As filed with the Securities and Exchange Commission on
December 2, 1998
Registration No. 0-24633
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 1
to
FORM 10-SB
GENERAL FORM FOR REGISTRANTS OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
RAKO CORPORATION
(Name of Small Business Issuer in its charter)
IDAHO 91-0853320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3256 Agate Court, Boise, Idaho 83705
(Address of principal executive officers) (Zip Code)
Issuer's telephone number: (208) 336-3036
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
<PAGE>
RAKO CORPORATION
FORM 10-SB
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business. . . . . . . . . . . . . . . . . 3
ITEM 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . 11
ITEM 3. Description of Property. . . . . . . . . . . . . . . . . 14
ITEM 4. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . 14
ITEM 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . . . . . . 15
ITEM 6. Executive Compensation . . . . . . . . . . . . . . . . . 17
ITEM 7. Certain Relationships and Related Transactions . . . . . 17
ITEM 8. Description of Securities. . . . . . . . . . . . . . . . 18
PART II
ITEM 1. Market Price of and Dividends on Registrant's
Common Equity and Other Shareholder Matters. . . . . . 18
ITEM 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 21
ITEM 3. Changes in and Disagreements with Accountants. . . . . . 21
ITEM 4. Recent Sales of Unregistered Securities. . . . . . . . . 21
ITEM 5. Indemnification of Directors and Officers. . . . . . . . 21
PART F/S
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 22
PART III
ITEM 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . S-1
ITEM 2. Description of Exhibits. . . . . . . . . . . . . . . . . S-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
PART I
Except as otherwise indicated, the information in this
Registration Statement reflects the one (1) share for three (3)
shares reverse stock split of the common Stock in May 1996, and the
two (2)shares for one (1) share forward stock split effected in
March 1998.
ITEM 1.
Business Development
Rako Corporation (the "Company") was organized on October 10,
1968, under the laws of the State of Idaho as Bell Silver Mining
and Milling Corporation, having the stated purpose of engaging in
various oil and mining activities. The Company engaged in limited
oil and mining operations and, from the time of its inception, the
Company has undergone several name changes and business changes.
On May 3, 1969, the Company changed its name to Silver Strike
Mining Co., Inc. In 1973, the Company entered into a Merger
Agreement with Best Corporation, a Montana corporation ("Best"),
whereby Best was merged with and into the Company with the Company
being the surviving corporate entity. In connection with the
merger with Best, the Company changed its name to Rako Corporation,
evidenced by the Certificate of Amendment filed with the State of
Idaho on May 17, 1973. Although the Company did perform some
mining activities, it was inactive from approximately 1986 to
April 1996.
On April 4, 1996, the Company entered into a Letter of Intent
whereby it was proposed that the Company would acquire all the
issued and outstanding shares of Spencer Entertainment, Inc., a
Nevada corporation ("Spencer"), in exchange for the issuance of
shares of the Company's common stock representing a controlling
interest in the Company. A special meeting of shareholders was
called for May 9, 1996. At that meeting, the proposal to acquire
Spencer was voted on and approved in addition to various other
proposals including the election of a new Board of Directors
consisting of nominees of Spencer, the one (1) share for three (3)
shares reverse stock split, and the change of the corporate name to
Spencer Entertainment, Inc. Following the special meeting, the
Company changed its name to Spencer Entertainment, Inc. on May 15,
1996.
At the time of the acquisition of Spencer, the Company
intended to become engaged in the film and entertainment business,
specializing in co-production and foreign distribution of high
quality films as well as obtaining video merchandising and music
rights connected with the films with which it became involved.
However, the new principals and directors of the Company were
unable to facilitate the business plan of Spencer and secure
adequate funding. Thus, on November 22, 1996, the Company
finalized a Rescission Agreement with Spencer whereby the
Acquisition Agreement was rescinded and the 3,150,000 shares of the
Company's common stock issued in connection with the Acquisition
Agreement, were returned to the Company and canceled. From May 9,
1996 to November 22, 1996, the Company did not engage in any
material business operations. In connection with the Rescission
Agreement, the Company's directors that were nominated by Spencer
were replaced by those persons who were directors of the Company
immediately prior to the Acquisition Agreement. On March 17, 1998,
the Company held a special meeting of shareholders, at which
meeting the shareholders ratified the rescission of the Acquisition
Agreement with Spencer, approved the proposal to change the
Company's name to Rako Corporation and approved the proposal to
effect the two (2) shares for one (1) share forward stock split of
the Company's issued and outstanding common stock.
Since November 1996, the Company has been active in seeking
potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses. The Company is
considered a development stage company and, due to its status as a
"shell" corporation, its principal purpose is to locate and
consummate a merger or acquisition with a private entity. Because
of the Company's current status having no assets and no recent
operating history, in the event the Company does successfully
acquire or merge with an operating business opportunity, it is
likely that the Company's current shareholders will experience
substantial dilution and there will be a probable change in control
of the Company.
The Company is voluntarily filling this registration statement
on Form 10-SB in order to make information concerning itself more
readily available to the public. Management believes that being a
reporting company under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), could provide a prospective merger or
acquisition candidate with additional information concerning the
Company. Further, management believes that this could possibly
make the Company more attractive to an operating business
opportunity as a potential merger or acquisition candidate. As a
result of filing its registration statement, the Company is
obligated to file with the Commission certain interim and periodic
reports including an annual report containing audited financial
statements. The Company intends to continue to voluntarily file
its periodic reports under the Exchange Act in the event its
obligation to file such reports is suspended under applicable
provisions of the Exchange Act.
Any target acquisition or merger candidate of the Company will
become subject to the same reporting requirements as the Company
upon consummation of any merger or acquisition. Thus, in the event
the Company successfully completes the acquisition of or merger
with an operating business opportunity, that business opportunity
must provide audited financial statements for at least the two most
recent fiscal years or, in the event the business opportunity has
been in business for less than two years, audited financial
statements will be required from the period of inception. This
could limit the Company's potential target business opportunities
due to the fact that many private business opportunities either do
not have audited financial statements or are unable to produce
audited statements without undo time and expense.
The Company's principal executive offices are located at 3256
Agate Court, Boise, Idaho 83705, and its telephone number
is (208) 336-3036.
Business of Issuer
The Company has no recent operating history and no
representation is made, nor is any intended, that the Company will
be able to carry on future business activities successfully.
Further, there can be no assurance that the Company will have the
ability to acquire or merge with an operating business, business
opportunity or property that will be of material value to
the Company.
