U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-KSB
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13
--- OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___ to ___
THE FINANCIAL GROUP CONNECTION, INC.
-------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 88-0228665
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2533 North Carson Street
Carson City, Nevada 89706
- --------------------------------------- -----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (702) 883-8484
Securities to be registered pursuant to Section 12(b) of the Act: none
Securities to be registered pursuant to Section 12(g) of the Act:
$.001 Common Stock
-------------------
(Title of Class)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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 disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K 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 II of this Form 10-K or any amendments to
this Form 10-K. /X/
----
As of December 31, 1998, there were 1,000,000 shares of the Registrant's
Common Stock, $.001 par value, outstanding.
The aggregate market value of shares of Common Stock held by non-affiliates
of the Registrant is $-0-.
State the Registrant's revenues for the December 31, 1998 fiscal year:
$-0-.
1
TABLE OF CONTENTS Page
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Item 1. Description of Business 3
Item 2. Description of Property 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matter to Vote of Security Holders 7
Item 5. Market for Common Registrant Equity and
Related Stockholder Matter 7
Item 6. Management's Discussion and Analysis or Plan of Operation 11
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act 22
Item 10. Executive Compensation 24
Item 11. Security Ownership of Certain Beneficial Owners
and Management 25
Item 12. Certain Relationships and Related Transactions 26
Item 13. Exhibits and Reports on Form 8-K 26
Signatures 27
2
PART I
Item 1. Description of Business
- --------------------------------
The Financial Group Connection, Inc. (the "Company") was incorporated on
July 24, 1987 under the laws of the State of Nevada to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since
inception and has no operations to date. Other than issuing shares to its
original shareholders who originally contemplated operating the Company as
a mortgage broker clearing house, the Company never commenced any
operational activities. As such, the Company can be defined as a "shell"
company, whose sole purpose at this time is to locate and consummate a
merger or acquisition with a private entity. The Board of Directors of the
Company has elected to commence implementation of the Company's principal
business purpose described below under "Item 2 - Plan of Operation."
The Company is filing this registration statement on a voluntary basis
because the primary attraction of the Company as a merger partner or
acquisition vehicle will be its status as a public company. Any business
combination or transaction will likely result in a significant issuance of
shares and substantial dilution to present stockholders of the Company.
In addition, the Company is filing this registration statement to enhance
investor protection and to provide information if a trading market
commences. On December 11, 1997, the National Association of Securities
Dealers, Inc. (NASD) announced that its Board of Governors had approved a
series of proposed changes for the Over The Counter ("OTC") Bulletin Board
and the OTC market. The principal changes, which was approved by the
Securities and Exchange Commission on January 5, 1999 allows only those
companies that report their current financial information to the Securities
and Exchange Commission, banking, or insurance regulators to be quoted on
the OTC Bulletin Board. The rule provides for a phase-in period for those
securities already quoted on the OTC Bulletin Board.
The proposed business activities described herein may classify the Company
as a "blank check" company. Many states have enacted statutes, rules and
regulations limiting the sale of securities of "blank check" companies in
their respective jurisdictions.
The Company's business is subject to numerous risk factors, including the
following:
No Operating History or Revenue and Minimal Assets. The Company has had no
operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company
will, in all likelihood, sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination. This
may result in the Company incurring a net operating loss which will
increase continuously until the Company can consummate a business combina-
tion with a profitable business opportunity. There is no assurance that
the Company can identify such a business opportunity and consummate such a
business combination.
3
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance
that the Company will be successful in locating candidates meeting such
criteria. In the event the Company completes a business combination, of
which there can be no assurance, the success of the Company's operations
may be dependent upon management of the successor firm or venture partner
firm and numerous other factors beyond the Company's control.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of
small private and public entities. A large number of established and well-
financed entities, including venture capital firms, are active in mergers
and acquisitions of companies which may be desirable target candidates for
the Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company
and, consequently, the Company will be at a competitive disadvantage in
identifying possible business opportunities and successfully completing a
business combination. Moreover, the Company will also compete in seeking
merger or acquisition candidates with numerous other small public
companies.
