UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2000
GREAT BASIN WATER COMPANY,
A Nevada Corporation
2950 E. Flamingo Rd., Suite F, Las Vegas, Nevada 89121
(702) 214-8440
IRS Tax ID #: 86-0889096
<PAGE> 1
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
The consolidated financial statements for the quarter ended March
31, 2000 for Great Basin Water Company (the "Company") follow.
<PAGE> 2
Great Basin Water Company
Financial Statements
For the period beginning January 1, 2000
and ending March 31, 2000
TABLE OF CONTENTS
Page
--------
Independent Auditor's Report 1
Balance Sheet - Assets 2
Balance Sheet - Liabilities and Stockholders' Equity 3
Statement of Cash Flows 4
Income Statement 5
Statement of Capital Account 6
Statement of Retained Earnings 7
Summary of Significant Accounting Policies 8
<PAGE> 3
Russell G. Nay, CPA
4278 Apex Drive
Las Vegas, Nevada 89147
Telephone: (702) 227-8380
The Board of Directors
Great Basin Water Company
I have reviewed the accompanying consolidated balance sheet of
Great Basin Water Company as of March 31, 2000, and the related
statements of income, cash flows and stockholders' equity for the
period ended March 31, 2000, in accordance with the standards
established by the American Institute of Certified Public
Accountants. All Information included in these Financial
Statements is the representation of the management of Great Basin
Water Company.
A review consists principally of inquiries of company personnel
and analytical procedures applied to financial data. It is
substantially less in scope than an examination in accordance
with Generally Accepted Auditing Standards, the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such
an opinion.
Based on my review, I am not aware of any material modifications
that should be made to the accompanying Financial Statements in
order for them to be in conformity with Generally Accepted
Accounting Principles.
/s/ RUSSELL G. NAY
Russell G. Nay
Las Vegas, Nevada
May 22, 2000
(1)
<PAGE> 4
Great Basin Water Company
A Development Company
Consolidated Balance Sheet
For the period beginning January 1, 2000
and ending March 31, 2000
Period Period
Ended Ended
3/31/2000 12/31/1999
------------ ------------
Assets
Current Assets
----------------------------
Cash $ 18 $ 1,633
Accounts Receivable 2,300 2,300
Land Escrow 5,000 5,000
Loan to Sunset Gold Enterprises 2,000 2,000
------------ ------------
Total Current Assets $ 9,318 $ 10,933
Fixed Assets
----------------------------
Furniture & Fixtures $ 9,918 $ 9,918
Computer Equipment 8,118 8,118
Jeep Cherokee 5,000 5,000
Accumulated Depreciation (6,373) (5,458)
Well #2, 14 Inch Well 75,000 75,000
Well #3, 14 Inch Well 75,000 75,000
Well #4, 12 Inch Well 75,000 75,000
Well #5, 12 Inch Well 75,000 75,000
Value of 2,733.35 Acre Feet of
Water from Wells 2, 3, 4, 5 450,000 450,000
Land--Well #1 55,000 55,000
Land for Waste Treatment Plant 80,000 80,000
Capitalized Land Improvement Costs 139,350 0
------------ ------------
Total Fixed Assets $ 1,041,013 $ 902,578
Other Assets
-----------------------------
Receivable--Sterling
Investments, Ltd. $ 592,050 $ 592,050
Investment in Shadow Ridge 2,000,000 1,848,894
Investment in HDB Telemetry
Systems 200,000 200,000
Investment in HDB Telemetry
Systems - Canada (20%) 40,285 40,285
------------ ------------
Total Other Assets $ 2,832,335 $ 2,681,229
------------ ------------
Total Assets $ 3,882,666 $ 3,594,740
============ ============
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(2)
<PAGE> 5
Great Basin Water Company
A Development Company
Consolidated Balance Sheet (cont.)