Management plans to investigate, research and, if justified,
potentially acquire or merge with one or more businesses or
business opportunities. The Company currently has no commitment or
arrangement, written or oral, to participate in any business
opportunity and management cannot predict the nature of any
potential business opportunity it may ultimately consider.
Management will have broad discretion in its search for and
negotiations with any potential business or business opportunity.
Sources of Business Opportunities
Management of the Company intends to use various resources in
the search for potential business opportunities including, but not
limited to, the Company's officers and directors, consultants,
special advisors, securities broker-dealers, venture capitalists,
members of the financial community and others who may present
management with unsolicited proposals. Because of the Company's
lack of capital, it may not be able to retain on a fee basis
professional firms specializing in business acquisitions and
reorganizations. Rather, the Company will most likely have to rely
on outside sources, not otherwise associated with the Company, that
will accept their compensation only after the Company has finalized
a successful acquisition or merger. To date, the Company has not
engaged or entered into any discussion, agreement or understanding
with a particular consultant regarding the Company's search for
business opportunities. Company management has in the past
consulted with Williams Investment Co. ("Williams"), a consulting
company located in Salt Lake City, Utah. Because there is no
agreement or understanding with Williams, the Company may use other
consultants if it so elects. However, due to its past experience,
the Company may use the consulting and advisory services of
Williams. Presently, no final decision has been made nor is
management in a position to identify any future prospective
consultants for the Company.
If the Company elects to engage an independent consultant, it
will look only to consultants that have experience in working with
small companies in search of an appropriate business opportunity.
Also, the consultant must have experience in locating viable merger
and/or acquisition candidates and have a proven track record of
finalizing such business consolidations. Further, the Company
would like to engage a consultant that will provide services for
only nominal up-front consideration and is willing to be fully
compensated only at the close of a business consolidation.
The Company does not intend to limit its search to any
specific kind of industry or business. The Company may investigate
and ultimately acquire a venture that is in its preliminary or
development stage, is already in operation, or in various stages of
its corporate existence and development. Management cannot predict
at this time the status or nature of any venture in which the
Company may participate. A potential venture might need additional
capital or merely desire to have its shares publicly traded. The
most likely scenario for a possible business arrangement would
involve the acquisition of or merger with an operating business
that does not need additional capital, but which merely desires to
establish a public trading market for its shares.
Management believes that the Company could provide a potential
public vehicle for a private entity interested in becoming a
publicly held corporation without the time and expense typically
associated with an initial public offering.
Evaluation
Once the Company has identified a particular entity as a
potential acquisition or merger candidate, management will seek to
determine whether acquisition or merger is warranted or whether
further investigation is necessary. Such determination will
generally be based on management's knowledge and experience, or
with the assistance of outside advisors and consultants evaluating
the preliminary information available to them. Management may
elect to engage outside independent consultants to perform
preliminary analysis of potential business opportunities. However,
because of the Company's lack of capital it may not have the
necessary funds for a complete and exhaustive investigation of any
particular opportunity.
In evaluating such potential business opportunities, the
Company will consider, to the extent relevant to the specific
opportunity, several factors including potential benefits to the
Company and its shareholders; working capital, financial
requirements and availability of additional financing; history of
operation, if any; nature of present and expected competition;
quality and experience of management; need for further research,
development or exploration; potential for growth and expansion;
potential for profits; and other factors deemed relevant to the
specific opportunity.
Because the Company has not located or identified any specific
business opportunity as of the date hereof, there are certain
unidentified risks that cannot be adequately expressed prior to the
identification of a specific business opportunity. There can be no
assurance following consummation of any acquisition or merger that
the business venture will develop into a going concern or, if the
business is already operating, that it will continue to operate
successfully. Many of the potential business opportunities
available to the Company may involve new and untested products,
processes or market strategies which may not ultimately prove
successful.
Form of Potential Acquisition or Merger
Presently, the Company cannot predict the manner in which it
might participate in a prospective business opportunity. Each
separate potential opportunity will be reviewed and, upon the basis
of that review, a suitable legal structure or method of
participation will be chosen. The particular manner in which the
Company participates in a specific business opportunity will depend
upon the nature of that opportunity, the respective needs and
desires of the Company and management of the opportunity, and the
relative negotiating strength of the parties involved.
Actual participation in a business venture may take the form of an
asset purchase, lease, joint venture, license, partnership, stock
purchase, reorganization, merger or consolidation. The Company may
act directly or indirectly through an interest in a partnership,
corporation, or other form of organization, however, the Company
does not intend to participate in opportunities through the
purchase of minority stock positions.
Because of the Company's current situation, having no assets
and no recent operating history, in the event the Company does
successfully acquire or merge with an operating business
opportunity, it is likely that the Company's present shareholders
will experience substantial dilution and there will be a probable
change in control of the Company. Most likely, the owners of the
business opportunity which the Company acquires or mergers with
will acquire control of the Company following such transaction.
Management has not established any guidelines as to the amount of
control it will offer to prospective business opportunities, rather
management will attempt to negotiate the best possible agreement
for the benefit of the Company's shareholders.
Management does not presently intend to borrow funds to
compensate any persons, consultants, promoters or affiliates in
relation to the consummation of a potential merger or acquisition.
However, if the Company engages outside advisors or consultants in
its search for business opportunities, it may be necessary for the
Company to attempt to raise additional funds. As of the date
hereof, the Company has not made any arrangements or definitive
agreements to use outside advisors or consultants or to raise any
capital. In the event the Company does need to raise capital, most
likely the only method available to the Company would be the
private sale of its securities. These possible private sales would
most likely have to be to persons known by the directors of the
Company or to venture capitalists that would be willing to accept
the risks associated with investing in a company with no current
operation. Because of the nature of the Company as a development
stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a
commercial or private lender. Management will attempt to acquire
funds on the best available terms for the Company. However, there
can be no assurance that the Company will be able to obtain
additional funding when and if needed, or that such funding, if
available, can be obtained on terms reasonable or acceptable to the
Company. The Company does not anticipate using Regulation S under
the Securities Act of 1933 to raise any funds prior to consummation
of a merger or acquisition. Although not presently anticipated,
there is a remote possibility that the Company could sell
securities to its management or affiliates.
