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 August 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: 0-23559
SUNBURST ACQUISITIONS III, INC.
(Name of small business issuer in its charter)
COLORADO 84-1432001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4807 S. ZANG WAY, MORRISON, COLORADO 80465
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303)979-2404
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: COMMON STOCK, NO PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |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. |_|
Issuer's revenues for its most recent fiscal year: $ -0-
Aggregate market value of voting stock held by non-affiliates as of November 30,
2000: -0-
Number of shares of Common Stock outstanding as of November 30, 2000: 33,303,840
Documents incorporated by reference: NONE
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
--------------------------------------------------------------------------------
GENERAL
The Company was incorporated under the laws of the State of Colorado on August
27, 1997, and is in the early developmental and promotional stages. To date the
Company's only activities have consisted of the raising of capital and efforts
to seek one or more properties or businesses for acquisition. The Company has
not commenced any commercial operations. The Company has no full-time employees
and owns no real estate.
The Company's business plan has always been to seek, investigate, and, if
warranted, 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.
AMERICAN RECRUITMENT CONFERENCES/WORKSEEK
As of August 30, 1999, the Company entered into an Agreement and Plan of
Reorganization with American Recruitment Conferences, Inc., a California
corporation ("ARC"), and Workseek.com, a California corporation ("Workseek").
ARC and Workseek, which are affiliated companies, were to be acquired by the
Company in a reverse acquisition transaction, resulting in the shareholders of
ARC and Workseek obtaining control over the Company. A series of transactions
were contemplated by the Agreement, including implementation of a 16.16-to-1
forward split, voluntary surrender for cancellation of shares by the existing
shareholders of the Company, and issuance of new shares to the ARC and Workseek
shareholders.
In contemplation of the ARC/Workseek acquisition, shares of the Company's Common
Stock were sold in a private placement in August and September 1999, with the
proceeds loaned to ARC. A total of 1,000,000 shares were sold for $1,400,000 in
cash and $600,000 in receivables assigned to the Company. The promissory note
from ARC and Workseek evidencing the loan was due January 23, 2000, and is
secured by the accounts, equipment, general intangibles, inventory, negotiable
collateral, assets, and proceeds therefrom of ARC and Workseek.
As of November 30, 2000, the proposed transaction had not been consummated and
the loan had not been repaid. The Company is in the process of foreclosing on
its security interest, but recovery of the amount due under the promissory note
is doubtful. Accordingly, the promissory note receivable has been offset by a
full allowance for realization.
2
<PAGE>
ADMINISTRATIVE OFFICES
The Company currently maintains a mailing address at 4807 S. Zang Way, Morrison,
Colorado 80465, which is the office address of its President. The Company's
telephone number there is (303) 979-2404. 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. 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.
No remuneration will be paid to the Company's officers except as set forth under
"Executive Compensation" and under "Certain Relationships and Related
Transactions."
ITEM 2. DESCRIPTION OF PROPERTY.
--------------------------------------------------------------------------------
The Company currently maintains a mailing address at 4807 S. Zang Way, Morrison,
Colorado 80465, 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 (303) 979-2404.
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, other than any proceedings resulting
from the Company's decision to foreclose on its security interest in the assets
of ARC and Workseek.
No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 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.
3
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
--------------------------------------------------------------------------------
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year which ended August 31, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------------------
Although the Company's shares have been approved for trading on the OTC Bulletin
Board since approximately November 19, 1998, under the trading symbol "SBSQ," 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 62 persons.
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. Until it conducted the private
placement in contemplation of the ARC/Workseek acquisition, it had experienced
no significant change in liquidity or capital resources or stockholders' equity
other than the receipt of proceeds in the amount of $8,000 from its inside
capitalization funds, and the expenditure of such funds in furtherance of the
Company's business plan, including primarily expenditure of funds to pay legal
and accounting expenses. Consequently, the Company's balance sheet for the
fiscal year ended August 31, 2000, reflects a current asset value of $338.