For the period beginning January 1, 2000
and ending March 31, 2000
Period Period
Ended Ended
3/31/2000 12/31/1999
------------ ------------
Liabilities and Stockholders' Equity
Current Liabilities
-----------------------------
Accounts Payable $ 77,466 $ 350
Payable to Shareholder 8,629 69,643
Payroll Liabilities 9,852
------------ ------------
Total Current Liabilities $ 86,095 $ 79,845
------------ ------------
Long-Term Liabilities
-----------------------------
Note Payable to Town Square $ 16,000 $ 16,000
Note Payable to Shareholders 592,050 592,050
Note Payable to
Derral Christensen 49,401 49,401
Note on Land for Waste
Treatment Plant 80,000 80,000
Notes Payable to Shareholders 299,229 218,157
------------ ------------
Total Long-Term Liabilities $ 1,122,775 $ 1,035,453
------------ ------------
Equity
-----------------------------
8% Preferred Series B Stock,
$100 Par Value, 7,500 shares
authorized, issued and
outstanding $ 750,000 $ 750,000
Common Stock, $.001 par value,
25,000,000 Shares authorized,
5,757,740 Shares issued 5,758 5,184
Paid in Capital in excess of
par value 2,286,740 2,061,141
Retained Earnings (282,607) (257,038)
------------ ------------
Total Stockholders' Equity $ 2,759,891 $ 2,559,287
------------ ------------
Total Liabilitites &
Stockholders' Equity $ 3,882,666 $ 3,594,740
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(3)
<PAGE> 6
Great Basin Water Company
A Development Company
Consolidated Income Statement
For the period beginning January 1, 2000
and ending March 31, 2000
Period Period
Ended Ended
3/31/2000 3/31/1999
------------ ------------
Income
Interest Income $ 0 $ 0
Expenses:
Telephone 2,552 2,585
Postage & Delivery 253 822
Bank Charges 154 170
Insurance 170 0
Rent 2,225 3,541
Payroll Expense 0 7,870
Storage Expense 220 0
Supplies 262 0
Licenses, Permits & Fees 975 2,830
Other Expenses 1,500 2,586
Office Expense 469 829
Professional Fees 11,860 6,921
Travel & Entertainment 2,469 8,003
Interest Expense 500 0
Outside Services 1,000 0
Utilities 45 0
Depreciation Expense 915 900
------------ ------------
Total Expenses $ 25,569 $ 37,057
------------ ------------
Income from Operations Before
Income Taxes $ (25,569) $ ($37,057)
Income Taxes on Operations 0 0
------------ ------------
Net Income/(Loss) $ (25,569) $ (37,057)
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(4)
<PAGE> 7
Great Basin Water Company
A Development Company
Consolidated Statement of Cash Flows
For the period beginning January 1, 2000
and ending March 31, 2000
Cash Flows From Operating Activities
Net Income $ (25,569)
Non-cash Items included in
Net Income: Depreciation 915
---------
Net Cash Flows Provided by Operating Activities $ (24,654)
Cash Flows From Investing Activities
Investment in Subsidiaries $ 0
Increase/(Decrease) in Accounts Payable (5,969)
Purchase of Assets for Cash 0
(Increase)/Decrease in Receivables 29,008
Net Cash Flows Provided by Investing Activities $ 23,039
Cash Flows From Financing Activities
Loan From Shareholder $ 0
Long-Term Loans 0
Common Stock 0
Additional Paid in Capital 0
---------
Net Cash Flows Provided by Financing Activities $ 0
---------
Net Change in Cash Flows $ (1,615)
=========
Cash At The Beginning of The Period $ 1,633
=========
Cash At The End Of The Period $ (18)
=========
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(5)
<PAGE> 8
Great Basin Water Company
A Development Company
Consolidated Statement of Stockholders' Equity
For the period ended March 31, 2000
<TABLE>
<CAPTION>
$0.001 Additional $100 Additional
par Paid In par Paid In
Shares Value Capital Value Capital Total
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of Common
Stock for cash on
September 16, 1997 3,687,740 $3,688 $ 3,688
Issuance of Common
Stock in Public
Offering January 1998 500,000 500 $74,500 75,000
Issuance of Restricted
Stock, for Shadow
Ridge Water Co. 1,000,000 1,000 1,999,000 2,000,000
Issuance of Preferred
Stock for four water
wells in February 1999 $750,000 $285 750,285
Stock Issuance For
HDB Telemetry Systems
July 12, 1999 100,000 100 199,900 200,000
Stock Issuance For
20% HDB Telemetry
Systems, Canada
July 12, 1999 20,000 20 39,980 40,000
Additional Paid-In
Capital 0
Stock Issuance
January 2000 450,000 450 4,050 4,500
Stock Issuance Costs (30,975) (30,975)
------------------------------------------------------------
Balance at
March 31, 2000 5,757,740 $5,758 $2,286,455 $750,000 $285 $3,042,498
</TABLE>
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(6)
<PAGE> 9
Great Basin Water Company
A Development Company
Statement of Retained Earnings
For the period beginning January 1, 2000
and ending March 31, 2000
Balance of Retained Earnings at
December 31, 1999 $ (257,038)
Current Period Activity (25,569)
Dividends and Distributions 0
---------
Balance of Retained Earnings at
March 31, 2000 $ (282,607)
==========
The accompanying Summary of Significant Accounting Policies are
an integral part of these financial statements.
