FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number 13-4051167
NAVARONE, INC.
(Exact name of registrant as specified in its charter)
Nevada 13-4051167
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Judy Shelton, 1106 West Choctaw Street, Broken Bow, OK 74728
(Address of principal executive offices)
(Zip Code)
(580) 584-5499
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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.
X Yes ___ No
State the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding as of November 2, 2000
-------------- ----------------------------------
Common Stock 20,485,000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
CONTENTS
PAGE
Unaudited Condensed Consolidated
Balance Sheets, September 30, 2000
and December 31, 1999 2
Unaudited Condensed Consolidated
Statements of Operations, for
the three and nine months ended
September 30, 2000 and 1999 and
from inception on March 19, 1997
through September 30, 2000 3
Unaudited Condensed Consolidated
Statements of Cash Flows, for the
nine months ended September 30, 2000
and 1999 and from inception on
March 19, 1997 through September 30,
2000 4
Notes to Unaudited Condensed
Consolidated Financial Statements 5 - 9
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited]
ASSETS
September 30, December 31,
2000 1999
___________ ___________
CURRENT ASSETS:
Cash held by shareholder $ - $ 3,918
___________ ___________
Total Current Assets $ - $ 3,918
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 950 $ 587
___________ ___________
Total Current Liabilities 950 587
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value,
100,000,000 shares authorized,
20,485,000 and 10,385,000 shares
issued and outstanding 20,485 10,385
Capital in excess of par value 25,523 24,980
Deficit accumulated during the
development stage (46,958) (32,034)
___________ ___________
Total Stockholders' Equity
(Deficit) (950) 3,331
___________ ___________
$ - $ 3,918
___________ ___________
Note: The balance sheet at December 31, 1999 was taken from the
audited financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
2
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[Unaudited]
For the Three For the Nine From Inception
Months Ended Months Ended on March 19,
September 30, September 30, 1997 through
__________________ ___________________ September 30,
2000 1999 2000 1999 2000
_________ ________ _________ _________ _____________
REVENUE, net $ - $ - $ - $ - $ -
_________ ________ _________ _________ _____________
EXPENSES:
General and
administrative 11,050 - 11,050 - 11,050
_________ ________ _________ _________ _____________
LOSS FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES (11,050) - (11,050) - (11,050)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
_________ ________ _________ _________ _____________
LOSS FROM CONTINUING
OPERATIONS (11,050) - (11,050) - (11,050)
_________ ________ _________ _________ _____________
DISCONTINUED
OPERATIONS:
Loss from
discontinued
operations
(net of $0
income taxes) - (2,766) (3,874) (12,101) (34,908)
Loss on disposal
of discontinued
operations
(net of $0
income taxes) - - - - -
_________ ________ _________ _________ _____________
LOSS FROM DISCONTINUED
OPERATIONS - (2,766) (3,874) (12,101) (34,908)
_________ ________ _________ _________ _____________
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING
PRINCIPLE - - - (1,000) (1,000)
_________ ________ _________ _________ _____________
NET LOSS $ (11,050)$ (2,766)$ (14,924)$ (13,101)$ (46,958)
_________ ________ _________ _________ _____________
LOSS PER COMMON
SHARE:
Continuing
operations $ (.00) $ - $ (.00) $ - $ (.00)
Discontinued
operations (.00) (.00) (.00) (.00) (.00)
Cumulative effect
of change in
accounting
principle - - - (.00) (.00)
_________ ________ _________ _________ _____________
Net Loss Per
Common Share $ (.00)$ (.00)$ (.00)$ (.00)$ (.00)
_________ ________ _________ _________ _____________
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
3
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
For the Nine From Inception
Months Ended on March 19,
September 30, 1997 Through
___________________ September 30,
2000 1999 2000
_________ _________ _____________
Cash Flows From Operating Activities:
Net loss $ (14,924)$ (13,101)$ (46,958)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Non-cash expense 10,100 - 10,100
Effect of change in accounting
principle - 1,000 1,000
Change in assets and liabilities:
Increase (decrease) in accounts
payable 363 - 950
_________ _________ _____________
Net Cash (Used) by Operating
Activities (4,461) (12,101) (34,908)
_________ _________ _____________
Cash Flows From Investing Activities - - -
_________ _________ _____________
Net Cash (Used) by Investing
Activities - - -
_________ _________ _____________
Cash Flows From Financing Activities:
Proceeds from common stock issuance - - 38,500
Payment of stock offering costs - - (6,635)
Capital contribution 543 2,500 3,043
_________ _________ _____________
Net Cash Provided by Financing
Activities 543 2,500 (34,908)
_________ _________ _____________
Net Increase (Decrease) in Cash (3,918) (9,601) -
Cash at Beginning of Period 3,918 17,925 -
_________ _________ _____________
Cash at End of Period $ - $ 8,324 $ -
_________ _________ _____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For the nine months ended September 30, 2000:
A shareholder of the Company forgave the Company of their $543 debt,
accounted for as a contribution to capital.
