United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange
Act of 1934
For the fiscal year ended June 30, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to _______________
Commission file number: 333-39629
Omni Doors, Inc.
(Name of small business issuer as specified in its charter)
Florida 59-2549529
(State of Incorporation) (I.R.S. Employer Identification No.)
30 Rockefeller Plaza, 19th Floor, New York, NY 10112
(Address of principal executive offices)
(212) 332-7222
(Issuer's telephone number)
Securities registered pursuant to Section 12 (b) of the Exchange Act: Common
Stock
Securities registered pursuant to Section 12 (g) of the Exchange Act: None
Check whether issuer (1) has 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 [ ] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended June 30, 1999 were zero
dollars (explanations provided below).
The aggregate market value of the Common Stock as of June 30, 1999 was
$5,700,000 (computed by reference to the average bid and asked prices of such
stock, as reported in the over the counter market, that is, 11,400,000 shares
times $0.50 per share). As of June 30, 1999, the registrant had 11,400,000
shares of Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] ___ No _[X_].
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TABLE OF CONTENTS
Part I Page
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1. Description of Business 1
2. Description of Property 2
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 3
Part II
5. Market for the Company's Common Stock and Related Stockholder Matters 3
6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 4
7. Index to Financial Statements 6
8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 6
Part III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 6
10. Executive Compensation 8
11. Security Ownership of Certain Beneficial Owners and Management 9
12. Certain Relationships and Related Transactions 9
13. Exhibits and Reports on Form 8-K 10
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CAUTION REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information
relating to the Company that are based on believes held by the Company or its
management as well as assumptions made by and information currently available
to the Company or its management. When used in this document, the words
"anticipate", "believe", "estimate", "expect", and "intend" and similar
expressions, as they relate to the current view of the Company
regarding future events and are subject to certain risks, uncertainties and
assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated, expected or intended. In each
instance, forward-looking information should be considered in light of the
accompanying meaningful cautionary statements contained herein.
Part I
ITEM 1. DESCRIPTION OF BUSINESS
General
The Company is currently seeking a merger partner to develop an operating
business.
History
The Company, Omni Doors, Inc., is a Florida corporation ("Omni") which was
incorporated on July 19, 1985. Up until June 30, 1998 Omni's primary
business had been the assembly and distribution of industrial doors for sale
to building contractors in the South Florida market.
On April 6, 1998, the Board of Directors of Millennia Inc., a Delaware
corporation, ("Millennia") which at that time owned 100% of the outstanding
stock of Omni, declared the payment of a stock dividend to Millennia's
stockholders. Stockholders record of Millennia on April 17, 1998 received
one share of the common stock of Omni for each four shares of common stock of
Millennia owned on that record date. No fractional shares were issued since
all fractions were rounded up to the nearest whole share; thus, shareholders
who would otherwise have been entitled to a fraction of a share of Omni were
issued one full share in lieu thereof. This distribution of approximately
570,000 shares of Omni represented five percent of the total issued and
outstanding shares of the Company.
On July 10, 1998, Millennia incorporated a new wholly-owned subsidiary,
Millennia Doors, Inc., a Texas corporation, so that all of the assets and
liabilities of Omni Doors, Inc. at that time, as well as the business
operations then conducted by Omni, could be transferred into this new
corporation. Pursuant to a contract dated July 14, 1998, Millennia sold
10,260,000 shares (representing 90% of the total outstanding shares) of the
common stock of Omni to an unrelated firm, China Economic Growth Investment
Corp., LLC., which then distributed the shares to its three partners: Yong
Chen, Zuxiang Huang, and Zheng Yao. The new controlling stockholders of Omni
intend to acquire by merger an operating business with a history of
profitable operations and/or develop a mutual fund management business.
At the time of this transaction, Omni did not actively conduct any business
with unrelated parties. Related parties had provided cash advances to the
Company to support its continued existence. Since the July 14, 1998
transaction, the address of Omni's U.S. representative office has been 30
Rockefeller Plaza, 19th Floor, New York, NY 10112 and its telephone number
has been (212)332-7222.