No Agreement for Business Combination or Other Transaction - No Standards
for Business Combination. The Company has no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with
or acquisition of, a private or public entity. There can be no assurance
the Company will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination. Management
has not identified any particular industry or specific business within an
industry for evaluation by the Company. There is no assurance the Company
will be able to negotiate a business combination on terms favorable to the
Company. The Company has not established a specific length of operating
history or a specified level of earnings, assets, net worth or other
criteria which it will require a target business opportunity to have
achieved, and without which the Company would not consider a business
combination in any form with such business opportunity. Accordingly, the
Company may enter into a business combination with a business opportunity
having no significant operating history, losses, limited or no potential
for earnings, limited assets, negative net worth or other negative
characteristics.
Continued Management Control, Limited Time Availability. While seeking a
business combination, management anticipates devoting up to ten hours per
month to the business of the Company. None of the Company's officers has
entered into a written employment agreement with the Company and none is
expected to do so in the foreseeable future. The Company has not obtained
key man life insurance on any of its officers or directors. Notwithstanding
the combined limited experience and time commitment of management, loss of
the services of any of these individuals would adversely affect development
of the Company's business and its likelihood of continuing operations. See
"Item 5 - Directors, Executive Officers, Promoters and Control Persons."
4
Conflicts of Interest - General. 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. Management has adopted a policy
that the Company will not seek a merger with, or acquisition of, any entity
in which management serve as officers, directors or partners, or in which
they or their family members own or hold any ownership interest.
Reporting Requirements May Delay or Preclude Acquisition. Sections 13 and
5(d) of the Securities Exchange Act of 1934 (the "1934 Act"), require
companies subject thereto to provide certain information about significant
acquisitions, including certified financial statements for the company
acquired, covering one, two, or three years, depending on the relative size
of the acquisition. The time and additional costs that may be incurred by
some target entities to prepare such statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by
the Company. Acquisition prospects that do not have or are unable to obtain
the required audited statements may not be appropriate for acquisition so
long as the reporting requirements of the 1934 Act are applicable.
Lack of Market Research or Marketing Organization. The Company has
neither conducted, nor have others made available to it, results of market
research indicating that market demand exists for the transactions
contemplated by the Company. Moreover, the Company does not have, and
does not plan to establish, a marketing organization. Even in the event
demand is identified for a merger or acquisition contemplated by the
Company, there is no assurance the Company will be successful in completing
any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a
business combination with a business opportunity. Consequently, the
Company's activities may be limited to those engaged in by business
opportunities which the Company merges with or acquires. The Company's
inability to diversify its activities into a number of areas may subject
the Company to economic fluctuations within a particular business or
industry and therefore increase the risks associated with the Company's
operations.
Regulation. Although the Company will be subject to regulation under the
1934 Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940, insofar as the Company will not
be engaged in the business of investing or trading in securities. In the
event the Company engages in business combinations which result in the
Company holding passive investment interests in a number of entities, the
Company could be subject to regulation under the Investment Company Act of
1940. In such event, the Company would be required to register as an
investment company and could be expected to incur significant registration
and compliance costs. The Company has obtained no formal determination from
the Securities and Exchange Commission as to the status of the Company
under the Investment Company Act of 1940 and, consequently, any violation
of such Act would subject the Company to material adverse consequences.
5
Probable Change in Control and Management. A business combination
involving the issuance of the Company's Common Shares will, in all
likelihood, result in shareholders of a private company obtaining a
controlling interest in the Company. Any such business combination may
require management of the Company to sell or transfer all or a portion of
the Company's Common Shares held by them, or resign as members of the Board
of Directors of the Company. The resulting change in control of the
Company could result in removal of one or more present officers and
directors of the Company and a corresponding reduction in or elimination of
their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination.