(7)
<PAGE> 10
Great Basin Water Company
A Development Company
Summary of Significant Accounting Policies
For the period beginning January 1, 2000
and ending March 31, 2000
1. Organization of the Company
Great Basin Water Company, (the "Company") was incorporated on
August 27, 1997, under the laws of the State of Nevada.
The Company was organized as a utility holding company to
acquire, own, and consolidate water and waste treatment
companies.
The Company is currently a publicly traded company.
2. Stock Transactions
The Company issued 500,000 shares of stock in an offering in
January 1998. The majority of the proceeds received in this
offering were utilized to cover operations of the Company, and to
pay certain obligations of Shadow Ridge Water Company, a wholly
owned subsidiary.
Shadow Ridge Water Company was acquired November 1, 1998. The
Company issued 1,000,000 shares of restricted common stock, with
a par value of $0.001 per share. The value of the stock at that
time is estimated to be approximately $2.00 per share, for a
total of $2,000,000. This amount is reflected on the
Consolidated Balance Sheet under Investment in Shadow Ridge and
the stock transaction is under Restricted Stock. Management has
determined the value of the stock as of the acquisition date, but
expects this estimate to be conservative.
The original acquisition of Shadow Ridge Water Co. included a
road and other land improvements which added value to that
company. However, the land which held the road and improvements
was lost due to a question in the actual ownership of the land.
That land has been replaced in another acquisition and the value
of the investment in Shadow Ridge remains unchanged.
The Company issued 450,000 shares of common stock to the Chairman
of the Board, the Chief Financial Officer and the President of
the Company for their preparation of the business plan for the
next five years, their management and positioning of the Company
to move into the acquisition phase, and the establishment of
corporate relations.
(8)
<PAGE> 11
Great Basin Water Company
A Development Company
Summary of Significant Accounting Policies (cont.)
For the period beginning January 1, 2000
and ending March 31, 2000
3. Land and Well Acquisitions
In February of 1999, the Company acquired four water wells with
pumps and 2,733.35 acre feet of water in exchange for 7,500
shares of Preferred Stock. (See Statement of Capital Accounts).
The wells and pumps have a rated capacity of approximately
1,850,000 gallons per day, more than adequate to supply
developments for which the Company has provided Assurances of
Service. Groundwater acquired was valued at approximately
$166.00 per acre foot.
The Investment in Shadow Ridge is net of the access road and
improvements. The access road is 3.04 miles in length, and 184
feet wide. Book value includes the costs associated with
surveying, engineering, and mapping of 7.5 miles of mains and
laterals for water and waste treatment. The book value also
includes the costs of aquisition of three separate franchises
from Mohave County, Arizona.
A parcel of land was purchased for $55,000 and holds Well #1.
A parcel of land was acquired on which it is planned that a waste
treatment plant will be constructed.
