<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 2000
[ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 333-57043
BANNER HOLDING CORP.
--------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Florida 65-0826508
------------------------------ -------------------
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 North U.S. Highway One
Tequesta, Florida 33469
(561) 747-0244
--------------------------------------------------------------------------------
(Address and telephone number of principal executive offices)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-K. [x]
State issuer's revenues for its most recent fiscal year. $0
As of July 31, 2000, there were 3,000,000 shares of common stock
outstanding. The aggregate market value of such shares held by non-affiliates of
the registrant was $0.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company was formed as a Florida corporation in January 1998 to effect a
merger, exchange of capital stock, asset acquisition or other similar business
combination (a "Business Combination") with an operating business (a "Target")
which the Company believes has significant growth potential. The Company filed a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
which became effective April 20, 2000. An Initial Public Offering Prospectus
dated April 11, 2000 was included in the Registration. The Company has not
engaged in any commercial business since the offering and has not determined
when it will do so. The Company has no plan, proposal, agreement, understanding
or arrangement to acquire or merge with any specific business or entity and has
not identified any specific business or entity for investigation and evaluation.
The Company intends to utilize cash (derived from the proceeds of the offering),
equity, debt or a combination thereof to effect a Business Combination.
BUSINESS COMBINATION
The Company's officers and directors, shareholders, its legal counsel or other
professional associates may introduce prospective Business Combinations. The
Company's search is not restricted to any specific business, industry or
geographic location. It may participate in a business venture of virtually any
kind. In implementing a structure for a particular Business Combination, the
Company may become party to a merger, consolidation, reorganization, joint
venture or licensing agreement with another corporation or entity. The Company
may acquire assets and establish wholly-owned subsidiaries in various
businesses, or acquire existing businesses as subsidiaries.
EVALUATION BY INVESTORS
The offering was a "blank check" offering due to management's broad discretion
with respect to the specific application of the net proceeds of the offering.
Substantially all of the net proceeds of the offering are intended to be
generally applied toward effecting a Business Combination, but have not been
marked for any specific purpose. Management has sole discretion in determining
which businesses, if any, are to be acquired, and the terms of such acquisition.
Investors in the blank check offering will have the opportunity to evaluate the
merits and risks of an acquisition and will be entitled to elect whether they
desire to remain investors in the Company. An acquisition will only be
consummated if investors representing 80% of the maximum offering proceeds
reconfirm their investments (as described in the following paragraph).
The "blank check" offering was subject to Rule 419 of Regulation C under the
Securities Act of 1933 as Amended. Rule 419 requires that net offering proceeds
and the securities issued to investors must be deposited in an escrow account.
The deposited funds (except for an amount up to 10% of the deposited funds) and
deposited securities may not be released until an acquisition conforming to
certain specified criteria has been consummated and a sufficient number of
investors reconfirm their investment in accordance with the procedures set forth
in Rule 419. At that time a new prospectus describing the acquisition candidate
and its business and including audited financial statements will be delivered to
all investors. The Company must return the pro rata portion of the deposited
funds to any investor who does not elect to remain an investor. A sufficient
number of investors
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must elect to remain investors, or all investors will be entitled to the return
of a pro rata portion of the deposited funds (plus interest) and none of the
deposited securities will be issued to investors. In the event an acquisition is
not consummated within 18 months of the effective date of the prospectus, the
deposited funds will be returned on a pro rata basis to all investors.
IDENTIFYING A TARGET
The selection of a Target will be complex and risky because of competition for
such business opportunities among all segments of the financial community. In
searching for a Target, the Company will consider various factors:
-costs associated with effecting a Business Combination
-equity interest in and possible management participation in the Target
-growth potential of the Target and its industry
-experience and skill of management and availability of additional personnel
of the Target
-capital requirements of the Target
-competitive position of the Target
-potential for further research, development or exploration
-degree of current or potential market acceptance of product/service
-risk factors
-regulatory environment of the Target's industry
-profit potential
The evaluation as to the merits of a particular Business Combination will be
based on relevant factors above as well as other considerations deemed by
management to be relevant to effecting a Business Combination consistent with
the Company's business objective. Management will conduct an extensive due
diligence review which will encompass, among other things, meeting with
incumbent management and inspection of facilities, as well as review of
financial or other information made available to the Company.
