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 June 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: 0-24703
SUNBURST ACQUISITIONS VII, INC.
(Name of small business in its charter)
Colorado 84-1466651
(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. ___
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 September 28, 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 June 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 June 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 June 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 has, as yet, 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 in-
vestment 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 anti-
cipated 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 manage-
ment, 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.
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:
(1) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(2) Strength and diversity of existing management, or
management prospects that are scheduled for recruitment;
(3) 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; and
(4) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(5) The availability of audited financial statements for the
business opportunity; and
(6) Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
significant prospect in the foreseeable future of becoming sufficient to
enable the securities of the Company to qualify for listing on an
exchange or on a national automated securities quotation system, such
as NASDAQ.
No one of the factors described above will be controlling in
the selection of a business opportunity, and management will attempt
to analyze all factors appropriate to the opportunity and make a
determination based upon reasonable investigative measures and
available data. 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.
Company management believes that various types of potential
merger or 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 of 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 leases, purchase and sale agree-
ments, 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 acquisi-
tion 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 up to 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.
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 anti-
cipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for em-
ployees 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
June 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 $10,000 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 June 30, 2000, reflects a current asset value of
$53, all of which is in the form of cash, and a total asset value of
$53.
Results of Operations
During the period from June 30, 1998 (inception) through June
30, 2000, the Company accumulated a deficit of $13,082. 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 June 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.
Need for Additional Financing
It is anticipated that the Company will require additional
capital in order to meet its cash needs for the next year, including the
costs of compliance with the continuing reporting requirements of the
Securities Exchange Act of 1934, as amended.
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 does not currently contemplate making a
Regulation S 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
Year 2000 issues are not currently material to the Company's
business, operations or financial condition, and the Company does not
currently anticipate that it will incur any material expenses to
remediate Year 2000 issues it may encounter. However, Year 2000
issues could become material to the Company following its completion
of a business combination transaction in the event that the business it
acquired uses computer equipment or software which experienced
disruptions as a result of the Year 2000 date change. In that event,
the Company will be required to adopt a plan and a budget for
addressing such issues.
ITEM 7. FINANCIAL STATEMENTS.
See following pages.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
Report of Independent Public Accountants
Balance Sheet
Statement of Operations
Statement of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of SUNBURST
ACQUISITIONS VII, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions VII, Inc. (a development stage company) as of June 30,
2000, and the related statement of operations, stockholders' equity,
and cash flows for the years ended June 30, 2000 and 1999, and for
the period from inception (June 30, 1998), to June 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit 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 audit provides 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 VII, Inc. as of June 30, 2000, and the results of
its operations and cash flows for the years ended June 30, 2000 and
1999, and for the period from inception (June 30, 1998) to June 30,
2000, in conformity with generally accepted accounting principles.
Comiskey & Company, P.C.
Denver, Colorado
August 21, 2000
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 53
Total current assets 53
TOTAL ASSETS $ 53
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Total current liabilities -
STOCKHOLDERS' EQUITY
Preferred stock, no par value
20,000,000 shares authorized;
100,000 shares issued and
outstanding 10,000
Common stock, no par value;
100,000,000 shares authorized;
1,935,000 shares issued and
outstanding 1,935
Additional paid-in capital 1,200
Deficit accumulated during the development stage (13,082)
53
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 53
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period For the For the
from inception year ended year ended
(June 30, 1998) June 30, June 30,
to June 30, 2000 2000 1999
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
Amortization 300 240 60
Bank service fees 7 7 -
Consulting fees 1,935 - -
General office 879 342 537
Gifts 24 - 24
Legal fees 3,706 1,021 2,685
Professional fees 5,031 2,711 2,320
Rent 1,200 600 600
Total expenses 13,082 4,921 6,226
NET LOSS (13,082) (4,921) (6,226)
Accumulated deficit
Balance, beginning
of period - (8,161) (1,935)
Balance, end of
period $(13,082) $(13,082) $(8,161)
NET LOSS PER SHARE $(0.01) (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 VII, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (June 30, 1998) to June 30, 2000
(Page 1 of 3)
<TABLE>
<CAPTION>
Preferred Stock
Number of
Shares Amount
<S> <C> <C>
Preferred stock issued for
cash, June 1998
at $0.10 per share 100,000 $10,000
Common stock issued for
services, June 1998
at $0.001 per share - -
Net loss for the year
ended June 30, 1998 - -
Balance
June 30, 1998 100,000 10,000
Rent at no charge - -
Net loss for the year
ended June 30, 1999 - -
Balance June 30, 1999 100,000 10,000
Rent at no charge - -
Net loss for the year
ended June 30, 2000 - -
Balance, June 30, 2000 100,000 $10,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (June 30, 1998) to June 30, 2000
(Page 2 of 3)
<TABLE>
<CAPTION>
Common Stock
Number of
Shares Amount
<S> <C> <C>
Preferred stock issued for
cash, June 1998
at $0.10 per share - $ -
Common stock issued for
services, June 1998
at $0.001 per share 1,935,000 1,935
Net loss for the year
ended June 30, 1998 - -
Balance
June 30, 1998 1,935,000 1,935
Rent at no charge - -
Net loss for the year
ended June 30, 1999 - -
Balance
June 30, 1999 1,935,000 1,935
Rent at no charge - -
Net loss for the year
ended June 30, 2000 - -
Balance, June 30, 2000 1,935,000 $1,935
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (June 30, 1998) to June 30, 2000
(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, June 1998
at $0.10 per share $ - $ - $10,000
Common stock issued for
services, June 1998
at $0.001 per share - - 1,935
Net loss for the year
ended June 30, 1998 - (1,935) (1,935)
Balance,
June 30, 1998 - (1,935) 10,000
Rent at no charge 600 - 600
Net loss for the year
ended June 30, 1999 - (6,226) (6,226)
Balance June 30, 1999 600 (8,161) 4,374
Rent at no charge 600 - 600
Net loss for the year
ended June 30, 2000 - (4,921) (4,921)
Balance, June 30, 2000 $1,200 $(13,082) $ 53
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period For the For the
from inception year ended year ended
(June 30, 1998) June 30, June 30,
to June 30, 2000 2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(13,082) $(4,921) $(6,226)
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 - 565 (565)
Net cash flows from
operating activities (9,467) (3,516) (6,131)
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 - -
Net cash flows from
financing activities 10,000 - -
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 53 (3,516) (6,431)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 3,569 10,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD 53 53 3,569
</TABLE>
The accompanying notes are an integral part of the financial statements.
