U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
X____Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended April 30, 2000.
_____Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ____.
Commission File No: 0-24483
SUNBURST ACQUISITIONS V, INC.
(Name of small business in its charter)
Colorado 84-1461844
(State or other (IRS Employer Identification
jurisdiction of Incorporation) No.)
4807 S. Zang Way
Address of Principal Executive Office (street and number)
Morrison, Colorado 80465
City, State and Zip Code
Issuer's telephone number: (303) 979-2404
Securities to be registered under Section 12(b) of the Act:
Title of each class
N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ____
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form
10-KSB._X_
State issuer's revenue for its most recent fiscal year: $ -0-
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked priced of such stock, as of a
specified date within the past 60 days (See definition of affiliate in
Rule 12b-2): -0-
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates
on the basis of reasonable assumptions, if the assumptions are stated.
(Issuers involved in bankruptcy proceedings during the past five
years):
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes ____
No ____
(Applicable only to corporate registrants) State the number of shares
outstanding of each of the issuer's classes of common equity, as of the
latest practicable date: 1,935,000 as of April 30, 2000.
(Documents incorporated by reference. If the following documents are
incorporated by reference, briefly describe them and identify the part
of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933
("Securities Act"). The listed documents should be clearly described
for identification purposes.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
The Company was incorporated under the laws of the State of
Colorado on April 30, 1998, and is in the early developmental and
promotional stages. To date the Company's only activities have been
organizational ones, directed at the raising of capital, and preliminary
efforts to seek one or more properties or businesses for acquisition.
The Company has not commenced any commercial operations. The
Company has no full-time employees and owns no real estate.
The Company's business plan is to seek, investigate, and, if
warranted, acquire one or more properties or businesses. Such an
acquisition may be made by purchase, merger, exchange of stock, or
otherwise, and may encompass assets or a business entity, such as a
corporation, joint venture, or partnership. The Company has very
limited capital, and it is unlikely that the Company will be able to
take advantage of more than one such business opportunity. The
Company intends to seek opportunities demonstrating the potential of
long-term growth as opposed to short-term earnings.
As of the end of its fiscal year ending April 30, 2000, the
Company has not identified any business opportunity that it plans to
pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition. During the
fiscal year ending April 30, 2000, the Company's officers and
directors had preliminary contacts with representatives of numerous
companies concerning the general possibility of a merger or
acquisition by an entity like the Company, whose shares are registered
under the Securities Exchange Act of 1934. However, none of these
preliminary contacts or discussions resulted in any type of agreement.
It is anticipated that the Company's officers and directors will
continue to initiate contacts with securities broker-dealers and other
persons engaged in other aspects of corporate finance to advise them
of the Company's existence and to determine if the companies or
businesses they represent have an interest in considering a merger or
acquisition with the Company. No assurance can be given that the
Company will be successful in finding or acquiring a desirable
business opportunity, given the limited funds that are expected to be
available for acquisitions, or that any acquisition that occurs will be
on terms that are favorable to the Company or its stockholders.
The Company's search will be directed toward small and
medium-sized enterprises which have a desire to become public
corporations and which are able to satisfy, or anticipate in the
reasonably near future being able to satisfy, the minimum asset
requirements in order to qualify shares for trading on NASDAQ or on
an exchange such as the American or Pacific Stock Exchange. (See
"Investigation and Selection of Business Opportunities.") The
Company anticipates that the business opportunities presented to it
will (i) be recently organized with no operating history, or a history
of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of
funds to develop a new product or service or to expand into a new
market; (iv) be relying upon an untested product or marketing
concept; or (v) have a combination of the characteristics mentioned in
(i) through (iv). The Company intends to concentrate its acquisition
efforts on properties or businesses that it believes to be undervalued.
Given the above factors, investors should expect that any acquisition
candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for
investment opportunities to any particular geographical area or
industry, and may, therefore, engage in essentially any business, to
the extent of its limited resources. This includes industries such as
service, finance, natural resources, manufacturing, high technology,
product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities,
economic conditions, and other factors.
