U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
___Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended March 31, 1999.
X__Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from September 1,
1998 to March 31, 1999.
Commission File No: 0-23561
SUNBURST ACQUISITIONS IV, INC.
(Name of small business in its charter)
Colorado 84-1431797
__________________________________________________________
(State or other (IRS Employer Identification
jurisdiction of Incorporation) No.)
2082 Cherry Street
__________________________________________________________
Address of Principal Executive Office (street and number)
Denver, Colorado 80207
__________________________________________________________
City, State and Zip Code
(Issuer's telephone number: (303)321-0461
Securities to be registered under Section 12(b) of the Act:
Title of each class
__________________________________________________________
N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ____
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. ___
State issuer's revenue for its most recent fiscal year: $ -0-
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked priced of such stock, as of a
specified date within the past 60 days (See definition of affiliate in
Rule 12b-2): -0-
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates
on the basis of reasonable assumptions, if the assumptions are stated.
(Issuers involved in bankruptcy proceedings during the past five
years) Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.
Yes ____ No ____
(Applicable only to corporate registrants) State the number of shares
outstanding of each of the issuer's classes of common equity, as of the
latest practicable date: 8,800,831 as of October 21, 1999.
(Documents incorporated by reference. If the following documents are
incorporated by reference, briefly describe them and identify the part
of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933
("Securities Act"). The listed documents should be clearly described
for identification purposes.
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 as of March 31, 1999 remained in
the early developmental and promotional stages. As of March 31,
1999, the Company's only activities had been organizational ones,
directed at the raising of capital, and preliminary efforts to seek one
or more properties or businesses for acquisition. As of March 31,
1999, the Company has not commenced any commercial operations,
owns no real estate and has no full-time employees.
The Company's business plan is 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.
As of March 31, 1999, the Company had not identified any
business opportunity that it planned to pursue, nor had the Company
reached any agreement or definitive understanding with any person
concerning an acquisition. As of August 4, 1999, subsequent to the
end of the fiscal year, the Company acquired an interest in Prologic
Management Systems, Inc., an Arizona corporation engaged in the
business of providing systems integration services, networking
services, software development and applications software for the
commercial market. (See Description of Business - Subsequent
Event).
No assurance can be given that the Company will be successful
in finding or acquiring a desirable business opportunity, given the
limited funds that are expected to be available for acquisitions, or that
any acquisition that occurs will be on terms that are favorable to the
Company or its stockholders.
The Company's search has been directed toward enterprises
which have a desire to be become a public corporation and which
have a business plan designed to allow them to take advantage of
opportunities available to public entities. This includes entities which
have been recently organized, with no operating history, or a history
of losses attributable to under-capitalization or other factors, entities
in need of funds to develop a new product or service or to expand
into a new market, entities which desire to use their securities to make
acquisitions, and entities which have a combination of these
characteristics.
In searching for investment opportunities, the Company is not
restricted to any particular geographical area or industry. Therefore,
subject to economic conditions, limitations on its ability to locate
available business opportunities, and other factors, the Company has
substantial discretion in selecting an appropriate business opportunity.
In connection with any acquisition, it is highly likely that an
amount of stock constituting control of the Company would be issued
by the Company or purchased from the Company's current principal
shareholders by the target entity or its controlling shareholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis of the
quality of the other company's management and personnel, the anti-
cipated acceptability of new products or marketing concepts, the merit
of technological changes, and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria. In many instances, it is anticipated that the
historical operations of a specific firm may not necessarily be
indicative of the potential for the future because of the possible need
to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment manage-
ment, or make other changes.
Because the Company may participate in a business
opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the
Company will incur further risks, because management in many
instances will not have proved its abilities or effectiveness, the
eventual market for such company's products or services will likely
not be established, and such company may not be profitable when
acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the
Company's management to complete acquisitions without submitting
any proposal to the stockholders for their consideration. Company
management does not generally anticipate that it will provide holders
of the Company's securities with financial statements, or any other
documentation, concerning a target company or its business prior to
any merger or acquisition. In some instances, however, the proposed
participation in a business opportunity may be submitted to the
stockholders for their consideration, either voluntarily by Company
management which elects to seek the stockholders' advice and
consent, or because state law so requires.
The analysis of business opportunities will be undertaken by or
under the supervision of the Company's executive officers and
directors. Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and in that event,
might pay a finder's fee. Since Company management has no current
plans to use any outside consultants or advisors to assist in the
investigation and selection of business opportunities, no policies have
been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such consultants or advisors, the
services to be provided, the term of service, or regarding the total
amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company
agrees to pay would be paid in stock and not in cash. Otherwise, the
Company anticipates that it will consider, among other things, the
following factors:
(a) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(b) Competitive position as compared to other companies of
similar size and experience within the industry segment as well as
within the industry as a whole;
(c) Strength and diversity of existing management, or
management prospects that are scheduled for recruitment;
(d) Capital requirements and anticipated availability of
required funds, to be provided from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
(e) The cost of participation by the Company as compared to
the perceived tangible and intangible values and potential;
(f) The extent to which the business opportunity can be
advanced;
(g) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(h) The accessibility of required management expertise,
personnel, raw materials, services, professional assistance, and other
required items; and
(i) Whether the financial condition of the business opportunity
would be, or would have a significant prospect in the foreseeable
future to become, such as to permit the securities of the Company,
following the business combination, to qualify to be listed on an
exchange or on a national automated securities quotation system, such
as NASDAQ, so as to permit the trading of such securities to be
exempt from the requirements of Rule 15c2-6 recently adopted by the
Securities and Exchange Commission. See "Risk Factors - The
Company - Regulation of Penny Stocks."
