chief Financial Officer. The lease payment for the
premises rented from Mr. Censoprano is $692 per month.
ITEM 3. - LEGAL PROCEEDINGS
On May 10, 1999, Mortgage Internet Technologies
commenced legal proceedings in the United States District Court for
the Northern District of California (Case No. 99-2183CW), against
the Company's wholly owned subsidiary, M & A West (a Nevada
corporation), Scott Kelly, Carol Pizzo, and Virtuallender.com, Inc. (a
Nevada corporation). The suit seeks, among other things, to enjoin
the defendants from utilization of the name Virtuallender. The
plaintiff's application for a temporary restraining order was denied by
the Court on the grounds that the Plaintiffs were not likely to prevail.
Management considers the suit without merit, but will continue to
vigorously defend the case should a preliminary injunction be issued.
ITEM 4. - SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS
No matters were submitted to a vote of the security holders
during the 4th quarter of the fiscal year, other than those as shown in
the previous filing of the Company on Form 8-K dated May 12, 1999.
ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDERS MATTERS.
The Company's shares were initially approved for trading on
the OTC Bulletin Board on April 15, 1998, under the symbol
"BUFF." On May 12, 1999, following closing under the
Reorganization and Stock Purchase Agreement between Buffalo
Capital IV, Ltd., and M & A West (Nevada), the Company changed
its name to M & A West, Inc., and changed its trading symbol to
"MAWI." Prior to May 12, 1999, there was no trading activity in
the Company's common stock. During the period from May 12, 1999
through May 31, 1999, the high bid price was $20 and the low bid
price was $9 1/8. As of May 31, 1999, the Company's outstanding
common stock was held of record by 64 persons. The prices
presented are bid prices, which represent prices between broker-
dealers and do not include retail mark-ups and mark-downs, or any
commission to the dealer. The prices presented may not represent
actual transactions.
The Company has never paid cash dividends on its common
stock, but anticipates that at some point in the future, dividends in the
form of restricted or free trading common stock from acquired
companies may be paid to the shareholders of the Company. There is
no guarantee that any such dividends will be paid.
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION.
Overview
The Company develops, invests in, and operates Internet and
technology related companies. The Company's strategy includes the
internal development and operation of majority owned subsidiaries
within the "M & A West" family, as well as investment in other
Internet companies, either directly by M & A West or through other
venture capital arrangements. The Company's strategy also envisions
and promotes opportunities for synergistic business relationships
among the Internet companies within its portfolio. The Company
intends to continue its focus as a Seed Round Internet Startup
investor.
As of May 31, 1999, the Company has a 51% ownership interest in
Digital Bridge, Inc. and a 21% ownership interest in
VirtualLender.com, Inc. ("VirtualLender"). Digital Bridge offers e-
commerce web design and development, web-site hosting and Internet
marketing consulting for its web development and design clients as
well as graphics and consulting services for small to medium sized
businesses. Digital Bridge, Inc. now has several clients of its own
and is exploring the possibility of becoming a separate public
company.
VirtualLender originated from M & A West's mortgage company, M
& A West Financial. VirtualLender is a mortgage banker/direct
lender focusing on originating sub-prime loans and mortgages over the
Internet.
The Company has adopted a strategy of seeking opportunities to
realize significant gains through the selective sale of investments or
having separate subsidiaries or affiliates sell minority interests to
outside investors. The Company believes that this strategy provides
the ability to significantly increase shareholder value as well as
provide capital to support the growth in the Company's subsidiaries
and investments. Additionally, in fiscal year 1999, the Company will
continue to develop and refine the products and services of its
businesses, with the goal of significantly increasing revenue as new
products are commercially introduced, and will continue to pursue a
strong pace of investing in new Internet opportunities.
Results of Operations
On May 12, 1999, M & A West, Inc., a Nevada corporation,
completed a share exchange transaction with Buffalo Capital IV, Ltd.,
a publicly traded shell company, in a transaction whereby M & A
West became a wholly-owned subsidiary of Buffalo Capital IV.
Immediately after the transaction, Buffalo Capital IV, Ltd. changed its
name to M & A West, Inc. All references to "the Company" in this
section refer to M & A West, Inc., the Nevada corporation, prior to
May 12, 1999, and to the consolidated entity from May 12, 1999.
The following table sets forth, for the years indicated, certain items
from the Company's Consolidated Statements of Operations expressed
as a percentage of net revenues.
<TABLE>
<CAPTION>
Fiscal Year ended May 31,
1999 1998
<S> <C> <C>
Net revenues 1,087,019 97,033
Cost of revenues 0 0
Research and
development expenses 0 0
In-process research
and development
Selling, general and
administrative expenses 1,498,123 50,431
Operating loss
Operating Profit 328,896 46,602
Other income, net (43,489) 15,345
Income tax (expense) (128,690) (27,200)
Net income 156,717 34,747
</TABLE>
Fiscal 1999 Compared to Fiscal 1998
Net revenues for the Company increased $989,986 or approximately
1,120%, to $1,087,019 in 1999, from $97,033 in 1998. The increase
reflects an increase of $505,054 in the Company's commission income
and $1,224,932 from the Company's trading gains. The Company
believes that its portfolio of companies will continue to develop and
introduce their products commercially, will actively pursue increased
revenues from new and existing customers, and will look to expand
into new market opportunities. Therefore, the Company expects to
report future revenue growth.