As a consequence of the Company's registration of its
securities under the Securities Exchange Act of 1934, any entity
which has an interest in being acquired by the Company is expected to
be an entity that desires to become a public company as a result of the
transaction. In connection with such an acquisition, it is highly likely
that an amount of stock constituting control of the Company would be
issued by the Company or purchased from the Company's current
principal shareholders by the target entity or its controlling
shareholders.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and
directors, its other stockholders, professional advisors such as
attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may
present unsolicited proposals. The Company has no plans,
understandings, agreements, or commitments with any individual for
such person to act as a finder of opportunities for the Company.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis of the
quality of the other company's management and personnel, the
anticipated acceptability of new products or marketing concepts, the
merit of technological changes, and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria. In many instances, it is anticipated that the
historical operations of a specific firm may not necessarily be
indicative of the potential for the future because of the possible need
to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment
management, or make other changes. Because of the lack of training
or experience of the Company's management, the Company will be
dependent upon the owners of a business opportunity to identify such
problems and to implement, or be primarily responsible for the
implementation of, required changes. Because the Company may
participate in a business opportunity with a newly organized firm or
with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because
management in many instances will not have proved its abilities or
effectiveness, the eventual market for such company's products or
services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the
Company's management to complete acquisitions without submitting
any proposal to the stockholders for their consideration. Company
management does not generally anticipate that it will provide holders
of the Company's securities with financial statements, or any other
documentation, concerning a target company or its business prior to
any merger or acquisition. In some instances, however, the proposed
participation in a business opportunity may be submitted to the
stockholders for their consideration, either voluntarily by Company
management which elects to seek the stockholders' advice and
consent, or because state law so requires.
The analysis of business opportunities will be undertaken by or
under the supervision of the Company's executive officers and
directors.
Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and in that event,
might pay a finder's fee. Since Company management has no current
plans to use any outside consultants or advisors to assist in the
investigation and selection of business opportunities, no policies have
been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such consultants or advisors, the
services to be provided, the term of service, or regarding the total
amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company
agrees to pay would be paid in stock and not in cash. Otherwise, the
Company anticipates that it will consider, among other things, the
following factors:
(a) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(b) Competitive position as compared to other companies of
similar size and experience within the industry segment as well as
within the industry as a whole;
(c) Strength and diversity of existing management, or
management prospects that are scheduled for recruitment;
(d) Capital requirements and anticipated availability of
required funds, to be provided from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
(e) The cost of participation by the Company as compared to
the perceived tangible and intangible values and potential;
(f) The extent to which the business opportunity can be
advanced;
(g) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(h) The accessibility of required management expertise,
personnel, raw materials, services, professional assistance, and other
required items; and
(i) Whether the financial condition of the business opportunity
would be, or would have a significant prospect in the foreseeable
future to become, such as to permit the securities of the Company,
following the business combination, to qualify to be listed on an
exchange or on a national automated securities quotation system, such
as NASDAQ, so as to permit the trading of such securities to be
exempt from the requirements of Rule 15c2-6 recently adopted by the
Securities and Exchange Commission. See "Risk Factors - The
Company - Regulation of Penny Stocks."
In regard to the last criterion listed above, the current
standards for NASDAQ listing include, among other things, the
requirements that the issuer of the securities that are sought to be
listed have net tangible assets of at least $4,000,000, or a market
capitalization of at least $50,000,000, or net income in its latest fiscal
year of not less than $750,000. Many, and perhaps most, of the
business opportunities that might be potential candidates for a
combination with the Company would not satisfy the NASDAQ listing
criteria. To the extent that the Company seeks potential NASDAQ
listing, therefore, the range of business opportunities that are available
for evaluation and potential acquisition by the Company would be
significantly limited.
In applying the criteria listed above, no one of which will be
controlling, management will attempt to analyze all factors
appropriate to the opportunity and make a determination based upon
reasonable investigative measures and available data. Potentially
available business opportunities may occur in many different
industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such
business opportunities extremely difficult and complex. Potential
investors must recognize that, because of the Company's limited
capital available for investigation and management's limited
experience in business analysis, the Company may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a
business opportunity and it has not established any deadline for
completion of a transaction. It expects, however, that the process of
seeking candidates, analysis of specific proposals and the selection of
a business opportunity may require several additional months or more.
Prior to making a decision to participate in a business
opportunity, the Company will generally request that it be provided
with written materials regarding the business opportunity containing
such items as a description of product, service and company history;
management resumes; financial information; available projections,
with related assumptions upon which they are based; an explanation of
proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions
between such company and its affiliates during relevant periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated
capital requirements; audited financial statements or an indication that
audited statements will be available within sixty (60) days following
completion of a merger transaction; and other information deemed
relevant.
As part of the Company's investigation, the Company's
executive officers and directors may meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain
information provided, check references of management and key
personnel, and take other reasonable investigative measures, to the
extent of the Company's limited financial resources and management
expertise.