The Company issued 10,100,000 shares of common stock for services
rendered, valued at $10,100.
For the nine months ended September 30, 1999:
None
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
4
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Ezboy Imageworks, Inc. was organized under the
laws of the State of Nevada on March 19, 1997, but changed its
name in 1998 to Navarone, Inc (the Company). The Company
previously intended to develop and pursue patent protection for
novelty items for the photographic industry. The Company also
intended to manufacture and market its inventions. During July
2000, the Company discontinued its previously planned operations
formed a wholly-owned subsidiary OK Trading Corporation, a Nevada
Corporation to begin a brokerage service where the Company, buys
and sells liquidation and close-out merchandise and related
products to retail stores, flea market vendors, auction houses
and other bulk purchasers and sellers. The Company has, at the
present time, not paid any dividends and any dividends that may
be paid in the future will depend upon the financial requirements
of the Company and other relevant factors. The Company has not
generated significant revenues and is considered a development
stage company as defined in Statement of Financial Accounting
Standards (SFAS) No. 7.
Condensed Consolidated Financial Statements - The accompanying
consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 2000 and 1999 and for
the periods then ended have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1999 audited financial
statements. The results of operations for the periods ended
September 30, 2000 are not necessarily indicative of the
operating results for the full year.
Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary OK
Trading Corporation. All significant inter-company accounts and
transactions have been eliminated in consolidation.
Income Taxes - The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." This statement
requires an asset and liability approach for income taxes.
Loss Per Share - The computation of loss per share is based on
the weighted average number of shares outstanding during the
period presented in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". [See
Note 6]
Cash and Cash Equivalents - For purposes of the financial
statements, the Company considers all highly liquid debt
investments purchased with a maturity of three months or less to
be cash equivalents.
Accounting 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, the disclosures of
contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from
those estimated.
5
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Restatement - The financial statements have been restated for all
periods presented to reflect a ten for one forward stock split
effective January 5, 2000 [See Note 3].
Recently Enacted Accounting Standards - Statement of Financial
Accounting Standards (SFAS) No. 136, "Transfers of Assets to a
not for profit organization or charitable trust that raises or
holds contributions for others", SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - deferral of
the effective date of FASB Statement No. 133 (an amendment of
FASB Statement No. 133.)," SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities
- and Amendment of SFAS No. 133", SFAS No.139, "Rescission of
SFAS No. 53 and Amendment to SFAFS No 63, 89 and 21", and SFAS No.
140, "Accounting to Transfer and Servicing of Financial Assets and
Extinguishment of Liabilities", were recently issued, SFAS No.
136, 137, 138, 139 and 140 have no current applicability to the
Company or their effect on the financial statements would not
have been significant.
NOTE 2 - DISCONTINUED OPERATIONS
During July 2000, management decided to abandon the Company's
original business plan of developing manufacturing and
pursuing patent protection for novelty items for the photographic
industry.
The following is a condensed proforma statement of operations
that reflects what the presentation would have been for the
periods ended September 30, 2000 and 1999 and from inception on
March 19, 1997 through September 30, 2000 if the Company had not
discontinued it's previous operations:
For the Nine From Inception
Months Ended on March 19,
September 30, 1997 Through
___________________ September 30,
2000 1999 2000
_________ _________ _____________
Net revenues $ - $ - $ -
Other operating expenses (14,924) (12,101) (45,958)
Other income (expenses) - - -
Provision for income taxes - - -
Change in accounting principle - (1,000) (1,000)
_________ _________ _____________
Net loss $ (14,924)$ (13,101)$ (46,958)
_________ _________ _____________
Loss per common share: $ (.00)$ (.00)$ (.00)
_________ _________ _____________
6
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK
Common Stock - During July 2000, the Company's president,
director and majority shareholder as well as the Company's
secretary, director and shareholder, sold their controlling
interest in the Company and resigned as officers and directors of
the Company. The newly appointed officers and directors
commenced the development of the Company's new business plan.
Pursuant to a meeting of the new board of directors the Company
issued the new President of the Company 10,100,000 shares of the
Company's common stock in lieu of $10,100 in cash compensation
for services rendered.
