U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X ] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Calender year ended December 31, 1999.
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________.
Commission File Number: 000-28409
Eastport Red's Incorporated
(Name of Small Business Issuer in its charter)
Nevada 84-1416078
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
3434 E. 7800 S., #237, Salt Lake City, Utah 84121
(Address of Principal Executive Offices and Zip Code)
Issuer's telephone number: (801) 274-6415
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered: Not Applicable
Name of each exchange on which each class is to be registered: Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
(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 is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's total revenues for the year ended December 31, 1999 were
$0.00.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of such stock, as of
February 28, 2000, was $0.00 based on an estimated 1,000,000 shares held by
non-affiliates.
The number of shares outstanding of the Company's common stock ($0.001
par value), as of February 28, 2000, was 11,000,000 shares.
Total Number of Pages: 30
Index to Exhibits is Located on Page: 18
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TABLE OF CONTENTS
PART I
Item Number and Caption Page
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Property. . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to Vote . . . . . . . . . . . . . . . . . . 11
PART II
Item 5. Market for Common Equity and Related Matters . . . . . . . . . . . 11
Item 6. Management's Discussion and Analysis of Operations or Plan of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 13
Item 8. Changes in and Disagreements with Accountants. . . . . . . . . . . 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
Compliance with Section 16(a) of the Exchange Act. . . . . . . . . 14
Item 10. Executive Compensation . .. . . . . . . . . . . . . . . . . . . . 16
Item 11. Security Ownership of Certain Beneficial Owners and Management. . 16
Item 12. Certain Relationships and Related Transactions. . . . . . . . . . 17
Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 17
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . 18
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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PART I
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Item 1. Description of Business
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Eastport Red's Incorporated (the "Company") was incorporated under the
laws of the State of Nevada on July 18, 1997. The Company has had no
commercial operations to date. The Company has no full-time employees and
owns no real estate.
The Company's current business plan is to seek, investigate, and acquire
a business opportunity representing assets or businesses intended to enhance
shareholder value. The Company is deemed to be a new or start-up venture with
all of the unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
At the present time neither the Company nor its officers, directors or
affiliates has identified any business opportunity to acquire or pursue, nor
has the Company reached any agreement or understanding with any person
concerning a transaction of any kind. The Company is unable to predict when
it may participate in a business opportunity. It expects, however, that the
analysis and selection of a business opportunity may take several months or
more.
Because an opportunity has not been identified, it is impossible to
predict or disclose the specific risks and hazards of such opportunity. There
is no assurance that the Company will acquire a favorable business opportunity
or that such opportunity will generate revenues or profits, or that
shareholder value will be increased thereby. As such, any potential business
opportunity is expected to be highly speculative and therefore risky. Such
opportunity may be highly illiquid and could result in a total loss to the
Company and its stockholders.
The Company has limited capital which may not be adequate to take
advantage of many business opportunities. In the event funds are adequate, it
is likely that it will only be able to take advantage of only one such
business opportunity. This lack of diversification may prevent the Company
from pursuing future opportunities if its first one proves to be unsuccessful.
Moreover, a significant portion of the Company's available funds may be
expended for investigative expenses without any guarantee that a transaction
will be consummated. The Company's long term success may therefore depend
upon its ability to raise additional capital. However, the Company has not
investigated the availability, source, or terms for additional capital and
will not do so until it determines such a need. Additionally, there is no
assurance that funds will be available from any source or, if available,
obtainable on terms acceptable to the Company. If not available, the
Company's operations will be limited to those that can be financed with its
limited capital.
Another effect of the Company's limited capital is that its analysis and
investigation of potential opportunities will also be limited which could
increase the Company's risk. Management decisions will likely be made without
detailed feasibility studies, independent analysis and market surveys. The
Company will likely be making decisions upon information provided by the
owner, sponsor, or others associated with the business opportunity. Such
information may not always be objective.
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Management of the Company believes that various opportunities may be
attracted to the Company because of their desire to eventually develop a
public market in the Company's stock in order to enhance liquidity for current
and future shareholders; to implement potential plans for raising capital
through the public sale of securities; and to acquire additional assets
through issuance of securities rather than for cash.
The reorganization of a business opportunity 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
final structure, which is currently impossible to predict, will be the result
of negotiations, consultation from legal counsel, and the needs of the
specific business opportunity. Although it is likely, there is no assurance
that the Company would be the surviving entity.
There is also a possibility that the Company may finance the
reorganization of the business opportunity by borrowing against the assets or
against the projected future revenues or profits of the business opportunity
to be acquired. This could increase the Company's exposure to larger losses.
A business opportunity acquired through a heavily financed ("leveraged")
transaction is profitable only if it generates enough revenues to cover the
related debt and expenses. Failure to make payments on the debt incurred
could result in the loss of a portion or all of the assets acquired. There is
no assurance that any business opportunity acquired through a leveraged
transaction will generate sufficient revenues to cover the related debt and
expenses. There are currently no loan arrangements or arrangements for any
financing whatsoever relating to any business opportunities.