Cost of revenues is not applicable.
Selling expenses increased $930,734, or approximately 4,141%, to
$953,765 in 1999, from $23,031 in 1998. The increase reflects
increases of $254,720 in advertising and $416,673 in consultant fees.
Employee business expenses and payroll increased $259,341 or
approximately 1,914% in 1999 from $13,547 in 1998.
General and administrative expenses increased $516,959, or
approximately 1,887%, to $544,358 in 1999, from $27,400 in 1998.
Interest income increased $354 in 1999, from $0 in 1998.
Equity in losses of affiliates resulted from the Company's ownership
in certain investments that are accounted for under the equity method.
Under the equity method of accounting, the Company's proportionate
share of each affiliate's operating losses and amortization of the
Company's net excess investment over its equity in each affiliate's net
assets is included in equity in losses of affiliates. Equity in losses of
affiliates for fiscal 1999 include the results from the Company's
minority ownership interest in Virtuallender.com, Inc. The Company
expects its portfolio companies to continue to invest in development of
their products and services, and to recognize operating losses, which
will result in future charges recorded by the Company to reflect its
proportionate share of such losses.
The Company's effective tax rates for fiscal 1999 and 1998 were 45%
and 44%, respectively. The Company's effective tax rate differs
materially from the federal statutory rate primarily due to valuation
allowances provided on certain deferred tax assets, the provision for
state income taxes, and non-deductible goodwill amortization and in-
process research and development charges.
Liquidity and Capital Resources
Working capital at May 31, 1999 increased to $2,487,347 compared
to $308,039 at May 31, 1998, predominately as a result of increased
revenues from services rendered. The Company's principal uses of
capital during fiscal 1998 were $1,498,000 for funding of operations,
primarily those of start-up activities in the Company's investment and
development segment, $500,000 for investments in affiliates and
acquisitions, and $20,000 for purchases of property and equipment.
Fiscal 1998 was the Company's start-up year and, as a result, it had
little activity in these areas.
The Company intends to continue to fund existing and future Internet
and interactive media investment and development efforts, and to
actively seek new investment opportunities. The Company believes
that existing working capital and the availability of additional
securities which could be sold or posted as collateral for additional
loans, will be sufficient to fund its operations, investments and capital
expenditures for the foreseeable future. Should further capital be
needed to fund future investment and acquisition activity, the
Company may seek to raise capital through additional public or
private offerings of the Company's or its subsidiaries' stock, or
through debt financings.
Year 2000 Compliance.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These
date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many
companies' software and computer systems may need to be upgraded
or replaced in order to comply with such "Year 2000" requirements.
The Company is in the process of evaluating and correcting the Year
2000 compliance of its proprietary products and services and third
party equipment and software that it uses, as well as its non-
information technology systems, such as building security, voice mail
and other systems. The Company's Year 2000 compliance efforts
will consist of the following phases: (i) identification of all software
products, information technology systems and non-information
technology systems; (ii) assessment of repair or replacement
requirements; (iii) repair or replacement; (iv) testing; (v)
implementation; and (vi) creation of contingency plans in the event of
Year 2000 failures. The Company has substantially completed phase
(i) and has begun phases (ii) and (iii) of its Year 2000 efforts. The
Company expects to complete its Year 2000 compliance efforts by the
end of December, 1999.
To date, the Company has not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance
issues, other than the purchase of new computer equipment and
software represented by their respective manufacturers as Year 2000
compliant. Preliminary estimates regarding expected costs for
completing the Company's Year 2000 remediation efforts and for
correcting Year 2000 issues are $250,000, but there can be no
assurance that the costs will not exceed such amounts. The
Company's expectations regarding Year 2000 remediation efforts will
evolve as it continues to analyze and correct its systems. The
Company has not yet developed a formal Year 2000-specific
contingency plan. The Company expects that a formal Year 2000
contingency plan will evolve as it completes its Year 2000 compliance
efforts. Failure by the Company to resolve Year 2000 issues with
respect to its proprietary products and services could have a material
adverse effect on the Company's business, results of operations and
financial condition. Furthermore, failure of third-party equipment or
software to operate properly with regard to the year 2000 and
thereafter could require the Company to incur significant unanticipated
expenses to remedy any problems.
Factors That May Affect Future Results.
The Company operates in a rapidly changing environment that
involves a number of risks, some of which are beyond the Company's
control. Forward-looking statements in this document and those made
from time to time by the Company through its senior management are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements
concerning the expected future revenues or earnings or concerning
projected plans, performance, product development, product release
or product shipment, as well as other estimates related to future
operations are necessarily only estimates of future results and there
can be no assurance that actual results will not materially differ from
expectations. The Company undertakes no obligation to publicly
release the results of any revisions to forward-looking statements
which may be made to reflect events or circumstances occurring after
the date such statements were made or to reflect the occurrence of
unanticipated events. Factors that could cause actual results to differ
materially from results anticipated in forward-looking statements
include, but are not limited to the following:
Future Capital Needs - During its last fiscal year, the Company
generated operating profits which were partially funded by gains on
sales of its interests in other companies. To the extent the Company
may become involved in future investments, however, the Company
may need to access outside sources of financing. There can be no
assurance that any such financing will be available. If such financing
is available, furthermore, it may involve issuing securities senior to
the Common Stock or equity financings which are dilutive to holders
of the Common Stock.