In regard to the last criterion listed above, the current
standards for NASDAQ listing include, among other things, the
requirements that the issuer of the securities that are sought to be
listed have net tangible assets of at least $4,000,000, or a market
capitalization of at least $50,000,000, or net income in its latest fiscal
year of not less than $750,000. Many, and perhaps most, of the
business opportunities that might be potential candidates for a
combination with the Company would not satisfy the NASDAQ listing
criteria. To the extent that the Company seeks potential NASDAQ
listing, therefore, the range of business opportunities that are available
for evaluation and potential acquisition by the Company would be
significantly limited.
In applying the criteria listed above, no one of which will be
controlling, management will attempt to analyze all factors appropriate
to the opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at
various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize
that, because of the Company's limited capital available for
investigation and management's limited experience in business
analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
Prior to making a decision to participate in a business op-
portunity, the Company will generally request that it be provided with
written materials regarding the business opportunity containing such
items as a description of products, services and company history;
management resumes; financial information; available projections,
with related assumptions upon which they are based; an explanation of
proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions
between such company and its affiliates during relevant periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated
capital requirements; audited financial statements or an indication that
audited statements will be available within sixty (60) days following
completion of a merger transaction; and other information deemed
relevant.
As part of the Company's investigation, the Company's
executive officers and directors may meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain
information provided, check references of management and key
personnel, and take other reasonable investigative measures, to the
extent of the Company's limited financial resources and management
expertise.
Company management believes that various types of potential
merger or acquisition candidates might find a business combination
with the Company to be attractive. These include acquisition
candidates desiring to create a public market for their shares in order
to enhance liquidity for current shareholders, acquisition candidates
which have long-term plans for raising equity capital through the
public sale of securities and believe that the possible prior existence of
a public market for their securities would be beneficial, and
acquisition candidates which plan to acquire additional assets through
issuance of securities rather than for cash, and believe that the
possibility of development of a public market for their securities will
be assistance in that process. Acquisition candidates which have a
need for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive alternative
unless they are able to negotiate separate arrangements with third
parties to raise capital in conjunction with the business combination
transaction.
Form of Acquisition
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and
desires of the Company and the promoters of the opportunity and,
upon the basis of that review and the relative negotiating strength of
the Company and such promoters, the legal structure or method
deemed by management to be suitable will be selected. Such structure
may include, but is not limited to leases, purchase and sale agree-
ments, licenses, joint ventures and other contractual arrangements.
The Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing
such structure may require the merger, consolidation or reorganization
of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders
of the Company most likely will not have control of a majority of the
voting shares of the Company following a reorganization transaction.
As part of such a transaction, the Company's directors may resign and
new directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisi-
tion is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the stockholders
of the acquired company of up to 80% of the common stock of the
combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions
rather than other "tax free" provisions provided under the Internal
Revenue Code, the Company's stockholders in such circumstances
would retain in the aggregate 20% or less of the total issued and
outstanding shares. This could result in substantial additional dilution
in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might
also be done simultaneously with a sale or transfer of shares
representing a controlling interest in the Company by the current
officers, directors and principal shareholders. (See "Description of
Business - General").
It is anticipated that any securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available,
from registration under applicable federal and state securities laws. In
some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain
conditions or at specified times thereafter. The issuance of substantial
additional securities and their potential sale into any trading market
that might develop in the Company's securities may have a depressive
effect upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the
terms of closing and the conditions which must be satisfied by each of
the parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it will enter
into a letter of intent with the management, principals or owners of a
prospective business opportunity prior to signing a binding agreement.
Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind either the Company or the business
opportunity to consummate the transaction. Execution of a letter of
intent will by no means indicate that consummation of an acquisition
is probable. Neither the Company nor the business opportunity will
be bound to consummate the acquisition unless and until a definitive
agreement concerning the acquisition as described in the preceding
paragraph is executed. Even after a definitive agreement is executed,
it is possible that the acquisition would not be consummated should
either party elect to exercise any right provided in the agreement to
terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
Competition
The Company expects to encounter substantial competition in
its efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and corporations,
venture capital affiliates of large industrial and financial companies,
small investment companies, and wealthy individuals. Many of these
entities will have significantly greater experience, resources and
managerial capabilities than the Company and will therefore be in a
better position than the Company to obtain access to attractive
business opportunities. The Company also will experience competition
from other public "blind pool" companies, many of which may have
more funds available than does the Company.
Administrative Offices
The Company currently maintains a mailing address at 2082
Cherry Street, Denver, Colorado 80207, which is the office address of
its President. The Company's telephone number there is (303) 321-
0461. 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 anti-
cipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for em-
ployees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. No remuneration will be paid to the Company's officers
except as set forth under "Executive Compensation" and under "Certain
Relationships and Related Transactions."
Subsequent Event
On July 8, 1999, the Company entered into a Stock Purchase
and Merger Agreement ("SPMA") with Prologic Management
Systems, Inc., an Arizona corporation ("Prologic"). Prologic is
engaged in the business of providing systems integration services,
networking services, software development and applications software
for the commercial market. The terms of the SPMA require that the
Company purchase up to 5,280,763 shares of common stock of
Prologic for $3,000,000.