Although the terms and structure of a transaction with the Company
cannot be predicted, it is anticipated that the transaction would be a "tax
free" reorganization under the Internal Revenue Code of 1986. Such a
transaction normally requires the issuance to the stockholders of the acquired
entity, a controlling interest (i.e. 80% or more) 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
current stockholders would retain, in the aggregate, 20% or less of the total
issued and outstanding shares. This could result in substantial dilution in
the equity of stockholders of the Company prior to such reorganization.
It is likely that any business combination entered into by the Company
will result in a change of control as a result of stock issuances by the
Company or shares purchased from the current principal shareholders of the
Company by the acquiring entity or its affiliates. If stock is purchased from
the current shareholders, the transaction is very likely to result in
substantial gains to them relative to their purchase price for such stock.
Such sale may occur at a price not relative to or reflective of any value of
the shares held by such parties, and at a price which may not be achieved by
other individual shareholders at the time. Additionally, the sale of a
controlling interest by certain principal shareholders of the Company could
occur at a time when the other shareholders of the Company remain subject to
restrictions on the transfer of their shares. The Company does not believe
its officers and directors would become an "underwriter" within the meaning of
the Section 2(11) of the Securities Act of 1933, as amended, with regards to
such sales as such sales would likely be made in non-public transactions.
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The Company anticipates that any new securities issued in a
reorganization would be issued in reliance upon exemptions, if any are
available, from registration under applicable federal and state securities
laws. Any securities which the Company might acquire in exchange for its
Common Stock will likely be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"). Sales of such securities,
cannot proceed unless a registration statement has been declared effective by
the Securities and Exchange Commission or an exemption from registration is
available. The Company would be required to comply with the provisions of the
Act to effect any resale. In the event of a resale, the Company may rely on
Section 4(1) of the Act, which exempts sales of securities not involving a
public offering. Also, the Company may agree to register such securities
sometime after the transaction is consummated. The issuance of additional
securities and their potential sale into any trading market that might develop
in the Company's securities could have a depressive effect upon the price of
the Company's stock.
Nevada Business Corporation Act vests authority in the Board of
Directors with written consent to decide and approve the issuance of stock.
While in some instances a proposed participation in a business opportunity may
be submitted to the stockholders for their consideration, it is unlikely that
the Company's minority shareholders will be furnished with financial
statements, or any other documentation, concerning a target opportunity. It
is also emphasized that management of the Company could effect transactions
having a potentially adverse impact upon the Company's shareholders. The
Company may adopt an amendment to its Articles of Incorporation which
precludes the anti-takeover provisions of Nevada Revised Statutes. Also, a
shareholder may have no right of dissent under Nevada law, if a majority of
shareholders consent in writing to the transaction.
Depending upon the nature of the transaction, the current officers and
directors of the Company will likely resign their positions with the Company
upon completion of a transaction. In the event of such resignation(s), the
Company's current management would not have any control over the conduct of
the Company's business following the Company's combination with a business
opportunity.
The Company does not foresee that it would enter into any business
opportunity with which its officers or directors are currently affiliated.
Should the Company determine in the future, contrary to foregoing
expectations, that a transaction with an affiliate would be in the best
interest of the Company and its stockholders, the Company may enter into such
a transaction only if: a) The material facts as to the relationship or
interest of the affiliate are disclosed to the board of directors and
shareholders, and the Board and/or majority of disinterested shareholders in
good faith authorizes the transaction by the affirmative vote, even though the
disinterested parties constitute less than a quorum; and b) The contract or
transaction is fair as to the Company as of the time it is authorized,
approved or ratified, by the Board of Directors and/or the stockholders.
Sources of Opportunities
Business opportunities may come to the Company's attention from various
sources, including its officer and director, its stockholders, professional
advisors such as attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may present
unsolicited proposals. The Company has no plans, understandings, agreements,
or commitments with any individual to act as a finder of opportunities for the
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Company. The analysis of business opportunities will be undertaken by or
under the supervision of the Company's president, who is not a professional
business analyst. See "Management". Although there are no current plans to
do so, Company management may hire an outside consultant to assist in the
investigation and selection of business opportunities, and may pay a finder's
fee. 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 the total amount of fees
that may be paid. And, because of the limited resources of the Company, it is
likely that any fee the Company agrees to pay would be in stock instead of
cash.
It is possible that the range of business opportunities available for
consideration by the Company could be limited by the impact of Securities and
Exchange Commission regulations regarding purchase and sale of "penny stocks."
The regulations would affect, and possibly impair, any market that might
develop in the Company's securities until such time as they qualify for
listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations.
Investigation and Selection of Business Opportunities
Management will make a decision to participate in a specific business
opportunity based on an analysis of the quality of the opportunity's business
plan, its management and personnel, the anticipated market acceptability of
new products or marketing concepts, the merit of technological changes, the
perceived benefit the opportunity will derive from becoming a publicly held
entity, and numerous other factors which are difficult, if not impossible, to
analyze through the application of any objective criteria. It is likely that
the historical operations of a specific business opportunity may not be
indicative of its future potential because of possible future changes in
marketing approaches, expansion plans, product emphasis, management, or other
changes.