Business Services
The Company currently conducts M & A and asset management-related activities
on behalf of related companies controlled by the three Board members of the
Company.
Properties
As of June 30, 1999 Omni operates at offices owned by a related party in
Beijing located at No. 1/A, Beitaipingzhuang Road, Haidian District, Beijing,
China 100088. The Company rents an U.S. representative office at 30
Rockefeller Plaza, 19th Fl., New York, New York. This facility is leased
under an office lease agreement, which expires on September 30, 2000.
Competition
The business that Company aims at entering is highly competitive.
Many much bigger companies are also seeking merger opportunities. But the
Company has limited prior experience in mergers and acquisitions in US.
There is no assurance that the Company can develop a viable operational
business through reverse merger. The Company is facing much larger
competitors with successful merger and acquisition deal making and/or
business operating histories.
Employees
The Company currently has only one full-time administrative employee.
ITEM 2. DESCRIPTION OF PROPERTY
Currently, Omni conducts its business from its principal executive office
located in Beijing at No.1/A, Beitaipingzhuang Road, Haidian District,
Beijing, China, 100088. The company has a representative office at 30
Rockefeller Plaza, 19th Fl., New York, New York. This facility was leased
under a lease that expires in September 2000.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any pending actions that will have a
material adverse effect on its businesses, financial conditions and results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1999 annual meeting of the shareholders of the Company shall be held to
vote on the following issues: (1) to elect directors; (2) to authorize the
Board of Directors to change the corporate name to a company name that fits
its future business; (3) to authorize the Board of Directors to change the
Company's state of registration from Florida to Delaware; (4) to consider,
and act upon, any other matters that may come before the annual meeting.
Such annual meeting is expected to be held in late October 1999.
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Part II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDERS
MATTERS
The Common Stock of the Company has been quoted on the NASDAQ over the
counter market, starting May 4, 1998, under the symbol "OMDO". During the
period of June 30, 1998 through June 30, 1999 the range of representative
high and low closing bid prices for the common stock of "OMDO" was between
$4.5 and $0.07. These quotations represent inter-dealer prices, do not
include retail markups, markdowns or commissions and may not represent actual
transactions.
On June 30, 1999, the closing bid price of the Common Stock was $0.50 per
share. On June 18, 1999, there were 1646 shareholders of record of "OMDO"
common stock.
Omni has never paid any cash dividends. The Company currently does not earn
any revenues from unrelated parties due to the nature of the transitional
period that it is in. The Company does not anticipate paying cash dividends
on its common stock in the foreseeable future. The Company's future dividend
policy will be determined by its board of directors on the basis of various
factors, including but not limited to the Company's results of operations,
financial conditions, business opportunities and capital requirements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes associated with
them as contained elsewhere in this report. This discussion should not be
construed to imply that the results discussed herein will necessarily
continue into the future or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future. This
discussion represents only the best present assessment of the Company.
General Comments
The Company has received cash advances from related parties to support its
continued existence. They are unpredictable and may not continue.
Fiscal Year Ended June 30, 1999 Compared to Fiscal Year Ended June 30,
1998
Results of Operations
The Company had no sales for the fiscal year ended June 30, 1999 as compared
to a net sales figure of approximately $531,000 for the comparable period
ended June 30, 1998.
On the other hand, Omni's operating expenses with respect to the drive to
eventually close a successful merger deal were mounting considerably for this
fiscal year as compared to approximately only $113,000 for the comparable
period ended June 30, 1998. Such dramatic increase in expenses resulted from
the same reason sited above.
Capital Resources
The related companies controlled by the Board members of Omni have been
providing cash advances to the Company to support its existence. It is likely
that future capital resources will continue to be provided by related
companies, but there is no guarantee in that respect.
Liquidity
Management believes that the Company has enough cash to sustain operation and
business development for another year.