In the case of a future acquisition or merger, there exists a
possibility that a condition of such transaction might include the
sale of shares presently held by officers and/or directors of the
Company to parties affiliated with or designated by the potential
business opportunity. Presently, management has no plans to seek
or actively negotiate such terms. However, if this situation does
arise, management is obligated to follow the Company's Articles of
Incorporation and all applicable corporate laws in negotiating such
an arrangement. Under this scenario of a possible sale by officers
and directors, it is unlikely that similar terms and conditions
would be offered to all other shareholders of the Company or that
the shareholders would be given the opportunity to approve such a
transaction.
In the event of a successful acquisition or merger, a finder's
fee, in the form of cash or securities, may be paid to persons
instrumental in facilitating the transaction. The Company has not
established any criteria or limits for the determination of a
finder's fee, although it is likely that an appropriate fee will be
based upon negotiations by the Company and the appropriate business
opportunity and the finder. Management cannot at this time make an
estimate as to the type or amount of a potential finder's fee that
might be paid. It is unlikely that a finder's fee will be paid to
an affiliate of the Company because of the potential conflict of
interest that might result. If such a fee was paid to an
affiliate, it would have to be in such a manner so as not to
compromise an affiliate's possible fiduciary duty to the Company or
to violate the doctrine of corporate opportunity. Further, in the
unlikely event a finder's fee was to be paid to an affiliate, the
Company would have such an arrangement ratified by the shareholders
in an appropriate manner.
Presently, it is highly unlikely that the Company will acquire
or merge with a business opportunity in which the Company's
management, affiliates or promoters have an ownership
interest. Any possible related party transaction of this type
would have to be ratified by a disinterested Board of Directors and
by the shareholders. Management does not anticipate that the
Company will acquire or merge with any related entity. Further, as
of the date hereof, none of the Company's officers, directors, or
affiliates or associates have had any preliminary contact or
discussions with any specific business opportunity, nor are there
any present plans, proposals, arrangements or understandings
regarding the possibility of an acquisition or merger with any
specific business opportunity.
Rights of Shareholders
It is presently anticipated by management that prior to
consummating a possible acquisition or merger, the Company, if
required by relevant state laws and regulations, will seek to have
the transaction ratified by shareholders in the appropriate manner.
However, under Delaware law, certain actions that would routinely
be taken at a meeting of shareholders, may be taken by written
consent of shareholders having not less than the minimum number of
votes that would be necessary to authorize or take the action at a
meeting of shareholders. Thus, if shareholders holding a majority
of the Company's outstanding shares decide by written consent to
consummate an acquisition or a merger, minority shareholders would
not be given the opportunity to vote on the issue. The Board of
Directors will have the discretion to consummate an acquisition or
merger by written consent if it is determined to be in the best
interest of the Company to do so. Regardless of whether an action
to acquire or merge is ratified by written consent or by holding a
shareholders' meeting, the Company will provide to its shareholders
complete disclosure documentation concerning a potential target
business opportunity including the appropriate audited financial
statements of the target. This information will be disseminated by
proxy statement in the event a shareholders' meeting is held, or by
subsequent report to the shareholders if the action is taken by
written consent.
Competition
Because the Company has not identified any potential
acquisition or merger candidate, it is unable to evaluate the type
and extent of its likely competition. The Company is aware that
there are several other public companies with only nominal assets
that are also searching for operating businesses and other business
opportunities as potential acquisition or merger candidates. The
Company will be in direct competition with these other public
companies in its search for business opportunities and, due to the
Company's lack of funds, it may be difficult to successfully
compete with these other companies.
Employees
As of the date hereof, the Company does not have any employees
and has no plans for retaining employees until such time as the
Company's business warrants the expense, or until the Company
successfully acquires or merges with an operating business. The
Company may find it necessary to periodically hire part-time
clerical help on an as-needed basis.
Facilities
The Company is currently using as its principal place of
business the personal residence of its President located in Boise,
Idaho. Although the Company has no written agreement and pays no
rent for the use of this facility, it is contemplated that at such
future time as the Company acquires or merges with an operating
business, the Company will secure commercial office space from
which it will conduct its business. However, until such time as
the Company completes an acquisition or merger, the type of
business in which the Company will be engaged and the type of
office and other facilities that will be required is unknown. The
Company has no current plans to secure such commercial office
space.
Industry Segments
No information is presented regarding industry segments. The
Company is presently a development stage company seeking a
potential acquisition of or merger with a yet to be identified
business opportunity. Reference is made to the statements of
income included herein in response to Part F/S of this Form 10-SB
for a report of the Company's operating history for the past two
fiscal years.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with
the consolidated financial statements and notes thereto appearing
elsewhere in the Form 10-SB.
The Company is considered a development stage company with no
assets or capital and with no significant operations or income
since approximately 1986. The costs and expenses associated with
the preparation and filing of this registration statement have been
paid for by a shareholder of the Company. It is anticipated that
the Company will require only nominal capital to maintain the
corporate viability of the Company and necessary funds will most
likely be provided by the Company's officers and directors in the
immediate future. However, unless the Company is able to
facilitate an acquisition of or merger with an operating business
or is able to obtain significant outside financing, there is
substantial doubt about its ability to continue as a going concern.
In the opinion of management, inflation has not and will not
have a material effect on the operations of the Company until such
time as the Company successfully completes an acquisition
or merger. At that time, management will evaluate the possible
effects of inflation on the Company related to it business and
operations following a successful acquisition or merger.
Plan of Operation
During the next 12 months, the Company will actively seek out
and investigate possible business opportunities with the intent to
acquire or merge with one or more business ventures. In its search
for business opportunities, management will follow the procedures
outlined in Item 1 above. Because the Company lacks funds, it may
be necessary for the officers and directors to either advance funds
to the Company or to accrue expenses until such time as a
successful business consolidation can be made. Management intends
to hold expenses to a minimum and to obtain services on a
contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or
merger can be accomplished and will strive to have the business
opportunity provide their remuneration. However, if the Company
engages outside advisors or consultants in its search for business
opportunities, it may be necessary for the Company to attempt to
raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside
advisors or consultants or to raise any capital. In the event the
Company does need to raise capital, most likely the only method
available to the Company would be the private sale of its
securities. Because of the nature of the Company as a development
stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a
commercial or private lender. There can be no assurance that the
Company will be able to obtain additional funding when and if
needed, or that such funding, if available, can be obtained on
terms acceptable to the Company.
The Company does not intend to use any employees, with the
possible exception of part-time clerical assistance on an as-needed
basis. Outside advisors or consultants will be used only if they
can be obtained for minimal cost or on a deferred payment basis.