TERMS OF BUSINESS COMBINATION AGREEMENT
The actual terms of an acquisition or merger transaction are unpredictable. Tax
considerations as well as other relevant factors will be evaluated in
determining the precise structure of a particular Business Combination, which
could be effected through various forms of a merger, consolidation or stock or
asset acquisition. The parties will endeavor to structure the Business
Combination to achieve the most favorable tax treatment to the Company, the
Target and their respective shareholders. Although the Company has no
commitments to date to issue any Shares other than as described in the Initial
Public Offering Prospectus, the Company will, in all likelihood, issue a
substantial number of additional Shares in connection with a Business
Combination. To the extent that such additional Shares are issued, dilution to
the
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interests of the Company's shareholders will occur, or a change in control of
the Company may occur. The written agreements executed in consummation of a
Business Combination will contain, but not be limited to, the following:
-representations and warranties by all parties thereto
-specifications as to default penalties
-terms of closing
-conditions to be met prior to closing
-conditions to be met after closing
-allocation of costs, including legal and accounting fees
The Company is subject to all the reporting requirements included in the
Exchange Act. It will therefore exercise its affirmative duty to file
independent audited financial statements with the Securities and Exchange
Commission as part of its Form 8-K upon consummation of a merger or acquisition.
The closing documents will provide that such audited financial statements be
available at closing or within ample time to comply with reporting requirements.
If such statements are not available, or do not conform to representations made
by the Target, the proposed transaction will be voidable at the discretion of
present Company management.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has an oral agreement with the Company President that permits the
Company to share with related companies executive offices rent-free in
approximately 1200 square feet of office space located at 120 N. U.S. Highway
One, Tequesta, Florida 33469. The Company considers this space adequate for its
needs and has no plans with respect to office space in the future. The Company
does not own any property and does not intend to make any such acquisitions in
the near future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any threatened litigation of
any nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no trading market for the shares of the Company nor is there any
assurance that a regular trading market will develop for the Shares, or that, if
developed, any such market will be sustained. The Company anticipates that
trading of the Shares will be conducted through what is customarily known as the
"pink sheets" and/or on the National Quotation Bureau's Over-the-Counter
Electronic Bulletin Board (the "Bulletin Board"). Any market for the Shares
which may result will likely be less well developed that if the Shares were
traded on NASDAQ or on an exchange.
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The Company has registered the shares of the Offering only in New York. The
shares may only be traded in New York. There can be no assurances that the
shares will be eligible for sale or resale in any other jurisdiction other than
New York. The Company may apply to register the shares in several states or for
secondary trading.
As of July 31, 2000 two persons own the 3,000,000 shares of common stock
outstanding. On January 26, 1998, the Company issued 1,650,000 shares of its
Common Stock to John M. O'Keefe, the Company's President and a Director, and
1,350,000 shares to Vicki J. Lavache, the Company's Secretary/Treasurer and a
Director, respectively for cash and a demand note aggregating $39,000. Each paid
$0.013 per share. Mr. O'Keefe paid $13,415 in cash and gave the Company a
promissory note for $8035. The note was paid by Mr. O'Keefe. Ms. Lavache paid
$17,550 in cash. In addition, the shareholders contributed $26,452 for offering
and administrative expenses to April 30, 2000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company, a development stage entity, has neither engaged in any operations
nor generated any revenues to date. Its entire activity since its inception has
been fund raising through an offering of equity securities.
The Company's administrative expenses to date are approximately $19,000.
Included in the expenses is $13,500 in non-cash general and administrative
expense.
Substantially all of the Company's working capital needs will be attributable to
the identification of a suitable Target, and thereafter to effectuate a Business
Combination with such Target. Although no assurances can be made, the Company
believes it can satisfy its cash requirements until a Business Combination is
consummated with 10% of the net proceeds derived from the Offering. Expenses to
date have been limited to accounting, legal, and filing fees. Upcoming expenses
will include escrow agent fees and transfer agent fees.
ITEM 7. FINANCIAL STATEMENTS
The financial statements that constitute Item 7 follow the text of this report.