On August 4, 1999, in a transaction accounted for using the
purchase method, the Company acquired 3,459,972 shares of common
stock of Prologic for a subscription price of $1,000,000, or $0.2890
per share (Tranche 1"). In addition, a Voting Trust Agreement was
executed granting the Company voting rights to a total of 1,071,060
shares of Prologic common stock. Following the closing of Tranche
1 and execution of the Voting Trust Agreement, the Company owned
or had voting control of approximately 55% of the issued and
outstanding common shares of Prologic. The Company funded the
purchase through the sale of 500,831 shares of its common stock at
$2.00 per share.
The Company's second stage investment under the SPMA
("Tranche 2") involves the purchase of up to 1,820,791 additional
shares for a purchase price of $2,000,000, or approximately $1.0984
per share. The proceeds from Tranche 2 are intended to be used by
Prologic to facilitate the acquisition of another (unaffiliated) company
(the "Tranche 2 Acquisition"), and Tranche 2 is to be funded
essentially simultaneously with the closing of the Tranche 2
Acquisition. As of the date hereof, Tranche 2 has not yet closed.
It is intended that Prologic merge into the Company or into a
subsidiary of the Company organized for that purpose. As a
condition to closing of the merger, the Company is obligated to have
a binding commitment from investors to provide it, in two stages,
with up to $4,000,000 in equity capital. The Tranche 2 funding
described above will represent the first stage. The second $2,000,000
stage (Tranche 3), which is intended to be funded after completion of
the merger, will require that the Company have a binding
commitment from investors to purchase a total of 890,287 shares of
common stock for a total purchase price of $2,000,000, or $2.246 per
share.
In conjunction with execution of the SPMA, the Company and
certain of its shareholders entered into an agreement with a group of
investors to permit such investors to acquire control of the Company
in return for providing the funds required by the SPMA. The
agreement with these investors involved a four step reorganization of
the Company including (i) the sale by five current shareholders of the
Company of a total of 385,000 (pre-split) shares of common stock;
(ii) the voluntary surrender for cancellation of a total of 436,000 (pre-
split) shares of common stock, reducing the number of issued and
outstanding shares from 2,435,000 to 1,999,000 (pre-split); (iii)
completion of a 20:1 forward split increasing the number of issued
and outstanding shares to 39,980,000; and (iv) the voluntary
surrender for cancellation of a total of 31,680,000 shares, reducing
the number of issued and outstanding shares (following completion of
the forward split described above) to 8,300,000.
Under the terms of the SPMA, Prologic will merge into the
Company only after the Tranche 2 funding has been completed and
the Company has a commitment to provide the Tranche 3 funding.
To effect the merger, the Company will issue common and preferred
shares for all of the outstanding common and preferred shares of
Prologic in the ratio of one Sunburst share for each Prologic share
surrendered. Prologic shares held in treasury, by way of any
Prologic subsidiary, and by the Company directly as a result of the
transactions noted above, will be cancelled. An adjustment to the
number of shares of Sunburst common stock will be made in order
that the number of shares of common stock issued to former Prologic
shareholders, as described above, will result in those shareholders
holding 47.15% of the common stock of Sunburst after the merger
but prior to Tranche 3, as detailed in Section 8.6(a)(v) of the SPMA.
The Company changed its fiscal year end from August 31 to
March 31, which is the reporting year of Prologic. Prologic is
designated as the accounting acquiror in the transaction. However,
the financial statements which are included in this Form 10-KSB do
not include the results of Prologic for any of the periods presented.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. Except for historical
matters, the matters discussed in this Form 10-KSB are forward-
looking statements based on current expectations, and involve risks
and uncertainties. Forward-looking statements include, but are not
limited to, statements under the following headings:
(i) "Description of Business - General" - the general
description of the Company's plan to seek a merger or acquisition
candidate, and the types of business opportunities that may be
pursued.
(ii) "Description of Business - Investigation and Selection
of Business Opportunities" - the steps which may be taken to
investigate prospective business opportunities, and the factors which
may be used in selecting a business opportunity.
(iii) "Description of Business - Form of Acquisition" - the
manner in which the Company may participate in a business
acquisition.
The Company wishes to caution the reader that there are many
uncertainties and unknown factors which could affect its ability to
carry out its business plan in the manner described herein.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently maintains a mailing address at 2082
Cherry Street, Denver, Colorado, 80207, 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) 321-0461.
The Company currently has no investments in real estate, real
estate mortgages, or real estate securities, and does not anticipate
making any such investments in the future. However, the policy of
the Company with respect to investment in real estate assets could be
changed in the future without a vote of security holders.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings,
and no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner
of record or beneficial owner of more than 5.0% of the securities of
the Company, or any associate of any such director, officer or
security holder is a party adverse to the Company or has a material
interest adverse to the Company in reference to pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of
the Company during the last quarter of the fiscal year which ended
March 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
As of March 31, 1999, there was not currently a public
trading market for the Company's shares. Subsequent to March 31,
1999, a securities broker received approval from the National
Association of Securities Dealers to post a quotation for the
Company's shares on the OTC Bulletin Board. As of October 21,
1999, the Company's securities were held of record by a total of
approximately 163 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.
At inception (August, 1997), the Company issued a total of
80,000 shares of Preferred Stock, for consideration consisting of
$8,000 in cash. In May 1999, all of the outstanding preferred stock
was converted into a total of 3,200,000 shares of common stock. At
inception, the Company also issued a total of 38,700,000 shares of
common stock for consideration consisting of services valued at
$1,935. In January, 1999, the Company issued a total of 4,800,000
shares of common stock for consideration consisting of $6,000 in
cash. All of such issuances of shares were made in reliance on
exemptions from registration under Section 4(2) of the Securities Act
of 1933 and Regulation D promulgated thereunder.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION.