The Company will be dependent upon the owners of a business opportunity
to identify any potential future problems and to implement necessary 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, the
Company may incur further risks because management and the Company's products
or services may be unproven and unprofitable when acquired. Business
opportunities presented to the Company may (i) be recently organized with no
operating history, or a history of losses attributable to under-capitalization
or other factors; (ii) be experiencing financial or operating difficulties;
(iii) be in need of funds to develop a new product or service or to expand
into a new market; (iv) be relying upon an untested product or marketing
concept; or (v) have a combination of the characteristics mentioned in (i)
through (iv). The Company intends to concentrate its reorganization efforts
on properties or businesses that it believes to be undervalued. Given the
above factors, investors should expect that any reorganization candidate may
have a history of losses or low profitability.
The Company's search will be directed primarily towards small and medium
sized business opportunities with or without revenues and earnings which
desire to become public corporations and which are able to satisfy, or
anticipate in the near future being able to satisfy, the minimum asset
requirements in order to qualify shares for trading on NASDAQ or a stock
exchange. The Company intends to seek opportunities demonstrating the
potential of long term growth.
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The Company's investigation of business opportunities will not be
restricted to any particular geographical area, industry, or stage of growth
and may, therefore, engage in essentially any business, to the extent of its
limited resources. No specific factors described herein will be controlling
in the selection of a business opportunity. Management will attempt to
analyze the factors it deems appropriate to each opportunity and make a
determination based upon a reasonable investigation of available data.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with a business plan
regarding the business opportunity containing such items as: a description of
the company's products and services; a description of the company's 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 and estimated capital
requirements.
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. However,
it is also possible that an investigation of such opportunities may be
exclusively by phone, mail, facsimile, email or other methods not involving a
physical meeting or inspection with such opportunities.
The Company will likely require audited financial statements from
opportunities with which it proposes to acquire or merge because the Company
will be subject to the reporting provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and thus will be required to furnish
audited financial statements for any opportunity in which it engages. Failure
to do so could expose the Company to enforcement actions by the Securities and
Exchange Commission which could result in penalties, legal fees and/or
injunctive action, which would have a material adverse effect on the Company
and its operations.
In the event that audited financial statements are not available, the
Company may still engage in such an opportunity if it believes that audited
financial statements will be provided within a reasonable time after the
Company enters into a transaction with such opportunity. However without
audited financial information, the Company will not have the benefit of full
and accurate information provided by independent verification about the
financial condition and recent interim operating history of the target
company. This could substantially increase the risk of a potential
transaction.
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
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forth remedies upon default, and include miscellaneous other terms. Even
after a definitive agreement is executed, it is possible that the
reorganization would not be consummated should any party elect to exercise any
right provided in the agreement to terminate it on specified grounds.
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
possibly experience competition from other public companies seeking such
opportunities, some of which may have more funds available than does the
Company.
Regulation
The Company may acquire an opportunity that is subject to regulation or
licensing by federal, state, or local authorities which may be a
time-consuming, expensive process and may limit other investment opportunities
of the Company.
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities, and therefore intends
to avoid being classified as an "investment company" under the Investment
Company Act of 1940 (the "Investment Act"). Such a classification could
subject the Company to a costly registration process. Section 3(a) of the
Investment Act excludes from the definition of an "investment company," any
entity that does not engage primarily in the business of investing,
reinvesting or trading in securities, or that does not engage in the business
of investing, owning, holding or trading "investment securities" (defined as
"all securities other than government securities or securities of
majority-owned subsidiaries") the value of which exceeds 40% of the value of
its total assets (excluding government securities, cash or cash items). Since
the Company will not register as an investment company, stockholders will not
be afforded certain protections under the Investment Act.
Regulation of Penny Stocks. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means,
in general terms, institutions with assets in excess of $5,000,000, or
individuals having a net worth in excess of $1,000,000 or having an annual
income that exceeds $200,000 (or that, when combined with a spouse's income,
exceeds $300,000). For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive
the purchaser's written consent prior to the sale of a security.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities in an offering or in any market that might develop
thereafter.
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In addition, the Securities and Exchange Commission has adopted a number
of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would
apply to the Company and to its securities. The rules may further affect the
ability of owners of Shares to sell the securities of the Company in any
market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market
for the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (iii) "boiler
room" practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a
position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to the Company's securities.
Blue Sky Considerations. Because the securities to be registered
hereunder have not been registered for resale under the blue sky laws of any
state, the holders of such shares and persons who desire to purchase them in
any trading market that might develop in the future, should be aware that
there may be significant state blue-sky law restrictions upon the ability of
investors to sell the securities and of purchasers to purchase the securities.
Warning is hereby given that the shares may be "restricted" from resale. In
the event of a violation of state laws regarding resale of the shares, the
Company could be liable for civil and criminal penalties which would be a
substantial impairment to the Company.
At the date of this annual report, the Company has no intention
of offering further shares in a private offering to anyone. Further, the
policy of the Board of Directors is that any future offering of shares will
only be made after a reorganizationhas been made and can be disclosed in
appropriate Form 8-K filings.
Rule 144 Sales. Shares of the Company's Common Stock that are held by
officers, directors, and any stockholder owing greater than 10% of the total
issued and outstanding shares are "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, as amended (the "Act"). As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a person
who has held restricted securities for one year may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that
does not exceed the greater of 1.0% of a company's outstanding common stock or
the average weekly trading volume during the four calendar weeks prior to the
sale. There is no limit on the amount of restricted securities that may be
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sold by a non-affiliate after the restricted securities have been held by the
owner for a period of two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registration
of shares of Common Stock of present stockholders, may have a depressive
effect upon the price of the Common Stock in any market that may develop. Of
the total shares outstanding, 10,000,000 shares become available for resale
(subject to volume limitations for affiliates) under Rule 144, within one
year. One million shares are already available for resale under Rule 144
without any volume limitation.