Management is confident that it will be able to operate in this
manner and to continue its search for business opportunities during
the next twelve months.
Net Operating Loss
The Company has accumulated approximately $2,000 of net
operating loss carryforwards as of September 30, 1998, which
may be offset against taxable income and income taxes in future
years. The use of these losses to reduce future income taxes will
depend on the generation of sufficient taxable income prior to the
expiration of the net operating loss carryforwards. The
carry-forwards expire in the year 2011. In the event of certain
changes in control of the Company, there will be an annual
limitation on the amount of net operating loss carryforwards which
can be used. No tax benefit has been reported in the financial
statements for the year ended December 31, 1997 or the nine
month period ended September 30, 1998 because there is a 50%
or greater chance that the carryforward will not be used.
Accordingly, the potential tax benefit of the loss carryforward is
offset by a valuation allowance of the same amount.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" and Statement of Financial Accounting Standards No. 129
"Disclosures of Information About an Entity's Capital Structure."
SFAS No. 128 provides a different method of calculating earnings
per share than is currently used in accordance with Accounting
Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128
provides for the calculation of "Basic" and "Dilutive" earnings per
share. Basic earnings per share includes no dilution and is
computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution
of securities that could share in the earnings of an entity,
similar to fully diluted earnings per share. SFAS No. 129
establishes standards for disclosing information about an entity's
capital structure. SFAS No. 128 and SFAS No. 129 are effective for
financial statements issued for periods ending after December 15,
1997. Their implementation is not expected to have a material
effect on the financial statements.
The Financial Accounting Standards Board has also issued SFAS
No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and
distributors to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income
be reported in a financial statement that displays with the same
prominence as other financial statements. SFAS No. 131 supersedes
SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards on the way that
public companies report financial information about operating
segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosure regarding products and services, geographic areas and
major customers. SFAS No. 131 defines operating segments as
components of a company about which separate financial information
is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. Because of the
recent issuance of the standard, management has been unable to
fully evaluate the impact, if any the standard may have on future
financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation
of the standard.
Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Risk Factors and Cautionary Statements
This Registration Statement contains certain forward-looking
statements. The Company wishes to advise readers that actual
results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company
search for appropriate business opportunities and subsequently
acquire or merge with such entity, to meet its cash and working
capital needs, the ability of the Company to maintain its existence
as a viable entity, and other risks detailed in the Company's
periodic report filings with the Securities and Exchange
Commission.
ITEM 3. Description of Property
The information required by this Item 3, Description of
Property, is set forth in Item 1, Description of Business, of this
Form 10-SB/A.
ITEM 4. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information, to the best of the
Company's knowledge, as of December 1, 1998, with respect to
each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock, each director and all directors
and officers as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
Kenneth D. Montee* 363,334 35.4%
3256 Agate Court
Boise, ID 83850
Al Scarth 363,334 35.4%
421 Sherman
Coeur D'Alene, ID 83814
Edward Cowle 92,694 9.0%
102 East 87th Street
New York, NY 10128
All directors and officers 363,334 35.4%
a group (2 persons)
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the
Company has been advised that each person above has sole
voting power over the shares indicated above.
(1) Based upon 1,025,030 shares of common stock outstanding
on December 1, 1998.
ITEM 5. Directors, Executive Officers, Promoters and Control
Persons
Executive Officers and Directors
The executive officers and directors of the Company are as
follows:
Name Age Position
Kenneth D. Montee 55 President, Chief Executive
Officer and Director
Ray Montee 53 Secretary / Treasurer and
Director
___________________________
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. There are no agreements with respect to the election of
directors. The Company has not compensated its directors for
service on the Board of Directors or any committee thereof, but
directors are entitled to be reimbursed for expenses incurred for
attendance at meetings of the Board of Directors and any committee
of the Board of Directors. However, due to the Company's lack of
funds, the directors will defer their expenses and any compensation
until such time as the Company can consummate a successful
acquisition or merger. As of the date hereof, no director has
accrued any expenses or compensation. Officers are appointed
annually by the Board of Directors and each executive officer
serves at the discretion of the Board of Directors. The Company
does not have any standing committees. Presently, none of the
Company's directors are directors of any other "shell" or "blank
check" companies or other corporations that are actively
pursuing acquisitions or mergers. Current management of the
Company has no present intent, nor is it likely that they will
become involved with promoting other shell or blank check companies
in the foreseeable future.
No director, officer, affiliate or promoter of the Company
has, within the past five years, filed any bankruptcy petition,
been convicted in or been the subject of any pending criminal
proceedings, or is any such person the subject or any order,
judgment, or decree involving the violation of any state or federal
securities laws.
All of the Company's present directors have other full-time
employment and will routinely devote only such time to the Company
necessary to maintain its viability. It is estimated that each
director will devote less than ten hours per month to the Company's
activities. The directors will, when the situation requires,
review potential business opportunities or actively participate in
negotiations for a potential merger or acquisition on an as-needed-
basis.
Currently, there is no arrangement, agreement or understanding
between the Company's management and non-management shareholders
under which non-management shareholders may directly or indirectly
participate in or influence the management of the Company's
affairs. Present management openly accepts and appreciates any
input or suggestions from the Company's shareholders. However, the
Board of Directors is elected by the shareholders and the
shareholders have the ultimate say in who represents them on the
Board of Directors. There are no agreements or understandings for
any officer or director of the Company to resign at the request of
another person and none of the current offers or directors of the
Company are acting on behalf of, or will act at the direction of
any other person.
In connection with the preparation and filing of this
registration statement, one of the Company's shareholders,
Edward F. Cowle, has paid for certain legal and professional fees
related to the registration statement. Although, as of the date
hereof there is no agreement or arrangement for Mr. Cowle to
provide additional funds, the Company is not precluded from
approaching Mr. Cowle or any other shareholder and requesting
additional financial assistance. Because such additional funding
is only speculative at this time, the Company has not developed any
criteria or plans related to this funding.
The business experience of each of the persons listed above
during the past five years is as follows:
Kenneth D. Montee, age 55, is a graduate of Boise State
University with a degree in Finance. Mr. Montee has been active in
real estate and investments since 1972, owing his own real estate
company and working for two years from 1980 to 1982 as a commodity
broker with Dean Witter. In 1986, Mr. Montee acquired a
controlling interest in Rako Corporation. From 1993 to the
present, Mr. Montee has been a developer of real estate through
various partnerships and corporations which he formed. He is also
an active investor in securities and commodities. Mr. Montee is
the brother of Ray Montee, Secretary / Treasurer and a director of
the Company.