As of March 31, 1999, the Company remained in the
development stage and, since inception, has experienced no significant
change in liquidity or capital resources or stockholder's equity other
than the receipt of proceeds in the amount of $8,000 at inception,
from its inside capitalization funds, receipt of an additional $6,000 in
January, 1999, as consideration for issuance of an additional
4,800,000 shares of common stock, 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
March 31, 1999, reflects a current asset value of $1,996 in the form
of cash, and a total asset value of $1,996.
Results of Operations
During the period from August 27, 1997 (inception) through
March 31, 1999, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital,
preparation and filing of the registration of its securities under the
Securities Exchange Act of 1934, as amended, compliance with its
periodical reporting requirements, and efforts to locate a suitable
merger or acquisition candidate. No revenues were received by the
Company during this period.
Plan of Operations
For the fiscal year ending March 31, 2000, the Company
expects to continue its efforts to locate a suitable business acquisition
candidate and thereafter to complete a business acquisition
transaction. The Company anticipates incurring a loss for the fiscal
year as a result of expenses associated with compliance with the
reporting requirements of the Securities Exchange Act of 1934, and
expenses associated with locating and evaluating acquisition
candidates. The Company 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.
As a result of the anticipated losses for the fiscal year, 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.
As of August 4, 1999, subsequent to the end of the fiscal year,
the Company acquired an interest in Prologic Management Systems,
Inc., an Arizona corporation engaged in the business of providing
systems integration services, networking services, software
development and applications software for the commercial market.
(See Description of Business - Subsequent Event). The Company's
financial statements which accompany this Report on Form 10-KSB
do not include any financial information relating to Prologic.
However, the acquisition of an interest in Prologic will affect the
Company's results of operations for the fiscal year ending March 31,
2000. For additional information regarding Prologic, reference
should be made to the report which it filed with the Securities and
Exchange Commission on Form 10-KSB for its fiscal year ended
March 31, 1999.
Year 2000 issues are not currently material to the Company's
business, operations or financial condition, and the Company does not
currently anticipate that it will incur any material expenses to
remediate Year 2000 issues it may encounter. However, Year 2000
issues may become material to the Company following its completion
of a business combination transaction. In that event, the Company
will be required to adopt a plan and a budget for addressing such
issues.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements attached to this Report on Form 10-
KSB as pages F-1 to F-26 are incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
The Company has had no change in, or disagreements with,
it's 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>
Michael R. Quinn 73 President and a
Director since August, 1997
Jay Lutsky 54 Secretary and a Director
since August, 1997
</TABLE>
The directors named above will serve until the next annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding
between any of the directors or officers of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer.
The directors and officers will devote their time to the Com-
pany'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
MICHAEL R. QUINN
Mr. Quinn has served as President and Director of the
Company since its inception (August, 1997). 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 III, 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.
JAY LUTSKY
Mr. Lutsky has served as Secretary and as a Director of the
Company since its inception(August, 1997). 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. ("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 III, Inc.,
Sunburst Acquisitions V, Inc., Sunburst Acquisitions VI, Inc.,
Sunburst Acquisitions VII, Inc. and Sunburst Acquisitions VIII, Inc.,
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.
Compliance With Section 16(a) of the Exchange Act.
Jay Lutsky and Michael R. Quinn were each 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, none of such persons made a timely filing of Form 3.
None of such persons filed a report on Form 5 for the fiscal year
ended March 31, 1999.
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.
As adjusted to take into account the subsequent conversion of all
outstanding preferred stock to common and a subsequent 20:1 forward
split of the outstanding common stock as of March 31, 1999, the
Company had a total of 48,700,000 shares of common stock issued
and outstanding. In conjunction with acquisition of an interest in
Prologic (see Description of Business - Subsequent Event), a total of
40,400,000 shares of common stock were voluntarily surrendered for
cancellation by various shareholders. In addition, the Company
issued 500,831 new shares of common stock to raise the funds
necessary to close the Tranche 1 portion of the acquisition of shares in
Prologic. Accordingly, as of August 4, 1999 (the date of closing of
the Tranche 1 under the Stock Purchase and Merger Agreement with
Prologic), the Company had a total of 8,800,531 shares of common
stock issued and outstanding.
After giving effect to all of the foregoing transactions, the
following table sets forth, as of March 31, 1999, 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>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
<S> <C> <C>
Michael R. Quinn<F1>
2082 Cherry Street
Denver, CO 80207 199,894<F2> 2.27%
Jay Lutsky <F1>
4807 S. Zang Way
Morrison, CO 80465 202,252<F3> 2.30%
Bristol Capital, LLC
11611 San Vicente Blvd.
Suite 615
Los Angeles, CA 90049 675,000 7.67%
All directors and executive
officers (2 persons) 402,146 4.57%
<FN>
<F1> The person listed is an officer, a director, or both, of the
Company.
<F2> Includes 3,120 owned by Mr. Quinn's spouse, of which he
may be deemed to be the beneficial owner.