The Company is a development stage company and currently has no
employees and does not anticipate a need to engage any full-time employees so
long as it is seeking and evaluating business opportunities.
The Company currently has only one individual who is serving as its
officer and director on a part time basis. The Company will be heavily
dependent upon his skills, talents, and abilities to implement its business
plan, and may, from time to time, find that the inability of this person to
devote full time attention to the business of the Company may result in a
delay in progress toward implementing its business plan. Additionally,
conflicts of interest may arise that can be resolved only through exercise of
good judgment as is consistent with fiduciary duties to the Company. 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. Certain of the
officers and directors of the Company may be directors and/or principal
shareholders of other companies and, therefore, could face conflicts of
interest with respect to potential reorganizations. In addition, officers and
directors of the Company may in the future participate in business ventures
which could be deemed to compete directly with the Company. Additional
conflicts of interest and non-arms length transactions may also arise in the
future in the event the Company's officers or directors are involved in the
management of any firm with which the Company transacts business. The
Company's Board of Directors has adopted a policy that the Company will not
seek a merger or reorganization with, any entity in which management serve as
officers or directors, or in which they or their family members own or hold a
controlling ownership interest. Although the Board of Directors could elect
to change this policy, the Board of Directors has no present intention to do
so. In addition, if the Company and other companies with which the Company's
officers and directors are affiliated both desire to take advantage of a
potential business opportunity, then the Board of Directors has agreed that
said opportunity should be available to each such company in the order in
which such companies registered or became current in the filing of annual
reports under the Exchange Act subsequent to January 1, 2000.
The Company's officers and directors or majority shareholders may
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
reorganization transaction. It is anticipated that a substantial premium over
the initial cost of such shares may be paid by the purchaser in conjunction
with any sale of shares by the Company's officers and directors which is made
as a condition to, or in connection with, a proposed merger or reorganization
transaction. The fact that a substantial premium may be paid to the Company's
officers and directors to acquire their shares creates a potential conflict of
interest for them in satisfying their fiduciary duties to the Company and its
other shareholders. Even though such a sale could result in a substantial
profit to them, they would be legally required to make the decision based upon
the best interests of the Company and the Company's other shareholders, rather
than their own personal pecuniary benefit.
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Because investors will not be able to evaluate the merits of possible
business reorganizations by the Company, they should critically assess the
information concerning the Company's officers and directors.
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Item 2. Description of Property
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The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address
at 3434 E 7800 S. #237, Salt Lake City, Utah. The Company's previous address
was 2133 E. 9400 S., Suite 151, Sandy, Utah 84903. The Company pays no rent
for the use of this mailing address. 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.
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Item 3. Legal Proceedings
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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 any litigation.
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Item 4. Submission of Matters to Vote
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None
PART II
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Item 5. Market for Common Equity and Related Matters
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No public trading market exists for the Company's securities. There
were twenty-four (24) holders of record of the Company's common stock on
February 28, 2000. No dividends have been paid to date and the Company's
Board of Directors does not anticipate paying dividends in the foreseeable
future.
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Item 6. Management's Discussion and Analysis of Operations or Plan of
Operations.
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Liquidity and Capital Resources for the Year Ended December 31, 1999 (Audited)
The Company remains in the development stage and, since inception, has
had no revenues. At December 31, 1999 the Company had working capital of
$6,874. The Company had cash in the amount of $7,793. All cash raised by the
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Company to date, has come from the sale of 10,000,000 shares of the Company's
common stock to First Avenue, Ltd. for $10,000, as well as a $750 loan to the
Company by its previous President, Marlon Hill. Ken W. Kurtz, the Company's
President, Secretary, Treasurer and Director is a general and limited partner
of First Avenue, Ltd. The shares were sold to First Avenue, Ltd. to obtain
capital to pay the costs of becoming a reporting company under the Securities
Exchange Act of 1934, as amended. Management is hopeful that in becoming a
reporting company will increase the number of prospective business ventures
that may be available to the Company.
During the period from July 18, 1997 (inception) through December 31,
1999, the Company has engaged in no significant operations other than
organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. No revenues were received by the Company during this period. The
Company has incurred operating expenses since inception to the period ended
December 31, 1999 of ($4,126). The net loss on operations was ($2,292) from
January 1, 1999 through December 31, 1999. Such losses will continue unless
revenues and business can be acquired by the Company. There is no assurance
that revenues or profitability will ever be achieved by the Company.
Results of Operations
Year ended December 31, 1999 and 1998 and from inception on July 18, 1997 to
December 31, 1997 and 1999 (audited).
The Company had no revenues for the years ended December 31, 1999 and
1998 or from inception on July 18, 1997 to December 31, 1997 and 1999. The
Company incurred $2,292 in net operating losses for the year ended December
31, 1999 as compared to $324 in net operating losses for the year ended
December 31, 1998 and $1,510 from inception on July 18, 1997 to December 31,
1997 and $4,126 from inception on July 18, 1997 to December 31, 1999.