4. Accounts and Notes Payable
The Shareholder payable on the Balance Sheet represents operating
expenses of the Company which were paid by the shareholder and
will be reimbursed to him.
The Notes Payable to Shareholder represent outstanding notes
which were made with Shadow Ridge prior to the acquisition, and
are now the obligation of the Company.
A note payable in the amount of $55,000 was issued to Derral
Christensen for the land which holds Well #1.
A note in the amount of $80,000 was given in exchange for the
land where the water treatment plant will be constructed.
5. Investments
On July 12, 1999 the Company acquired 100% of HDB Telemetry
Systems in exchange for 100,000 shares of stock valued at $2.00
per share.
On July 12, 1999 the Company acquired 20% of HDB Telemetry
Systems Canada in exchange for 20,000 shares of stock valued at
$2.00 per share.
(9)
<PAGE> 12
Great Basin Water Company
A Development Company
Summary of Significant Accounting Policies (Cont.)
For the period beginning January 1, 2000
and ending March 31, 2000
5. Investments (Cont.)
In December 1999, two of the major shareholders assigned to the
Company a note and all associated income therefore. This
assignment of income is a loan to the Company, and is expected to
be paid back at such time as the Company is able.
6. Depreciable Assets
The Company is depreciating assets on the straight-line basis
over the appropriate lives for those assets.
(10)
<PAGE> 13
Item 2. Management's Discussion and Analysis
This registration statement includes, without limitation,
certain statements containing the words "believes",
"anticipates", "estimates", "could", "should", "plans to" and "it
is reasonable to assume", and words and phrases of a similar
nature which constitute "forward-looking statements" meaning
actual results could differ from projected or expected results.
In particular, the statements herein regarding the Company's
expansion and acquisition plans and methods; the stabilization of
business and its affect on revenues and expenses; the length of
time the proceeds from the Company's stock and cash acquisition
plans and the cash flow from operations acquired and planned
could and would fund its planned operations and acquisitions; the
complete effect to the Company's operations if lack of agreement
or cooperation with those third party investors on which the
company relies, the effect of the name recognition associated
with the utility industry in acquiring future and planned water
and waste treatment companies or the effects on the operations of
the Company if the Company were to lose the services of any of
its officers or directors or the management anticipated to be
acquired in the acquisitions; the role consolidation has in the
acquisition of the companies that is anticipated and the effects
on rate limitations levied by the Corporate Commissions or the
Utility Commissions, and the possible effect of misinterpretation
of new policies or lack of awareness could have on operations,
are forward looking statements. These forward-looking statements
reflect management's current expectations and are inherently
uncertain and dependent upon investor relations for the
acquisitions. The Company's actual results may differ
significantly from management's expectations.
INTRODUCTION
------------
The Company is a holding company with two operating
subsidiaries: Shadow Ridge and H.D.B. Telemetry. Shadow Ridge
holds franchises for water and waste treatment utility services
on approximately 7,000 acres of land in the State of Arizona. It
has requests for Assurance of Service from three developers that
are currently awaiting their preliminary approval prior to
starting construction on the first phase of 435 homes within the
franchise area of Shadow Ridge.
H.D.B. Telemetry is a "start up" company that has developed
utility meters that can be read by satellite on OrbsComm and
through the system can transfer the data from Satellite directly
to the software billings with limited possibility of corruption.
The Corporation is entering into a Contract with a Canadian Firm
For the first 125 communicators that will monitor and calculate
Flow through the OrbsComm relay. This is expected to be
operational within the next 90 day period.
<PAGE> 14
There have not been any revenues from either subsidiary and
revenues are not expected from either until the third quarter of
2000.
The Company is designed to serve as a utility holding
company that would acquire and operate water utility companies
and waste treatment systems, first in Northwest Arizona and
eventually throughout the Southwestern United States. The Company
has negotiated agreements to acquire three operating water
utility companies in the region of Northwestern Arizona and are
expected to close on the acquisitions in the first quarter of
2000. The acquisitions, if and when completed, are expected to
produce for the Company an immediate increase in annual revenues
of approximately $600,000.00 per year.