Ray Montee, age 53, was for 23 years and until he retired from
the business in December 1997, the President and a director of
Ray's R.V.'s Inc., a recreational vehicle parts, service and sales
company located in Coeur D'Alene, Idaho. Mr. Montee has also been
since 1993, President and a director of Affordable Home Center,
Inc., a manufactured home sales company. He is currently active as
General Manager of Affordable's nine locations throughout Idaho,
Washington and Montana. Mr. Montee attended North Idaho College
from 1962 to 1964 taking general courses and vocational courses in
body and fender repair. Mr. Montee is the brother of Kenneth D.
Montee, President and a director of the Company.
ITEM 6. Executive Compensation
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or
directors. The Company has not paid any salaries or other
compensation to its officers, directors or employees for the years
ended December 31, 1997 and 1996, or for the nine month
period ended September 30, 1998. Further, the Company has
not entered into an employment agreement with any of its officers,
directors or any other persons and no such agreements are
anticipated in the immediate future. It is intended that the
Company's directors will defer any compensation until such time as
an acquisition or merger can be accomplished and will strive to
have the business opportunity provide their remuneration. As of
the date hereof, no person has accrued any compensation.
ITEM 7. Certain Relationships and Related Transactions
During the past two fiscal years, there have been no
transactions between the Company and any officer, director, nominee
for election as director, or any shareholder owning greater than
five percent (5%) of the Company's outstanding shares, nor any
member of the above referenced individuals' immediate family
The Company's officers and directors are subject to the
doctrine of corporate opportunities only insofar as it applies to
business opportunities in which the Company has indicated an
interest, either through its proposed business plan or by way of an
express statement of interest contained in the Company's minutes.
If directors are presented with business opportunities that may
conflict with business interests identified by the Company, such
opportunities must be promptly disclosed to the Board of Directors
and made available to the Company. In the event the Board shall
reject an opportunity so presented and only in that event, any of
the Company's officers and directors may avail themselves of such
an opportunity. Every effort will be made to resolve any conflicts
that may arise in favor of the Company. There can be no assurance,
however, that these efforts will be successful.
ITEM 8. Description of Securities
Common Stock
The Company is authorized to issue 50,000,000 shares of Common
Stock, par value $.001 per share, of which 1,025,030 shares are
issued and outstanding as of the date hereof. In May 1996, the
Company effected the one (1) share for three (3) shares reverse
stock split of its common Stock, and in March 1998, the Company
effected the two (2) shares for one (1) share forward stock split.
All references to the Company's Common Stock herein are in post-
split shares. All shares of Common Stock have equal rights and
privileges with respect to voting, liquidation and dividend rights.
Each share of Common Stock entitles the holder thereof to (i) one
non-cumulative vote for each share held of record on all matters
submitted to a vote of the stockholders; (ii) to participate
equally and to receive any and all such dividends as may be
declared by the Board of Directors out of funds legally available
therefor; and (iii) to participate pro rata in any distribution of
assets available for distribution upon liquidation of the Company.
Stockholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or any other securities. The
Common Stock is not subject to redemption and carries no
subscription or conversion rights. All outstanding shares of
Common Stock are fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue 20,000,000 shares of
Preferred Stock, par value One Tenth of a Cent ($.001) per share.
The Preferred Stock shall have preference as to dividends and to
liquidation of the Corporation. The Board of Directors shall
establish the specific rights, preferences, privileges and
restrictions of such Preferred Stock, or any series thereof, at the
time of issuance. As of the date hereof, no shares of Preferred
Stock have been issued.
PART II
ITEM 1. Market Price of And Dividends on the Registrant's Common
Equity and Other Shareholder Matters
No shares of the Company's common stock have previously been
registered with the Securities and Exchange Commission (the
"Commission") or any state securities agency or authority. The
Company intends to make an application to the NASD for the
Company's shares to be quoted on the OTC Bulletin Board.
The Company's application to the NASD will consist of current
corporate information, financial statements and other documents as
required by Rule 15c2-11 of the Securities Exchange Act of 1934, as
amended. Inclusion on the OTC Bulletin Board permits price
quotations for the Company's shares to be published by such
service. The Company is not aware of any established trading
market for its common stock nor is there any record of any reported
trades in the public market in recent years. Although the Company
intends to submit its application to the OTC Bulletin Board
contemporaneously with the filing of this registration statement,
the Company does not anticipate its shares to be traded in the
public market until such time as a merger or acquisition can be
consummated. Also, secondary trading of the Company's shares may
be subject to certain state imposed restrictions regarding shares
of shell companies. Except for the application to the OTC Bulletin
Board, there are no plans, proposals, arrangements or
understandings with any person concerning the development of a
trading market in any of the Company's securities. The Company's
common stock last traded in a public market as Silver Strike Mining
Co., Inc. during the 1970s.
The ability of an individual shareholder to trade their shares
in a particular state may be subject to various rules and
regulations of that state. A number of states require that an
issuer's securities be registered in their state or appropriately
exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to
register its securities in any particular state. Further, most
likely the Company's shares will be subject to the provisions of
Section 15(g) and Rule 15g-9 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), commonly referred to as the
"penny stock" rule. Section 15(g) sets forth certain requirements
for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity
security is considered to be a penny stock unless that security is:
registered and traded on a national securities exchange meeting
specified criteria set by the Commission; authorized for quotation
on The NASDAQ Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at
least $5.00 per share) or the issuer's net tangible assets; or
exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will
be subject to additional sales practice requirements on broker-
dealers who sell penny stocks to persons other than established
customers and accredited investors, generally persons with assets
in excess of $1,000,000 or annual income exceeding $200,000, or
$300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must
make a special suitability determination for the purchase of such
securities and must have received the purchaser's written consent
to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the first transaction, of a risk
disclosure document relating to the penny stock market. A broker-
dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current
quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks held
in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of
broker-dealers to trade and/or maintain a market in the Company's
common stock and may affect the ability of shareholders to sell
their shares.
As of December 1, 1998 there were 93 holders of record
of the Company's common stock, which figure does not take into
account those shareholders whose certificates are held in the name
of broker-dealers or other nominees. Because there has been no
established public trading market for the Company's securities, no
trading history is presented herein.