The net operating loss for all periods resulted primarily from general
and administrative expenses and interest expense. The net loss per share for
each period was less than ($.01) per share.
For the current calender year, the Company anticipates incurring a loss
as a result of legal and accounting expenses, expenses associated with
registration under the Securities Exchange Act of 1934, as amended, and
expenses associated with locating and evaluating reorganization candidates.
The Company anticipates that until a business combination is completed with an
candidate, it will not generate revenues other than interest income, and may
continue to operate at a loss after completing a business combination,
depending upon the performance of the acquired business.
Need for Additional Financing
Management believes that the Company has sufficient cash to meet the
anticipated needs of the Company's operations through the calendar year ended
2000. However, there can be no assurances to that effect, as the Company has
no revenues and the Company's need for capital may change dramatically if it
acquires an interest in a business opportunity during that period. In the
event the Company requires additional funds, the Company will have to seek
loans or equity placements to cover such cash needs. There is no assurance
additional capital will be available to the Company on acceptable terms. In
the event the Company is able to complete a business combination during this
period, lack of its existing capital may be a sufficient impediment to prevent
12
<PAGE>
it from accomplishing the goal of completing a business combination. There is
no assurance, however, that without funds it will ultimately allow registrant
to complete a business combination. Once a business combination is completed,
the Company's needs for additional financing are likely to increase
substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be adequate
to meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
Year 2000 Issues
Year 2000 problems result primarily from the inability of some computer
software to property store, recall, or use data after December 31, 1999.
These problems may affect many computers and other devices that contain
embedded computer chips. The Company's operations, however, do not rely on
information technology (IT) systems. Accordingly, the Company does not
believe it will be material affected by Year 2000 problems.
The Company relies on non-IT systems that may suffer from Year 2000
problems, including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil
field operators, and utilities. In light of the Company's substantially
reduced operations, the Company does not believe that such non-IT systems
or third-party Year 2000 problems will affect the Company in a manner that is
different or more substantial than such problems affect other similarly
situated companies or industry generally. Consequently, the Company does not
currently intend to conduct a readiness assessment of Year 2000 problems or to
develop a detailed contingency plan with respect to Year 2000 problems that
may affect the Company.
- ------------------------------------------------------------------------------
Item 7. Financial Statements
- ------------------------------------------------------------------------------
Filed herewith are the Company's audited financial statements for the
periods from inception on July 18, 1997 through December 31, 1997 and December
31, 1999, and for the year ended December 31, 1999 and 1998.
- ------------------------------------------------------------------------------
Item 8. Changes in and Disagreements with Accountants
- ------------------------------------------------------------------------------
None
13
<PAGE>
PART III
- ------------------------------------------------------------------------------
Item 9. Directors, Executive Officers, Promoters and Control Persons
Compliance with Section 16(a) of the Exchange Act
- ------------------------------------------------------------------------------
The directors and executive officers currently serving on the Company are
as follows:
NAME AGE POSITION HELD SINCE
------ ----- --------------- -------
Ken W. Kurtz 32 President, Secretary, 1999
Treasurer and Director
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 the directors and 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 of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month.
As a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
Biographical Information
Ken W. Kurtz, age 32: Since February 1992, Mr. Kurtz has been the sole
officer, sole director and sole shareholder of Park Street Investments, Inc.,
a Utah corporation. Through Park Street Investments, Inc., Mr. Kurtz provides
consulting services to public and private companies on mergers,
recapitalizations, and other forms of corporate reorganization. Mr. Kurtz is,
and additionally, Mr. Kurtz has served on the board of directors and as an
officer of other reporting publicly held "shell" or inactive companies
including Hamilton Exploration Co., Inc. in 1995, Area Investment and
Development Company since 1997, Score One, Inc. since 1998, and is or has been
deemed a control person of Black Stallion Management, Inc. and Nugget
Exploration, Inc. Mr. Kurtz graduated from the University of Utah with a
Bachelor's of Science degree in Finance.
The possibility exists that Mr. Kurtz could become an officer, director,
or major stockholder of other shell companies in the future. Certain
conflicts of interest are inherent in the participation of the Company's
officers and directors as management in other shell companies, which may be
difficult, if not impossible, to resolve in all cases in the best interests of
the Company. No policy has been adopted by the Company to resolve these
conflicts. Tese conflicts could affect the timing and quality of an by the
Company, and therefore affect the value, liquidity, and duration of an
investment in the Company. Failure by management to conduct the Company's
business in its best interests may result in liability of management of the
Company to the shareholders.
Management will devote minimal time to the operations of the Company, and
any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
14
<PAGE>
None of the Company's officers and/or directors receives any compensation
for their respective services rendered to the Company, nor have they received
such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or reorganization. As of the date of filing this
report, the Company has no funds available to pay officers or directors.
Further, none of the officers or directors is accruing any compensation
pursuant to any agreement with the Company. No retirement, pension, profit
sharing, stock option or insurance programs or other similar programs have
been adopted by the Company for the benefit of its employees.