Company management believes that various types of potential
merger ar acquisition candidates might find a business combination
with the Company to be attractive. These include acquisition
candidates desiring to create a public market for their shares in order
to enhance liquidity for current shareholders, acquisition candidates
which have long-term plans for raising equity capital through the
public sale of securities and believe that the possible prior existence of
a public market for their securities would be beneficial, and
acquisition candidates which plan to acquire additional assets through
issuance of securities rather than for cash, and believe that the
possibility of development of a public market for their securities will
be assistance in that process. Acquisition candidates which have a
need for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and
desires of the Company and the promoters of the opportunity and,
upon the basis of that review and the relative negotiating strength of
the Company and such promoters, the legal structure or method
deemed by management to be suitable will be selected. Such structure
may include, but is not limited to, share exchanges, mergers,
agreements for purchase of and sale of stock or assets, leases,
licenses, joint ventures and other contractual arrangements. The
Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing
such structure may require the merger, consolidation or reorganization
of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders
of the Company most likely will not have control of a majority of the
voting shares of the Company following a reorganization transaction.
As part of such a transaction, the Company's directors may resign and
new directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an
acquisition is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the stockholders
of the acquired company of more than 80% of the common stock of
the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions
rather than other "tax free" provisions provided under the Internal
Revenue Code, the Company's stockholders in such circumstances
would retain in the aggregate 20% or less of the total issued and
outstanding shares. This could result in substantial additional dilution
in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might
also be done simultaneously with a sale or transfer of shares
representing a controlling interest in the Company by the current
officers, directors and principal shareholders. (See "Description of
Business - General").
It is anticipated that any securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available,
from registration under applicable federal and state securities laws. In
some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain
conditions or at specified times thereafter. The issuance of substantial
additional securities and their potential sale into any trading market
that might develop in the Company's securities may have a depressive
effect upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the
terms of closing and the conditions which must be satisfied by each of
the parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it will enter
into a letter of intent with the management, principals or owners of a
prospective business opportunity prior to signing a binding agreement.
Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind either the Company or the business
opportunity to consummate the transaction. Execution of a letter of
intent will by no means indicate that consummation of an acquisition
is probable. Neither the Company nor the business opportunity will
be bound to consummate the acquisition unless and until a definitive
agreement concerning the acquisition as described in the preceding
paragraph is executed. Even after a definitive agreement is executed,
it is possible that the acquisition would not be consummated should
either party elect to exercise any right provided in the agreement to
terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
Competition
The Company expects to encounter substantial competition in
its efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and corporations,
venture capital affiliates of large industrial and financial companies,
small investment companies, and wealthy individuals. Many of these
entities will have significantly greater experience, resources and
managerial capabilities than the Company and will therefore be in a
better position than the Company to obtain access to attractive
business opportunities. The Company also will experience competition
from other public "blind pool" companies, many of which may have
more funds available than does the Company.
Administrative Offices
The Company currently maintains a mailing address at 4807 S.
Zang Way, Morrison, Colorado 80465, which is the office address of
its President. The Company's telephone number there is (303) 979-
2404.
Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate
the need for maintaining office facilities at any time in the foreseeable
future. The Company pays no rent or other fees for the use of this
mailing address.
Employees
The Company is a development stage company and currently
has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not
anticipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with
the decision whether or not to acquire or participate in specific
business opportunities. No remuneration will be paid to the
Company's officers except as set forth under "Executive
Compensation" and under "Certain Relationships and Related
Transactions."
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. Except for historical
matters, the matters discussed in this Form 10-KSB are
forward-looking statements based on current expectations, and involve
risks and uncertainties. Forward-looking statements include, but are
not limited to, statements under the following headings:
(i) "Description of Business - General" - the general
description of the Company's plan to seek a merger or acquisition
candidate, and the types of business opportunities that may be
pursued.
(ii) "Description of Business - Investigation and Selection of
Business Opportunities" - the steps which may be taken to investigate
prospective business opportunities, and the factors which may be used
in selecting a business opportunity.
(iii) "Description of Business - Form of Acquisition" - the
manner in which the Company may participate in a business
acquisition.
The Company wishes to caution the reader that there are many
uncertainties and unknown factors which could affect its ability to
carry out its business plan in the manner described herein.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently maintains a mailing address at 4807 S.
Zang Way, Morrison, Colorado 80465, which is the address of its
President. The Company pays no rent for the use of this mailing
address, however, for financial statement purposes, the Company is
accruing $50 per month as additional paid-in capital for this use. The
Company does not believe that it will need to maintain an office at
any time in the foreseeable future in order to carry out its plan of
operations described herein. The Company's telephone number is
(303) 979-2404.