An index to the financial statements appears in Item 13(a) of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Title
---- --- -----
John M. O'Keefe 57 President, Director
Vicki J. Lavache 53 Secretary/Treasurer, Director
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Mr. O'Keefe, President and Director since January 1998, serves as chief
executive officer of Merit First, Inc. (which he formed in June 1996), an
investment banking firm specializing in advising development stage enterprises
concerning finance, located in Tequesta, Florida. Prior to that, he served as
chief financial officer of Eutro Group Holding, Inc., a publicly-traded company
located in Jupiter, Florida in the medical diagnostic business, since 1993.
Earlier in his career, Mr. O'Keefe sold life and health insurance and worked as
a bank loan officer. He spent four years in the U.S. Navy after attending
Fordham University in New York in 1964. Mr. O'Keefe is a promoter of four
"public shell" companies registered with the Securities and Exchange Commission:
Zenith Holding Corp., Greenhold Group, Inc., Liege Holding, Inc., and Haven
Holding, Inc., all Florida corporations.
Ms. Lavache, Secretary/Treasurer, Director since January 1998, serves as
secretary/treasurer of Merit First, Inc. Previously, she served with Mr. O'Keefe
on the Board of Eutro Group Holding. From 1986 through 1999 she owned Executive
Line Business Services, Inc. in Jupiter, Florida, a provider of secretarial,
bookkeeping and other business services. Ms. Lavache serves as President and
Director of four "public shell" companies registered with the Securities and
Exchange Commission: Zenith Holding Corp., Greenhold Group, Inc., Liege Holding,
Inc., and Haven Holding, Inc., all Florida corporations.
The directors of the Company hold office until the next annual meeting of the
shareholders and until their successors have been elected and qualified. The
directors receive no compensation for serving as such, other than reimbursement
of reasonable expenses incurred in attending meetings. Officers are appointed by
the Board of Directors and serve at the discretion of the Board. Messrs. O'Keefe
and Lavache, the current executive officers of the Company, devote approximately
50% of their time to the affairs of the Company.
There are no agreements or understandings for any officer or director to resign
at the request of another person and neither of the officers or directors is
acting on behalf of or will act at the direction of another person.
As detailed in Items 6 and 9 of this report and as reported on Forms 3 as filed
with the Securities and Exchange Commission, officers and directors, John M.
O'Keefe and Vicki J. Lavache own 3,000,000 shares of common stock constituting
100% of the outstanding shares.
ITEM 10. EXECUTIVE COMPENSATION
No compensation has been paid to any officers or directors since inception. The
Company does not expect to pay any direct or indirect compensation to its
officers and directors except for reimbursement for reasonable out-of-pocket
expenses. There are no understandings or arrangements otherwise relating to
compensation. Management anticipates that shares of the Company's authorized but
unissued Common Stock may be utilized in connection with a business acquisition
or combination and not as compensation to the Company's management, promoters,
or their affiliates or associates.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 31, 2000 with respect to
the beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, and (iii) officers and directors as a group.
AMOUNT AND APPROXIMATE
PERCENTAGE OF OUTSTANDING SHARES
<TABLE>
<CAPTION>
Beneficial Percentage
Class Shareholder Ownership of Class
----- ----------- --------- ---------
<S> <C> <C> <C>
Common John M. O'Keefe (1) 1,650,000 55%
8671 SE Somerset Island Way
Jupiter, Florida 33458
Common Vicki J. Lavache (1) 1,350,000 45%
1510 Seabrook Road
Jupiter, Florida 33469
Common Officers and directors
as a group (2 persons) 3,000,000 100%
</TABLE>
(1) An officer and director
Unless otherwise noted, the persons named in the table have sole voting and
investment power with respect to all Shares beneficially owned by them. Neither
person named in the tables is acting as nominee for any persons or is otherwise
under the control of any person or group of persons.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since inception the Company has maintained its executive offices in
approximately 1200 square feet of office space at 120 N. U.S. Highway One in
Tequesta, Florida. The space is provided at no cost by Merit First, Inc., a
private company owned by Company shareholders John O'Keefe and Vicki Lavache.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements - April 30, 2000
Table of Contents i
Report of Independent Public Accountant F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
(b) Reports on Form 8-K
None.