The Company's primary plan of operation is based upon a business
combination with a private concern which, in all likelihood, would result
in the Company issuing securities to shareholders of any such private
company. The issuance of previously authorized and unissued Common Shares
of the Company would result in reduction in percentage of shares owned by
present and prospective shareholders of the Company and may result in a
change in control or management of the Company.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public
trading market for its shares. A business opportunity may attempt to avoid
what it deems to be adverse consequences of undertaking its own public
offering by seeking a business combination with the Company. Such
consequences may include, but are not limited to, time delays of the
registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders and the inability
or unwillingness to comply with various federal and state laws enacted for
the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so
as to minimize the federal and state tax consequences to both the Company
and the target entity; however, there can be no assurance that such
business combination will meet the statutory requirements of a tax- free
reorganization or that the parties will obtain the intended tax-free
treatment upon a transfer of stock or assets. A non- qualifying
reorganization could result in the imposition of both federal and state
taxes which may have an adverse effect on both parties to the transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential
business opportunity must provide audited financial statements for review,
for the protection of all parties to the business combination. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company, rather than incur the expenses
associated with preparing audited financial statements.
Mergers. Any merger or acquisition effected by the Company can be expected
to have a significant dilutive effect on the percentage of shares held by
the Company's then shareholders.
6
Trading Market. There is no trading market for the Company's common stock
at present, and there has been no trading market to date. There is no
assurance that a trading market will ever develop or, if such market does
develop, that it will continue. The Company intends to request a
broker-dealer to make application to the NASD Regulation, Inc. to have the
Company's securities traded on the OTC Bulletin Board or published in print
and electronic media, or either, in the National Quotation Bureau LLC "Pink
Sheet."
Year 2000 Compliance: A business combination will, in all likelihood,
result in the Company disclosing additional Year 2000 matters. Many
existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the
Year 2000. The Year 2000 issue affects virtually all companies and
organizations.
Item 2. Description of Property
- -------------------------------
The Company has no properties and at this time has no agreements to acquire
any properties.
The Company operates from the offices of its resident agent at 2533 N.
Carson Street, Carson, Nevada 89701. This space is provided to the Company
on a rent free basis, and it is anticipated that this arrangement will
remain until such time as the Company successfully consummates a merger or
acquisition. Management believes that this arrangement will meet the
Company's needs for the foreseeable future.
Item 3. Legal Proceedings
- -------------------------
There is no litigation pending or threatened by or against the Company.
Item 4. Submission of Matter to Vote of Security Holders
- --------------------------------------------------------
None.
Item 5. Market Price for Common Registrant Equity and Related Stockholder
Matters.
- ---------------------------------------------------------------------------
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. There is no assurance that a
trading market will ever develop or, if such a market does develop, that it
will continue.
(a) Market Price.
The Company's Common Stock is not quoted at the present time.
7
(b) Recent Sales of Unregistered Securities.
The Company has not issued any of its securities during the three year
period preceding the date of this registration statement. All of the
shares of Common Stock of the Company previously issued have been issued
for investment purposes in a "private transaction" and are "restricted"
shares as defined in Rule 144 under the Securities Act of 1933, as amended.
These shares may not be offered for public sale except under Rule 144, or
otherwise, pursuant to said Act.
As of the date of this report, all of the issued and outstanding shares of
the Company's Common Stock are eligible for sale under Rule 144 promulgated
under the Securities Act of 1933, as amended, subject to certain
limitations included in said Rule.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares
which does not exceed the greater of one percent of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a
person who has satisfied a two year holding period and who is not, and has
not been for the preceding three months, an affiliate of the Company.
The Securities and Exchange Commission adopted Rule 15g-9, which
established the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In
order to approve a person's account for transactions in penny stocks, the
broker or dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that
person and that person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny
stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating
to the penny stock market, which, in highlight form, (i) sets forth the
basis on which the broker or dealer made the suitability determination; and
(ii) that the broker or dealer received a signed, written agreement from
the investor prior to the transaction. Disclosure also has to be made
about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities
and the rights and remedies available to an investor in cases of fraud in
penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
For the initial listing in the NASDAQ SmallCap market, a company must have
net tangible assets of $4 million or market capitalization of $50 million
or a net income (in the latest fiscal year or two of the last fiscal years)
of $750,000, a public float of 1,000,000 shares with a market value of $5
million. The minimum bid price must be $4.00 and there must be 3 market
makers. In addition, there must be 300 shareholders holding 100 shares or
more, and the company must have an operating history of at least one year
or a market capitalization of $50 million.