The Company currently has no investments in real estate, real
estate mortgages, or real estate securities, and does not anticipate
making any such investments in the future. However, the policy of
the Company with respect to investment in real estate assets could be
changed in the future without a vote of security holders.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings,
and no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner
of record or beneficial owner of more than 5.0% of the securities of
the Company, or any associate of any such director, officer or
security holder is a party adverse to the Company or has a material
interest adverse to the Company in reference to pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of
the Company during the fourth quarter of the fiscal year which ended
April 30, 2000.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There is not currently a public trading market for the
Company's securities. Such securities are currently held of record by
a total of approximately 116 persons.
No dividends have been declared or paid on the Company's
securities, and it is not anticipated that any dividends will be declared
or paid in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity other than the receipt of proceeds in
the amount of $16,535 from its inside capitalization funds, and the
expenditure of such funds in furtherance of the Company's business
plan, including primarily expenditure of funds to pay legal and
accounting expenses. Consequently, the Company's balance sheet for
the fiscal year ended April 30, 2000, reflects a current asset value of
$1,883, which is all in the form of cash, and current liabilities of
$6.00.
Results of Operations
During the period from April 30, 1998 (inception) through
April 30, 2000, the Company has accumulated a deficit of $14,658
During this period, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital,
preparation and filing of the registration of its securities under the
Securities Exchange Act of 1934, as amended, compliance with its
periodical reporting requirements, and efforts to locate a suitable
merger or acquisition candidate. No revenues were received by the
Company during this period.
For the fiscal year ending April 30, 2001, the Company
anticipates incurring a loss as a result of expenses associated with
compliance with the reporting requirements of the Securities Exchange
Act of 1934, and expenses associated with locating and evaluating
acquisition candidates. The Company anticipates that until a business
combination is completed with an acquisition candidate, it will not
generate revenues. It may also continue to operate at a loss after
completing a business combination, depending upon the performance
of the acquired business.
Plan of Operations and Need for Additional Financing
During the fiscal year ending April 30, 2001, the Company
plans to continue with efforts to seek, investigate, and, if warranted,
acquire one or more properties or businesses. The Company also
plans to file all required periodical reports and to maintain its status as
a fully-reporting Company under the Securities Exchange Act of
1934. In order to proceed with its plans for the next year, it is
anticipated that the Company will require additional capital in order to
meet its cash needs. These include the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of
1934, as amended, as well as any costs the Company may incur in
seeking business opportunities.
No specific commitments to provide additional funds have been
made by management or other stockholders, and the Company has no
current plans, proposals, arrangements or understandings with respect
to the sale or issuance of additional securities prior to the location of a
merger or acquisition candidate. Accordingly, there can be no
assurance that any additional funds will be available to the Company
to allow it to cover its expenses. Notwithstanding the foregoing, to
the extent that additional funds are required, the Company anticipates
receiving such funds in the form of advancements from current
shareholders without issuance of additional shares or other securities,
or through the private placement of restricted securities rather than
through a public offering.
The Company may also seek to compensate providers of
services by issuances of stock in lieu of cash. For information as to
the Company's policy in regard to payment for consulting services,
see "Certain Relationships and Transactions."
Year 2000 Compliance
The Company did not encounter problems related to
compliance with Year 2000 issues. Therefore, Year 2000 issues are
not currently material to the Company's business, operations or
financial condition. Furthermore, the Company does not anticipate
that it will encounter Year 2000 issues or incur expenses related to
remediation of Year 2000 issues in conjunction with acquisition of a
business opportunity.
ITEM 7. FINANCIAL STATEMENTS.
See following pages.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
Report of Independent Public Accountants 17
Balance Sheet 18
Statements of Operations 19
Statements of Stockholders' Equity 20
Statements of Cash Flows - 26
Notes to Financial Statements - 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Sunburst Acquisitions V, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions V, Inc. (a development stage company) as of April 30,
2000, and the related statements of operations, stockholders' equity,
and cash flows for each of the years ended April 30, 2000 and 1999,
and for the period from inception (April 30, 1998) to April 30, 2000.
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 audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 Sunburst
Acquisitions V, Inc. as of April 30, 2000, and the results of its
operations and cash flows for each of the years ended April 30, 2000
and 1999, and for the period from inception (April 30, 1998) to April
30, 2000 in conformity with generally accepted accounting principles.