<F3> Includes 5,000 shares owned by Mr. Lutsky's spouse, of
which he may be deemed to be the beneficial owner.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of
Incorporation provide that the Company will indemnify its directors
and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on
account of their being or having been Company directors or officers
unless, in any such action, they are adjudged to have acted with gross
negligence or willful misconduct. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and
is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Corporation Code, the Company's
Articles of Incorporation exclude personal liability for its directors for
monetary damages based upon any violation of their fiduciary duties
as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, acts in violation
of Section 7-5-114 of the Colorado Corporation Code, or any
transaction from which a director receives an improper personal
benefit. This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
Conflicts of Interest
None of the officers of the Company will devote more than a
portion of his time to the affairs of the Company. There will be
occasions when the time requirements of the Company's business
conflict with the demands of the officers' other business and
investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be
obtained upon terms favorable to the Company.
Each of the Company's officers and directors also are officers,
directors, or both of several other 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.
Company management, and the other principal shareholders of
the Company, intend to actively negotiate or otherwise consent to the
purchase of a portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition transaction.
Members of management acquired a portion of their shares for
services rendered at a price which is equivalent to $0.00005 per
share, a portion of their shares for cash at a price of $0.00125 per
share and a portion of their shares for cash at a price which is the
equivalent of $0.0015 per share. It is anticipated that a substantial
premium may be paid by the purchaser in conjunction with any sale of
shares by officers, directors or affiliates of the Company which is
made as a condition to, or in connection with, a proposed merger or
acquisition transaction. The fact that a substantial premium may be
paid to Company officers, directors and affiliates to acquire their
shares creates a conflict of interest for them and may compromise
their state law fiduciary duties to the Company's other shareholders.
In making any such sale, Company officers, directors and affiliates
may consider their own personal pecuniary benefit rather than the best
interests of the Company and the Company's other shareholders, and
the other shareholders are not expected to be afforded the opportunity
to approve or consent to any particular buy-out transaction involving
shares held by members of Company management.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements. The financial statements attached to
this Report on Form 10-KSB as pages F-1 to F-26 which are are
incorporated herein by reference are as follows:
Report of Independent Accountants
Balance Sheet (As of March 31, 1999)
Statements of Operations
Statement of Stockholders Equity
Statements of Cash Flows
Balance Sheet (Unaudited) (As of June 30, 1999)
Statements of Operations (Unaudited) (For the period from
inception to June 30, 1999 and for the three months ended
June 30, 1999 and 1998)
Statements of Cash Flows (Unaudited) (For the period from
inception to June 30, 1999 and for the three months ended
June 30, 1999 and 1998).
2. The Exhibits listed below are filed as part of this Annual
Report.
<TABLE>
<CAPTION>
Exhibit No. Document
<S> <C>
2.1 Stock Purchase and Merger Agreement
(incorporated by reference from Report on Form 8-K dated August 4,
1999, filed with the Securities and Exchange Commission on October
20, 1999).
3.1 Articles of Incorporation (incorporated by
reference from Registration Statement on Form 10-SB/A filed with the
Securities and Exchange Commission on December 29, 1997).
3.2 Bylaws (incorporated by reference from
Registration Statement on Form 10-SB/A filed with the Securities and
Exchange Commission on December 29, 1997).
4.1 Specimen Common Stock Certificate
(incorporated by reference from Registration Statement on Form 10-
SB/A filed with the Securities and Exchange Commission on
December 29, 1997).
4.3 Specimen Class A Convertible Preferred Stock
Certificate (incorporated by reference from Registration Statement on
Form 10-SB/A filed with the Securities and Exchange Commission on
December 29, 1997).
27.1 Financial Data Schedule for 7 month period ended March 31,
1999
(b) No reports on Form 8-K were filed by the Company
during the last quarter of it's fiscal year ending March 31, 1999.
27.2 Financial Data Schedule for 3 month period ended June 30, 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.
SUNBURST ACQUISITIONS IV, INC.
By: /s/ ________________
Michael R. Quinn (Principal Executive Officer and Director)
Date: November 16, 1999
By: /s/ ________________
Jay Lutsky (Principal Financial Officer and Director)
Date: November 16, 1999
SUNBURST ACQUISITIONS IV, INC.
FINANCIAL STATEMENTS
SEVEN MONTHS ENDED MARCH 31, 1999, FOR THE YEAR
ENDED AUGUST 31, 1998, FOR THE INITIAL PERIOD ENDED
AUGUST 31, 1997 AND FOR THE PERIOD FROM INCEPTION
(AUGUST 27, 1997) TO MARCH 31, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Sunburst Acquisitions IV, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions IV, Inc. (a development stage company) as of March 31,
1999, and the related statements of operations, stockholders' equity,
and cash flows for the seven month period ended March 31, 1999, for
the year ended August 31, 1998, for the initial period ended August
31, 1997, and for the period from inception (August 27, 1997) to
March 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 IV, Inc. as of March 31, 1999, and the results of its
operations, the changes in its stockholders' equity and its cash flows
for the seven month period ended March 31, 1999, for the year ended
August 31, 1998, for the initial period ended August 31, 1997, and
for the period from inception (August 27, 1997) to March 31, 1999,
in conformity with generally accepted accounting principles.