8
For continued listing in the NASDAQ SmallCap market, a company must have
net tangible assets of $2 million or market capitalization of $35 million
or a net income (in the latest fiscal year or two of the last fiscal years)
of $500,000, a public float of 500,000 shares with a market value of $1
million. The minimum bid price must be $1.00 and there must be 2 market
makers. In addition, there must be 300 shareholders holding 100 shares or
more.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities
to be traded without the aforesaid limitations. However, there can be no
assurances that, upon a successful merger or acquisition, the Company will
qualify its securities for listing on NASDAQ or some other national
exchange, or be able to maintain the maintenance criteria necessary to
insure continued listing. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such
qualification in the future may result in the discontinuance of the
inclusion of the Company's securities on a national exchange. In such
events, trading, if any, in the Company's securities may then continue in
the non-NASDAQ over-the-counter market. As a result, a shareholder may
find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, the Company's securities.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities
to be traded without the aforesaid limitations. However, there can be no
assurances that, upon a successful merger or acquisition, the Company will
qualify its securities for listing on NASDAQ or some other national
exchange, or be able to maintain the maintenance criteria necessary to
insure continued listing. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such
qualification in the future may result in the discontinuance of the
inclusion of the Company's securities on a national exchange. In such
events, trading, if any, in the Company's securities may then continue in
the non-NASDAQ over-the-counter market. As a result, a shareholder may
find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, the Company's securities.
(b) Holders.
There are thirty-four (34) holders of the Company's Common Stock. In 1987,
the Company issued 1,000,000, as adjusted for the stock split, of its
Common Shares for cash. All of the issued and outstanding shares of the
Company's Common Stock were issued in accordance with the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as
amended.
As of the date of this registration statement, 907,500 shares of the
Company's Common Stock are eligible for sale under Rule 144 promulgated
under the Securities Act of 1933, as amended, subject to certain limita-
tions included in said Rule. In general, under Rule 144, a person (or
persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three-month period
a number of shares which does not exceed the greater of one percent of the
then outstanding Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. Rule 144 also permits, under
certain circumstances, the sale of shares without any quantity limitation
by a person who has satisfied a two-year holding period and who is not, and
has not been for the preceding three months, an affiliate of the Company.
9
(c) Dividends.
The Company has not paid any dividends to date, and has no plans to do so
in the immediate future.
(d) Description of Securities.
The Company's authorized capital stock consists of 25,000,000 shares, par
value $.001 per share. There are 1,000,000 Common Shares issued and
outstanding as of the date of this filing.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters
to be voted upon by shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption rights and may be issued
only as fully-paid and non-assessable shares. Cumulative voting in the
election of directors is not permitted, which means that the holders of a
majority of the issued and outstanding shares of Common Stock represented
at any meeting at which a quorum is present will be able to elect the
entire Board of Directors if they so choose and, in such event, the holders
of the remaining shares of Common Stock will not be able to elect any
directors. In the event of liquidation of the Company, each shareholder is
entitled to receive a proportionate share of the Company's assets available
for distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of the
Company's Common Stock issued and outstanding are fully-paid and
nonassessable. Holders of the Common Stock are entitled to share pro rata
in dividends and distributions with respect to the Common Stock, as may be
declared by the Board of Directors out of funds legally available therefor.
(e) Indemnification.
