SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission file number O-25483
WELLSPRING INVESTMENTS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 33-0835337
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) identification No.)
------------------------------ -------------------
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
(Address of Principal Executive Offices)
(949) 719-1977
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Y ear,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 No X The issuer was not required to file
reports during the preceding 90 days.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of March 31, 1999, there
were outstanding 1,000,000 shares of common stock, par value $0.001, and 5,000
shares of Series A Convertible Preferred Stock, par value $0.001.
1
<PAGE>
WELLSPRING INVESTMENTS, INC.
INDEX
Page
----
Part I Financial Information
Item 1. Financial Statements
Balance sheet as of March 31, 1999
and December 31, 1998 (unaudited) 3
Statements of loss for the three months ended
March 31, 1999 and 1998 (unaudited) 4
Statements of cash flows for the three months ended
March 31, 1999 and 1998 (unaudited) 7
Notes to financial statements 8
Item 2. Managements Discussion and Analysis or Plan of Operation9
Part II Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
2
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PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
<TABLE>
<CAPTION>
WELLSPRING INVESTMENTS, INC.
(A Development Stage Company)
BALANCE SHEET
<S> <C> <C>
March 31, 1999 December 31, 1998
---------------- -------------------
ASSETS
Cash $ 2,936 $ --
---------------- -------------------
Deferred costs of stock issuance $ -- $ 10,000
---------------- -------------------
Total assets $ 2,936 $ 10,000
================ ===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Due to related party $ 240 $ 672
Accrued liabilities $ 800 $ 10,800
---------------- -------------------
Total current liabilities $ 1,040 $ 11,472
---------------- -------------------
Stockholders' deficit:
Preferred stock:
Series A Convertible Preferred Stock,
0.0001 par value, 5,000,000 shares
authorized; no shares issued and
outstanding (December 31, 1998) and
5,000 shares issued and outstanding
(March 31, 1999) $ 1 $ --
Common stock, $0.0001 par value,
authorized: 25,000,000 shares;
1,000,000 shares issued and
outstanding on December 31, 1998
and March 31, 1999 $ 100 $ 100
Additional Paid-In Capital $ 29,999 $ --
Deficit accumulated during the
development stage $ (28,204) $ (1,572)
---------------- -------------------
Total stockholders' deficit $ 1,896 $ (1,472)
---------------- -------------------
$ 2,936 $ 10,000
================ ===================
</TABLE>
3
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<TABLE>
<CAPTION>
WELLSPRING INVESTMENTS, INC.
(A Development Stage Company)
STATEMENTS OF LOSS
<S> <C> <C>
Three months ended Three months ended
March 31, 1999 March 31, 1998
-------------------- --------------------
Operating expenses:
Taxes and licenses $ 232 $ 25
Legal fees $ 20,000 $ --
Accounting fees $ 4,000 $ --
Administrative Expenses $ 2,400 $ --
-------------------- -------------------
Total operating expenses $ 26,632 $ 25
-------------------- --------------------
Net loss before income taxes $ (26,632) $ (25)
Provision for income taxes $ -- $ (800)
-------------------- --------------------
Net loss $ (26,632) $ (825)
==================== ====================
Net loss per share $ (0.027) $ (0.001)
==================== ====================
Weighted average common
shares outstanding $ 1,000,000 $ 1,000,000
==================== ====================
</TABLE>
4
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<TABLE>
<CAPTION>
WELLSPRING INVESTMENTS, INC.
(A Development Stage Company)
Series A Convertible Deficit
Common Stock Preferred Stock Accumulated
Additional During the
Paid-In Development
Shares Amount Shares Amount Capital Stage Total
<S> <C> <C> <C> <C> <C> <C> <C>
---------- ------------ --------- ------- -------- --------- ---------
Issuance of common stock as
compensation for services to
stockholder/director ($0.0001 per
share) (Note 3) 1,000,000 $ 100 - $ - $ - $ - $ 100
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Net loss for the period from date of
inception (October 24, 1994) to
December 31, 1994 - - - - - (216) (216)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at December 31, 1994 1,000,000 100 - - - (216) (116)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Net loss for the year - - - - - (111) (111)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at December 31, 1995 1,000,000 100 - - - (327) (227)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Net loss for the year - - - - - (105) (105)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at December 31, 1996 1,000,000 100 - - - (432) (332)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Net loss for the year - - - - - (75) (75)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at December 31, 1997 1,000,000 100 - - - (507) (407)
---------- ------------ --------- ------- -------- --------- ---------
Net loss for the year - - - - - (1,065) (1,065)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at December 31, 1998 1,000,000 100 - - - (1,572) (1,472)
---------- ------------ --------- ------- -------- --------- ---------
Issuance of Series A Preferred
Stock ($0.0001 per share) - - 5,000 1 29,999 - 30,000
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Net loss for the three months
ended March 31, 1999 - - - - - (26,632) (26,632)
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
Balance at March 31, 1999 1,000,000 100 5,000 1 29,999 (28,204) 1,896
- ------------------------------------- ---------- ------------ --------- ------- -------- --------- ---------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
WELLSPRING INVESTMENTS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<S> <C> <C>
Three months ended Three Months ended
March 31, 1999 March 31, 1998
-------------------- --------------------
Cash flows from operating activities:
Net loss $ (26,632) $ (825)
Adjustments to reconcile net loss
to net cash used in operating activities:
Decrease in deferred costs of stock issuance $ 10,000 $ --
Advances from related party $ -- $ 25
Increase (Decrease) in accrued liabilities $ (10,432) $ 800
-------------------- --------------------
Net cash used in operating activities $ (27.064) $ --
-------------------- --------------------
Cash flows from financing activities:
Issuance of 5000 shares Series A
Preferred Stock $ 30,000 $ --
-------------------- --------------------
Net cash provided by financing activities $ 30,000 $ --
-------------------- --------------------
Net increase (decrease) in cash $ 2,936 $ --
-------------------- --------------------
Cash, beginning of period $ -- $ --
-------------------- --------------------
Cash, end of period $ 2,936 $ --
==================== ====================
</TABLE>
6
<PAGE>
WELLSPRING INVESTMENTS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies.