RESULTS OF OPERATIONS
During the period from August 27, 1997 (inception) through August 31, 1998, the
Company 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 periodic reporting requirements, and efforts to locate a
suitable merger or acquisition candidate. No revenues were received by the
Company during this period and the Company incurred a net loss of $10,305.
For the fiscal years ending August 31, 1999, the Company incurred a net loss of
$9,031 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.
For the fiscal year ending August 31, 2000, the Company incurred a net loss of
$2,022,917, primarily as a result of the $2,000,000 valuation allowance taken
against the promissory note from ARC and
4
<PAGE>
Workseek. Legal fees of $9,292 were incurred as a result of the negotiations and
dealings with ARC and Workseek and compliance with the SEC's reporting
requirements.
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.
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.
--------------------------------------------------------------------------------
See the pages beginning with F-1.
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.
5
<PAGE>
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:
NAME AGE POSITIONS HELD AND TENURE
Jay Lutsky 58 President and a Director since August, 1997
Michael R Quinn 77 Secretary, Treasurer, and a Director since
August, 1997
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.
BIOGRAPHICAL INFORMATION
JAY LUTSKY
Mr. Lutsky has served as President and as a Director of the Company since its
inception. From 1968 to 1974, Mr. Lutsky was employed at United Bank of Denver
in various management positions, including Guaranteed Check Manager, Corporate
Programs Manager and Executive Lending Officer. From April 1974 through April
1980, Mr. Lutsky was involved in the publishing and ski promotions business,
serving as President of Mountain States Ski Association, a company he helped to
start. From August 1983 through September 1985, Mr. Lutsky worked in the
positions of General Manager of the SumFun Program, Regional marketing Manager,
and Investor Relations Manager for Gold C Enterprises, Inc., a publicly-traded
Colorado corporation that published discount coupon books. Since May of 1980,
Mr. Lutsky has done business as Dolphin & Associates, a private consulting firm
and he has managed his personal investment portfolio.
Mr. Lutsky has served on the board and been president of several public
companies. From December 1986 through May, 1990, Mr. Lutsky served as president
of Eagle Venture Acquisitions, Inc. ("Eagle"). Eagle merged with Network
Financial Services, Inc. ("Network") in May 1990. Mr. Lutsky continued on the
board of Network which traded on the NASDAQ system until December, 1993. Mr.
Lutsky was a vice-president and served on the board of Starlight Acquisitions,
Inc.
6
<PAGE>
("Starlight") a blank check offering. Starlight merged with Toucan Gold
Corporation ("Toucan"), TUGO- Bulletin Board, on May 10, 1996. Mr. Lutsky now
serves as an advisor to the current board of directors of Toucan. Until
November, 1997, Mr. Lutsky was an officer and served on the board of directors
of Gatwick, Ltd., a Regulation A public company. In November, 1997, Gatwick,
Ltd., changed its name to AIM Smart Corporation and completed a share
acquisition transaction with Smart AIM Corporation, a Michigan corporation. Mr.
Lutsky also currently serves on the board of directors of Sunburst Acquisitions
V, Inc., Sunburst Acquisitions VI, Inc., Sunburst Acquisitions VII, Inc. and
Sunburst Acquisitions VIII, Inc., all of which are blind pool or blank check
companies he has formed in conjunction with Mr. Quinn.
He earned a Bachelor of Science degree from Kent State University in 1967.
MICHAEL R. QUINN
Mr. Quinn has served as Secretary and Director of the Company since its
inception. He has been involved with several development stage companies. He
consults with companies contemplating trading publicly and his services consist
of corporate structuring, management, accounting, productions, sales, etc.
Mr. Quinn earned the degrees of Metallurgical Engineer and Engineer of Mines at
the Colorado School of Mines in 1946. He did graduate work and was employed as a
research assistant at MIT.