Management's vision for the Company is to build a
substantial regional utility company through a strategic program
of acquiring water rights, service franchises and existing water
companies along the paths of predicted growth throughout the
desert regions of the Pacific Southwest. In this way, the
Corporation can systematically build equity, increase earnings
and maximize share value through the consolidation of the
companies acquired.
"New-build" systems as in the case of Shadow Ridge, will
utilize the latest in hi-tech plastic pipe, pumps and delivery
systems, which allow the smaller companies to become more
profitable and less expensive. Packaged waste treatment plants
are planned in all of the systems in which Shadow Ridge has been
petitioned for service. In the "new-build" systems, the assets of
the corporation grow in direct proportion to developer
activities. While the company is responsible for the waste
treatment facility, wells, storage facilities and some of the
main transmission lines, the developer is responsible for the
mains, lateral's and service units. Upon completion of the
infrastructure (transmission and distribution system), the
developer deeds the infrastructure to the Company for ownership
and of course the utility assumes the maintenance after proper
inspection. Hence earnings from new-build systems do not grow in
direct proportion to the customer growth. This cost is off-set
through impact fees and tap fees paid by the developer which then
in turn, pays for the build out cost and the costs associated
with the assurance of continued service.
<PAGE> 15
The featured direction of the Company is to acquire existing
water and waste treatment companies. The fundamental feature of
these investor owned water companies is that each is structured
in the holding company, servicing its customers through one or
more subsidiary companies, usually, but not necessarily, wholly
owned subsidiaries. The management of the Company's affairs is
centralized within its executive management team and its Board of
Directors. As of December 31, 1999, the Company's net
shareholders equity was $2,551,723 or $0.48 per share. Net
shareholder's equity (also called "book value") per share
represented the amount of the total assets of the Company from
its audited balance sheet, reduced by the amount of its total
liabilities, divided by the total number of shares of Common
Stock issued and outstanding.
In comparison of this years quarterly to last years
quarterly we should comment on the increase of fixed assets. The
increase is due to the addition of the land that will be utilized
for the Waste Treatment Plant for The Shadow Ridge Water Company.
Current progress by the developers will result in the progression
of that new water system during this fiscal year. The Sterling
Investment receivable is from the dedication of funds anticipated
from the sale of bonds owned by two of the Officers of the
Corporation. Also adding to the increase in assets is the
acquisition of Twenty Per Cent of the H.D.B. Canada Corporation
which is the manufacturing and assembly plant of the
communicators utilized in the OrbsComm relay.
The long term liabilities are increased with the addition of
the $592,050 notes payable to stockholders. The stockholders are
officers and directors of the corporation who are assigning the
proceeds of some of the sale of bonds as well as salaries and
compensation not paid to the main officers.
The Corporation has been able to lower expenses of the
operational and acquisition phase of the business plan, primarily
because of the centralization of the offices in the Las Vegas
area.
The trend of acquisition and consolidation of utility
companies is a growing Trend in the United States. Primarily
being conducted in the Eastern part there is now recognized
another corporation in the west that is approaching our same
business plan.
With the additional funds anticipated in the next quarter,
it is reasonable to assume that the first of the smaller water
companies with whom we are targeting acquisition, should be
acquired and operational. The first ones are also the ones with
better management that will be retained to assist in
the consolidation of the remaining companies.
It is also reasonable to assume that during the remainder of
the year, at least three of the targeted companies will move into
the consolidation of operations.
To ensure the continued operations to effect the business
plan for the year 2000, the Chairman of the Board and the
President of the Corporation have assigned proceeds from their
personal bonds in the amount of $592,050.00 which will be
sufficient to move the corporation into the acquisition phases of
the business plan. It is reasonable to assume that such funds
shall be sufficient and the total may not be required.
Relationships with investment groups have enabled the
corporation to move into the acquisition phases of the business
plan and three companies that have agreed to acquisition terms
are in the review process. It is anticipated that all three
companies shall pass the reviews and be acquired by the
Corporation. Even though it was anticipated that all three
companies would pass the reviews required and become operational
with our Corporation by May of 2000, Corporate Commission and
legal work is delaying the acquisition of the companies that may
even move the closing dates to the third quarter of 2000. The
Company also anticipates that it might acquire a minimum of two
more water or utility-related corporations in 2000.