Except for acts or omissions which involve intentional misconduct, fraud or
known violation of law or for the payment of dividends in violation of
Nevada Revised Statutes, there shall be no personal liability of a director
or officer to the Company, or its stockholders for damages for breach of
fiduciary duty as a director or officer. The Company may indemnify any
person for expenses incurred, including attorneys fees, in connection with
their good faith acts if they reasonably believe such acts are in and not
opposed to the best interests of the Company and for acts for which the
person had no reason to believe his or her conduct was unlawful. The
Company may indemnify the officers and directors for expenses incurred in
defending a civil or criminal action, suit or proceeding as they are
incurred in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director
or officer to repay the amount of such expenses if it is ultimately
determined by a court of competent jurisdiction in which the action or suit
is brought determined that such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed that in the
opinion of the U.S. Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
10
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operation
- -----------------------------------------------------------------------
The Company has not commenced business activities and has no assets or
operations. The Company is dependent upon its officers to meet any de
minimis costs which may occur.
Item 7. Financial Statements
- ----------------------------
Financial Statements will follow on page 12.
11
AUDITED FINANCIAL STATEMENTS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
- ----------------- ----------
<S> <C>
Independent Auditors' Report F-2
Financial Statements
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flow F-5
Statement of Shareholders' Equity F-6
Notes to the Financial Statements F-8
12
<PAGE>
The Financial Group Connection, Inc.
(A Development Stage Company)
Financial Statements
December 31, 1998 and 1997
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell Schvaneveldt, C.P.A.
Independent Auditor's Report
----------------------------
Board of Directors
The Financial Group Connection, Inc.
(A Development Stage Company)
I have audited the accompanying balance sheets of The Financial Group
Connection, Inc., as of December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the
period July 24, 1987, (Inception) to December 31, 1998, and the years ended
December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. 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 the significant estimates made by management, as well as
evaluating the overall financial statements presentation. I believe that
my audit provides a reasonable basis for my opinion.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #4 to the
financial statements, the Company has an accumulated deficit and a negative
net worth at December 31, 1998. 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 discussed in Note #4. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
In my opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of The Financial Group
Connection, Inc., as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the period July 24, 1987, (Inception) to
December 31, 1998, and the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
March 17, 1999
F-2
The Financial Group Connection, Inc.
(A Development Stage Company)
Balance Sheets
December 31, 1998 and 1997
</TABLE>
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Assets
Current Assets $ -0- $ -0-
- -------------- ----------- -----------
Total Assets $ -0- $ -0-
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities
- -------------------
Accounts Payable $ 24,314 $ -0-
----------- -----------
Stockholders' Equity
- --------------------
Common Stock Authorized 25,000,000 Shares,
$0.001 Par Value:
1,000,000 Shares Issued & Outstanding 1,000 1,000
Paid In Capital 960 960
Accumulated Deficit ( 26,274) ( 1,960)
----------- -----------
Stockholders' Equity ( 24,314) -0-
----------- -----------
Total Liabilities &
Stockholders' Equity $ -0- $ -0-
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
The Financial Group Connection, Inc.
Statements of Operations
(A Development Stage Company)
Accumulated for the Period July 24, 1987 (Inception) to December 31, 1998
& the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ -0- $ -0- $ -0-
- -------- ------------ ------------ ------------
Expenses
- --------
Filing Fees 1,850 200 150
Office Expenses 90 -0- 90
Professional Fees 24,334 24,114 220
------------ ------------ ------------
Total Expenses 26,274 24,314 460
------------ ------------ ------------
Net Loss ($ 26,274) ($ 24,314) ($ 460)
============ ============ ============
Loss Per Share ($ .02) ($ .00)
Weighted Average
Shares Outstanding 1,000,000 1,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
The Financial Group Connection, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period July 24, 1987 (Inception) to December 31, 1998
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
July 24, 1987 -0- $ -0- $ -0- $ -0-
Shares Issued for
Cash Retroactively