Year 2000 Concerns
The Company does not rely on computer heavily. Management believes the Year
2000 problems do not pose a serious issue for the Company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Consolidated Financial Statements of the Company (Audited)
Independent Auditor's Report F-1
Balance Sheet as of June 30, 1999 F-2
Statements of Operations for the years
ended June 30, 1999 and 1998 F-3
Statements of Changes in Stockholders' Equity for the years ended
June 30, 1999 and 1998 F-4
Statements of Cash Flows for the years ended June 30, 1999 and 1998 F-5
Notes to Financial Statements F-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
As of June 30, 1999 the executive officers and directors of the Company were:
Name Age Position
Chen Yong 40 Chairman and CEO
Huang Zuxiang 44 Vice chairman, CFO and secretary
Sophia Yao 31 President and treasurer
Set forth below is a description of the backgrounds of executive officers
and directors of Omni as of June 30, 1999.
Yong Chen, age 40. Mr. Chen has served as chairman of the board of Omni and
its CEO since July 1998. He also serves as president and executive vice
chairman of China National Zhonghao Financial Co, Ltd., a commercial lending
and investment-banking firm owned by China National Ministry of Chemical
Industries. Before that, he served as a deputy general manager of the Fund
Development Department at China International Trust & Investment Corporation
(CITIC).
Zuxiang Huang, age 44. Mr. Huang has served as vice chairman of the board of
Omni and its chief financial officer and secretary since July 1998. Mr.
Huang is the founder, chairman and CEO of Credit China Group, a merger &
acquisition investment-banking firm headquartered in Beijing. Prior to
founding Credit China Group, he served as a member of the Advisory Board at
the People's Bank of China - China's central bank. Mr. Huang had also been
an associate professor in finance at Ha-Er-Bin Financial Institute after he
graduated from China Academy of Social Sciences.
Sophia Yao, age 31. Ms. Yao has served as a director, president and treasurer
of Omni since July 1998. Prior to the takeover of Omni from Millennium in
July 1998, Ms. Yao, as an international merger and acquisition specialist,
co-founded Credit China Corp in New York in 1995 and has been serving as its
president ever since.
Directors of the Company hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified.
Officers are elected by the Company's board of directors to hold office until
their respective successors are elected and qualified.
The Company's Bylaws provide that directors may be paid their expenses, if
any, and may be paid a fixed sum for attendance at each Board of Directors
meeting. During the fiscal year ended June 30, 1999, none of the directors
were paid any director's fees.
Committees of the Board of Directors
The board of directors of Omni currently has no committees.
ITEM 10. EXECUTIVE COMPENSATION
Officers and directors of Omni were not compensated for their service to the
Company during the fiscal years ended June 30, 1998 and 1999 except certain
reimbursements to the officers and directors for the expenses incurred during
their actions on behalf of the Company. None of these officers and directors
were paid a cash compensation, salary, or bonus during these two fiscal
years. In the same period, the Company also did not award any stock options
or other form of no-cash compensation to any person.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information about the beneficial
ownership of the "OMDO" common stock owned (i) by each person known to the
Company to be the beneficial owner of 5% or more of its outstanding common
stock, (ii) by the officers, directors and key employees of the Company
individually and (iii) by the officers and directors of the Company as a
group.
Name and address Number of shares Percentage
beneficially owned
Chen Yong 3,898,000 34.193%
30 Rockefeller Plaza, Ste 1922
New York, NY 10112
Zuxiang Huang 2,924,100 25.65%
30 Rockefeller Plaza, Ste 1922
New York, NY 10112
Zheng Yao 2,924,100 25.65%
30 Rockefeller Plaza, Ste 1922
New York, NY 10112
Millennia, Inc. 570,017 5%
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Sophia Yao - 0 - - 0 -
All officers and directors 6,822,100 59.843%
as a group (3 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sophia Yao is a daughter of Zheng Yao.
Credit China Group, one of the companies controlled by Zuxiang Huang net cash
advances totaling $300,000 to the Company. China International Finance
Company, Ltd., one of the companies controlled by Cheng Yong, provided cash
advances totaling $400,000 to the Company. These cash advances have been/and
are designated to be used to pay various general and administrative expenses
incurred by the Company.