The Company has added two employees.
Year 2000
---------
Neither the Company, nor its subsidiaries, has had any
negative effects from the year 2000 date change and management
does not expect any material issues to arise in the future in
this regard. The year 2000 was not considered a problem or a
threat to the Company or any of our subsidiaries. All the
programs were checked by the technicians from H.D.B. Telemetry
and were all considered Y2K compliant, including all the software
designs of H.D.B. Telemetry.
<PAGE> 16
Results of Operations
---------------------
The Company posted revenues of $7,524 for the quarter ended
March 31, 2000, up from $0 for the same quarter in 1999. This
revenue was derived from $1,500 in Executive Assistance, Inc.,
and $6,024 in Eyesite.com, Inc., both wholly-owned subsidiaries
of the Company. Eyesite.com, Inc. incurred a cost of goods sold
of $2,500 for the quarter ended March 31, 2000. The Company
anticipates increased revenue in the following quarters for
Eyesite.com, Inc., but does not expect additional revenue in
Executive Assistance at this time. Currently, any income from our
equity investment in e-Data is immaterial.
The Company's total general and administrative expenses
increased from $2,186 in the first quarter of 1999 to $508,642 in
the same period of 2000. Of this expense, $310,027 was
attributable directly to the Company, $196,815 was attributable
to Eyesite.com, $1,222 was attributable to Executive Assistance
and the remaining $578 to Framing Systems, Inc., another wholly-
owned subsidiary of the Company. The Company anticipates these
figures to continue to rise for Rhino and Eyesite.com, as both
companies increase staff to handle the marketing, administrative,
management, legal, accounting and technological demands of its
increased business activity. Personnel costs and professional
fees grew from $0 in the first quarter of 1999 to $319,929 in the
same period of 2000. Again, these figures are attributable to
$228,636 for the Company, $90,221 for Eyesite.com and $1,072 for
Executive Assistance. Additionally, the Company's operating costs
increased from $1,328 in the first quarter of 1999 to $165,735 in
the first quarter of 2000. Total operations costs for Rhino
itself was $65,404, Eyesite.com was $100,063, Executive
Assistance was $150 and Framing Systems was $118. This increase
was caused by normal operating costs incurred by the Company,
including office lease on a month to month basis, marketing,
administrative and other costs related to doing business. The
Company was not doing business during the first quarter of 1999.
With the anticipated expansion of the Company's operations during
2000, management anticipates operating costs to increase as we
expect to enter into formal long-term lease arrangements for both
Rhino and Eyesite.com and a significant increase in the Company's
advertising budget in 2000. This is due to the Company's need to
promote the products and services of its subsidiaries and other
equity investments.
<PAGE> 17
Other Income/(Expense) went from $0 in the first quarter of
1999 to ($58,569) in the first quarter of 2000. The change was
caused by $70,238 in interest expense ($69,413 for Rhino and $825
for Eyesite.com) in the first quarter of 2000, which was offset
by interest income of $38,796 ($35,255 for Rhino and $3,541 for
Eyesite.com). The Company's equity interest in E-Data Alliance
Corp. resulted in a loss of ($29,345). The Company will continue
to make loans to other companies as a way to pursue business
opportunities. The increase in interest expense was caused by the
Company incurring additional debt to finance operations and
acquisitions. The Company anticipates that interest expense will
continue to increase into 2000 as the Company continues to expand
and grow its operations. Therefore, it is anticipated that
interest income for the Company will continue to grow into 2000.
It is possible that the Company will have other extraordinary
income in 2000, but at this time management cannot predict the
source of any potential extraordinary income.
Financial Condition
-------------------
At quarter end, cash and cash equivalents were $81,943 as
compared to $0 at March 31, 1999. The ratio of current assets to
current liabilities was .60 to 1 at March 31, 2000.