Denver, Colorado
May 24, 2000
Comiskey & Co.
PROFESSIONAL CORPORATION
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
BALANCE SHEET
April 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,883
Total current assets 1,883
TOTAL ASSETS 1,883
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 6
Total current liabilities 6
STOCKHOLDERS' EQUITY
Preferred stock, no par value
20,000,000 shares authorized;
100,000 shares issued and outstanding -
Common stock, no par value; 100,000,000
shares authorized; 1,935,000 shares
issued and outstanding 11,935
Additional paid-in capital 4,600
Deficit accumulated during the
development stage (14,658)
1,877
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 1,883
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
from inception For the year
(April 30, 1998) ended
to April 30, April 30,
2000 2000 1999
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
Amortization 300 240 60
Bank fees 21 21 -
Consulting fees 1,935 - -
General office 392 93 299
Legal fees 4,484 922 3,562
Professional fees 4,756 2,466 2,290
Rent 1,200 600 600
Transfer agent 1,570 920 650
Total expenses 14,658 5,262 7,461
NET LOSS (14,658) (5,262) (7,461)
Accumulated deficit
Balance, beginning
of period - (9,396) (1,935)
Balance, end of
period $(14,658) $(14,658) $(9,396)
NET LOSS PER SHARE $ (NIL) $ (NIL) $ (NIL)
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
OUTSTANDING 2,135,000 2,135,000 2,135,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (April 30, 1998) to April 30, 2000
(Page 1 of 3)
<TABLE>
<CAPTION>
Preferred Stock
Number of
Shares Amount
<S> <C> <C>
Preferred stock issued for
cash, April 1998
at $0.10 per share 100,000 $ 10,000
Common stock issued for
services, April 1998
at $0.001 per share - -
Net loss for the year
ended April 30, 1998 - -
Balance
April 30, 1998 100,000 10,000
Rent at no charge - -
Net loss for the year
ended April 30, 1999 - -
Balance April 30, 1999 100,000 10,000
Rent at no charge - -
Contribution by
stockholder - -
Conversion of preferred
stock (100,000) (10,000)
Net loss for the year ended
April 30, 2000 - -
Balance,
April 30, 2000 - $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (April 30, 1998) to April 30, 2000
(Page 2 of 3)
<TABLE>
<CAPTION>
Common Stock
Number of
Shares Amount
<S> <C> <C>
Preferred stock issued for
cash, April 1998
at $0.10 per share - $ -
Common stock issued for
services, April 1998
at $0.001 per share 1,935,000 1,935
Net loss for the year
ended April 30, 1998 - -
Balance
April 30, 1998 1,935,000 1,935
Rent at no charge - -
Net loss for the year
ended April 30, 1999 - -
Balance
April 30, 1999 1,935,000 1,935
Rent at no charge - -
Contribution by
stockholder - -
Conversion of preferred
stock 200,000 10,000
Net loss for the year ended
April 30, 2000 - -
Balance,
April 30, 2000 2,135,000 $ 11,935
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the period from inception (April 30, 1998) to April 30, 1999
(Page 3 of 3)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during the Total
Paid-in development stockholders'
Capital stage equity
<S> <C> <C> <C>
Preferred stock issued for
cash, April 1998
at $0.10 per share - - 10,000
Common stock issued for
services, April 1998
at $0.001 per share - - 1,935
Net loss for the year
ended April 30, 1998 - (1,935) (1,935)
Balance,
April 30, 1998 - (1,935) 10,000
Rent at no charge 600 - 600
Net loss for the year
ended April 30, 1999 - (7,461) (7,461)
Balance April 30, 1999 600 (9,396) 3,139
Rent at no charge 600 - 600
Contribution by
stockholder 3,400 - 3,400
Conversion of preferred
stock - - -
Net loss for the year ended
April 30, 2000 - (5,262) (5,262)
Balance,
April 30, 2000 $ 4,600 $(14,658) $ 1,877
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
from inception For the year
(April 30, 1998) ended
to April 30, April 30,
2000 2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(14,658) $(5,262) $(7,461)
Adjustments to reconcile
net loss to net cash flows
from operating activities:
Amortization 300 240 60
Rent expense 1,200 600 600
Stock issued for
consulting fees 1,935 - -
Decrease (increase) in
prepaid expenses - 13 (13)
Increase (decrease) in
accounts payable 6 (44) 50
Net cash flows from
operating activities (11,217) (4,453) (6,764)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in organization costs (300) - (300)
Net cash flows from
investing activities (300) - (300)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock 10,000 - -
Cash contributed by shareholder 3,400 3,400 -
Net cash flows from financing
activities 13,400 3,400 -
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,883 (1,053) (7,064)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 2,936 10,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,883 $ 1,883 $ 2,936
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS V, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Development Stage Company