It is possible that, after the Company successfully consummates a merger
or reorganization with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of the Company's management for
the purposes of providing services to the surviving entity, or otherwise
provide other compensation to such persons. However, the Company has adopted
a policy whereby the offer of any post-transaction remuneration to members of
management will not be a consideration in the Company's decision to undertake
any proposed transaction. Each member of management has agreed to disclose to
the Company's Board of Directors any discussions concerning possible
compensation to be paid to them by any entity which proposes to undertake a
transaction with the Company and further, to abstain from voting on such
transaction. Therefore, as a practical matter, if each member of the
Company's Board of Directors were offered compensation in any form from any
prospective merger or reorganization candidate, the proposed transaction would
not be approved by the Company's Board of Directors as a result of the
inability of the Board to affirmatively approve such a transaction.
It is possible that persons associated with management may refer a
prospective merger or reorganization candidate to the Company. In the event
the Company consummates a transaction with any entity referred by associates
of management, it is possible that such an associate will be compensated for
their referral in the form of a finder's fee. It is anticipated that this fee
will be either in the form of restricted Common Stock issued by the Company as
part of the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the reorganization or merger candidate, because
the Company has insufficient cash available. The amount of such finder's fee
cannot be determined as of the date of filing this report, but is expected to
be comparable to consideration normally paid in like transactions. No member
of management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
The Company has adopted a policy that its affiliates and management shall
not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
Exclusion of Liability
The Nevada Corporation Act excludes 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 the Nevada Corporation Act, or
any transaction from which a director receives an improper personal benefit.
15
<PAGE>
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.
Compliance with Section 16(a) of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers, directors and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities ("ten-percent stockholders") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. Officers, directors and
ten-percent stockholders also are required to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based
solely on its review of the copies of such forms furnished to it, the Company
believes that all Section 16(a) reporting requirements were complied with by
the Company's officers and directors and ten-percent stockholders during the
year ended December 31, 1999.
- ------------------------------------------------------------------------------
Item 10. Executive Compensation
- ------------------------------------------------------------------------------
No officer or director has received any other remuneration in the two
year period prior to the filing of this report. Although there is no current
plan in existence, it is possible that the Company will adopt a plan to pay or
accrue compensation to its officers and directors for services related to
seeking business opportunities and completing a merger or acquisition
transaction. See "Certain Relationships and Related Transactions." The
Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
- ------------------------------------------------------------------------------
Item 11. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------------
The following table sets forth, as of the date of this Annual Report, 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.
OWNERSHIP
SHAREHOLDERS AND BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ---------------------------------- ---------------- ----------
First Avenue, Ltd.(1)
3434 East 7800 South, #237
Salt Lake City, Utah 84121 10,000,000 90%
All directors and executive 10,000,000 90%
officers as a group
(1) Ken W. Kurtz, the Company's President, Secretary, Treasurer and
Director is a general and limited partner of First Avenue, Ltd. Mr. Kurtz may
be deemed to have investment power and voting power over the shares.
16
<PAGE>
- ------------------------------------------------------------------------------
Item 12. Certain Relationships and Related Transactions
- ------------------------------------------------------------------------------
The Company issued to its founding directors a total of 1,000,000 shares
of Common Stock for services rendered in connection with the Company's
formation with a value of $1,000. On May 3, 1999 the Company issued to First
Avenue, Ltd. a total of 10,000,000 shares of Common Stock for $10,000. Ken W.
Kurtz, the Company's President, Secretary Treasurer and Director is a general
and limited partner of First Avenue, Ltd.
Notes Payable: During October 1997, a previous officer/shareholder of the
Company advanced $750 to the Company. The note is payable upon demand and
accrues interest at 10% per annum. Accrued interest amounted to $169 at
December 31, 1999.
No officer, director, or affiliate of the Company has or proposes to have
any direct or indirect material interest in any asset proposed to be acquired
by the Company through security holdings, contracts, options, or otherwise.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate for consulting services to
assist management in evaluating a prospective business opportunity would be
paid in stock or in cash. Any such issuance of stock would be made on an ad
hoc basis. Accordingly, the Company is unable to predict whether or in what
amount such a stock issuance might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and
completing a merger or reorganization transaction.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an
reorganization candidate requiring the sale of all or a portion of the Common
Stock held by the Company's current stockholders to the reorganization
candidate or principals thereof, or to other individuals or business entities,
or requiring some other form of payment to the Company's current stockholders,
or requiring the future employment of specified officers and payment of
salaries to them. It is more likely than not that any sale of securities by
the Company's current stockholders to a reorganizationcandidate would be at a
price substantially higher than that originally paid by such stockholders.
Any payment to current stockholders in the context of a reorganization
involving the Company would be determined entirely by the largely
unforeseeable terms of a future agreement with an unidentified business
entity.
- ------------------------------------------------------------------------------
Item 13. Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------------------
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits beginning on page 18 of this
Form 10-KSB. The Index to Exhibits is incorporated herein by reference.
Included only with the electronic filing of this report is the Financial
Data Schedule for the year ended December 31, 1999.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during the
last quarter of the period covered by this report.