Dependence on a Single Customer - During fiscal year 1999 a
significant portion of the Company's revenues were derived from a
limited number of customers, including Starnet Communications
International, Inc. ("Starnet"), which accounted for 81% of total
revenues. However, the Company is actively shifting its focus from
investor relations services to seed round investment, and, therefore,
the Company believes that its dependence on Starnet as a source of
revenue will decline significantly.
Dependence on Continued Growth of the Internet and Internet
Infrastructure - The Company's future success is highly dependent
upon continued growth in the use of the Internet generally and, in
particular, as a medium for advertising, marketing, services and
commerce. Commercial use of the Internet is at an early stage of
development, and market acceptance of the Internet as a medium for
advertising, information services and commerce is subject to a high
level of uncertainty. The relative effectiveness of the Internet as an
advertising medium as compared to traditional advertising media, for
example, has not been determined. Further, there can be no
assurance that the required infrastructure to support future Internet
user and traffic growth or complementary products or services
necessary to make the Internet a viable commercial marketplace will
be developed, or, if they are developed, that the Internet will become
a viable commercial marketplace for products and services such as
those offered by the Company. If commercial use of the Internet fails
to continue to expand, the Company's business, results of operations
and financial condition would be adversely affected.
Dependence on Key Personnel - The Company's performance is
substantially dependent on the performance of its executive officers
and other key employees and its ability to attract, train, retain and
motivate high quality personnel, especially highly qualified technical
and managerial personnel. The loss of the services of any of its
executive officers or key employees could have a material adverse
effect on its business, results of operations or financial condition.
Competition for talented personnel is intense, and there can be no
assurance that the Company will be able to continue to attract, train,
retain or motivate other highly qualified technical and managerial
personnel in the future.
Government Regulation and Legal Uncertainties The Company is
not currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally. However,
governmental regulators may, in the future, seek to impose
regulations on Internet activities. There are currently few laws or
regulations directly applicable to access to or commerce on the
Internet. Due to increasing popularity and use of the Internet,
however, it is possible that a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as user
privacy, pricing, characteristics and quality of products and services.
The adoption of any additional laws or regulations may also decrease
the growth of the Internet, which could in turn decrease the demand
for the Company's products and services or could increase the
Company's cost of doing business. Moreover, the applicability to the
Internet of a range of existing laws in domestic and international
jurisdictions governing issues such as commerce, taxation, property
ownership, defamation and personal privacy is uncertain and will
likely evolve over the course of many years. Any such new
legislation or regulation or application or interpretation of existing
laws, including tax laws, could have an adverse effect on the
Company's business, results of operations and financial condition.
Rapid Change in Technology and Distribution Channels - Because the
use of the Internet as a commercial medium is relatively recent and
continues to evolve, the market for the Company's products and
services is characterized by rapidly changing technology, evolving
industry standards, frequent new product and service introductions,
shifting distribution channels, and changing customer demands.
Accordingly, the Company's future success will depend on its ability
to adapt to this rapidly evolving marketplace. There can be no
assurance that the Company will be able to adequately adapt its
products and services or to acquire new products and services that can
compete successfully or that the Company will be able to establish and
maintain effective distribution channels. Failure to maintain
competitive product and service offerings and distribution channels
would have an adverse affect on the Company's business, results of
operations and financial condition. In addition, responding to these
rapid technological changes could require substantial expenditures by
the Company, and there can be no assurance that such expenditures
will yield a positive investment return.
Intense Competition - The market for Internet products and services is
highly competitive and lacks significant barriers to entry. The
Company expects competition to intensify in the future. Numerous
well-established companies and smaller entrepreneurial companies are
focusing significant resources on developing and marketing products
and services that will compete with the Company's products and
services. There can be no assurance that the Company will be able to
compete successfully or that competitive pressures, including possible
downward pressure on the prices it charges for its products and
services, will not adversely affect its business, results of operations
and financial condition.
Risks Inherent to the Company's Acquisition Strategy - The Company
has in the past, and intends in the future, to expand through the
acquisition of businesses, technologies, products and services, such as
the recent acquisitions of interests in VirtualLender and Digital
Bridge. Acquisitions may result in the potentially dilutive issuance of
equity securities, the incurrence of additional debt, the write-off of in-
process research and development or software acquisition and
development costs, and the amortization of goodwill and other
intangible assets. Any such adjustment could result in an increase in
the amount of goodwill recorded, which would result in higher
amortization expenses and, therefore, adversely affect the Company's
operating results. Further, acquisitions involve a number of special
problems, including difficulty integrating technologies, operations and
personnel and diversion of management attention in connection with
both negotiating the acquisitions and integrating the assets. There can
be no assurance that the Company will be successful in addressing
such problems. In addition, growth associated with numerous
acquisitions places significant strain on the Company's managerial and
operational resources. The Company's future operating results will
depend to a significant degree on its ability to successfully manage
growth and integrate acquisitions. Furthermore, many of the
Company's investments are in early-stage companies, with limited
operating histories and limited or no revenues; there can be no
assurance that the Company will be successful in developing such
companies.