(27) Financial Data Schedule (for SEC use only)
6
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BANNER HOLDING CORP.
By: /s/ John M. O'Keefe
-----------------------
John M. O'Keefe
President
August 15, 2000
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BANNER HOLDING CORP.
(a development stage company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants F-1
Balance Sheet F-2
Statements of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
i
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Banner Holding Corp. (a development stage company)
We have audited the accompanying balance sheet of Banner Holding Corp. (a
development stage company) as of April 30, 2000, and the related statements of
operations, stockholders' equity and cash flows for the two years ended April
30, 2000, and for the period from January 26, 1998 (inception) to April 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based upon our audit.
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 Banner Holding Corp. (a
development stage company) as of April 30, 2000, and the results of its
operations and its cash flows for the two years ended April 30, 2000, and for
the period from January 26, 1998 (inception) to April 30, 2000, 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 shown in the accompanying financial
statements, the Company incurred a net loss of $19,248 for the period January
26, 1998 (inception) to April 30, 2000, and has a negative working capital of
$22,886. The Company has no operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to this matter are discussed in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
August 14, 2000
F-1
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BANNER HOLDING CORP.
(a development stage company)
BALANCE SHEET
APRIL 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 144
--------
Total current assets 144
Other assets:
Deferred offering costs 82,590
--------
$ 82,734
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 23,030
--------
Total current liabilities 23,030
--------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized
no shares issued or outstanding --
Common stock, $.01 par value, 25,000,000 shares authorized,
3,000,000 shares issued and outstanding 30,000
Additional paid-in capital 48,952
Deficit accumulated during the development stage (19,248)
--------
Total stockholders' equity 59,704
--------
$ 82,734
========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-2
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BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
January 26, 1998
Year ended Year ended (inception) to
April 30, 2000 April 30, 1999 April 30, 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
General and administrative expenses 11,290 6,458 19,248
--------- ---------- ---------
Net loss $ (11,290) $ (6,458) $ (19,248)
========= ========== =========
Loss per share, basic and diluted $ (0.00) $ (0.00)
========= ==========
Weighted averages shares outstanding 3,000,000 3,000,000
========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-3
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BANNER HOLDING CORP.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Preferred Stock Common Stock Additional during the
-------------- ------------------- paid-in development Stockholders'
Shares Amount Shares Amount capital stage receivable Total
------ ------ ------ ------ ------- ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders shares -- $ -- 3,000,000 $ 30,000 $ 9,000 $ -- $ (29,528) $ 9,472
Non-cash credit for general
and administrative expenses -- -- -- -- 1,500 -- -- 1,500
Net loss -- -- -- -- -- (1,500) -- (1,500)
---- ---- ---------- ---------- ---------- ---------- ---------- ----------
Balance, April 30, 1998 -- -- 3,000,000 30,000 10,500 (1,500) (29,528) 9,472
Payment of stockholders'
receivable -- -- -- -- -- -- 19,945 19,945
Non-cash credit for general
and administrative expenses -- -- -- -- 6,000 -- -- 6,000
Net loss -- -- -- -- -- (6,458) -- (6,458)
---- ---- ---------- ---------- ---------- ---------- ---------- ----------
Balance, April 30, 1999 -- -- 3,000,000 30,000 16,500 (7,958) (9,583) 28,959
Payment of stockholders'
receivable -- -- -- -- -- -- 9,583 9,583
Contribution to capital -- -- -- -- 26,452 -- -- 26,452
Non-cash credit for general
and administrative expenses -- -- -- -- 6,000 -- -- 6,000
Net loss -- -- -- -- -- (11,290) -- (11,290)
---- ---- ---------- ---------- ---------- ---------- ---------- ----------
Balance, April 30, 2000 -- $ -- 3,000,000 $ 30,000 $ 48,952 $ (19,248) $ -- $ 59,704
==== ==== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
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BANNER HOLDING CORP.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
January 26, 1998
Year ended Year ended (inception) to
April 30, 2000 April 30, 1999 to April 30, 2000
-------------- -------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(11,290) $ (6,458) $(19,248)
Adjustments to reconcile net loss to
net cash used in operating activities:
Non-cash charge for general and
administrative expenses 6,000 6,000 13,500
Changes in assets and liabilities:
Increase in accounts payable and -- -- --
accrued expenses 5,970 12,208 23,030
-------- -------- --------
Net cash provided by operating activities 680 11,750 17,282
-------- -------- --------
Cash flows from financing activities:
Increase in deferred offering costs (37,318) (31,948) (82,590)
Proceeds from sale of stock and contribution of
capital 26,452 -- 35,924
Proceeds stockholder receivable 9,583 19,945 29,528
-------- -------- --------
Net cash used in financing activities (1,283) (12,003) (17,138)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents: (603) (253) 144
-------- -------- --------
Cash and cash equivalents, beginning of period 747 1,000 --
-------- -------- --------
Cash and cash equivalents, end of period $ 144 $ 747 $ 144
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ -- $ -- $ --
======== ======== ========
Cash paid for income taxes during the period $ -- $ -- $ --
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
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BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Banner Holding Corp. (the "Company"), was incorporated in Florida
on January 26, 1998. The Company is a development stage company, formed to
consummate a Blank Check Offering (See Note 5).