As of the date hereof, the Company has issued and outstanding
1,025,030 shares of common stock. In 1996, the Company issued
3,150,000 shares of common stock in connection with the acquisition
of Spencer Entertainment, Inc. However, upon the rescission of the
acquisition, all 3,150,000 shares were returned to the Company and
canceled. No other shares of the Company's common stock have been
issued during the preceding three fiscal years.
Of the Company's total outstanding shares, 205,668 shares may
be sold, transferred or otherwise traded in the public market
without restriction, unless held by an affiliate or controlling
shareholder of the Company. Of these 205,668 shares, the Company
has not identified any shares as being held by affiliates of the
Company.
A total of 819,362 shares are considered restricted securities
and are presently held by affiliates and/or controlling
shareholders of the Company. All 819,362 restricted shares are
presently eligible for sale pursuant to Rule 144 , subject to
the volume and other limitations set forth under Rule 144. In
general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned
restricted shares of the Company for at least one year, including
any person who may be deemed to be an "affiliate" of the Company
(as the term "affiliate" is defined under the Act), is entitled to
sell, within any three-month period, an amount of shares that does
not exceed the greater of (i) the average weekly trading volume in
the Company's common stock, as reported through the automated
quotation system of a registered securities association, during the
four calendar weeks preceding such sale or (ii) 1% of the shares
then outstanding. A person who is not deemed to be an "affiliate"
of the Company and has not been an affiliate for the most recent
three months, and who has held restricted shares for at least two
years would be entitled to sell such shares without regard to the
resale limitations of Rule 144.
All of the Company's issued and outstanding shares were issued
by the Company prior to 1985 in exchange for mining claims,
services rendered and for cash. Available corporate records
indicate that the Company has not previously filed a registration
statement with the Commission.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.
ITEM 2. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which
any of its property is subject and, to the best of its knowledge,
no such actions against the Company are contemplated or threatened.
ITEM 3. Changes in and Disagreements With Accountants
There have been no changes in or disagreements with
accountants.
ITEM 4. Recent Sales of Unregistered Securities
On May 9, 1996, the Company issued a total of 3,150,000 shares
of its authorized, but previously unissued common stock to the
shareholders and designees of Spencer Entertainment, Inc, in
connection with the acquisition of Spencer. This issuance was not
registered with the Commission because it was believed to be exempt
form the registration requirements of the Act under Section 4(2) of
the Act. Upon the rescission of the acquisition, all 3,150,000
shares were returned to the Company and canceled. No other shares
of the Company's common stock have been issued during the preceding
three fiscal years.
ITEM 5. Indemnification of Directors and Officers
As permitted by the provisions of the Idaho General Business
Corporation Law (the "Idaho Code"), the Company has the power to
indemnify any officer or director who, in their capacity as such,
is made a party to any suit or proceeding, whether criminal,
administrative or investigative, if such officer or director acted
in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Company and, in the case of
any criminal proceeding, the person had no reasonable cause to
believe their conduct was unlawful. An officer or director shall
be indemnified against expenses to the extent they have been
successful on the merits or otherwise in defense of any action,
suit or proceeding. Indemnification or advance expenses to an
officer or director is available only to the extent as permitted
under Sections 30-1-850 through 30-1-859 of the Idaho Code.
Further, the Idaho Code permits a corporation to purchase and
maintain liability insurance on behalf of its officers and
directors.
Transfer Agent
The Company has designated Interstate Transfer Company, 56
West 400 South, Suite 260, Salt Lake City, Utah 84101, as its
transfer agent.
PART F/S
The Company's financial statements for the fiscal years ended
December 31, 1997 and 1996 and the three month period ended March
31, 1998 have been examined to the extent indicated in their
reports by Jones, Jensen & Company, independent certified public
accountants, and have been prepared in accordance with generally
accepted accounting principles and pursuant to Regulation S-B as
promulgated by the Securities and Exchange Commission and are
included herein in response to Item 15 of this Form 10-SB. The
unaudited financial statements for the period ended September 30,
1998 have been prepared by the Company.
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 1998 and December 31, 1997
(Audited)
<PAGE>
CONTENTS
Independent Auditors' Report . . . . . . . . . . . . . . . . F-3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Operations . . . . . . . . . . . . . . . . . . F-5
Statements of Stockholders' Equity . . . . . . . . . . . . . F-6
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-7
Notes to the Financial Statements. . . . . . . . . . . . . . F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Rako Corporation
Boise, Idaho
We have audited the accompanying balance sheets of Rako Corporation
(a development stage company) as of March 31, 1998 and December 31, 1997 and
the related statements of operations, stockholders' equity and cash flows for
the three months ended March 31, 1998, the years ended December 31, 1997 and
1996, and from inception on October 9, 1968 through March 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether he financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rako Corporation as of March
31, 1998 and December 31, 1997 and the results of its operations and its cash
flows for the three months ended March 31, 1998, the years ended December 31,
1997 and 1996, and from inception on October 9, 1968 through March 31, 1998
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is a development stage company with no
significant operating revenues to date. Because the Company has no significant
sources of revenue there is substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Jones, Jensen & Company
May 19, 1998
RAKO CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
1998 1997