Uncertainties Associated with Selling Assets - A significant element of
the Company's business plan involves selling, in public or private
offerings, portions of the companies it has acquired and developed.
The Company's ability to engage in any such transactions, the timing
of such transactions and the amount of proceeds from such
transactions are dependent on market and other conditions largely
beyond the Company's control. Accordingly, there can be no
assurance that the Company will be able to engage in such
transactions in the future or that when the Company is able to engage
in such transactions they will be at favorable prices. If the Company
were unable to liquidate portions of its portfolio companies at
favorable prices, the Company's business, financial condition and
results of operations would be adversely affected.
Fluctuating Value of Certain Stock Assets - A portion of the
Company's assets includes the equity securities of both publicly traded
and non-publicly traded companies. Such assets include a large
number of shares of common stock of VirtualLender.com, Inc., a
publicly traded company. Fluctuations in the market price and
valuations of the Company's holdings in such other companies, which
are partially dependent on market and other conditions that are beyond
the Company's control, may result in fluctuations of the market price
of the Company's Common Stock. The market price of the
Company's VirtualLender.com, Inc. stock may also be adversely
affected by changes in interest rates and the real estate market.
Management of Growth - The Company's growth has placed, and is
expected to continue to place, a significant strain on the Company's
managerial, operational and financial resources. Further, as the
number of the Company's users, advertisers and other business
partners grows, the Company is required to manage multiple
relationships with various customers, strategic partners and other third
parties. These requirements will be exacerbated in the event of
further growth of the Company or in the number of its strategic
relationships or sponsorship arrangements. There can be no assurance
that the Company's systems, procedures or controls will be adequate
to support the Company's operations or that the Company's
management will be able to achieve the rapid execution necessary to
successfully offer its services and implement its business plan. The
Company's future operating results will also depend on its ability to
expand its sales and marketing organization and expand its support
organization commensurate with the growth of its business and the
Internet. If the Company is unable to manage growth effectively, the
Company's business, results of operations and financial condition will
be adversely affected.
Risks Associated with Brand Development - The Company believes
that establishing and maintaining its brand names is a crucial aspect of
its effort to continue to expand and attract Internet business and that
the importance of brand recognition will increase in the future due to
the growing number of Internet companies. Promotion and
enhancement of the Company's brand names will depend largely on
the Company's ability to provide consistently high-quality products
and services, which cannot be assured. If consumers do not perceive
the Company's existing products and services to be of high quality, or
if the Company introduces new products and services or enters into
new business ventures that are not favorably received by consumers,
the value of the Company's brand names could be diminished.
Dependence on Third-Party Relationships - The Company is
currently, and expects to be in the future, dependent on a number of
third-party relationships. These relationships include arrangements
relating to the creation of traffic on the Company-affiliated Web sites
and resulting generation of advertising and commerce-related revenue.
The termination of, or the failure of such Company-affiliated Web
sites to renew such relationships on reasonable terms, could have an
adverse effect on the Company's business, results of operations and
financial condition. The Company also is generally dependent on
other third-party relationships with advertisers, sponsors and partners.
Most of these arrangements do not require future minimum
commitments to use the Company's services, are often not exclusive
and are often short-term or may be terminated at the convenience of
the other party. There can be no assurance that these third parties
will not reassess their commitment to the Company at any time in the
future, or that they will not develop their own competitive services or
products. Further, there can be no assurance that the services of
these companies will achieve market acceptance or commercial
success and therefore there can be no assurance that the Company's
existing relationships will result in sustained or successful business
partnerships or significant revenues for the Company.
Fluctuations in Quarterly Results - In the past, the Company's
operating results have fluctuated on a quarterly basis, and the
Company expects to continue to experience significant fluctuations in
future quarterly operating results. Such fluctuations have been, and
may in the future be, caused by numerous factors, many of which are
outside the Company's control, including demand for the Company's
products and services, incurrence of costs associated with acquisitions,
divestitures and investments, the timing of divestitures, market
acceptance of new products and services, specific economic conditions
in the Internet and direct marketing industries, and general economic
conditions. The emerging nature of commercial use of the Internet
makes predictions concerning future revenues difficult. The Company
believes that period-to-period comparisons of its results of operations
will not necessarily be meaningful and should not be relied upon as
indicative of future performance.
Computer Operations - The Company's operations are dependent in
part upon its ability to protect its computer operating systems against
physical damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The
Company's data centers are equipped with generator back up
equipment, multiple fiber lines and other liquid and fire protection
systems for protection in case of disaster. Despite the implementation
of physical and network security measures by the Company, its
servers are also vulnerable to computer viruses, break-ins and similar
disruptive problems. The occurrence of any of these events could
result in interruptions, delays or cessations in service to users of the
Company's products and services which could have a material adverse
effect on the Company's business, results of operations and financial
condition.