Over the last six years, Mr. Quinn has served as a consultant to equity holders
involved in a bankruptcy case, as a consultant and lead plaintiff in three
lawsuits, all of which have resulted in favorable decisions for the plaintiff.
He served as President, Treasurer and Director of O.T.C. Capital Corporation
("OTC"). OTC acquired Capital 2000 and is currently actively trading. He was a
founder of American Leverage, Inc., and was its Secretary/Treasurer and a
Director until American Leverage, Inc. acquired Data National Corporation
("Data"). Data is active, profitable and in a growth mode. Until November, 1997,
Mr. Quinn was an officer and served on the board of directors of Gatwick, Ltd.,
a Regulation A public company. In November, 1997, Gatwick, Ltd., changed its
name to AIM Smart Corporation and completed a share acquisition transaction with
Smart AIM Corporation, a Michigan corporation. Mr. Quinn also currently serves
on the board of directors of Sunburst Acquisitions IV, Inc., Sunburst
Acquisitions V, Inc., Sunburst Acquisitions VI, Inc., Sunburst Acquisitions VII,
Inc. and Sunburst Acquisitions VIII, Inc., all of which are blind pool or blank
check companies he has formed in conjunction with Mr. Lutsky.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Jay Lutsky and Michael R. Quinn are subject to the report their beneficial
ownership of the Company's securities under Section 16(a) of the Exchange Act.
Each was required to file an Initial Statement of Beneficial Ownership of
Securities on Form 3 at the time of the registration of the Company's securities
under Section 12(g) of the Exchange Act. To the best knowledge and belief of the
Company, such persons made a late filing of Form 3.
7
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
--------------------------------------------------------------------------------
No officer or director received any remuneration from the Company during the
fiscal year. Until the Company acquires additional capital, it is not intended
that any officer or director will receive compensation from the Company other
than reimbursement for out-of-pocket expenses incurred on behalf of the Company.
See "Certain Relationships and Related Transactions." The Company has no stock
option, retirement, pension, or profit-sharing programs for the benefit of
directors, officers or other employees, but the Board of Directors may recommend
adoption of one or more such programs in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------------------------
The following table sets forth, as of November 30, 2000, the number of shares of
Common Stock owned of record and beneficially by executive officers, directors
and persons who hold 5.0% or more of the outstanding Common Stock of the
Company. Also included are the shares held by all executive officers and
directors as a group.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OWNED BENEFICIALLY CLASS OWNED (1)<F1>
--------------------------------------------------------------------------------
<S> <C> <C>
Jay Lutsky 13,057,280 39.21%
4807 S. Zang Way
Morrison, Colorado 80465
--------------------------------------------------------------------------------
Michael R. Quinn 13,024,960 39.11%
2082 Cherry Street
Denver, Colorado 80207
--------------------------------------------------------------------------------
All directors and executive 26,082,240 78.32%
officers (2 persons)
--------------------------------------------------------------------------------
<FN>
(1)<F1> Based on 33,303,840 shares outstanding.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------------------------------
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado law, the Company's Articles of Incorporation provide
that the Company will indemnify its directors and officers against expenses and
liabilities they incur to defend, settle, or satisfy any civil or criminal
action brought against them on account of their being or having been Company
directors or officers unless, in any such action, they are adjudged to have
acted with gross negligence or willful misconduct. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
8
<PAGE>
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 Colorado based development-stage corporation in the same
business as the Company. These companies may be in direct competition with the
Company for available opportunities. However, as of the end of the Company's
fiscal year, each of these entities had substantially the same shareholders as
the Company, which means that there was no actual conflict of interest between
the Company and these other entities as of that time.