CURRENT ASSETS $ - $ -
Total Current Assets - -
Total Assets $ - $ -
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - -
Total Current Liabilities - -
STOCKHOLDERS' EQUITY
Common stock at $0.001 par value;
authorized 50,000,000 common
shares and 20,000,000 preferred
shares; 1,025,030 common shares
issued and outstanding 1,025 1,025
Additional paid-in capital 89,611 89,611
Deficit accumulated during the
development stage (90,636) (90,636)
Total Stockholders' Equity - -
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ - $ -
RAKO CORPORATION
(A Development Stage Company)
Statements of Operations
From
Inception on
For the October 9,
Three Months For the Years Ended 1968 Through
March 31, December 31, March 31,
1998 1997 1996 1998
REVENUE $ - $ - $ - $ -
EXPENSES - - 2,461 (93,097)
NET LOSS FROM OPERATIONS $ - $ - (2,461) $(93,097)
LOSS PER SHARE $ 0.00 $ 0.00 $ 0.00
RAKO CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 9, 1968 Through March 31, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Inception on October 9, 1968 - $ - $ - $ -
Common stock issued for mining
claims recorded at predecessor
cost of $0.00 per share 400,000 400 (400) -
Common stock issued for services
at $0.15 per share 400,000 400 59,600 -
Common stock issued for cash
at $0.45 per share 14,734 15 6,615 -
Costs associated with
stock offering - - (994) -
Common stock issued for mining
claims recorded at predecessor
cost of $0.075 per share 333,334 333 24,667 -
Net loss for the period ended
December 31, 1995 - - - (90,636)
Balance,
December 31, 1995 1,148,068 1,148 89,488 (90,636)
Cancellation of common stock (123,024) (123) 123 -
Fractional shares adjustment (14) - - -
Capital contributed for payment
of expenses - - 2,461 -
Net loss for the year ended
December 31, 1996 - - - (2,461)
Balance,
December 31, 1996 1,025,030 1,025 92,072 (93,097)
Net loss for the year ended
December 31, 1997 - - - -
Balance,
December 31, 1997 1,025,030 1,025 92,072 (93,097)
Net loss for the three months
ended March 31, 1998 - - - -
Balance,
March 31, 1998 1,025,030 $ 1,025 $ 92,072 $ (93,097)
RAKO CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the October 9,
Three Months For the Years Ended 1968 Through
March 31, December 31, March 31,
1998 1997 1996 1998
CASH FLOWS FROM
OPERATING ACTIVITIES
Income (loss) from operations $ - $ - $ (2,461) $ (93,097)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Stock issued for services - - - 60,000
Increase (decrease) in accounts
payable - - - 25,000
Net Cash Used by Operating
Activities - - (2,461) (8,097)
CASH FLOWS FROM
INVESTING ACTIVITIES - - - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock for cash - - - 5,636
Expenses paid on Company's behalf - - 2,461 2,461
Net Cash Provided by
Financing Activities - - 2,461 8,097
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS - - - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - - -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ - $ - $ - $ -
Cash Paid For:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF
NON-CASH FINANCING ACTIVITIES
Stock issued for services $ - $ - $ - $ 60,000
Stock issued for mining claims $ - $ - $ - $ 25,000
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1998 and December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
On October 9, 1968, Bell Silver Mining and
Milling Corporation was incorporated under the
Laws of Idaho with the purpose of developing
mining claims. On the date of incorporation,
10,000,000 shares of $0.10 par value common
stock were authorized.
On March 3, 1969, Bell Silver Mining and Milling
Corporation changed its name to Silver Strike
Mining Co. Inc. The number of shares of common
stock authorized was changed from 10,000,000
shares of $0.10 par value common stock to
5,000,000 shares of $0.10 par value common stock.
On May 17, 1973, Silver Strike Mining and
Milling Co. Inc, changed its name to Rako
Corporation.
On March 25, 1996, the Articles of Incorporation
were amended to change the par value of the
common stock to $0.005 and the number of
authorized shares to 100,000,000.
On May 15, 1996, the Articles of Incorporation
were amended to change the par value of he
common stock to $0.001 and the number of
authorized shares to 50,000,000 common and
20,000,000 preferred.
The Company has elected a calendar year end.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared
using the accrual method of accounting.
b. Provision for Taxes
No provision for income taxes has been made due
to the inactive status of the Company. The
Company has net operating loss carryovers of
approximately $2,000 which expire in 2011. The
potential tax benefit of the loss carryovers has
been offset in full by a valuation allowance.
c. Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or
less when purchased to be cash equivalents.
d. Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could differ
from those estimates.
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1998 and December 31, 1997 and 1996
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared
using generally accepted accounting principles
applicable to a going concern which contemplates
the realization of assets and liquidation of
liabilities in the normal course of business.
The Company has not established revenues
sufficient to cover its operating costs and
allow it to continue as a going concern. The
Company is seeking a merger with an existing,
operating Company. (see Note 5). Currently
management has committed to covering all
operating and other costs until a merger is
completed.
NOTE 4 - STOCK TRANSACTIONS
On October 10, 1968, the Board of Directors
issued 600,000 shares of $0.10 par value common
stock for mining claims received from the
founder of the Company. The claims were
recorded at predecessor cost of $-0-.
On October 10, 1968, the Board of Directors
issued 600,000 shares of $0.10 par value common
stock for services rendered during the
organization of the Company.
On October 28, 1969, the Board of Directors
initiated a public offering in which 22,100
shares of $0.10 par value common stock were sold
at a gross price of $0.30 per share.
On September 13, 1984, the Board of Directors
issued 500,000 shares of $0.10 par value common
stock for mining claims which were recorded at
predecessor cost of $0.05 per share.
On April 10, 1996, the Company canceled 184,536
shares of common stock.
On May 15, 1996, the shareholders effected a
1-for-3 reverse stock split of all the issued
and outstanding common stock.
On March 17, 1998, the shareholders effected a
2-for-1 forward stock split of all the issued
and outstanding common stock.
The accompanying financial statements reflect
the stock splits on a retroactive basis.