Dependence on Proprietary Rights; Risk of Infringement - The
Company's success depends in part on its proprietary technology and
its ability to protect such technology under applicable patent,
trademark, copyright and trade secret laws. Accordingly, the
Company seeks to protect the intellectual property rights underlying
its products and services by filing applications and registrations, as
appropriate, and through its agreements with employees, suppliers,
customers and partners. However, there can be no assurance that
measures adopted by the Company to protect its proprietary
technology will prevent infringement or misappropriation of such
technology. Further, legal standards relating to the validity,
enforceability and scope of protection of certain proprietary rights in
the context of the Internet industry currently are not resolved. The
Company licenses certain components of its products and services
from third parties. The failure by the Company to maintain such
licenses, or to find replacement components in a timely and cost
effective manner, could have a material adverse effect on the
Company's business, results of operation and financial condition.
From time to time the Company has been, and expects to continue to
be, subject to claims in the ordinary course of its business, including
claims of alleged infringement of intellectual property rights of third
parties by the Company. Any such claim could subject the Company
to significant liability for damages and could result in invalidation of
the Company's proprietary rights and, even if not meritorious, could
be time-consuming and expensive to defend, and could result in the
diversion of management time and attention, any of which could have
an adverse effect on the Company's business, results of operations or
financial condition.
As of May 31, 1999, the Company has not been named in any lawsuit
that may materially affect its financial condition.
ITEM 7. FINANCIAL STATEMENTS.
(a) Consolidated financial statements at May 31, 1999 and for
the years ended May 31, 1999 and 1998 are attached.
<PAGE>
M & A WEST, INC.
<TABLE>
<CAPTION>
Index to Financial Statements
<S> <C>
Report of Independent Public Accountants 6
Consolidated Balance Sheet 7
Consolidated Statements of Operations 8
Consolidated Statements of Cash Flows 10
Notes to Financial Statements 12
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
M & A West, Inc.
We have audited the accompanying consolidated balance sheet of M
& A West, Inc. as of May 31, 1999, and the related consolidated
statements of operations and cash flows for each of the two years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of M & A West,
Inc. as of May 31, 1999, and the consolidated results of its
operations, and cash flows for each of the two years then ended in
conformity with generally accepted accounting principles.
Denver, Colorado
August 10, 1999
<PAGE>
M & A West, Inc.
CONSOLIDATED BALANCE SHEET
May 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents 1,141,813
Accounts receivable - clients 10,000
Marketable securities held for
trading 573,976
Investments - at equity 426,558
Investments - at cost 327,000
Employee advances 8,000
TOTAL CURRENT ASSETS: 2,487,347
OTHER ASSETS:
Deferred income tax asset 12,110
Property and equipment, net
of depreciation 20,584
TOTAL ASSETS 2,520,041
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 114,127
Income taxes payable 168,000
Payroll taxes accrued and
payable 25,912
TOTAL CURRENT LIABILITIES 308,039
STOCKHOLDERS' EQUITY
Common stock, no par value;
100,000,000 shares authorized;
11,000,000 shares issued and
outstanding 2,020,538
Retained earnings 191,464
Total equity 2,212,002
TOTAL LIABILITIES AND EQUITY 2,520,041
</TABLE>
The accompanying notes are an integral part of these financial statements.
M & A West, Inc.
STATEMENTS OF OPERATIONS
For the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
REVENUE
Commission income 602,087 97,033
Trading gains and losses 1,224,932 -
TOTAL REVENUE 1,827,019 97,033
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 258,579 3,859
Employee business expenses 119,003 10,286
Consultants 422,298 5,625
Payroll 153,885 3,261
Other selling, general and
administrative expenses 544,358 27,400
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1,498,123 50,431
Income from operations 328,896 46,602
OTHER INCOME (EXPENSE)
Interest income 364 -
Unrealized investment gains
and losses on trading securities,
net (6,483) 15,345
Equity in loss of unconsolidated
subsidiary (37,370) -
TOTAL OTHER INCOME (EXPENSE)
(43,489) 15,345
NET INCOME BEFORE INCOME TAX
285,407 61,947
Income tax expense (128,690) (27,200)
NET INCOME 156,717 34,747
RETAINED EARNINGS
Balance, beginning of year 34,747 -
Balance, end of year 191,464 34,747
Net income per share .01 .0
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 10,582,904 10,560,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
M & A West, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income 156,717 34,747
Adjustments to reconcile net loss
to net cash flows from operations:
Unrealized (gain) loss on investments 6,483 (15,345)
Equity in loss of unconsolidated subsidiary 37,370 -
Depreciation 4,071 -
Deferred income taxes (12,110) 6,750
Equity securities - trading (538,548) (26,566)
Accounts receivable (10,000) -
Employee advances 13,000 (21,000)
Accounts payable 114,029 98
Bank overdraft (866) 866
Other current liabilities 166,712 20,450
Net cash used in operations (63,142) -
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (4,117) -
Purchase of investments (790,928) -
Net cash used by investment activities (795,045) -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock for cash 2,000,000 -
Net cash provided by financing activities 2,000,000 -
Net increase in cash and equivalents 1,141,813 -
CASH AND CASH EQUIVALENTS
Beginning of year - -
CASH AND CASH EQUIVALENTS
End of year 1,141,813 -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES AND OTHER CASH INFORMATION
During the year ended May 31, 1999, management of the Company
contributed fixed assets totalling $20,538 to the Company as an equity
investment.