The Company intends to seek, investigate and, if such investigation warrants,
acquire an interest in a business. These opportunities will be presented by
persons who, or firms which, desire to employ the Company's funds in their
business or seek the perceived advantages of a publicly held corporation.
DEFERRED OFFERING COSTS - Amounts paid or accrued for costs related to the
anticipated public offering will be recorded as a reduction of the proceeds when
the offering is completed. If the offering is not completed, the costs will be
expensed. To date these costs have been legal, auditing and printing services.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of the Company's financial
instruments such as accounts payable, approximate their carrying value.
INCOME TAXES - The Company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when it is more likely than not that some
or all of the deferred tax assets will not be realized. Income tax expense is
the tax payable or refundable for the period, plus or minus the change during
the period in deferred tax assets and liabilities.
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.
LOSS PER SHARE - Financial Accounting Standards No. 128, "Earnings per Share"
("FAS 128"), requires presentation of earnings or loss per share on basic and
diluted earnings per share. The Company has potentially dilutive shares;
however, because the Company has a loss, the shares are deemed anti-dilutive.
Loss per share is computed by dividing net income by the weighted average number
of shares outstanding during the period.
START-UP COSTS - The Company has expensed all start-up costs, including
organizational costs as incurred.
F-6
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BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. GOING CONCERN CONTINGENCY
The Company is a development stage entity having no revenue or operations from
its inception to April 30, 2000. The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As shown
in the accompanying financial statements, the Company incurred a net loss of
$19,248 for the period January 26, 1998 (inception) to April 30, 2000, and has a
negative working capital of $22,886. The Company has no operations. The Company
is dependent upon its shareholders for its financial support. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
In order to begin any significant operations, the Company will have to pursue
other sources of capital, such as raising equity as discussed in Note 5 and a
merger with an operating company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
3. RELATED PARTY TRANSACTIONS
The Company shares facilities and certain other resources free of charge with a
company owned by the President and principal stockholders. The Company provided
a non-cash charge of $500 per month or $13,500 for the period from January 26,
1998 to April 30, 2000 for these expenses. The expense allocation was based on
an estimate of the usage of the officers' time, rent and general and
administrative expenses, such as copying, faxes, and telephone charges. The
credits are reflected as contributions to capital.
During the year ended April 30, 2000, another company wholly owned by the
stockholders of the Company loaned the Company funds to pay for offering and
other administrative expenses. The total amount of $26,452 was contributed to
capital during the period ended April 30, 2000.
The Company had no activity other than the preparation of the proposed public
offering mentioned in Note 5.
F-7
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BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. STOCKHOLDERS' EQUITY
In 1998, the Company issued 3,000,000 shares of stock to its founding
stockholders for $39,000. The Company received a commitment for a total of
$39,000 in capital contributions for these shares. These funds were used to
finance the expenses of the offering (see Note 5). As of April 30, 1999, the
founders owed the Company $9,583 as stockholders' receivable, which amount was
paid in full in the fiscal year ended April 30, 2000.