Omni paid $15,000 legal and consulting fees to Halter Capital Inc. during the
fiscal year ended June 30, 1998. Kevin Halter, Sr., Chairman & CEO of
Millennia, Inc., controls Halter Capital Inc.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
13.1 Certificate of Incorporation and Bylaws of the Company*
13.2 Specimen Stock Certificate for Common Stock*
Reports on Form 8-K
July 20, 1998 - relating to the sale of shares representing 90% of the
Company's outstanding common stock to China Economic Growth Investment Corp.,
LLC
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, being duly authorized by law.
Omni Doors, Inc.
/s/ Zuxiang Huang September 16, 1999
- -----------------------------------
Zuxiang Huang, Chief Financial Officer, Secretary,
Vice Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the date indicated.
/s/ Yong Chen September 16, 1999
- -----------------------------------
Chen Yong, CEO
Chairman of the Board of Directors
/s/ Zuxiang Huang September 16, 1999
- -----------------------------------
Huang Zuxiang, CFO, Secretary,
Vice Chairman of the Board of Directors
/s/ Sophia Yao September 16, 1999
- -----------------------------------
Sophia Yao, President, Treasurer, Director
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OMNI DOORS, INC.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 1999 AND 1998
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report ------------------------------------ 1
Financial Statements:
Balance Sheet as of June 30, 1999 ------------------------- 2
Statements of Operations
for the years ended June 30, 1999 and 1998 ------------- 3
Statements of Changes in Stockholders' Equity (Deficit)
for the years ended June 30, 1999 and 1998 ------------- 4
Statements of Cash Flows
for the years ended June 30, 1999 and 1998 ------------- 5
Notes to Financial Statements --------------------------------- 6
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INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Omni Doors, Inc.
New York, New York
We have audited the accompanying balance sheet of Omni Doors, Inc. as of June
30, 1999, and the related statements of operations, changes in stockholders'
equity (deficit) and cash flows for the years ended June 30, 1999 and 1998.
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 Omni Doors, Inc. as of June
30, 1999, and the results of its operations, and its cash flows for the years
ended June 30, 1999 and 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming Omni Doors,
Inc. will continue as a going concern. As discussed in Note 1 to the
financial statements, due to a change in ownership of the Company and related
transfer of all operating activities, the Company had no continuing
operations effective July 1, 1998. Since coming under new control, the
Company has been dependent upon payments from related parties for working
capital, has had no independent income generating operations, and has a
stockholders' deficit at June 30, 1999. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
HEIN + ASSOCIATES LLP
Dallas, Texas
September 2, 1999
F-1
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OMNI DOORS, INC.
BALANCE SHEET
JUNE 30, 1999
ASSETS
CURRENT ASSET -
Cash and cash equivalents $316,759
PROPERTY AND EQUIPMENT:
Furniture and computer equipment 71,164
Accumulated depreciation (11,860)
Net property and equipment 59,304
Total assets $376,063
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES -
Due to affiliate $400,000
COMMITMENT AND CONTINGENCY (NOTE 4) -
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - no par value, 25,000,000 shares authorized;
11,400,000 issued and outstanding 55,767
Contributed capital 472,463
Accumulated deficit (552,167)
Total stockholders' equity (deficit) (23,937)
Total liabilities and stockholders' equity (deficit) $376,063
See accompanying notes to these financial statements
F-2
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OMNI DOORS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30,
1999 1998
REVENUES $ - $ -
EXPENSES:
General and administrative 317,102 -
Depreciation 11,860 -
Total operating expenses 328,962 -
Loss from operations (328,962) -
INTEREST INCOME 5,025 -
LOSS FROM CONTINUING OPERATIONS (323,937) -
DISCONTINUED OPERATIONS, net of income taxes:
Loss from operations - (60,116)
Loss on disposition (126,124) -
Loss from discontinued operation (126,124) (60,116)
NET LOSS $(450,061) $(60,116)
NET LOSS PER SHARE -BASIC AND DILUTED $(.04) $(.01)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,400,000 11,400,000
See accompanying notes to these financial statements
F-3
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OMNI DOORS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1999 AND 1998
COMMON STOCK CONTRIBUTED ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
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BALANCES, June 30, 1997 11,400,000 $55,767 $172,463 $(41,990) $186,240
Net loss - - - (60,116) (60,116)
BALANCES, June 30, 1998 11,400,000 55,767 172,463 (102,106) 126,124