Cash paid for interest 16 -
Cash paid for income taxes - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
M & A West, Inc.
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business:
M & A West, Inc. is engaged in providing public relations
consulting services primarily to public companies, and in the trading
of equity securities for its own account. On May 12, 1999, M & A
West, Inc., a Nevada corporation, underwent a share exchange with
Buffalo Capital IV, Ltd., a publicly traded shell company, in a
transaction more fully described in Note 3, whereby M & A West
become a wholly owned subsidiary of Buffalo Capital IV, Ltd.
Immediately after the transaction, Buffalo Capital IV, Ltd. changed its
name to M & A West, Inc. All references to "the Company" in these
financial statements refer to M & A West, Inc., the Nevada
corporation, prior to May 12, 1999, and to the consolidated entity
from May 12 forward.
Basis of accounting
The accompanying financial statements of M & A West, Inc.
are prepared using the accrual basis of accounting in which revenues
are recognized when earned, and expenses are recognized when
incurred.
Principles of Consolidation
The accompanying consolidated financial statements of M & A
West, Inc., including the Company, a Colorado corporation, and its
wholly owned subsidiary, a Nevada corporation. All material
intercompany transactions and balances have been eliminated in
consolidation.
Marketable Securities and Investments
The Company holds investments in marketable equity securi-
ties. Investments held for trading purposes are represented at market
value, with realized and unrealized gains and losses on the
investments recognized in earnings during the period incurred.
Investments in which the Company has significant influence, but not
voting control, are accounted for at original cost, as adjusted for the
Company's share of the investee's gains and losses. Investments in
non-trading equity securities are considered available for sale, and are
accounted for at cost, which approximates market. There were no
sales of available-for-sale securities during the periods presented.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during each period presented. Actual results
could differ from these estimates.
Property and Equipment
The Company's property and equipment, consisting of
computers and equipment supporting the administrative function, are
stated at cost. Depreciation is provided using the straight line method
over estimated useful lives of 5 to 7 years.
Advertising
Advertising costs are expensed as incurred.
Cash Equivalents
For purposes 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.
Income Per Share
Income per share has been calculated using the weighted
average number of shares outstanding. Shares issued in the share
exchange transaction have been treated as outstanding since the
beginning of the period. Shares remaining with the original
shareholders of Buffalo Capital IV, Inc. have been treated as
outstanding since May 12, 1999. All per share amounts have been
restated to reflect stock splits and the share exchange ratio applicable
to the share exchange transaction.
2. RELATED PARTY TRANSACTIONS
For the year ended May 31, 1999, the Company's offices were
leased from the Company's Chief Executive Officer on a month-to-
month basis for monthly payments of $1,811.
Effective May, 1999, the Company leased space from its Chief
Financial Officer on a month-to-month basis for $692 per month.
3. STOCKHOLDERS' EQUITY
Authorized Capital
The Company's capital consists of 100,000,000 authorized
common shares, no par value, of which 11,000,000 shares were
issued and outstanding at May 31, 1999.
Reorganization and Stock Purchase
On May 12, 1999, a change in control of the Company
occurred, in conjunction with closing under a Reorganization and
Stock Purchase Agreement. On that date, the Company first
completed a 3.5:1 forward split, increasing its issued and outstanding
shares of common stock from 1,260,000 to 4,410,000. Following
that forward split, the Company issued 6,590,000 newly issued shares
of common stock to Scott L. Kelly, trustee of the Kelly Family Trust,
and Administrative Systems Corp. ("ASC"), solely in exchange for
2,500 shares of M & A West Incorporated, constituting all issued and
outstanding shares of common stock of M & A West, Incorporated.
As a result of that transaction, M & A West, Incorporated became a
wholly owned subsidiary of the Company.
Also on May 12, 1999, persons designated by M & A West,
Incorporated purchased a total of 986,220 shares from Mark DiSalvo,
a principal shareholder of the Company.
On May 13, 1999, certain persons, who are not affiliates of M
& A West Incorporated, purchased an additional 2,983,780 shares, or
approximately 27.13%, from the Company for total proceeds of
$2,000,000.
As a result of these transactions, the Company now has
11,000,000 issued and outstanding shares of common stock, of which
7,576,220 shares, or approximately 68.6%, are owned by Scott L.
Kelly, Trustee of the Kelly Family Trust and ASC. Persons who
were previously shareholders of Buffalo Capital IV, Ltd., own a total
of 440,000 shares or approximately 4%.
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of
Preferred Stock, with rights and privileges to be determined by the
Board of Directors. No preferred shares were issued and outstanding
at May 31, 1999.
Options and Warrants
In connection with the share exchange transaction described
above, the Company cancelled previously outstanding warrants to
purchase common shares. At May 31, 1999, no options or warrants
were outstanding to purchase the Company's common shares.