On March 1, 1998, the Company issued a warrant to the Company's law firm, to
purchase 150,000 shares of common stock at $.75 per share, exercisable through
February 28, 2001. In accordance with APB 25, "Accounting for Stock Issued to
Employees" and related interpretations, no expense has been recognized because
the exercise price of the warrants was in excess of the market price of the
underlying stock on the date of the warrant.
5. PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company is in the process of selling to the public an initial offering of
common stock which calls for a minimum of 200,000 or a maximum of 1,000,000
common shares to be sold at $.25 per share on a "best efforts" basis. If
proceeds from this offering are insufficient, the Company may be required to
seek additional capital. No assurance can be given that the Company will be able
to obtain such additional capital, or even if available, that such additional
capital will be available on terms acceptable to the Company. In the event that
management determines that the Company is unable to conduct any business
whatsoever, management, subject to the requirements of SEC Rule 419, which
provides that the deposited funds will be returned on a pro rata basis if an
acquisition meeting certain prescribed criteria is not consummated within 18
months of the date of this prospectus, may, in its sole discretion, seek
stockholders approval to liquidate the Company. In the event such a liquidation
were to occur at some point in time after the Company's compliance with the
provisions of Rule 419, all stockholders of the Company, including those owning
shares purchased privately at less than the public offering price, will receive
the liquidated assets on a pro rata basis (as opposed to being based on the
amounts paid for such shares). While management has not established any
guidelines for determining at what point in time it might elect to discontinue
its efforts to engage in a business combination and seek stockholder approval to
liquidate the Company, management is subject to the 18 month time frame set
forth in Rule 419 in which to effect an acquisition.
The Company has no revenues to date and is entirely dependent upon the proceeds
of this offering to commence operations relating to selection of a prospective
target. The Company will not receive any revenues until the consummation of a
business combination. Although the Company believes that the proceeds of this
offering will be sufficient to effect a business combination, inasmuch as the
Company has not yet identified any prospective target candidates, the Company
cannot ascertain with
F-8
<PAGE> 18
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PROPOSED PUBLIC OFFERING OF COMMON STOCK (CONTINUED)
any degree of certainty the capital requirements for any particular transaction.
In the event that the net proceeds of this offering prove to be insufficient for
purposes of effecting a business combination (because of the size of the
business combination or the depletion of 10% of the portion of the net proceeds
available to the Company for the search for a target), the Company will be
required to seek additional financing. In the event no target is identified or
no business combination is consummated, and all of the net proceeds other than
the deposited funds have been expended, the Company currently has no plans to
continue the operations of the Company. In such event, the founding stockholders
may consider lending the Company funds for operations. Although there are no
plans or arrangements with respect to such loans, the founding stockholders do
not currently anticipate such loans, if any, will be made on terms other than
for market interest rates. There can be no assurance that the founding
stockholders will make such loans to the Company. The deposited funds, including
any interest earned thereon, however, will not be used for expenses associated
with the evaluation and structuring of a contemplated business combination.
There can be no assurance that such financing would be available on acceptable
terms, if at all. To the extent that such additional financing proves to be
unavailable when needed to consummate a particular business combination, the
Company would, in all likelihood, be compelled to restructure the transaction or
abandon that particular business combination and seek alternate target
candidates.
6. INCOME TAXES
The Company had available at April 30, 2000, a net operating loss carry-forward
for federal and state tax purposes of approximately $19,000 which could be
applied against taxable income in subsequent years through 2019. The tax effect
of the net operating loss is approximately $2,000, and a full valuation
allowance was recorded, since realization is uncertain.
Reconciliation of the differences between income taxes computed at the federal
statutory tax rates and the provision for income taxes is as follows:
2000 1999
------ --------
Income taxes computed at federal
statutory tax rate $ 6,000 $ 3,000
------ --------
State tax provision, net of
federal benefits 1,000 --
Change in valuation allowance (7,000) (3,000)
------- -------
Provision for income taxes $ -- $ --
======= ========
F-9
<PAGE> 19
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Temporary differences that give rise to significant deferred tax assets are as
follows:
2000 1999
------ --------
Net operating loss carryforward $ 7,000 $ 3,000
------- -------
Total deferred tax assets
7,000 3,000
Valuation allowance
(7,000) (3,000)
------- -------
Net deferred tax asset $ -- $ --
======= =======
F-10