Operating activities used $416,372 of cash in the first
quarter of 2000 compared to $637 in the first quarter of 1999.
The majority of the cash utilized by operations in the first
quarter of 2000 was attributable to general & administrative
costs.
Investing activities consumed $108,880 during the first
quarter of 2000, compared to $0 in the same period of 1999.
Capital expenditures rose in the first quarter from $0 in 1999 to
$19,605 in 2000. The increase in cash used by investing was due
to the sale of unproductive assets and reinvestment in other
property and equipment for the expansion of the Company.
Additionally, during the quarter ended March 31, 2000, the
Company made short-term loans bearing 8% to 10% interest to
various companies totaling $568,739 which is an increase over
1999's total of $0. The Company also collected outstanding sums
due on notes receivable totaling $441,595. The Company
anticipates that a significant portion of these loans made will
continue to be repaid in 2000, thus providing a source of working
capital for the Company.
<PAGE> 18
Financing activity provided the Company with $217,124 net
cash as of March 31, 2000 as compared to $0 in the same period of
1999. During the first quarter, the Company acquired additional
financing in the amount of $654,338, of which $408,260 was for
Rhino and $194,950 was for Eyesite.com. This increase was also
caused by accrued interest on these notes and those outstanding
at year end. During this period, the Company repaid $364,523 of
notes. These payments were made to Dr. Gary Edwards and Digital
Information & Virtual Access, Inc. In accordance with the Board
of Directors' approval for the Company to repurchase its stock,
Rhino expended $72,691 for 19,650 shares of its common stock
purchased in the open market during the first quarter of 2000.
This financing provided, in part, the funding for operations
and investment activities. Management believes that collections
on advances, fees earned through incubation services, interest
income and reimbursement of expenses will be sufficient for the
Company's working capital needs for the whole of the year 2000.
As such, management anticipates that it may only need minimal
working capital loans from time to time during 2000. Management
anticipates collecting on approximately $200,000 to $500,000 of
outstanding notes receivable in the third or fourth quarters of
this year. Management foresees that its options for repaying
$3,372,551 in notes payable are open. The Company could approach
each lender to negotiate the renewal and extension of the debt or
discuss the exploration of converting such debt into equity in
the Company; could locate other private financing to replace the
current financing; or could make an equity placement of
securities to raise funds to repay these outstanding notes. Any
one or more of these options may be used, as the Company is not
committed to any single course of action at this time.
The Company believes that it has the financial resources and
commitments needed to meet business requirements in the
foreseeable future, including capital expenditures and working
capital requirements. The Company anticipates significant growth
of its operations in 2000. This growth will in turn cause certain
financial and operational areas of the Company to change. The
most significant change in operations will be the number of
employees working for the Company. The Company currently has 10
full-time employees and out-sources a large number of projects.
In an effort to bring these projects "in-house" and based on the
expansion, the Company anticipates having 35-50 full or part time
employees by the end of 2000. This expansion will also
significantly increase the funds utilized to provide sufficient
advertising & marketing, office space and equipment for the
increased staff and growth of the Company. Additionally, the
Company will be required to increase its expenditures for legal
and accounting services to meet its various compliance standards.
<PAGE> 19
Year 2000 Compliance
--------------------
Prior to January 1, 2000, it was widely believed that many
computer systems used today would not be able to interpret data
correctly after December 31, 1999, because such systems allow
only two digits to indicate the year in a date. The Company and
its subsidiaries have been engaged, both before December 31, 1999
and after January 1, 2000, in assessing this Year 2000 ("Y2K")
issue as it relates to their businesses, including their
electronic interactions with banks, vendors, customers and
others. The Company did not encounter any problems with Y2K
issues, nor, based upon a review of its systems, does it expect
to encounter any in the future.
Factors That May Impact Future Operating Results
------------------------------------------------
The Company and its subsidiaries operate in a rapidly
changing environment that involves numerous risks and
uncertainties. The following section lists some, but not all, of
these risks and uncertainties which may have a material adverse
effect on the Company's business, financial condition or results
of operations.