Restated 550,000 550
Net Loss for
the Period Ended
December 31, 1987 ( 550)
----------------------------------------------------
Balance,
December 31, 1987 550,000 550 ( 550)
Net Loss for
the Period Ended
December 31, 1988 ( 85)
----------------------------------------------------
Balance,
December 31, 1988 550,000 550 ( 635)
Net Loss for
the Period Ended
December 31, 1989 ( 85)
----------------------------------------------------
Balance,
December 31, 1989 550,000 550 ( 720)
Net Loss for
the Period Ended
December 31, 1990 ( 85)
----------------------------------------------------
Balance,
December 31, 1990 550,000 550 ( 805)
Net Loss for
the Period Ended
December 31, 1991 ( 85)
----------------------------------------------------
Balance,
December 31, 1991 550,000 550 ( 890)
Net Loss for
the Period Ended
December 31, 1992 ( 85)
----------------------------------------------------
Balance,
December 31, 1992 550,000 550 ( 975)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
The Financial Group Connection, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period July 24, 1987 (Inception) to December 31, 1998
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
----------------------------------------------------
<S> <C> <C> <C> <C>
Shares Issued for
Cash Retroactively
Restated 450,000 450 200
Net Loss for
the Period Ended
December 31, 1993 ( 225)
----------------------------------------------------
Balance,
December 31, 1993 1,000,000 1,000 200 ( 1,200)
Net Loss for
the Period Ended
December 31, 1994 ( 100)
----------------------------------------------------
Balance,
December 31, 1994 1,000,000 1,000 200 ( 1,300)
Net Loss for
the Period Ended
December 31, 1995 ( 100)
----------------------------------------------------
Balance,
December 31, 1995 1,000,000 1,000 200 ( 1,400)
Net Loss for
the Year Ended
December 31, 1996 ( 100)
----------------------------------------------------
Balance,
December 31, 1996 1,000,000 1,000 200 ( 1,500)
Contributed Capital 760
Net Loss for
the Year Ended
December 31, 1997 ( 460)
----------------------------------------------------
Balance,
December 31, 1997 1,000,000 1,000 960 ( 1,960)
Net Loss for
the Year Ended
December 31, 1998 ( 24,314)
----------------------------------------------------
Balance,
December 31, 1998 1,000,000 $ 1,000 $ 960 ($ 26,274)
====================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
The Financial Group Connection, Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated for the Period July 24, 1987 (Inception) to December 31, 1998
& the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Loss ($ 26,274) ($ 24,314) ($ 460)
Changes in Operating Assets & Liabilities;
Increase (Decrease) in Accounts Payable 24,314 24,314 ( 300)
------------ ------------ ------------
Net Cash Used by Operating Activities ( 1,960) -0- ( 760)
Cash Flows from Investing Activities -0- -0- -0-
- ------------------------------------ ------------ ------------ ------------
Cash Flows from Financing Activities
- ------------------------------------
Sale of Common Stock 1,200 -0- -0-
Contributed Capital 760 -0- 760
------------ ------------ ------------
Net Cash Provided by
Financing Activities 1,960 -0- 760
------------ ------------ ------------
Increase (Decrease) In Cash -0- -0- -0-
------------ ------------ ------------
Cash at Beginning of Period -0- -0- -0-
------------ ------------ ------------
Cash at End of Period $ -0- $ -0- $ -0-
============ ============ ============
Disclosures from Operating Activities
- -------------------------------------
Interest $ -0- $ -0- $ -0-
Taxes -0- -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
The Financial Group Connection, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Corporate History
- ---------------------------
The Company was organized on July 24, 1987, under the laws of the state of
Nevada, using the name The Financial Connection, Inc. On October 22,
1997, the Company requested reinstatement but the name "The Financial
Connection, Inc." was not available. A Certificate amending its Articles
of Incorporation was filed changing the name to The Financial Group
Connection, Inc. The voting common stock authorized was changed to
25,000,000 with a $0.001 per share par value.
The purposes for which the Corporation was organized are to manufacture
purchase, or otherwise acquire, own, mortgage, pledge, sell assign and
transfer or otherwise dispose of, to invent, trade, deal in and deal with,
goods, wares and merchandise and real and personal property of every class
and description, and all other acts authorized by law.
The Company has not engaged in any activities to produce significant
revenues and remains a development stage company.
NOTE #2 - Significant Accounting Policies
- -----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Shares shall be shown on stock options and
other convertible issues that may be exercised within ten years of the
financial statement dates.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
F. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is depreciated (amortized) over the lesser of
the length of the related assets or the estimated lives of the assets.