On March 19, 1997, the Company issued 10,000,000 shares of its
previously authorized, but unissued common stock to its attorney
for providing services valued at $10,000 related to organizing
the Company.
In October 1998, the Company issued 385,000 shares of its
previously authorized, but unissued common stock. Total proceeds
from the sale of stock amounted to $38,500 (or $1.00 per share).
Offering costs in the amount of $6,635 have been charged to
additional paid in capital.
In January 2000, the Company effected a ten for one forward stock
split. The financial statements for all periods presented have
been restated to reflect the stock split.
On August 15, 2000, the Company amended its Articles of
Incorporation increasing the authorized common shares from
25,000,000 to 100,000,000 with a par value of $.001.
NOTE 4 - RELATED PARTY TRANSACTIONS
Contributed Capital - A shareholder of the Company forgave the
Company of their $543 debt, accounted for as a contribution to
contributed capital.
Professional Services - A shareholder of the Company provides
professional, legal and managerial services to the Company.
Rent - The Company currently does not have a need to rent office
space but is using the address of an officer as a mailing
address, as needed, at no cost to the Company. The President of
the Company was paid a total of $3,000 in 1999 for the Company to
use his studio for a short period in 1999 when the Company was
doing prototype development.
Prototype Development - During 1999, the President donated $2,500
of services and unpaid expenses for prototype development that
included utilization of existing studio space, equipment and
materials. The $2,500 was accounted for as a contribution to
capital.
7
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5- INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes". SFAS No. 109 requires the Company to provide
a net deferred tax asset/liability equal to the expected future
tax benefit/expense of temporary reporting differences between
book and tax accounting methods and any available operating loss
or tax credit carryforwards. At September 30, 2000, the Company
has available unused operating loss carryforwards of
approximately $47,000, which may be applied against future
taxable income and which expire in various years through 2020.
The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is
dependent, in part, upon the tax laws in effect, the future
earnings of the Company, and other future events, the effects of
which cannot be determined. Because of the uncertainty
surrounding the realization of the loss carryforwards the Company
has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has
been recognized for the loss carryforwards. The net deferred tax
assets are approximately $16,000 and $10,700 as of September 30,
2000 and December 31, 1999, respectively; with an offsetting
valuation allowance at each period end of the same amount,
resulting in a change in the valuation allowance of approximately
$5,300 for the nine months ended September 30, 2000.
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per
share for the periods ended September 30, 2000 and 1999:
For the Three For the Nine From Inception
Months Ended Months Ended on March 19,
September 30, September 30, 1997 through
_____________________ _____________________ September 30,
2000 1999 2000 1999 2000
__________ __________ __________ __________ _____________
Loss from
continuing
operations
available to
common
shareholders
(numerator) $ (11,050)$ - $ (11,050)$ - $ (11,050)
__________ __________ __________ __________ _____________
Loss from
discontinued
Operations
(numerator) $ - $ (2,766)$ (3,874)$ (12,101)$ (34,908)
__________ __________ __________ __________ _____________
Cumulative effect
of change in
accounting
principle
(numerator) $ - $ $ - $ (1,000)$ (1,000)
__________ __________ __________ __________ _____________
Weighted average
number of common
shares
outstanding
used in loss per
share for the
period
(denominator)
[Restated] 18,838,261 10,385,000 13,223,321 10,385,000 10,820,101
__________ __________ __________ __________ _____________
8
<PAGE>
NAVARONE, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE [CONTINUED]
Dilutive loss per share was not presented, as the Company had no
common equivalent shares for all periods presented that would
affect the computation of diluted loss per share.
During 1999, the Company adopted Statement of Position 98-5 and
accordingly expensed its organization costs of $1,000. This has
been reflected as a cumulative effect of change in accounting
principle.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
However, the Company has incurred losses since its inception, and
has not yet been successful in establishing profitable
operations. These factors raise substantial doubt about the
ability of the Company to continue as a going concern. In this
regard, management is proposing to raise any necessary additional
funds not provided by operations through loans and/or through
additional sales of its common stock. There is no assurance that
the Company will be successful in raising this additional capital
or in achieving profitable operations. The financial statements
do not include any adjustments that might result from the outcome
of these uncertainties.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
Operation.
Navarone, Inc. (herein, the "Issuer", the "Registrant" or
the "Company") is a development phase Company. Until July 2000,
the Company was primarily engaged in the development of novelty
products related to the photographic industry. The Company
completed production of prototypes for its first two products and
management pursued the possibility of entering into royalty
agreements with companies interested in its Booger Bubble Gum
Card Packages or its Serenity Lamp, but to date, no such
agreements have been executed.