Sunburst Acquisitions V, Inc. (a development stage company) (the
"Company") was incorporated under the laws of the State of Colorado
on April 30, 1998. The initial principal office of the corporation is
4807 South Zang Way, Morrison, Colorado 80465.
The Company is a new enterprise in the development stage as defined
by Statement No. 7 of the Financial Accounting Standards Board. It
has no full-time employees and owns no real property. The Company
operates as a capital market access corporation after registering with
the U.S. Securities and Exchange Commission under the Securities
Exchange Act of 1934. The Company seeks to acquire, through
merger or acquisition, one or more businesses which have existing
management. Management of the Company will have virtually
unlimited discretion in determining the business activities in which the
Company might engage.
Accounting Method
The Company records income and expenses on the accrual method.
Loss per Share
Loss per share was computed using the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period.
Organization Costs
Costs to incorporate the Company were originally capitalized to be
amortized over a sixty-month period but have been written off
pursuant to SOP 98-5.
Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and
liabilities which represent financial instruments (none of which are
held for trading purposes) approximate the carrying values of such
amounts.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Use of Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that effect the
amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
2. Stockholders' Equity
As of April 30, 2000, 1,935,000 shares of the Company's no par
value common stock had been issued for consulting services provided.
The services were converted to shares at $0.001 per share.
As of April 30, 2000, 100,000 shares of the Company's no par value
Series A preferred stock had been issued at $0.10 per share.
Commencing on May 1, 2000, the holders of record of shares of this
Series A preferred stock shall be entitled to receive, when and as
declared by the board of directors out of funds legally available
therefore, cash dividends at the rate of $0.01 per share per annum,
payable quarterly, in arrears, on such dates as may from time to time
be determined by the board of directors.
In the event of a liquidation or dissolution of the Company, the
holders of shares of this Series A shall be entitled to receive out of
the assets of the Company an amount equal to $0.10 per share, plus
any accrued and unpaid dividends thereon to the date fixed for
distribution. This distribution shall be in preference and have priority
over any such distribution upon the common stock of the Company
and all other preferred stock of the Company. If the assets of the
Company are not sufficient to pay such amount in full to the holders
of this Series A and of all such other Series shall share ratably in any
such distribution of assets in accordance with the amounts which
would be payable on such distribution if the amounts to which the
holders of this and all such other Series are entitled were paid in full.
To the extent not previously converted into shares of common stock,
this Series A may be redeemed, in whole or in part, at the option of
the Company by resolution of its board of directors at a redemption
price per share of $0.15, plus any accrued and unpaid dividends
thereon to the date fixed for redemption.
The holders of shares of this Series A shall have the right to vote
either in the election of directors or in any other matter.
On April 26, 2000 the holders of the Company's preferred stock
agreed to convert all 100,000 preferred shares to common shares.
Each preferred share was converted to two common shares.
3. Related Party Transactions
As of the date hereof, Michael R. Quinn and Jay Lutsky are the
officers and directors of the Company, and are the owners of
1,684,000 shares of common stock, constituting approximately 79%
of the Company's issued and outstanding shares.
The Company's Secretary/Treasurer is providing office space at no
charge to the Company. For purposes of the financial statements, the
Company is accruing $50 per month as additional paid-in capital for
this use.
4. Income Taxes
The Company has Federal net operating loss carryforwards of
approximately $14,700 expiring during the years 2018 and 2020. The
tax benefit of these net operating losses is approximately $2,950 and
has been offset by a full allowance for realization. The carryforwards
may be limited upon the consummation of a business combination
under IRC Section 381. For the year ended April 30, 2000, the
valuation allowance increased by approximately $1,050.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
The Company has had no change in, or disagreements with, its
principal independent accountant since the date of inception.
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers currently serving the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions Held and
Tenure
<S> <C> <C>
Jay Lutsky 55 President, and a
Director since
April, 1998.
Michael R. Quinn 74 Secretary/Treasurer,
and a Director since
April, 1998.
</TABLE>
The directors named above will serve until the next annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding
between any of the directors or officers of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer.
The directors and officers will devote their time to the
Company's affairs on an "as needed" basis, which, depending on the
circumstances, could amount to as little as two hours per month, or
more than forty hours per month, but more than likely will fall within
the range of five to ten hours per month.