4. INCOME TAXES
The Company records deferred taxes for the effects of
unrealized gains and losses on marketable equity securities which are
recognized in income for tax purposes only when realized. The
Company's deferred tax assets and liabilities at May 31 consist of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C
Deferred tax asset (liability) 12,110 (6,750)
Valuation allowance - -
Total deferred tax asset (liability) 12,110 (6,750)
The Company's tax provision for each year is as follows:
Income taxes currently payable 147,550 20,450
Increase (decreased) in deferred taxes (18,860) 6,750
Total income tax expense 128,690 27,200
</TABLE>
The difference between the Company's effective tax rate for financial reporting
purposes and federal statutory rates applied to pretax financial statement
income is reconciled as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Federal statutory rate 34.0% 16.9%
State taxes 09.0% 09.0%
Penalties and other 02.0% 18.0%
Total effective tax rate 45.0% 43.9%
</TABLE>
5. INVESTMENTS
Investments at Equity
The Company has an approximate 21% investment in
VirtualLender.com at May 31, 1999, which is accounted for using the
equity method, whereby the Company's investment is increased by
gains and additional investments, and decreased by losses and
distributions. The following is a summary of the financial position
and operating results of Virtuallender.com as of May 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Current Assets 180,913
Property and equipment 260,266
Other assets 65,570
506,749
Total liabilities 3,748
Total stockholders' equity 503,001
Total revenue 11,135
Net loss 78,819
</TABLE>
The Company's total investment in Virtuallender.com at May 31,
1999, consists of 5,869,300 shares of Virtuallender.com common
stock. Of this amount, approximately 4,600 shares are included in
trading securities at May 31, 1999, at a market value of $29,900.
Market value for the remaining shares which constitute the
Company's investment at equity, based upon the closing bid for
Virtuallender.com at May 31, 1999, totalled $38,120,550, before
application of discounts for liquidity or current trading restrictions.
Investments in Other Equity Securities
The Company has invested in equity securities of companies
for which no established trading market exists at May 31, 1999.
These securities are stated at cost that does not exceed the estimated
net realizable value.
6. FIXED ASSETS
The Company's property and equipment consists of the
following at May 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Computers 16,613
Office furniture 8,042
24,655
Less accumulated depreciation 4,071
20,584
</TABLE>
7. CONCENTRATIONS.
At May 31, 1999, the Company had cash in excess of federally
insured limited of approximately $1,176,000.
For the year ended May 31, 1999, the Company realized
trading gains of approximately $1,000,000 from sales of securities of
a single entity.
8. LITIGATION
M & A West, Inc., the Nevada corporation, has been named
as a party in a lawsuit filed by Mortgage Internet Technologies against
M & A West, Inc. and others. The litigation (Case No. C-99-2183
CW in the United States District Court, Northern District of
California) seeks to enjoin parties from the utilization of the name
VirtualLender. The application for a temporary restraining order was
denied by the Court on the grounds that the Plaintiffs were not likely
to prevail. Management considers this suit without merit and has
accrued no provision for loss in the matter at May 31, 1999.
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>
Scott L. Kelly 35 President, CEO & Chairman of
the Board of Directors since 1996
Sal Censoprano 44 Chief Financial Officer,
Secretary & 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 full 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.
Biographical Information
Scott L. Kelly
Scott L. Kelly has served as CEO, President and a Director of
M & A West, Incorporated from 1996 to the present. He received a
Bachelor's Degree in Business Administration from Adelphi
University, Garden City, New York, in 1986, a Master's Degree in
Business Administration from San Francisco State University, in
1992, and a Certified Financial Planner Degree from the College of
Financial Planning, Denver, Colorado, in 1990. He is the Director of
the Boys and Girls Club Foundation and appears in "Who's Who" in
the California Directory. Mr. Kelly has served as a manager of
several brokerage firms and has trained over 50 stock brokers and
conducted more than 300 seminars on various financial subjects in the
United States, Russia, India, South America and Europe. From 1988
to 1989, he was a financial planner with American Express Financial
Services, from 1989 to 1996 he was Senior Vice President of
Interfirst Capital, and in 1996 he was Senior Vice President of
Waldron & Company.
Sal Censoprano
Mr. Censoprano has served as Secretary, Chief Financial
Officer and as a director of the Company since May, 1999. prior to
that time he was self-employed for approximately 15 years as a
certified public accountant, providing tax and accounting services to
the public. Mr. Censoprano received a bachelor's degree in
accounting from Queens College, New York, in 1977, and a masters
degree in accounting and taxation from Adelphi University, Garden
City, New York, in 1981.
ITEM 10. EXECUTIVE COMPENSATION.
The compensation payable to the Company's officers and
directors for the current fiscal year is as follows:
<TABLE>
<CAPTION>
Annual Salary Payable
<S> <C>
<C>
Scott L. Kelly, President $120,000 $10,000 per month
Sal Censoprano,
CFO & Secretary $100,000 $8,333 per month
</TABLE>
Both contracts are for a period of three years, expiring in the
year 2002. Both include bonuses that may be provided to the
employee/officers to be issued solely at the discretion of the Board
based upon the performance of the respective officers and the
performance of the Company. Neither of the Company's officers
received compensation from the Company during the previous fiscal
year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of May 31, 1999, the
number of shars of common stock owned of record and beneficially
by executive officers, directors, persons who hold 5% or more of the
outstanding common stock of the Company, and by all officers and
directors as a group:
<TABLE>
<CAPTION>
Name Number of shares Percent of
and Address Owned Beneficially Class Owned
<S> <C> <C>
Scott Kelly
(as Trustee of the
Kelly Family Trust)
583 San Mateo Avenue
San Bruno, CA 94066 4,942,500 44.93%
Sal Censoprano
1191 Chess Drive, #200
Foster City, CA 94404 0 0
Administrative Systems
Corporation, a
Nevada
corporation 1,647,500<F1> 14.98%
The Newman Company
1325 Airmotie Way
Suite 175
Reno, NV 89502 986,220 8.97%
Global Capital Concepts, Inc.