NOTES 5 - FAILED ACQUISITION
On May 9, 1996, the shareholders voted to
acquire all of the issued and outstanding shares
of Spencer Entertainment, Inc., a Nevada
Corporation, in exchange for the Company's
authorized, but previously unissued common
stock. On June 11, 1996, the Company issued
6,300,000 shares as part of the terms of this
agreement, however, on November 22, 1996, the
Company completed a recission agreement
regarding the plan of reorganization and
acquisition agreement between the Company and
Spencer Entertainment, Inc. and canceled the
6,300,000 shares that were issued. The
recission has been reflected in the financial
statements on a retroactive basis.<PAGE>
RAKO CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash $ - $ -
Total Current Assets - -
Total Assets $ - $ -
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - -
Total Current Liabilities - -
STOCKHOLDERS' EQUITY
Common stock at $0.001 par value; authorized
50,000,000 common shares and 20,000,000
preferred shares; 1,025,030 common shares
issued and outstanding 1,025 1,025
Additional paid-in capital 93,075 92,072
Deficit accumulated during the
development stage (94,100) (93,097)
Total Stockholders' Equity - -
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ - $ -
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
Statements of Operations
From
Inception on
For the October 9,
Nine Months For the Years Ended 1968 Through
September 30, December 31, September 30,
1998 1997 1996 1998
(Unaudited) (Unaudited)
REVENUE $ - $ - $ - $ -
EXPENSES 1,003 - 2,461 (94,100)
NET LOSS FROM OPERATIONS $ (1,003) $ - $ (2,461) $ (94,100)
BASIC LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00)
BASIC WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 1,025,030 1,025,030 1,025,030
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 9, 1968 Through September 30, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Inception on October 9, 1968 - $ - $ - $ -
Common stock issued for mining
claims recorded at predecessor
cost of $0.00 per share 400,000 400 (400) -
Common stock issued for services
at $0.15 per share 400,000 400 59,600 -
Common stock issued for cash
at $0.45 per share 14,734 15 6,615 -
Costs associated with stock offering - - (994) -
Common stock issued for mining
claims recorded at predecessor
cost of $0.075 per share 333,334 333 24,667 -
Net loss for the period ended
December 31, 1995 - - - (90,636)
Balance, December 31, 1995 1,148,068 1,148 89,488 (90,636)
Cancellation of common stock (123,024) (123) 123 -
Fractional shares adjustment (14) - - -
Capital contributed for payment of
expenses - - 2,461 -
Net loss for the year ended
December 31, 1996 - - - (2,461)
Balance, December 31, 1996 1,025,030 1,025 92,072 (93,097)
Net loss for the year ended
December 31, 1997 - - - -
Balance, December 31, 1997 1,025,030 1,025 92,072 (93,097)
Capital contributed for payment of
expenses (unaudited) - - 1,003 -
Net loss for the nine months ended
September 30, 1998 (unaudited) - - - (1,003)
Balance, September 31, 1998
(unaudited) 1,025,030 $ 1,025 $ 93,075 $ (94,100)
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the October 9,
Nine Months For the Years Ended 1968 Through
September 30, December 31, September 30,
1998 1997 1996 1998
(Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Income (loss) from operations $ (1,003) $ - $ (2,461) $ (94,100)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Stock issued for services - - - 60,000
Increase (decrease) in accounts
payable - - - 25,000
Net Cash Used by Operating
Activities (1,003) - (2,461) (9,100)
CASH FLOWS FROM
INVESTING ACTIVITIES - - - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock for cash - - - 5,636
Expenses paid on Company's behalf 1,003 - 2,461 3,464
Net Cash Provided by
Financing Activities 1,003 - 2,461 9,100
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS - - - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - - -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ - $ - $ - $ -
Cash Paid For:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF
NON-CASH FINANCING ACTIVITIES
Stock issued for services $ - $ - $ - $ 60,000
Stock issued for mining claims $ - $ - $ - $ 25,000
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1998 and December 31, 1997
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
On October 9, 1968, Bell Silver Mining and Milling
Corporation was incorporated under the Laws of Idaho with the
purpose of developing mining claims. On the date of
incorporation, 10,000,000 shares of $0.10 par value common
stock were authorized.
On March 3, 1969, Bell Silver Mining and Milling Corporation
changed its name to Silver Strike Mining Co. Inc. The number
of shares of common stock authorized was changed from
10,000,000 shares of $0.10 par value common stock to
5,000,000 shares of $0.10 par value common stock.
On May 17, 1973, Silver Strike Mining and Milling Co. Inc,
changed its name to Rako Corporation.
On March 25, 1996, the Articles of Incorporation were amended
to change the par value of the common stock to $0.005 and the
number of authorized shares to 100,000,000.
On May 15, 1996, the Articles of Incorporation were amended
to change the par value of he common stock to $0.001 and the
number of authorized shares to 50,000,000 common and
20,000,000 preferred.
The Company has elected a calendar year end.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting.
b. Provision for Taxes
No provision for income taxes has been made due to the
inactive status of the Company. The Company has net
operating loss carryovers of approximately $2,000 which
expire in 2011. The potential tax benefit of the loss
carryovers has been offset in full by a valuation allowance.
c. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
d. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1998 and December 31, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Unaudited Financial Statements
The accompanying unaudited financial statements include all
of the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments are of
a normal recurring nature.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of assets
and liquidation of liabilities in the normal course of
business. The Company has not established revenues
sufficient to cover its operating costs and allow it to
continue as a going concern. The Company is seeking a
merger with an existing, operating Company. (see Note 5).
Currently management has committed to covering all operating
and other costs until a merger is completed.
NOTE 4 - STOCK TRANSACTIONS
On October 10, 1968, the Board of Directors issued 600,000
shares of $0.10 par value common stock for mining claims
received from the founder of the Company. The claims were
recorded at predecessor cost of $-0-.
On October 10, 1968, the Board of Directors issued 600,000
shares of $0.10 par value common stock for services rendered
during the organization of the Company.
On October 28, 1969, the Board of Directors initiated a
public offering in which 22,100 shares of $0.10 par value
common stock were sold at a gross price of $0.30 per share.
On September 13, 1984, the Board of Directors issued 500,000
shares of $0.10 par value common stock for mining claims
which were recorded at predecessor cost of $0.05 per share.
On April 10, 1996, the Company canceled 184,536 shares of
common stock.
On May 15, 1996, the shareholders effected a 1-for-3 reverse
stock split of all the issued and outstanding common stock.
On March 17, 1998, the shareholders effected a 2-for-1
forward stock split of all the issued and outstanding common
stock.
The accompanying financial statements reflect the stock
splits on a retroactive basis.
<PAGE>
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1998 and December 31, 1997
NOTES 5 - FAILED ACQUISITION
On May 9, 1996, the shareholders voted to acquire all of the
issued and outstanding shares of Spencer Entertainment,
Inc., a Nevada Corporation, in exchange for the Company's
authorized, but previously unissued common stock. On June
11, 1996, the Company issued 6,300,000 shares as part of the
terms of this agreement, however, on November 22, 1996, the
Company completed a recission agreement regarding the plan
of reorganization and acquisition agreement between the
Company and Spencer Entertainment, Inc. and canceled the
6,300,000 shares that were issued. The recission has been
reflected in the financial statements on a retroactive
basis.
<PAGE>
PART III
ITEM 1. Index to Exhibits
The following exhibits are filed with this Registration Statement:
Exhibit No. Exhibit Name
2.1* Acquisition Agreement and Plan of Reorganization with
Spencer Entertainment, Inc.
3.1* Articles of Incorporation and Amendments thereto
3.2* By-Laws of Registrant
4. * See Exhibit No. 3.1, Articles of Incorporation,
Article V
10.1* Rescission Agreement with Spencer Entertainment, Inc.
27.* Financial Data Schedule
________________
* Previously filed
2. Description of Exhibits
See Item I above.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act
of 1934, the registrant caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly organized.
RAKO CORPORATION
(Registrant)
Date: December 2, 1998 By: /S/ Kenneth D. Montee
Kenneth D. Montee
President, Chief Executive
Officer and Director