Contributions from a principal stockholder - - 300,000 - 300,000
Net loss - - - (450,061) (450,061)
BALANCES, June 30, 1999 11,400,000 $55,767 $472,463 $(552,167) $(23,937)
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See accompanying notes to these financial statements
F-4
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OMNI DOORS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(450,061) $(60,116)
Adjustments to reconcile to net cash used
in operating activities:
Depreciation expense 11,860 3,638
Loss on disposition of discontinued operation 126,124 -
Provision for losses on accounts receivable - 5,000
Provision for losses on inventory - 32,141
(Increase) Decrease in:
Accounts receivable - (25,538)
Inventory - 21,588
Prepaid expenses and other - (3,008)
Increase (Decrease) in:
Accounts payable - (1,158)
Accrued liabilities - (3,237)
Net cash used in operating activities (312,077) (30,690)
CASH FLOWS FROM INVESTING ACTIVITIES -
Cash paid to acquire furniture and equipment (71,164) (991)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 300,000 -
Cash advances received from affiliate 400,000 -
Repayment of parent company advances and loans - (4,469)
Net cash provided by (used in)
financing activities 700,000 (4,469)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 316,759 (36,150)
CASH AND CASH EQUIVALENTS, beginning of year - 40,367
CASH AND CASH EQUIVALENTS, end of year $316,759 $4,217
SUPPLEMENTAL INFORMATION -
Interest paid for the period $ - $1,052
See accompanying notes to these financial statements
F-5
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NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization
Omni Doors, Inc. (the "Company") was incorporated on July 19, 1985 in the
State of Florida and was formerly a 95% owned subsidiary of Millennia, Inc.
("Millennia"). Through June 30, 1998, the Company's sole business activity
was the assembly and distribution of industrial metal doors in the South
Florida region of the United States. In July 1998, Millennia elected to
cease these operations and transferred all the Company's assets and
liabilities to a newly formed corporation effective as of the close of
business June 30, 1998.
Pursuant to a contract dated July 14, 1998, Millennia sold approximately
10,260,000 shares (90%) of the Company's common stock to China Economic
Growth Investment Corp., LLC ("CEGIC"). On August 12, 1998, CEGIC's board of
directors approved a merger with the Company. The new controlling
stockholders' intent is for the Company to acquire or merge with a business
with a history of profitable operations.
Continuation as a Going Concern
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Due to the Company's change in ownership
and related transfer of all its operating activities, the Company had no
continuing operations effective July 1, 1998. Since coming under new
control, the Company has been dependent upon payments from related parties
for working capital, has had no independent income generating operations, and
has a stockholders' deficit at June 30, 1999. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management
is in the process of exploring business opportunities to place into the
Company which they believe will permit the Company to attain profitable
operating results and allow the Company to continue as a going concern. It
is management's opinion that sufficient working capital can be derived from
continued payments from related parties to permit the Company to complete the
process of acquiring a profitable business.
Cash Equivalents
The Company considers cash in banks, certificates of deposit and other highly
liquid investments with a maturity of three months or less at the date of
purchase to be cash equivalents.
Property and Equipment
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives, generally three to five years,
of the individual assets using the straight-line method. Gains and losses
from the disposition of property and equipment are included in operations as
incurred.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due, if any, plus net
deferred taxes related primarily to differences between the bases of assets
and liabilities for financial and income tax reporting purposes. Deferred
tax assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred tax assets at June 30,
1999 are primarily due to recognition of operating losses that are available
to offset future taxable income. A valuation allowance is recognized to
fully limit recognition of deferred tax assets at June 30, 1999. Deferred
tax balances at June 30, 1999 are immaterial.
Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income" establishes standards for reporting and display of
comprehensive income, its components and accumulated balances in a full set
of general purpose financial statements. SFAS 130 requires that all items
that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that
displays with the same prominence as other financial statements. At June 30,
1999, The Company has no item which require presentation in this separate
statement.
