OMNI DOORS INC
Filing Type: 10KSB
Description: Annual Report
Filing Date:
Period End: Jun 30, 2000
Primary Exchange: Over the Counter Includes OTC
and OTCBB
Ticker: OMDO
<PAGE>
Table of Contents
--------------------------------------------------------------------------------
10KSB
Part I.........................................................................1
ITEM 1.........................................................................1
ITEM 2.........................................................................2
ITEM 3.........................................................................2
ITEM 4.........................................................................2
Part II........................................................................2
ITEM 5.........................................................................2
ITEM 6.........................................................................2
ITEM 7.........................................................................3
ITEM 8.........................................................................3
Part III.......................................................................3
ITEM 9.........................................................................3
ITEM 10........................................................................4
ITEM 11........................................................................4
Table 1........................................................................4
ITEM 12........................................................................5
ITEM 13........................................................................5
Balance Sheet................................................................F-2
Income Statement.............................................................F-3
Table 4......................................................................F-4
Cash Flow Statement..........................................................F-5
<PAGE>
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, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from June 30,1999 to June 30,2000
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, 2000 were zero dollars
(explanations provided below).
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant, as of June 30, 2000 was $142,500 (computed by reference to the
average bid and asked prices of such stock, as reported in the over the counter
market, that is, 570,000 shares times $0.25 per share). As of June 30, 2000, the
registrant had 11,400,000 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X].
<PAGE>
TABLE OF CONTENTS
Part I Page
ITEM 1. Description of Business 1
ITEM 2. Description of Property 2
ITEM 3. Legal Proceedings 2
ITEM 4. Submission of Matters to Vote of Security Holders 2
Part II
ITEM 5. Market for the Company's Common Stock and Related
Stockholder Matters 2
ITEM 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 2
ITEM 7. Index to Financial Statements 3
ITEM 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 3
Part III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 3
ITEM 10. Executive Compensation 4
ITEM 11. Security Ownership of Certain Beneficial Owners and Management 4
ITEM 12. Certain Relationships and Related Transactions 5
ITEM 13. Exhibits and Reports on Form 8-K 5
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.
<PAGE>
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, 2000 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.
1
<PAGE>
Employees
The Company currently has only one temporal help 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 VOTE OF SECURITY HOLDERS
None.
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, 1999 through June 30, 2000 the range of representative high and low closing
bid prices for the common stock of "OMDO" was between $.50 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, 2000, the closing bid price of the Common Stock was $0.25 per share.
On June 30, 2000, there were 441 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.
2
<PAGE>
Results of Operations
The Company had no sales for the fiscal year ended June 30, 2000.
We negotiated with Big Manhattan for a possible merger. But due to disagreements
on merger term, the merger did not go through.
Payable
All the rent and telephone charges reflected as accounts payable were paid by a
shareholder in October 2000.
On the other hand, Omni's operating expenses with respect to the drive to
eventually close a successful merger deal were again considerable. This
fiscal year costs were approximately $365,000 as compared to only $329,000 for
the comparable period ended June 30, 1999. The 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.
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, 2000 F-2
Statements of Operations for the years
ended June 30, 2000 and 1999 F-3
Statements of Changes in Stockholders' Equity for the years
ended June 30, 2000 and 1999 F-4
Statements of Cash Flows for the years ended June 30, 2000 and 1999 F-5
Notes to Financial Statements F-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
As of June 30, 2000 the executive officers and directors of the Company were:
Name Age Position
---- --- --------
Chen Yong 41 Chairman and CEO
Huang Zuxiang 44 Vice chairman, CFO and secretary
Sophia Yao 30 President and treasurer
3
<PAGE>
Set forth below is a description of the backgrounds of executive officers and
directors of Omni as of June 30, 2000.
Yong Chen, age 41. 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 30. 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, 2000 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.
Number of shares
Name and address beneficially owned Percentage
---------------- ------------------ ----------
Zheng Yao 9,746,200 85.493%
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 -
4
<PAGE>
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 $149,500 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.
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
NONE
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
-----------------------------------
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
-----------------------------------
Chen Yong, CEO
Chairman of the Board of Directors
/s/ Zuxiang Huang
-----------------------------------
Huang Zuxiang, CFO, Secretary,
Vice Chairman of the Board of Directors
/s/ Sophia Yao
-----------------------------------
Sophia Yao, President, Treasurer, Director
5
<PAGE>
OMNI DOORS, INC.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 2000 AND 1999
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report.................................................F-1
Financial Statements:
Balance Sheet as of June 30, 2000.........................................F-2
Statements of Operations for the Years Ended June 30, 2000 and 1999.......F-3
Statements of Changes in Stockholders' Equity (Deficit) for the Years
Ended June 30, 2000 and 1999.............................................F-4
Statements of Cash Flows for the Years Ended June 30, 2000 and 1999.......F-5
Notes to Financial Statements................................................F-6
<PAGE>
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, 2000, and the related statements of operations, changes in stockholders'
equity (deficit) and cash flows for the years ended June 30, 2000 and 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 Omni Doors, Inc. as of June 30,
2000, and the results of its operations, and its cash flows for the years ended
June 30, 2000 and 1999, 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, the Company had no continuing operations effective July 1, 1998. The
Company has been dependent upon payments from related parties for working
capital, has had no independent income generating operations, and has a working
capital and stockholders' deficit at June 30, 2000. 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
October 6, 2000
F-1
<PAGE>
OMNI DOORS, INC.