1325 Airmotive Way
Suite 175
Reno, NV
89502 1,000,000M<F2> 9.09%
Realtec, Ltd.
c/o AMS Financial
Sea Meadow House
Blackburn Highway
Road Town Tortola
British Virgin Islands 720,000 6.54%
Zacco Equities, Ltd.
P. O. Box 116
Road Town Tortola
British Virgin Islands 905,115 8.23%
All Officers and directors
as a group (2 in number) 4,942,500 44.93%
<FN>
<F1> The shares owned by Administrative Systems Corporation
are subject to a voting trust agreement for a period of 3 years, from
May, 1999 through May, 2002. The trustee of the voting trust is
Abbas Iranpour, of Tehran, Iran, who has absolute power and
discretion to vote the shares. The trust certificate holders are Abbas
Iranpour (75%) and Zahra Gilak (24%).
<F2> The shares owned by Global Capital Concepts, Inc., are
subject to a voting trust agreement which is renewable in the
discretion of a majority in interest of the trust certificate holders. The
trustees of the trust are Farkhondeh Goulakani (75%) and Zahra Gilak
(25%).
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
Scott L. Kelly, as Trustee of the Kelly Family Trust, controls
4,942,500 shares of common stock of the Company. Mr. Kelly is
Chief Executive Officer and Chairman of the Board of the
Corporation. Mr. Kelly is also owner of the building which houses
the Company's principal headquarters and leases the building to the
Corporation. The Company believes that the lease of 2,800 sq. ft. of
office space for $1,811.00 per month is below market. Nevertheless,
the Corporation reviews leases on an annual basis to determine
fairness of any such leases. Sal Censoprano as Chief Financial
Officer is paid $695.00 for approximately 1,000 ft. of space which
houses the Company's financial and audit division. The Company
believes that such rental amount is below market and reviews the
propriety and fairness of such rental annually.
Zahra Gilak, President of Administrative Systems, was
secretary of M&A West until May 15, 1999, when she tendered her
resignation. Ms. Gilak no longer holds any position either on the
Board or as an officer of the Company. Although she serves as
President of Administrative Systems, she does not possess the power
to vote the shares of M&A West owned by the corporation. Such
voting power has been transferred to a voting trust of which the
trustee is the major shareholder of Administrative Systems
Corporation. Said Trustee has no relationship to the Company, Inc.
and is not a shareholder in the Company.
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
Other than as disclosed in the above, the Company does not
believe that any other conflicts of interest exist among the officers,
directors or shareholders in any material respect. The Company
reviews all potential conflicts of interest that comes to its attention and
has directed all officers and directors and key personnel to disclose
any anticipated conflicts of interest before they arise.
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>
3.1 Articles of Incorporation (incorporated by
reference to Form 10-KSB/A filed with the Securities and Exchange
Commission on behalf of the Company on January 10, 1997)
3.2 Bylaws (incorporated by reference to Form 10-
KSB/A filed with the Securities and Exchange Commission on behalf
of the Company on January 10, 1997).
27 Financial Data Schedule
</TABLE>
(b) One report on Form 8-k was filed during the last
quarter of the fiscal year to report a change in control of the
Registrant. The date of the report was May 12, 1999. The report did
not include financial statements when originally filed. An amended
report on Form 8-k/a was filed on August 17, 1999, which included
audited consolidated financial statements of M & A West, Inc., as of
May 31, 1999, and related consolidated statements of operations and
cash flows for each of the two years then ended. The date of the
report on Form 8-k/a was May 12, 1999.
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.
M & A West, Inc.
By: /s/ Scott Kelly
(Principal Executive Officer and Director)
Date: September 13, 1999
By: /s/ Sal Censoprano
(Principal Financial Officer and Director)
Date: September 13, 1999
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 1,141,813
<SECURITIES> 573,976
<RECEIVABLES> 10,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,487,347
<PP&E> 24,655
<DEPRECIATION> 4,071
<TOTAL-ASSETS> 2,520,041
<CURRENT-LIABILITIES> 308,039
<BONDS> 0
0
0
<COMMON> 2,020,538
<OTHER-SE> 191,464
<TOTAL-LIABILITY-AND-EQUITY> 2,520,041
<SALES> 0
<TOTAL-REVENUES> 1,827,019
<CGS> 0
<TOTAL-COSTS> 1,498,123
<OTHER-EXPENSES> 43,489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 285,407
<INCOME-TAX> 128,690
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,717
<EPS-BASIC> .01
<EPS-DILUTED> 0
</TABLE>