SUNBURST ACQUISITIONS VII, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Sunburst Acquisitions VII, Inc. (a development stage company) (the
"Company") was incorporated under the laws of the State of Colorado
on June 30, 1998. The initial principal office of the Company is 4807
S. Zang Way, Morrison, CO 80465.
The Company is a new enterprise in the development stage as defined
by Statement No. 7 of the Financial Accounting Standards Board and
has not engaged in any business other than organizational efforts. It
has no full-time employees and owns no real property. The Company
intends to operate as a capital market access corporation by registering
with the U.S. Securities and Exchange Commission under the
Securities Exchange Act of 1934. After this, the Company intends to
seek to acquire one or more existing businesses which have existing
management, through merger or acquisition. 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.
Fiscal Year
The fiscal year of the corporation shall be established by the board of
directors.
Loss Per Share
Loss per share was computed using the weighted average number of
common share equivalents outstanding during the period.
Organization Costs
Costs to incorporate the Company were capitalized and are being
amortized over a sixty-month period. These costs were fully expensed
as of December 31, 1999 due 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 principals requires the Company's
management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
Consideration of Other Comprehensive Income Items
SFAF 130 - Reporting Comprehensive Income, requires companies to
present comprehensive income (consisting primarily of net income
plus other direct equity changes and credits) and its components as
part of the basic financial statements. For the year ended June 30,
2000, the Company's financial statements do not contain any changes
in equity that are required to be reported separately in comprehensive
income.
Stock Basis
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the fair value of the service or assets received
in exchange.
2. STOCKHOLDERS' EQUITY
As of June 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 June 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 July 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
therefor, 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, dissolution, or winding up of the
Corporation, the holders of shares of this Series A shall be entitled to
receive out of the assets of the Corporation 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
Corporation and all other preferred stock of the Corporation. If the
assets of the Corporation are not sufficient to pay such amount in full
to the holders of this Series A and of all such other Series, the holders
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 Corporation 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 no right to
vote either in the election of directors or in any other matter.
3. RELATED PARTY TRANSACTIONS
As of the date hereof, Michael R. Quinn and Jay Lutsky are
the officers and directors of the Company, and together are the
owners of 1,614,000 shares of its common stock, constituting
approximately 83% of the Company's issued and outstanding shares
of common stock. If the purchasers of the Series A shares exercise the
conversion privilege, Jay Lutsky and Michael R. Quinn together will
own 1,649,000 shares constituting approximately 77% of the
Company's issued and outstanding shares.
The Company's President 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 a Federal net operating loss carryforwards
of approximately $13,000 expiring in the year 2018 and 2020. The
tax benefit of this net operating losses is approximately $2,500 and
has been offset by a full allowance for realization. This carryforward
may be limited upon the consummation of a business combination
under IRC Section 381. For the period ended June 30, 2000, the
valuation allowance increased by approximately $900.
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 56 President, and a
Director since
June, 1998.
Michael R. Quinn 75 Secretary/Treasurer,
and a Director since
June, 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 V, Inc.,
Sunburst Acquisitions VI, 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 V, Inc., Sunburst Acquisitions VI, 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. Neither of them made a timely filing on
Form 3. They have each represented to the Company that they will
complete all required filings under Section 16(a) on or before October
15, 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>
Michael R. Quinn<F1>
2082 Cherry Street
Denver, Colorado 80207 823,000<F2> 38.55%
Jay Lutsky <F1>
4807 S. Zang Way
Morrison, CO 80465 826,000<F3> 38.69%
All directors and executive
officers (2 persons) 1,649,000 77.24%
<FN>
<F1> The person listed is an officer, a director, or both, of the
Company.
<F2> Includes 15,000 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 January 1,
1999.
<F3> Includes 20,000 shares of common stock issuable upon conversion of
Series A Preferred Stock. Each share of Preferred Stock is convertible into
two shares of common stock at any time on or after January 1, 1999.
</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 incorporated by reference.
<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 June 30, 1998).
3.2 Bylaws (incorporated by reference from Registration
Statement on Form 10-SB/A filed with the Securities and Exchange
Commission on June 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 June 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 June
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 June 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 VII, INC.
By: /s/ ________________
Jay Lutsky (Principal Executive Officer and Director)
Date: September 28, 2000
By: /s/ ________________
Michael R. Quinn (Principal Financial Officer and Director)
Date: September 28, 2000