The Company is dependent upon its current management team.
If the Company were to lose any one or more of its management
team, it could face a financial setback or suffer in other ways
related to is planned business. It could take the Company a
significant period of time to locate and train replacements, if
and when necessary. The Company does have employment agreements
with both its President and Chief Operating Officer, which may be
terminated upon certain circumstances. These agreements are filed
as exhibits to the Company's First Amendment to the Form 10-SB
filed with the Securities and Exchange Commission.
Since the Company has very little revenue at the moment, it
is dependent upon outside financing for working capital and to
grow its business. The Company may find it difficult to borrow
additional funds or have access to additional funds via some
other method. If such a situation occurs, the Company may not be
able to make debt service payments, provide the services it has
planned, increase its staff as planned or otherwise grow its
business.
<PAGE> 20
The Company has a significant portion of debt which must be
repaid in cash at some point or the Company must explore other
alternatives for repayment, which could be in the form of
conversion of debt to equity, replacement financing and/or an
offering of securities. The Company may find it difficult to
repay the existing debt when due, extend the due date of the
existing debt, reach some agreement with regard to converting the
debt to equity or otherwise satisfy its obligation. Likewise, if
a new source of financing is found to replace the current source,
the Company could face similar risks in the future with regard to
its ability to repay or otherwise take care of any future debt.
Also, any additional issuances of securities, whether in the form
of converting debt to equity or the form of a securities
offering, would dilute the share value of current shareholders.
The Company has made several unsecured loans to other small
companies. The Company faces a risk that these third party
borrowers will not be able to pay the interest and/or principal
on their debt. In the event these borrowers are unable to repay
the interest and/or principal, the Company may seek to convert
the debt into an equity interest in the borrowing entity.
However, the Company may face difficulty in negotiating with such
borrowers with regard to the ability to convert the debt into
equity or the conversion ratio. Likewise, if such debt is
converted into equity of the borrowing entity, there exists a
great possibility that the equity interest in the borrowing
entity will not be a liquid investment or that the value of such
equity interest will not be at or near the original loan to the
borrowing entity. Further, if one or more of these borrowing
entities is unable to make interest and/or principal payments
when due or if the debt is converted into a non-liquid equity
investment, the Company could face a working capital shortage.
The Company's subsidiary, Eyesite.com, has planned its
business in accordance with current legislation. If new
legislation is passed at a local, state or federal level, it
could materially adversely affect Eyesite.com's business plan.
Eyesite.com faces the risks that it might not be able to (1)
continue its business as planned, (2) adjust its business plan in
accordance with any new legislation, or (3) operate in such a
manner that would eventually be profitable.
In order to grow the Company's business as planned, the
Company will have to hire additional personnel for a number of
positions. The current low unemployment rate presents a challenge
for management of the Company to locate and attract qualified
individuals to fill the positions that the Company expects to
have available. The Company faces the risks that it might not be
<PAGE> 21
able to (1) fill every position as it becomes available in a
timely manner, (2) retain those employees it currently has or
that it hires, or (3) offer an attractive enough compensation
package to attract top quality candidates to its positions.
PART II - OTHER INFORMATION
(Items 1, 3, 4 and 5 have been omitted as there is no information
to report.)
Item 2. Changes in Securities.
During the quarter ended March 31, 2000, the Company issued
150,000 shares each, for an aggregate of 450,000 shares, of
restricted common stock to three officers and directors of the
Company for services rendered. These securities were issued in
reliance upon a transactional exemption provided by Section 4(2)
of the Securities Act of 1933, as amended.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit No. Description
----------- -------------------------------------------
27.0 Financial Data Schedule
Reports on Form 8-K
------------------------------------------------------------
During the quarter ended March 31, 2000, the Company did not
file any reports on Form 8-K with the Securities and Exchange
Commission.
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREAT BASIN WATER COMPANY
(Registrant)
Date: May 31, 2000 By:/s/ THOMAS R. WARREN
--------------------------------
Thomas R. Warren,
Chief Financial Officer and duly
authorized officer
<PAGE> 23