Denver, Colorado
November 8, 1999
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
BALANCE SHEET for March 31, 1999
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,996
Total current assets 1,996
TOTAL ASSETS $ 1,996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Accounts payable 50
Accounts payable - related party 342
Total current liabilities 392
STOCKHOLDERS' EQUITY
Preferred stock, no par value,
20,000,000 shares authorized;
80,000 shares issued and outstanding $ 8,000
Common stock, no par value;
100,000,000 shares authorized;
45,500,000 shares issued and
outstanding 10,935
Additional paid-in capital 950
Deficit accumulated during the
development stage (18,281)
Total stockholders' equity 1,604
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,996
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(page 1 of 2)
<TABLE>
<CAPTION>
For the period For the seven
from 8/31/97 month period
(inception) ended
to 3/31/99 3/31/99
<S> <C> <C>
REVENUES $ - $ -
EXPENSES
Amortization 300 240
Bank charges - (21)
Consulting fees 4,935 -
General Office 328 -
Legal fees 6,290 2,103
Professional fees 3,647 1,530
Rent 950 350
Taxes and licenses 107 -
Transfer agent 1,447 737
Travel 277 -
Total expenses 18,821 4,939
NET LOSS (18,821) (4,939)
Accumulated deficit
Balance,
beginning of period - (13,342)
Balance,
end of period $(18,281) $(18,281)
NET LOSS PER SHARE $ (NIL) (NIL)
WEIGHTED AVERAGE
NUMBER OF SHARES
OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS
OUTSTANDING 40,064,540 42,081,140
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(page 2 of 2)
<TABLE>
<CAPTION>
For the For the
year initial period
ended ended
8/31/98 8/31/97
<S> <C> <C>
REVENUES $ - $ -
EXPENSES
Amortization 60 -
Bank charges 21 -
Consulting fees 3,000 1,935
General Office 328 -
Legal fees 4,187 -
Professional fees 2,117 -
Rent 600 -
Taxes and licenses 107 -
Transfer agent 710 -
Travel 277 -
Total expenses 11,407 1,935
NET LOSS (11,407) (1,935)
Accumulated deficit
Balance,
beginning of period (1,935) -
Balance,
end of period $(13,342) $(1,935)
NET LOSS PER SHARE $ (NIL) (NIL)
WEIGHTED AVERAGE
NUMBER OF SHARES
OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS
OUTSTANDING 42,108,220 41,900,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 27, 1997) to March 31, 1999
(Page 1 of 3)
<TABLE>
<CAPTION>
Preferred Stock
Number of
shares Amount
<S> <C> <C>
Preferred stock issued for
cash, August 1997
at $0.10 per share 80,000 $ 8,000
Common stock issued for
services, August 1997
at $0.0005 per share - -
Net loss for the year
ended August 31, 1997 - -
Balance, August 31, 1997 80,000 8,000
Rent at no charge - -
Common stock issued for
services, July 1998
at $0.0015 per share - -
Net loss for the year
ended August 31, 1998 - -
Balance, August 31, 1998 80,000 8,000
Rent at no charge - -
Common stock issued for
cash, January 1999
at $0.00125 per share - -
Net loss for the period
ended March 31, 1999 - -
Balance March 31, 1999 80,000 $ 8,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (August 27, 1997)
to March 31, 1999 (Page 2 of 3)
<TABLE>
<CAPTION>
Common Stock
Number of
shares Amount
<S> <C> <C>
Preferred stock issued for
cash, August 1997
at $0.10 per share - -
Common stock issued for
services, August 1997
at $0.00005 per share 38,700,000 1,935
Net loss for the year
ended August 31, 1997 - -
Balance, August 31, 1997 38,700,000 1,935
Rent at no charge - -
Common stock issued for
services, July 1998
at $0.0015 per share 2,000,000 3,000
Net loss for the year
ended August 31, 1998 - -
Balance, August 31, 1998 40,700,000 4,935
Rent at no charge - -
Common stock issued for
cash, January 1999
at $0.00125 per share 4,800,000 6,000
Net loss for the period
ended March 31, 1999 - -
Balance March 31, 1999 45,500,000 $10,935
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (August 27, 1997)
to March 31, 1999 (Page 3 of 3)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during the Total
Paid-in development stockholders'
Capital stage equity
<S> <C> <C> <C>
Preferred stock issued for
cash, August 1997
at $0.10 per share - - $ 8,000
Common stock issued for
services, August 1997
at $0.0005 per share - - 1,935
Net loss for the year
ended August 31, 1997 - (1,935) (1,935)
Balance, August 31, 1997 - (1,935) 8,000
Rent at no charge 600 - 600
Common stock issued for
services, July 1998 - - 3,000
at $0.0015 per share
Net loss for the year - (11,407) (11,407)
ended August 31, 1998
Balance, August 31, 1998 600 (13,342) 193
Rent at no charge 350 - 350
Common stock issued for
cash, January 1999
at $0.00125 per share - - 6,000
Net loss for the period
ended March 31, 1999 - (4,939) (4,939)
Balance March 31, 1999 $950 $(18,281) $ 1,604
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(page 1 of 2)
<TABLE>
<CAPTION>
Period from For the seven
August 27, 1997 month period
(Inception) to ended 3/31/99
3/31/99
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(18,281) $(4,939)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Amortization 300 240
Rent expense 950 350
Stock issued for
consulting fees 4,935 -
Decrease (increase) in
prepaid expenses - 23
Increase (decrease) in
accounts payable 50 (410)
Increase (decrease) in
accounts payable - related party 342 342
Net cash used by
operating activities (11,704) (4,394)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in organization costs (300) -
Net cash used by
investing activities (300) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 6,000 6,000
Issuance of preferred stock 8,000 -
Net cash provided by
financing activities 14,000 6,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,996 1,606
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 390
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,996 $ 1,996
</TABLE>
The accompanying notes are an integral part of the financial statements
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(page 2 of 2)
<TABLE>
<CAPTION>
Period from For the seven
August 27, 1997 month period
(Inception) to ended 3/31/99
3/31/99
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(11,407) $(1,935)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Amortization 60 -
Rent expense 600 -
Stock issued for
consulting fees 3,000 1,935
Decrease (increase) in
prepaid expenses (23) -
Increase (decrease) in
accounts payable 460 -
Increase (decrease) in
accounts payable - related party (300) -
Net cash used by
operating activities (7,610) -
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in organization costs - -
Net cash used by
investing activities - -
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - -
Issuance of preferred stock - 8,000
Net cash provided by
financing activities - 8,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (7,610) 8,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 8,000 -
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 390 $ 8,000
</TABLE>
The accompanying notes are an integral part of the financial
statements
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company.