17
<PAGE>
Index to Exhibits
SEC Ref. Page
No. No. Description
- --------- ------ -------------
Ex-3(i) * Articles of Incorporation, as amended
Ex-3(ii) * By-laws
Ex-10 * Promissory Note made by the Company to the order
of Marlon Hill, dated October 1, 1997
Ex-23 30 Consent of Pritchett, Siler & Hardy, P.C.,
Independent Public Accountants dated February
29, 2000
Ex-27 ** Financial Data Schedule
* The listed exhibits are incorporated herein by this reference to the
Registration Statement on Form 10-SB filed by the Company with the
Securities and Exchange Commission on December 8, 1999.
** The Financial Data Schedule is presented only in the electronic filing
with the Securities and Exchange Commission.
18
<PAGE>
SIGNATURES:
In accordance with Section 13 or 15(d) of the Exchange Act, this report
has been signed below by the following persons on behalf by the undersigned
thereunto duly authorized.
Dated: February 29, 2000 Eastport Red's Incorporated
/s/ Ken W. Kurtz
-------------------------------------
By: Ken W. Kurtz, President, Secretary &
Treasurer
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.
Dated: February 29, 2000 /s/ Ken W. Kurtz
-------------------------------------
By: Ken W. Kurtz, Director
19
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1999
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
20
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
CONTENTS
PAGE
----
-- Independent Auditors' Report 1
-- Balance Sheets, December 31, 1999 and 1998 2
-- Statements of Operations, for the years ended
December 31, 1999 and 1998 and for the periods
from inception on July 18, 1997 through
December 31, 1997 and December 31, 1999 3
-- Statement of Stockholders' Equity (deficit) from inception
on July 18, 1997 through December 31, 1999 4
-- Statements of Cash Flows, for the years ended
December 31, 1999 and 1998 and for the periods
from inception on July 18, 1997 through
December 31, 1997 and 1999 5
-- Notes to Financial Statements 6 - 7
21
<PAGE>
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
430 EAST 400 SOUTH
SALT LAKE CITY, UTAH 84111
(801) 328-2727 - FAX (801) 328-1123
INDEPENDENT AUDITORS' REPORT
Board of Directors
EASTPORT RED'S INCORPORATED
Salt Lake City, Utah
We have audited the accompanying balance sheets of Eastport Red's Incorporated
[a development stage company] at December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1999 and 1998 and for the periods from inception on July
18, 1997 through December 31, 1997 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Eastport Red's Incorporated [a
development stage company] as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years ended
December 31, 1999 and 1998 and for the periods from inception on July 18, 1997
through December 31, 1997 and 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company was only recently formed, has incurred losses since
its inception and has not yet been successful in establishing profitable
operations, raising substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 5. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
PRITCHETT, SILER & HARDY, P.C.
February 8, 2000
Salt Lake City, Utah
22
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
BALANCE SHEETS
ASSETS
December 31,
-----------------------------------
1999 1998
___________ ___________
CURRENT ASSETS:
Cash in bank $ 7,793 $ 10
___________ ___________
Total Current Assets 7,793 10
___________ ___________
$ 7,793 $ 10
___________ ___________
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related party $ 750 $ 750
Accrued interest payable -
related party 169 94
___________ ___________
Total Current Liabilities 919 884
___________ ___________
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value,
5,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock, $.001 par value,
20,000,000 shares authorized,
11,000,000 and 1,000,000
shares issued and outstanding,
respectively 11,000 1,000
Capital in excess of par value - -
Deficit accumulated during the
development stage (4,126) (1,834)
___________ ___________
Total Stockholders' Deficit 6,874 (834)
___________ ___________
$ 7,793 $ 10
___________ ___________
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From
Inception on
For the July 18, 1997
Year Ended Through
December 31, December 31,
------------------ ------------------
1999 1998 1997 1999
-------- -------- -------- --------
REVENUE $ -- $ -- $ - $ --
EXPENSES
General and administrative (2,217) (249) (1,491) (3,957)
-------- -------- -------- --------
LOSS BEFORE OTHER
EXPENSES (2,217) (249) (1,491) (3,957)
OTHER EXPENSES:
Interest expense (75) (75) (19) (169)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (2,292) (324) (1,510) (4,126)
CURRENT TAX EXPENSE -- -- - --
DEFERRED TAX EXPENSE -- -- - --
-------- -------- -------- --------
NET LOSS $ (2,292) $ (324) $ (1,510) (4,126)
-------- -------- -------- --------
BASIC LOSS PER SHARE (.00) (.00) (.00) (.00)
-------- -------- -------- --------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON JULY 18, 1997
THROUGH DECEMBER 31, 1999
Capital Deficit
in Accumulated
Preferred Stock Common Stock Excess During the
_______________ ___________________ of Development
Shares Amount Shares Amount Par Value Stage
_______ _______ _________ _________ ________ ________
BALANCE, July 18, 1997 - $ - - $ - $ - $ -
Issuance of 1,000,000
shares common stock
for services at $.001
per share, July, 1997 - - 1,000,000 1,000 - -
Net loss for the period
ended December 31, 1997 - - - - - (1,510)
_______ _______ _________ _________ ________ ________
BALANCE, December 31, 1997 - - 1,000,000 1,000 - (1,510)
Net loss for the year
ended December 31, 1998 - - - - - (324)
_______ _______ _________ _________ ________ ________
BALANCE, December 31,1998 - - 1,000,000 1,000 - (1,834)
Issuance of 10,000,000
shares common stock
for cash at $.001
per share, May, 1999 - - 10,000,000 10,000 - -
Net loss for the period
ended December 31, 1999 - - - - - (2,292)
_______ _______ _________ _________ ________ ________
BALANCE, December 31,
1999 - $ - 11,000,000 $ 11,000 $ - $(4,126)
_______ _______ _________ _________ ________ ________
The accompanying notes are an integral part of this financial statement.