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 (1)<F1>
3.2 Bylaws (1)<F1>
4.1 Specimen Common Stock Certificate (1)<F1>
4.2 Specimen Class A Convertible Preferred Stock Certificate (1)<F1>
10.1 Agreement and Plan of Reorganization (2)<F2>
10.2 American Recruitment Conferences/Workseek Loan Documents (2)<F2>
9
<PAGE>
EXHIBIT NO. DOCUMENT
27 Financial Data Schedule
---------------
<FN>
(1)<F1> Incorporated by reference from the Registration Statement on Form
10-SB/A filed with the Securities and Exchange Commission on December
29, 1997).
(2)<F2> Incorporated by reference to the exhibits filed with the Company's
annual report on Form 10-KSB for the fiscal year ended August 31, 1999.
</FN>
</TABLE>
(b) No reports on Form 8-K were filed by the Company during the last
quarter of its fiscal year ending August 31, 2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUNBURST ACQUISITIONS III, INC.
Date: December 6, 2000 By: /s/ JAY LUTSKY
-----------------------------------------
Jay Lutsky, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: December 6, 2000 /s/ JAY LUTSKY
--------------------------------------------
Jay Lutsky
(Principal Executive Officer and Director)
Date: December 6, 2000 /s/ MICHAEL R. QUINN
--------------------------------------------
Michael R. Quinn
(Principal Financial and Accounting Officer
and Director)
10
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 2000
<PAGE>
CONTENTS
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
BALANCE SHEET F-2
STATEMENTS OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-6 TO F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Sunburst Acquisitions III, Inc.
We have audited the accompanying balance sheet of Sunburst Acquisitions III,
Inc. (a development stage company) as of August 31, 2000, and the related
statements of operations, stockholders' equity, and cash flows for each of the
two years then ended and for the period from inception (August 27, 1997) to
August 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sunburst Acquisitions III, Inc.
as of August 31, 2000, and the results of its operations and cash flows for each
of the two years then ended and for the period from inception (August 27, 1997)
to August 31, 2000 in conformity with generally accepted accounting principles.
Denver, Colorado
December 4, 2000
/S/ COMISKEY & COMPANY
PROFESSIONAL CORPORATION
F-1
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AUGUST 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 338
Note receivable (net of valuation allowance of $2,000,000) -
------------
Total current assets 338
TOTAL ASSETS $ 338
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 20,847
------------
Total current liabilities 20,847
STOCKHOLDERS' DEFICIT
Preferred stock, no par value; 20,000,000 shares
authorized; No shares issued and outstanding -
Common stock, no par value; 100,000,000
shares authorized; 33,303,840 shares issued and
outstanding 2,020,435
Additional paid-in capital 3,244
------------
Deficit accumulated during the development stage (2,044,188)
------------
Total stockholders' deficit (20,509)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 338
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
from inception For the year For the year
(August 27, 1997) ended ended
to August 31, August 31, August 31,
2000 2000 1999
----------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
------------- ------------- -------------
EXPENSES
Amortization 300 - 240
Consulting fees 4,935 - -
General office 966 162 296
Legal fees 17,678 10,193 4,317
Professional fees 13,706 9,292 2,297
Rent 1,800 600 600
Taxes and licenses 107 - -
Transfer agent 4,696 2,670 1,281
Valuation allowance 2,000,000 2,000,000 -
------------- ------------- -------------
Total expenses 2,044,188 2,022,917 9,031
------------- ------------- -------------
NET LOSS (2,044,188) (2,022,917) (9,031)
Accumulated deficit
Balance, beginning of period - (21,271) (12,240)
------------- ------------- -------------
Balance, end of period $ (2,044,188) $ (2,044,188) $ (21,271)
============= ============= =============
NET LOSS PER SHARE $ (NIL) $ (NIL) $ (NIL)
============= ============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 35,219,703 33,342,176 38,313,589
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Preferred stock Common stock Common Additional during the Total
Number of Number of Stock paid-in development stockholders'