Sunburst Acquisitions IV, 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
2082 Cherry Street, Denver, CO, 80207.
The Company is a new enterprise in the development stage as defined
by Statement No. 7 of the Financial Accounting Standards Board and,
at March 31, 1999, had 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 that 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 4, 1999, the Company acquired
an interest in Prologic Management Systems, Inc. in the transaction
more fully described in Footnote 5.
Accounting Method
The Company records income and expenses on the accrual method.
Fiscal Year
In connection with the Prologic transaction, the Company's Board of
Directors changed the Company's fiscal year end from August 31 to
March 31.
Loss per Share
Loss per share was computed using the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period.
Organization Costs
Costs to incorporate the Company were capitalized and have been
amortized over a sixty-month period. In fiscal 1999, the remaining
unamortized organization costs were charged to expense.
Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and
liabilities that 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.
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.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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 seven month period
ended March 31, 1999, 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 described in footnote 5, the Company underwent a 20:1 stock split
after the end of the year. Unless otherwise indicated, all share and
per share amounts have been restated to reflect the split.
As of March 31, 1999, 40,700,000 shares of the Company's no par
value common stock had been issued for consulting services provided.
The services were converted to shares at $0.00005 per share. An
additional 4,800,000 shares have been issued for cash at $0.00125 per
share. A total of 45,500,000 shares were outstanding at March 31,
1999.
As of March 31, 1999, 80,000 shares of the Company's no par value
Series A preferred stock had been issued at $0.10 per share. On May
25, 1999, the Series A preferred shares were converted into a total of
3,200,000 common shares.
Commencing on September 1, 1999, the holders of record of shares
of the Series A preferred stock were entitled to receive, when and as
declared by the board of directors out of funds legally available
therefore, cash dividends at the rate of $0.01 per share per annum,
payable quarterly, in arrears, on such dates as may from time to time
be determined by the board of directors.
In the event of a liquidation or dissolution of the Company, the
holders of shares of the Series A were entitled to receive out of the
assets of the Company an amount equal to $0.10 per share, plus any
accrued and unpaid dividends thereon to the date fixed for
distribution. This distribution was to be in preference and have
priority over any such distribution upon the common stock of the
Company and all other preferred stock of the Company. If the assets
of the Company were not sufficient to pay such amount in full to the
holders of this Series A and of all such other Series were to share
ratably in any such distribution of assets in accordance with the
amounts which would be payable on such distribution if the amounts
to which the holders of this and all such other Series are entitled were
paid in full.
To the extent not previously converted into shares of common stock,
the Series A shares were redeemable, in whole or in part, at the
option of the Company by resolution of its board of directors at a
redemption price per share of $0.15, plus any accrued and unpaid
dividends thereon to the date fixed for redemption.
The holders of shares of Series A had the right to vote either in the
election of directors or in any other matter.
3. RELATED PARTY TRANSACTIONS
As of the date hereof, Michael R. Quinn and Jay Lutsky are the
officers and directors of the Company, and are the owners of
36,601,920 shares of common stock, constituting approximately 80%
of the Company's issued and outstanding shares. Including the Series
A Preferred stock conversion privilege, Jay Lutsky and Michael R.
Quinn owned approximately 37,201,920 voting shares constituting
approximately 76% 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 $18,281 expiring during the years 2018 and 2019. The
tax benefit of these net operating losses is approximately $3,519 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 period ended May 31 1999, the
valuation allowance increased by approximately $970.
5. SUBSEQUENT EVENTS
Investment in Prologic Management Systems, Inc.
On July 8, 1999, Sunburst Acquisitions IV, Inc., ("Sunburst") entered
into a Stock Purchase and Merger Agreement ("SPMA") with
Prologic Management Systems, Inc., an Arizona corporation
("Prologic"). The terms of the SPMA required that Sunburst purchase
up to 5,280,763 shares of common stock of Prologic for $3,000,000.
On August 4, 1999, in a transaction accounted for using the purchase
method, Sunburst acquired 3,459,972 shares of common stock of
Prologic for a subscription price of $1,000,000, or $0.2890 per share
("Tranche 1"). In addition, a Voting Trust Agreement was executed
granting Sunburst voting rights to a total of 1,071,060 shares of
Prologic common stock. Following the closing of Tranche 1 and
execution of the Voting Trust Agreement, Sunburst owned or had
voting control of approximately 55% of the issued and outstanding
common shares of Prologic. Sunburst funded the purchase through
the sale of 500,831 shares of its common stock at $2.00 per share.
Commitment for additional investment in Prologic
Sunburst's second stage investment under the SPMA ("Tranche 2")
involves the purchase of up to 1,820,791 additional shares for a
purchase price of $2,000,000, or approximately $1.0984 per share.
The proceeds from Tranche 2 are intended to be used by Prologic to
facilitate the acquisition of another (unaffiliated) company (the
"Tranche 2 Acquisition"), and Tranche 2 is to be funded essentially
simultaneously with the closing of the Tranche 2 Acquisition.