Depreciation is computed on the straight line method for reporting
purposes and for tax purposes.
G. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
F-8
The Financial Group Connection, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE #3 - Taxes
- ---------------
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expenses. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to
the extent of any tax benefits that net operating losses may generate.
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
<TABLE>
<CAPTION>
Year of Loss Amount Expiration Date
-------------------------------------------------
<S> <C> <C>
1987 $ 550 2002
1988 85 2003
1989 85 2004
1990 85 2005
1991 85 2006
1992 85 2007
1993 225 2008
1994 100 2009
1995 100 2010
1996 100 2011
1997 460 2012
1998 24,314 2013
</TABLE>
<TABLE>
1998 1997
---------- ----------
<S> <C> <C>
Current Tax Asset Value of Net Operating
Loss Carryforwards at Current Prevailing
Federal Tax Rate $ 3,942 $ 294
Evaluation Allowance ( 3,942) ( 294)
---------- ----------
Net Tax Asset $ -0- $ -0-
Current Income Tax Expense -0- -0-
Deferred Income Tax Benefit -0- -0-
</TABLE>
NOTE #4 - Going Concern
- -----------------------
The Company currently has no operating capital and no operations that
provide cash flows. It is dependent upon capital contributions and loans
from its Officers for funds to meet its on going expenses. The Company
seeks a merger or business acquisition that will provide operating capital.
F-9
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
- ------------------------------------------------------------------------
The Company has not changed accountants since its formation and there are
no disagreements with the findings of said accountants.
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with 16(a) of the Exchange Act.
- ---------------------------------------------------------------------
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
----------------- ---- -----------------------------------------
<S> <C> <C>
Edward W. Babic 54 Director and President
Terry Tiffany 51 Director and Vice-President - Treasurer
Richard D. Bean 42 Director and Secretary
</TABLE>
The above listed officers and directors will serve until the next annual
meeting of the shareholders or until their death, resignation, retirement,
removal, or disqualification, or until their successors have been duly
elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors. Officers of the
Company serve at the will of the Board of Directors. There are no
agreements or understandings for any office or director to resign at the
request of another person, and no officer or director is acting on behalf
of, or will act at the direction of, any other person. There is no family
relationship between any executive officer and director of the Company.
22
Resumes
Edward W. Babic
- ---------------
Mr. Babic has been an officer and director of the Company for the past 5
years. From 1987 to the present, he has been actively engaged in mergers
and acquisitions, both as an independent consultant and in various
executive management positions. In 1994, he formed an independent
financial consulting business and also is a principal in a wholesale bakery
in Orange County, California.
Terry Tiffany
- -------------
Ms. Tiffany has been an officer and director of the Company for the past 5
years. From 1987 to the present, Mr. Tiffany has been involved in senior
management positions with various local and national mortgage companies.
She is a licensed real estate broker under the laws of the State of
California.
Richard D. Bean
- ---------------
Mr. Bean has been an officer and director of the Company for the past 5
years. Mr. Bean is a licensed contractor under the laws of the State of
California. From 1966 to the present, he has owned and operate his own
construction and engineering firm and has been actively engaged in buying
and selling real estate, for his own account, since 1993. He is presently
employed by Tower Engineering in Los Angeles, California, as a construction
and marketing consultant.
Previous Blank Check Companies - Current
Blank Check Companies
The officers and directors of the Company have not been officers and
directors in any other blank check offerings. The officers and directors,
however, do anticipate becoming involved with additional blank check
companies who may file under the Securities Act of 1933, as amended, or the
1934 Act, or either. In addition, the officers and directors of the
Company may become involved in additional blank check companies which may
request a broker-dealer to request clearance from the NASD Regulation, Inc.
for trading clearance in the applicable quotation medium.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are
potential inherent conflicts of interest in their acting as officers and
directors of the Company. Insofar as the officers and directors are
engaged in other business activities, management anticipates it will devote
only a minor amount of time to the Company's affairs.
23
The officers and directors of the Company are now and may in the future
become shareholders, officers or directors of other companies which may be
engaged in business activities similar to those conducted by the Company.