Loss Per Share
Income (loss) per share is calculated in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share".
Basic income (loss) per share is computed based upon the weighted average
number of common shares outstanding during the period. Diluted income (loss)
per share takes common equivalent shares into consideration. However, common
equivalent shares are not considered if their effect is antidilutive. Common
stock equivalents consist of outstanding stock options and warrants. Common
stock equivalents are assumed to be exercised with the related proceeds used
to repurchase outstanding shares except when the effect would be
antidilutive. There were no common stock equivalents for the years ended
June 30, 1999 and 1998.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to conform 1998 financial statements
to the presentation in 1999. The reclassifications had no effect on net
income.
2. DISCONTINUED OPERATIONS
In July 1998, the Company elected to transfer all its assets and liabilities
to a newly formed corporation and cease its door assembly and distribution
operations. The accompanying statement of operations for the year ended June
30, 1998 reflects the Company's results as discontinued operations. The
Company had net sales of $530,932 for the year ended June 30, 1998. The
$126,124 loss on disposition reflected in the statement of operations for the
year ended June 30, 1999 represents the book value of the net assets
transferred.
3. Related Party Transactions
Certain directors and stockholders of the Company are officers, directors
and/or stockholders in other companies with which the Company engaged in the
following transactions:
(a) In August 1998, the Company entered into a financing arrangement with
Credit China Group ("CCG"), a Beijing corporation. As of June 30, 1999,
the Company has received cash deposits totaling $300,000 in connection
with the arrangement. These cash advances have been used to pay various
expenses incurred by the Company Based on the agreement between the
parties, The Company has recorded the cash advances as contributed
capital.
(b) In June 1999, the Company entered into a financing arrangement with
China International Financial Co., Ltd. ("CIFC"), a Hong-Kong corporation.
In conjunction with this arrangement, the Company has received cash
advances totaling $400,000 through June 30, 1999. These advances are non-
interest bearing, unsecured and contain no specific terms of repayment.
The advances have been designated to pay various expenses incurred by the
Company. Based on the agreement between the parties, The Company has the
cash advances as a liability at June 30, 1999.
(c) The Company purchased office furniture and equipment from CCG for its
cost of $71,064.
4. COMMITMENT AND CONTINGENCY
The Company leases corporate office space under a non-cancelable operating
lease agreement, which expires in September 2000. Terms of the agreement
require minimum aggregate annual rental payments of $137,200 and $34,300 for
the periods ended June 30, 2000 and 2001, respectively. Rent expense under
the lease for the year ended June 30, 1999 was $126,000. A $34,300 security
deposit called for under the lease agreement was paid by CCG.
CCG is a party to an agreement among certain unrelated entities. The
agreement establishes the Guoxin Internet Group ("GIG"), an information
technologies company incorporated in China. Under the agreement, CCG will
pursue listing of GIG's stock on a national exchange. This may be achieved
through a stock-swap plan between GIG and the Company.
5. CONCENTRATION OF CREDIT RISK
The Company maintains its cash (including cash equivalents) in one financial
institution located in New York City, New York. The balances are insured by
the Federal Depository Insurance Corporation up to $100,000. At June 30,
1999, the Company's uninsured cash balances, per bank records, approximated
$236,000.
6. YEAR 2000
The Company and/or other entities with which the Company transacts business
could be adversely affected by the year 2000 problem, which is the result of
computer programs being written using two digits rather than four to define
the applicable year. Any programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations. The Company has
taken actions it believes are reasonably designed to address the year 2000
problem with respect to computer systems in use, but has not fully determined
the on their future operations or the costs they may incur to remediate the
problem. There can be no assurance the actions taken by the Company will be
sufficient to avoid any adverse impacts to the Company. However, management
believes the year 2000 problem will not have a materially adverse effect on
the Company.
7. SUBSEQUENT EVENT
In July 1999, the Company commenced formal negotiations in connection with a
proposed merger between the Company and Big Manhattan, Inc., an apparel
importer and distributor based in New York.
F-6
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