Tranche 2 has not yet closed.
It is intended that Prologic merge into Sunburst. As a condition to
closing the merger, Sunburst is obligated to have a binding
commitment from investors to provide it, in two stages, with up to
$4,000,000 in equity capital. The Tranche 2 funding described above
will represent the first stage. The second $2,000,000 stage ("Tranche
3"), which is intended to be funded after completion of the merger,
will require that Sunburst have a binding commitment from investors
to purchase a total of 890,287 shares of Sunburst common stock for a
total purchase price of $2,000,000, or $2.246 per share.
In conjunction with execution of the SPMA, Sunburst and certain of
its shareholders entered into an agreement with a group of investors to
permit the investors to acquire control of Sunburst in return for
providing the funds required by the SPMA. The agreement with these
investors involves a four step reorganization of Sunburst including (i)
the sale by five current shareholders of Sunburst of a total of 385,000
(pre-split) shares of common stock; (ii) the voluntary surrender for
cancellation of a total of 436,000 (pre-split) shares of common stock,
reducing the number of issued and outstanding shares from 2,435,000
to 1,999,000 (pre-split); (iii) completion of a 20:1 forward split
increasing the number of issued and outstanding shares to 39,980,000;
and (iv) the voluntary surrender for cancellation of a total of
31,680,000 shares, reducing the number of issued and outstanding
shares (following completion of the forward split described above) to
8,300,000.
Only after the successful completion of the above transactions, will
Prologic merge into Sunburst. To effect the merger, Sunburst will
issue common and preferred shares for all of the outstanding common
and preferred shares of Prologic in the ratio of one Sunburst share for
each Prologic share surrendered. Prologic shares held in treasury, by
way of any Prologic subsidiary, and by Sunburst directly as a result
of the transactions noted above will be cancelled. An adjustment to
the number of shares of Sunburst common stock will be made in order
that the shares of common stock issued to former Prologic
shareholders as described above will result in those shareholders
holding 47.15% of the outstanding common stock of Sunburst after
the merger but prior to Tranche 3, as detailed in Section 8.6(a)(v) of
the SPMA.
Sunburst has changed its fiscal year end from August 31 to March 31,
which is the reporting year of Prologic. Prologic is designated the
accounting acquiror in the transaction. The accompanying financial
statements do not include the results of Prologic for any of the periods
presented.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,124
Total current assets 1,124
TOTAL ASSETS $ 1,124
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Total current liabilities -
STOCKHOLDERS' EQUITY
Preferred stock, no par value,
20,000,000 shares authorized;
0 shares issued and outstanding -
Common stock, no par value;
100,000,000 shares authorized;
48,700,000 shares issued and
outstanding 18,935
Additional paid-in capital 1,100
Deficit accumulated during the
development stage (18,911)
Total stockholders' equity 1,124
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,124
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Period from
August 27, 1997 For the three months
(Inception) ended 6/30
to 6/30/99 1999 1998
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
Amortization 300 - 15
Consulting fees 4,935 - -
General office 328 - 142
Legal fees 6,290 - -
Professional fees 4,027 380 748
Rent 1,100 150 150
Taxes and Licenses 107 - -
Transfer Agent 1,547 100 -
Travel 277 - -
Total expenses 18,911 630 1,054
NET LOSS (18,911) (630) (1,054)
Accumulated deficit
Balance, beginning
of period (18,281) (7,911)
Balance, end of
period $(18,911) $(18,911) $(8,965)
NET LOSS PER SHARE $ (NIL) $ (NIL) $ (NIL)
WEIGHTED AVERAGE
NUMBER OF SHARES
OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS
OUTSTANDING 44,272,020 49,900,000 41,900,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Period from
August 27, 1997 For the three months
(Inception) ended 6/30
to 6/30/99 1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(18,911) $ (630) $(1,054)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Amortization 300 - 15
Rent expense 1,100 150 150
Stock issued for consulting
fees 4,935 - -
Increase (decrease) in
accounts payable - (50) -
Increase (decrease) in
accounts payable -
related party - (342) -
Net cash used by
operating activities (12,576) (872) (889)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in organization
costs (300) - -
Net cash used by
investing activities (300) - -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 6,000 - -
Conversion of preferred
to common 8,000 - -
Net cash provided by
financing activities 14,000 - -
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,124 (872) (889)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 1,996 2,109
CASH AND CASH EQUIVLALENTS,
END OF PERIOD $ 1,124 $ 1,124 $ 1,220
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS IV, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
MANAGEMENT'S REPRESENTATION OF INTERIM
FINANCIAL INFORMATION
The accompanying financial statements have been prepared by
Sunburst Acquisitions IV, Inc. without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules
and regulations, and management believes that the disclosures are
adequate to make the information presented not misleading. These
financial statements include all of the adjustments which, in the
opinion of management, are necessary to a fair presentation of
financial position and results of operations. All such adjustments are
of a normal and recurring nature. These financial statements should
be read in conjunction with the audited financial statements at March
31, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 7-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1999
<PERIOD-END> MAR-31-1999 JUN-30-1999
<CASH> 1,996 1,124
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,996 1,124
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,996 1,124
<CURRENT-LIABILITIES> 392 0
<BONDS> 0 0
0 0
8,000 0
<COMMON> 10,935 18,935
<OTHER-SE> 950 1,100
<TOTAL-LIABILITY-AND-EQUITY> 1,996 1,124
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,939 630
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,939) (630)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,939) (630)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