25
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENT OF CASH FLOWS
From
Inception on
For the July 18, 1997
Year Ended Through
December 31, December 31,
------------------ ------------------
1999 1998 1997 1999
-------- -------- -------- --------
Cash Flows Provided by Operating
Activities:
Net loss $ (2,292) $ (324) $ (1,510) $ (4,126)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Stock issued for services -- -- 1,000
Changes in assets and liabilities:
Increase in accrued interest -
Related party 75 75 19 169
-------- -------- -------- --------
Net Cash Provided (Used) by (2,217) (249) (491) (2,957)
Operating Activities -------- -------- -------- --------
Cash Flows Provided by Investing
Activities
-------- -------- -------- --------
Net Cash Provided by Investing
Activities
-------- -------- -------- --------
Cash Flows Provided by Financing
Activities:
Proceeds from issuance of common
stock 10,000 10,000
Increase in notes payable -
Related party 750 750
-------- -------- -------- --------
Net Cash Provided by Financing
Activities 10,000 750 10,750
-------- -------- -------- --------
Net Increase in Cash 7,783 (249) -- 7,793
Cash at Beginning of Period 10 259 -- --
-------- -------- -------- --------
Cash at End of Period $ 7,793 $ 10 $ 259 $ 7,793
-------- -------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest paid $ -- $ -- $ $ --
Income taxes paid $ -- $ -- $ $ --
Supplemental Schedule of Noncash Investing and Financing Activities:
For the years ended December 31, 1999 and 1998:
None
For the year ended December 31, 1997:
The Company issued 1,000,000 shares of Common Stock for services
rendered, valued at $1,000
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Eastport Red's Incorporated (the Company) was organized under
the laws of the State of Nevada on July 18, 1997. The Company has not
commenced planned principal operations and is considered a development stage
company as defined in SFAS No. 7. The Company is seeking potential business
ventures. The Company has, at the present time, not paid any dividends and
any dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.
Organization Costs - Organization costs, which reflect amounts expended to
organize the Company, amounted to $1,000 and were expensed during the period
ended December 31, 1997.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share". [See Note 6]
Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimated.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities..." and SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections" were recently issued. SFAS No. 132, 133, 134 and 135
have no current applicability to the Company or their effect on the financial
statements would not have been significant.
NOTE 2 - CAPITAL STOCK
Common Stock - During July 1997, in connection with its organization, the
Company issued 1,000,000 shares of its previously authorized, but unissued
common stock. The shares were issued for services rendered at $1,000 (or
$.001 per share).
During May 1999, the Company issued 10,000,000 shares of its previously
authorized, but unissued common stock for cash of $10,000 (or $.001 per
share).
27
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards.
The Company has available at December 31, 1999, unused operating loss
carryforwards of approximately $4,000 which may be applied against future
taxable income and which expire in various years from 2017 through 2019. The
amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the amount of the loss carryforwards and,
therefore, no deferred tax asset has been recognized for the loss
carryforwards. The net deferred tax assets are approximately $1,300 and $600
as of December 31, 1999 and 1998, respectively, with an offsetting valuation
allowance at each year end of the same amount resulting in a change in the
valuation allowance of approximately $700 during 1999.
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - As of December 1999, the Company has not paid any
compensation to an officer/director of the Company.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his/her home
as a mailing address, as needed, at no expense to the Company.
Notes Payable - During October 1997, an officer/shareholder of the Company
advanced $750 to the Company. The note is payable upon demand and accrues
interest at 10% per annum. Accrued interest amounted to $169 at December 31,
1999.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has incurred losses
since its inception and has not yet been successful in establishing profitable
operations. These factors raise substantial doubt about the ability of the
Company to continue as a going concern. In this regard, management is
proposing to raise any necessary additional funds not provided by operations
through additional sales of its common stock. There is no assurance that the
Company will be successful in raising this additional capital or achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
28
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share:
For the From Inception
Year Ended on July 18, 1997
December 31, Through December 31,
---------- ---------- ---------- ----------
1999 1998 1997 1999
---------- ---------- ---------- ----------
Loss from continuing operations
available to common shareholders
(numerator) $ (2,292) $ (324) $ (1,510) $ (4,126)
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 7,630,100 1,000,000 1,000,000 3,699,800
---------- ---------- ---------- ---------
29
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated February 8, 2000 relating to
the December 31, 1999 and 1998 financial statements of Eastport Red's
Incorporated, in this Annual Report filed on Form 10-KSB for Eastport Red's
Incorporated.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
February 28, 2000
30
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<CIK> 0001049103
<NAME> EASTPORT RED'S INCORPORATED
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<BONDS> 0
0
0
<COMMON> 11,000
<OTHER-SE> (4,126)
<TOTAL-LIABILITY-AND-EQUITY> 7,793
<SALES> 0
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<INTEREST-EXPENSE> (75)
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