shares Amount shares Amount Subscribed capital stage equity
-------- ------- ------------ --------- ----------- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred stock issued for
cash, August 27,1997 at
$0.001 per share 80,000 8,000 - - - - - 8,000
Common stock issued for
services, August 27, 1997 at
$0.000062 per share - - 31,269,600 1,935 - - - 1,935
Net loss for the period ended
August 31, 1997 - - - - - - (1,935) (1,935)
-------- ------- ------------ --------- ----------- ----- ----------- -----------
Balance, August 31, 1997 80,000 8,000 31,269,600 1,935 - - (1,935) 8,000
Rent at no charge - - - - - 600 - 600
Common stock issued for
services, July 1998 at
$0.00186 per share - - 1,616,000 3,000 - - - 3,000
Net loss for the year ended
August 31, 1998 - - - - - - (10,305) (10,305)
-------- ------- ------------ --------- ----------- ----- ----------- -----------
Balance, August 31, 1998 80,000 8,000 32,885,600 4,935 - 600 (12,240) 1,295
Rent at no charge - - - - - 600 - 600
Common stock issued for
cash, January 1999 at
$0.00155 per share - - 4,848,000 7,500 - - - 7,500
Preferred stock converted to
common, May 1999 at
$0.00309 per share (80,000) (8,000) 2,585,600 8,000 - - - -
Common stock subscribed,
year ended August 31, 1999 - - - - 2,000,000 - - 2,000,000
Net loss for the year ended
August 31, 1999 - - - - - - (9,031) (9,031)
-------- ------- ------------ --------- ----------- ----- ----------- -----------
Balance, August 31, 1999 - - 40,319,200 20,435 2,000,000 1,200 (21,271) 2,000,364
Issuance of common stock
subscribed, September 1999
at $2.00 per share - - 1,000,000 2,000,000 (2,000,000) - - -
Voluntary cancellation of
outstanding shares,
September 1999 - - (8,015,360) - - - - -
Rent at no charge - - - - - 600 - 600
Expenses paid by shareholder - - - - - 1,444 - 1,444
Net loss for the year ended
August 31, 2000 - - - - - - (2,022,917) (2,022,917)
-------- ------- ------------ --------- ----------- ----- ----------- -----------
Balance, August 31, 2000 - - 33,303,840 2,020,435 - 3,244 (2,044,188) (20,509)
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
from inception For the year For the year
(August 27, 1997) ended ended
to August 31, August 31, August 31,
2000 2000 1999
----------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,044,188) $(2,022,917) $(9,031)
Adjustments to reconcile
net loss to net cash flows
from operating activities:
Amortization 300 - 240
Rent expense 1,800 600 600
Stock issued for consulting fees 4,935 - -
Decrease in prepaid expenses - - 474
Decrease in accounts receivable
- related party - - 103
Increase in accounts payable 20,847 19,699 1,148
Decrease in accounts payable
- related party - - (495)
------------ ------------ --------
Net cash flows from operating activities (2,016,306) (2,002,618) (6,961)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in organization costs (300) - -
Cash in escrow - 1,271,000 -
------------ ------------ --------
Net cash flows from investing activities (300) 1,271,000 -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 2,007,500 2,000,000 7,500
Issuance of preferred stock 8,000 - -
Additional paid-in capital 1,444 1,444
Common stock subscribed - (1,271,000) -
------------ ------------ --------
Net cash flows from financing activities 2,016,944 730,444 7,500
------------ ------------ --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 338 (1,174) 539
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 1,512 973
------------ ------------ --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 338 $ 338 $ 1,512
============ ============ ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE COMPANY
Sunburst Acquisitions III, Inc. (a development stage company) (the
"Company") was incorporated under the laws of the State of Colorado on
August 27, 1997. The initial principal office of the corporation is 4807
South Zang Way, Morrison, Colorado 80465.
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.
On August 30, 1999, the Company entered into an Agreement and Plan of
Reorganization ("Agreement") by and among the Company, Sunburst Subsidiary,
Inc., a California corporation ("Subsidiary"), WorkSeek.com, a California
corporation ("WorkSeek") and American Recruitment Conferences, Inc., a
California corporation ("American"). The Agreement contemplates the merger
of American and WorkSeek into Subsidiary. The proposed merger has not been
consummated. See Note 6.