Biographical Information
JAY LUTSKY
Mr. Lutsky has served as President, and as a Director of the
Company since its inception. From 1968 to 1974, Mr. Lutsky was
employed at United Bank of Denver in various management positions,
including Guaranteed Check Manager, Corporate Programs Manager
and Executive Lending Officer. From April 1974 through April
1980, Mr. Lutsky was involved in the publishing and ski promotions
business, serving as President of Mountain States Ski Association, a
company he helped to start. From August 1983 through September
1985, Mr. Lutsky worked in the positions of General Manager of the
SumFun Program, Regional marketing Manager, and Investor
Relations Manager for Gold C Enterprises, Inc., a publicly-traded
Colorado corporation that published discount coupon books. Since
May of 1980, Mr. Lutsky has done business as Dolphin & Associates,
a private consulting firm and he has managed his personal investment
portfolio.
Mr. Lutsky has served on the board and been president of
several public companies. From December 1986 through May, 1990,
Mr. Lutsky served as president of Eagle Venture Acquisitions, Inc.
("Eagle"). Eagle merged with Network Financial Services, Inc.
("Network") in May 1990. Mr. Lutsky continued on the board of
Network which traded on the NASDAQ system until December,
1993. Mr. Lutsky was a vice-president and served on the board of
Starlight Acquisitions, Inc. ("Starlight") a blank check offering.
Starlight merged with Toucan Gold Corporation ("Toucan"),
TUGO-Bulletin Board, on May 10, 1996. Mr. Lutsky now serves as
an advisor to the current board of directors of Toucan. Until
November, 1997, Mr. Lutsky was an officer and served on the board
of directors of Gatwick, Ltd., a Regulation A public company. In
November, 1997, Gatwick, Ltd., changed its name to AIM Smart
Corporation and completed a share acquisition transaction with Smart
AIM Corporation, a Michigan corporation. Mr. Lutsky also
currently serves on the board of directors of Sunburst Acquisitions VI,
Inc., Sunburst Acquisitions VII, Inc. and Sunburst Acquisitions VIII,
Inc., all of which are blind pool or blank check companies he has
formed in conjunction with Mr. Quinn.
He earned a Bachelor of Science degree from Kent State
University in 1967.
MICHAEL R. QUINN
Mr. Quinn has served as Secretary/Treasurer and Director of
the Company since its inception. He has been involved with several
development stage companies. He consults with companies
contemplating trading publicly and his services consist of corporate
structuring, management, accounting, productions, sales, etc.
Mr. Quinn earned the degrees of Metallurgical Engineer and Engineer
of Mines at the Colorado School of Mines in 1946. He did graduate
work and was employed as a research assistant at MIT.
Over the last six years, Mr. Quinn has served as a consultant
to equity holders involved in a bankruptcy case, as a consultant and
lead plaintiff in three lawsuits, all of which have resulted in favorable
decisions for the plaintiff.
He served as President, Treasurer and Director of O.T.C.
Capital Corporation ("OTC"). OTC acquired Capital 2000 and is
currently actively trading. He was a founder of American Leverage,
Inc., and was its Secretary/Treasurer and a Director until American
Leverage, Inc. acquired Data National Corporation ("Data"). Data is
active, profitable and in a growth mode. Until November, 1997, Mr.
Quinn was an officer and served on the board of directors of Gatwick,
Ltd., a Regulation A public company. In November, 1997, Gatwick,
Ltd., changed its name to AIM Smart Corporation and completed a
share acquisition transaction with Smart AIM Corporation, a Michigan
corporation. Mr. Quinn also currently serves on the board of
Sunburst Acquisitions VI, Inc., Sunburst Acquisitions VII, Inc. and
Sunburst Acquisitions VIII, Inc., all of which are blind pool or blank
check companies he has formed in conjunction with Mr. Lutsky.
Compliance With Section 16(a) of the Exchange Act.
Michael R. Quinn and Jay Lutsky were each required to file an
Initial Statement of Beneficial Ownership of Securities on Form 3 at
the time of the registration of the Company's securities under Section
12(g) of the Exchange Act, and a report on Form 5 for the fiscal year
ending April 30, 1999 and April 30, 2000. None of the reports have
been filed in a timely manner. However, the initial reports on Form
3 and the reports on Form 5 for the fiscal year ending April 30, 1999
have been filed. They have each represented to the Company that
they will complete the required filing on Form 5 for the fiscal year
ending April 30, 2000.
ITEM 10. EXECUTIVE COMPENSATION.