Accordingly, additional direct conflicts of interest may arise in the
future with respect to such individuals acting on behalf of the Company or
other entities. Moreover, additional conflicts of interest may arise with
respect to opportunities which come to the attention of such individuals in
the performance of their duties or otherwise. The Company does not
currently have a right of first refusal pertaining to opportunities that
come to management's attention insofar as such opportunities may relate to
the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their
attention, either in the performance of their duties or in any other
manner, will be considered opportunities of, and be made available to the
Company and the companies that they are affiliated with on an equal basis.
A breach of this requirement will be a breach of the fiduciary duties of
the officer or director. If the Company or the companies in which the
officers and directors are affiliated with both desire to take advantage of
an opportunity, then said officers and directors would abstain from
negotiating and voting upon the opportunity. However, all directors may
still individually take advantage of opportunities if the Company should
decline to do so. Except as set forth above, the Company has not adopted
any other conflict of interest policy with respect to such transactions.
Investment Company Act of 1940
Although the Company will be subject to regulation under the Securities Act
of 1933, as amended, and the 1934 Act, management believes the Company will
not be subject to regulation under the Investment Company Act of 1940
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment
interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act of 1940. In such event, the
Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Securities and
Exchange Commission as to the status of the Company under the Investment
Company Act of 1940 and, consequently, any violation of such Act would
subject the Company to material adverse consequences. The Company's Board
of Directors unanimously approved a resolution stating that it is the
Company's desire to be exempt from the Investment Company Act of 1940 under
Regulation 3a-2 thereto.
Item 10. Executive Compensation.
- ---------------------------------
There has been no director and officer compensation paid by the Company for
services rendered to the Company.
24
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
There is no beneficial ownership of the Company's voting securities by any
person known by the Company to be the beneficial owner of more than 5% of
such securities, as well as the securities of the Company beneficially
owned by all directors and officers of the Company.
The total of the Company's outstanding Common Shares are held by 34
persons. The Company is informed and believes that each of the
shareholders has the sole investment power and sole voting power over each
common shares held by them.
The Company intends to prosecute a present pending application submitted by
a broker-dealer with the National Association of Security Dealers, Inc.,
its application for purposes of having its common shares quoted in the OTC
Bulletin Board Service. Except for the pending application, the Company
has no arrangements or understandings with any person or entity with regard
to the development of a trading market in the common shares of the Company.
(b) Security Ownership of Management.
The following table sets forth the beneficial ownership for each class of
equity securities of the Company beneficially owned by all directors and
officers of the Company.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Owner of Class
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Common Edward W. Babic 32,500 3.25%
Unit 116
2565 E. Chapman Avenue
Fullerton, CA 92831
Common Terry Tiffany 27,500 2.75%
5402 Knoxville
Lakewood, CA 90713
Common Richard D. Bean 32,500 3.25%
Unit C
3315 Broadway
Long Beach, CA 90804
Common All Officers and 92,500 9.25%
Directors as a Group
(three [3] individuals)
- -----------------------------------------------------------------------------
</TABLE>
25
Item 12. Certain Relationships and Related Transactions.
- ---------------------------------------------------------
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation
S-B.
Item 13. Exhibits and Reports of Form 8-K
- ------------------------------------------
Exhibit 23 Consent of Independent Auditor is attached.
Exhibit 27 Financial Data Schedule is attached.
Reports on Form 8-K. None.
26
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE FINANCIAL GROUP CONNECTION, INC.
_____________________________________
(Registrant)
Date: October 18, 1999
/S/ Edward W. Babic
By:----------------------------------
Edward W. Babic
President
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001057114
<NAME> THE FINANCIAL GROUP CONNECTION, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 24,314
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (25,314)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,314)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,314)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,314)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Consent of Darrell T. Schvaneveldt
Independent Auditor
I consent to the use, of our report dated March 17, 1999, in
the filing of the Form 10KSB, on the financial statements of The
Financial Group Connection, Inc., dated December 31, 1998,
included herein and to the reference made to me.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
October 18, 1999