BALANCE SHEET
JUNE 30, 2000
ASSETS
------
CURRENT ASSET -
Cash and cash equivalents $ 3,051
---------
PROPERTY AND EQUIPMENT:
Furniture and computer equipment 71,164
Accumulated depreciation (35,580)
---------
Net property and equipment 35,584
---------
Total assets $ 38,635
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Due to affiliate $ 400,000
Accounts payable 167,791
Accrued liabilities 5,400
---------
Total current liabilities 573,191
COMMITMENT AND CONTINGENCY (NOTE 4)
STOCKHOLDERS' DEFICIT:
Common stock - no par value, 25,000,000 shares authorized;
11,400,000 issued and outstanding 55,767
Contributed capital 321,963
Accumulated deficit (912,286)
---------
Total stockholders' deficit (534,556)
---------
Total liabilities and stockholders' deficit $ 38,635
=========
See accompanying notes to these financial statements.
F-2
<PAGE>
OMNI DOORS, INC.
STATEMENTS OF OPERATIONS
JUNE 30,
----------------------------
2000 1999
------------ ------------
REVENUES $ -- $ --
EXPENSES:
General and administrative 340,795 317,102
Depreciation 23,720 11,860
------------ ------------
Total operating expenses 364,515 328,962
------------ ------------
Loss from operations (364,515) (328,962)
INTEREST INCOME 4,396 5,025
------------ ------------
LOSS FROM CONTINUING OPERATIONS (360,119) (323,937)
DISCONTINUED OPERATIONS, net of income taxes -
Loss on disposition -- (126,124)
------------ ------------
Loss from discontinued operations -- (126,124)
------------ ------------
NET LOSS $ (360,119) $ (450,061)
============ ============
NET LOSS PER SHARE -BASIC AND DILUTED $ (.03) $ (.04)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 11,400,000 11,400,000
============ ============
See accompanying notes to these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
OMNI DOORS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 2000 AND 1999
COMMON STOCK
----------------------- CONTRIBUTED ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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)
Return of stockholder contributions -- -- (150,500) -- (150,500)
Net loss -- -- -- (360,119) (360,119)
---------- ---------- ---------- ---------- ----------
BALANCES, June 30, 2000 11,400,000 $ 55,767 $ 321,963 $ (912,286) $ (534,556)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
OMNI DOORS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(360,119) $(450,061)
Adjustments to reconcile to net cash used in operating activities:
Depreciation expense 23,720 11,860
Loss on disposition of discontinued operation -- 126,124
Increase in:
Accounts payable 167,791 --
Accrued liabilities 5,400 --
--------- ---------
Net cash used in operating activities (163,208) (312,077)
CASH FLOWS FROM INVESTING ACTIVITIES -
Cash paid to acquire furniture and equipment -- (71,164)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions (repayments) (150,500) 300,000
Cash advances received from affiliate -- 400,000
--------- ---------
Net cash provided by (used in) financing activities (150,500) 700,000
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (313,708) 316,759
CASH AND CASH EQUIVALENTS, beginning of year 316,759 --
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 3,051 $ 316,759
========= =========
</TABLE>
See accompanying notes to these financial statements.
F-5
<PAGE>
OMNI DOORS, INC.
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"). 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 stockholder's deficit at June 30, 2000. 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, 2000 are approximately $280,000 arising
from net operating losses which begin to expire in 2020. The Company has no
material deferred tax liabilities at June 30, 2000. A valuation allowance
is recognized to fully limit recognition of deferred tax assets at June 30,
2000.
F-6
<PAGE>
Loss 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. There were no common stock equivalents for the years ended
June 30, 2000 and 1999.
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.
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 $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 had received cash deposits totaling $300,000 in connection
with the arrangement. These cash advances have been used to pay various
general and administrative expenses incurred by the Company. Based on
the agreement between the parties, the Company recorded the cash
advances as contributed capital. During the year ended June 30, 2000
the Company repaid $150,500 of these advances.
(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, 2000. These
advances are non-interest bearing, unsecured and contain no specific
terms of repayment. The advances have been designated to pay various
general and administrative expenses incurred by the Company. Based on
the agreement between the parties, the Company has recorded the cash
advances as a liability at June 30, 2000.
4. COMMITMENT AND CONTINGENCY
--------------------------
The Company leases corporate office space under a non-cancellable operating
lease agreement which expires in September 2000. The Company was in default
on its lease agreement as of June 30, 2000, therefore the remaining future
lease payments at June 30, 2000 totaling $31,433 have been included as
accounts payable. Rent expense recorded under the lease for the years ended
June 30, 2000 and 1999 was $168,694 and $126,000, respectively. 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.
F-7