No officer or director received any remuneration from the
Company during the fiscal year. Until the Company acquires
additional capital, it is not intended that any officer or director will
receive compensation from the Company other than reimbursement
for out-of-pocket expenses incurred on behalf of the Company. See
"Certain Relationships and Related Transactions." The Company has
no stock option, retirement, pension, or profit-sharing programs for
the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in
the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth, as of the end of the Company's
most recent fiscal year, the number of shares of Common Stock
owned of record and beneficially by executive officers, directors and
persons who hold 5.0% or more of the outstanding Common Stock of
the Company. Also included are the shares held by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
<S> <C> <C>
Jay Lutsky <F1>
4807 S. Zang Way
Morrison, CO 80465 843,000<F2> 39.48%
Michael R. Quinn<F1>
2082 Cherry Street
Denver, Colorado 80207 841,000<F2> 39.39%
All directors and executive
officers (2 persons) 1,684,000 78.88%
<FN>
<F1> The person listed is an officer, a director, or both, of the
Company.
<F2> Includes 35,000 shares of common stock issuable upon conversion of
Series A Preferred Stock. Each share of Series A Preferred Stock is
convertible into two shares of common stock at any time on or after November
1, 1998.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of
Incorporation provide that the Company will indemnify its directors
and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on
account of their being or having been Company directors or officers
unless, in any such action, they are adjudged to have acted with gross
negligence or willful misconduct. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and
is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Corporation Code, the Company's
Articles of Incorporation exclude personal liability for its directors for
monetary damages based upon any violation of their fiduciary duties
as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, acts in violation
of Section 7-5-114 of the Colorado Corporation Code, or any
transaction from which a director receives an improper personal
benefit. This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
Conflicts of Interest
None of the officers of the Company will devote more than a
portion of his time to the affairs of the Company. There will be
occasions when the time requirements of the Company's business
conflict with the demands of the officers' other business and
investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be
obtained upon terms favorable to the Company.
Each of the Company's officers and directors also are officers,
directors, or both of several other Colorado based development-stage
corporation in the same business as the Company. These companies
may be in direct competition with the Company for available
opportunities.
Company management, and the other principal shareholders of
the Company, intend to actively negotiate or otherwise consent to the
purchase of a portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition transaction.
Members of management acquired their shares for services rendered
at a price of $0.001 per share, and the total purchase price for all
presently issued and outstanding shares (including both common stock
and Series A Convertible Preferred Stock) was $11,935, of which
$10,000 was paid in cash and $1,935 was paid in the form of
performance of services. It is anticipated that a substantial premium
may be paid by the purchaser in conjunction with any sale of shares
by officers, directors or affiliates of the Company which is made as a
condition to, or in connection with, a proposed merger or acquisition
transaction. The fact that a substantial premium may be paid to
Company officers, directors and affiliates to acquire their shares
creates a conflict of interest for them and may compromise their state
law fiduciary duties to the Company's other shareholders. In making
any such sale, Company officers, directors and affiliates may consider
their own personal pecuniary benefit rather than the best interests of
the Company and the Company's other shareholders, and the other
shareholders are not expected to be afforded the opportunity to
approve or consent to any particular buy-out transaction involving
shares held by members of Company management.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Exhibits listed below are filed as part of this Annual
Report.
<TABLE>
<CAPTION>
Exhibit No. Document
<S> <C>
3.1 Articles of Incorporation (incorporated by reference
from Registration Statement on Form 10-SB/A filed with the
Securities and Exchange Commission on April 30, 1998).
3.2 Bylaws (incorporated by reference from Registration
Statement on Form 10-SB/A filed with the Securities and Exchange
Commission on April 30, 1998).
4.1 Specimen Common Stock Certificate (incorporated by
reference from Registration Statement on Form 10-SB/A filed with the
Securities and Exchange Commission on April 30, 1998).
4.2 Specimen Class A Convertible Preferred Stock Certificate
(incorporated by reference from Registration Statement on Form
10-SB/A filed with the Securities and Exchange Commission on April
30, 1998).
27 Financial Data Schedule
</TABLE>
(b) No reports on Form 8-K were filed by the Company
during the last quarter of its fiscal year ending April 30, 2000.
Signatures
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SUNBURST ACQUISITIONS V, INC.
By: /s/ ________________
Jay Lutsky (Principal Executive Officer and Director)
Date: July 28, 2000
By: /s/ ________________
Michael R. Quinn (Principal Financial Officer and Director)
Date: July 28, 2000