The Company did not have the resources to market its products
directly. The Company also contemplated a second offering of
securities in order to raise additional funds, but ultimately
decided against it. The Company relied upon loans from its
officers and principal shareholders in order to keep its expenses
paid until such time as it achieved sufficient income, or until
such time as management should decide to abandon the Company's
original business plan and pursue merger or acquisition with an
existing business.
In July 2000, the Board met again, re-examined its options, and
decided that the Company must pursue another business or a merger
or acquisition with another on going business. In August 2000,
two (2) of the majority shareholders sold their controlling
interest in the Company and resigned as Officers and Directors of
the Company. At this point, the newly appointed Officer and
Director commenced development of the Company's new Business
Plan. Pursuant to a meeting of the new Board of Directors, the
Company authorized the formation of a wholly owned subsidiary, OK
Trading Corporation ("OK TRADING") a Nevada Corporation. Whereas
the initial business of OK TRADING will be to develop and operate
a business that brokers, buys and sells liquidation and close-out
merchandise and related products.
Plan of Operation
OK Trading Corp. ("OK TRADING") is currently assembling an
experienced management team that has demonstrated the ability to
cost effectively acquire merchandise through wholesale auctions
across the country as well as liquidation acquisitions and
discontinued merchandise. OK Trading will then resell the
merchandise in bulk to retail stores, flea market vendors,
auction houses and other bulk purchasers.
The Company's core target markets, retail stores, flea market
vendors, auction houses and other bulk purchasers are high value
customers because profit margins are typically substantial and
customer loyalty is typically high. The Company's management has
developed and refined the processes and procedures to acquire
10
<PAGE>
the targeted merchandise at a low cost. Adding staff and additional
geographic markets can increase the projected rate of merchandise
acquisition and re-sale. The Company's growth plan involves
leveraging current management, organization and infrastructure
assets to build a large merchandise and customer base in markets
that are currently very active. In addition to the customer base
providing substantial sales margins, the opportunity exists to
cross-sell additional products in the future at very low cost.
OK Trading will use various warehouse facilities around the
country on an as needed basis that allow the Company to have many
resources available without the overhead. OK Trading will closely
monitor additional markets that can be cost effectively and
successfully entered. The Company will also pursue development of
a web-site to facilitate the purchase and sale of its
merchandise, thus providing large growth opportunities to OK
Trading.
Forward-Looking Statements
When used in this Form 10-Q or other filings by the Company with
the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications, or in
oral statements made with the approval of an authorized officer
of the Company's executive officers, the words or phrases "would
be", "will allow", "intends to", "will likely result", "are
expected to", "will continue", "is anticipated", "estimate",
"project", or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made,
and advises readers that forward-looking statements involve
various risks and uncertainties. The Company does not undertake,
and specifically disclaims any obligation to update any forward-
looking statements to reflect occurrences or unanticipated events
or circumstances after the date of such statement.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
On August 7, 2000 pursuant to a meeting of the board of
directors, the company issued 10,100,000 shares of its treasury
stock in lieu of cash compensation for services, therefore
increasing the number of issued and outstanding shares to
20,485,000.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security holders.
None.
Item 5. Other Information.
The Company is filing this report to inform shareholders of the
change in control that has occurred.
Change in Control of Registrant.
On August 3, 2000, Salem Krieger ("KRIEGER") the President,
Director and a Major shareholder as well as Maureen Abato
("ABATO") the Secretary, Treasurer, Director and a Major
Shareholder executed an agreement with Judy Shelton ("SHELTON"),
to transfer a majority (57%) of the outstanding shares of common
stock of the Company owned by Krieger and Abato to Judy Shelton.
The terms of the Agreement between Krieger, Abato and
Shelton requires that the present officers and directors of the
Company resign and appoint Shelton as Sole officer and Director.
Pursuant to a meeting of the new Board, Judy Shelton was
issued 10,100,000 shares of the company's treasury stock in lieu
of cash compensation for services rendered, resulting in Ms.
Shelton's ownership of 78% of the issued and outstanding shares
of the Company. Additionally the Company was authorized to form a
wholly owned subsidiary, OK Trading Corporation ("OK TRADING") as
a Nevada Corporation. The business of OK Trading will be to
implement and operate a business that brokers, buys and sells
liquidation and close-out merchandise and related products.
12
<PAGE>
Security Ownership of Management
Name Title Class No. of Shares Percent
Judy Shelton President Common 16,075,000 78%
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NAVARONE, INC.
By: /s/ Judy Shelton .
Judy Shelton, Pres. & Director
Dated: Broken Bow, OK
November2, 2000
13
<PAGE>