ACCOUNTING METHOD
The Company records income and expenses on the accrual method.
LOSS PER SHARE
Loss per share was computed using the weighted average number of shares of
common stock outstanding during the period.
ORGANIZATION COSTS
Costs to incorporate the Company were originally capitalized to be
amortized over a sixty-month period. With the adoption of SOP 98-5, the
unamortized portion of these costs was written off to expense during the
year ended August 31, 1999.
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.
STATEMENT OF CASH FLOWS
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.
F-6
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management
to make estimates and assumptions that effect the amounts reported in these
financial statements and accompanying notes. Actual results could differ
from those estimates.
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 August 31, 2000, the Company's
financial statements do not contain any changes in equity that are required
to be reported separately in comprehensive income.
STOCK BASIS
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the fair value of the service or assets received in
exchange.
2. STOCKHOLDERS' EQUITY
As of August 29, 1999, 2,035,000 shares of the Company's no par value
common stock had been issued for consulting services provided. The services
were converted to shares at $0.001 per share. 300,000 shares had been
issued for cash at $0.025 per share, and 160,000 additional shares are
outstanding as a result of the conversion of preferred stock at $0.050 per
share.
On August 30, 1999, the Company underwent a 16.16 for 1 forward stock split
of its then outstanding common shares. In addition, and in anticipation of
the merger mentioned above, the Company sold in a private placement, a
total of 1,000,000 post-split common shares at $2.00 per share. Proceeds
were received in the form of $1,400,000 cash and $600,000 in assigned
conversion agreements, under which creditors of American had agreed to
convert prior loans to American into common shares at the rate of $2.00 per
share. The private placement was completed in September 1999.
Officers and other stockholders also voluntarily cancelled 8,015,360 common
shares as part of the agreement in September 1999.
All share and per share amounts have been restated. A total of 33,303,840
shares were outstanding at August 31, 2000.
As of August 31, 2000, all shares of the Company's no par value Series A
preferred stock have been converted to common stock.
F-7
<PAGE>
SUNBURST ACQUISITIONS III, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
3. RELATED PARTY TRANSACTIONS
Following the conversion of their preferred shares, the Company's officers
and directors were the owners of 26,082,240 shares of common stock. These
common shares owned by the directors account for approximately 78% of the
Company's issued and outstanding shares.
The Company's President is providing office space at no charge to the
Company. For purposes of the financial statements, the Company is accruing
$50 per month as additional paid-in capital for this use.
4. INCOME TAXES
The Company has Federal net operating loss carryforwards of approximately
$2,044,188 expiring during the years 2018 and 2020. The tax benefit of
these net operating losses is approximately $389,162 and has been offset by
a full allowance for realization. This carryforward may be limited upon the
consummation of a business combination under IRC Section 381. For the years
ended August 31, 2000 and 1999, the valuation allowance increased by
approximately $385,067 and $1,740, respectively.
5. STATEMENT OF CASH FLOWS
Non cash investing and financing activities included the assignment of
notes receivable for stock in the amount of $600,000. The stock
subscription receivable of $129,000 was collected in September 1999.
6. NOTES RECEIVABLE
In connection with the Agreement, the cash proceeds from the private
placement were advanced to American pursuant to a promissory note and
security agreement in the amount of $1,400,000. The loan, which is secured
by all of American's right title and interest in accounts, equipment,
general intangibles, inventory, negotiable collateral, and proceeds from
the disposition of such collateral, was due and payable with interest at
10% per year on January 23, 2000. No payment has been made and collection
is doubtful. The note receivable has been offset by a full allowance for
realization.
No payment has been received on the $600,000 in assigned conversion
agreements and a full allowance for realization has been recorded.
F-8