Wellspring Investments, Inc. (the Company) is a developmental stage
enterprise incorporated on October 24, 1994 under the laws of the State of
Delaware. The Company intends to seek acquisitions or other business endeavors.
The Company has had no operations to date and its activities have been limited
to organization efforts related to obtaining initial financing. The Company
intends to purchase, merge with or acquire securities or assets held by target
entities via an exchange of the targeted company's securities or assets for the
Company's cash, securities and/or assets. The Company has not negotiated with
or identified a prospective acquisition candidate and has not targeted any
particular business or industry within which it will seek acquisitions. The
Company's fiscal year end is December 31.
The unaudited financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles may have been omitted.
Note 2 Related Parties.
The Company has retained the law firm of its President and majority
shareholder, The Law Offices of M. Richard Cutler, to serve as the Company's
corporate and securities counsel. Mr. Cutler will charge the Company his usual
and customary rates for legal services rendered to the Company. During fiscal
1998, Mr. Cutler prepared the Company's private placement offering and was paid
an attorney's fee of $10,000 in January 1999 from the Company's private
placement proceeds. This amount was accrued, outstanding and deferred as costs
related to the stock issuance as of December 31, 1998.
Mr. Lebrecht, the Company's vice president, owns 190,150 shares of the
Company's common stock and is also employed by The Law Offices of M. Richard
Cutler.
7
<PAGE>
Item 2. Managements Discussion and Analysis or Plan of Operation
The Company's activities since inception have been limited to
organizational matters, and the Company has not engaged in any operating
activity since its inception.
The Company has registered its common stock on a Form 10-SB registration
statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 12(g) thereof. The Company files with the Securities and
Exchange Commission periodic reports under Rule 13(a) of the Exchange Act,
including quarterly reports on Form 10-QSB and annual reports on Form 10-KSB.
As a reporting company under the Exchange Act, the Company may register
additional securities on Form S-8 (provided that it is then in compliance with
the reporting requirements of the Exchange Act) and on Form S-3 (provided that
is has during the prior 12 month period timely filed all reports required under
the Exchange Act), and its class of common stock registered under the Exchange
Act may be traded in the United States securities markets provided that the
Company is then in compliance with applicable laws, rules and regulations,
including compliance with its reporting requirements under the Exchange Act.
The Company was formed to engage in a merger with or acquisition of an
unidentified foreign or domestic private company which desires to become a
reporting ("public") company whose securities are qualified for trading in the
United States secondary market. The Company meets the definition of a "blank
check" company contained in Section 7(b)(3) of the Securities Act of 1933, as
amended.
Management believes that there are perceived benefits to being a reporting
company with a class of publicly-traded securities which may be attractive to
foreign and domestic private companies.
These benefits are commonly thought to include (1) the ability to use
registered securities to make acquisition of assets or businesses; (2) increased
visibility in the financial community; (3) the facilitation of borrowing from
financial institutions; (4) improved trading efficiency; (5) shareholder
liquidity; (6) greater ease in subsequently raising capital; (7) compensation of
key employees through options for stock for which there is a public market; (8)
enhanced corporate image; and, (9) a presence in the United States capital
market.
A private company which may be interested in a business combination with
the Company may include (1) a Company for which a primary purpose of becoming
public is the use of its securities for the acquisition of assets or businesses;
(2) a company which is unable to find an underwriter of its securities or is
unable to find an underwrite of securities on terms acceptable to it; (3) a
company which wishes to become public with less dilution of its common stock
than would occur normally upon an underwriting; (4) a company which believes
that is will be able to obtain investment capital on more favorable terms after
it has become public; (5) a foreign company which may wish an initial entry into
the United States securities market; (6) a special situation company, such as a
company seeking a public market to satisfy redemption requirements under a
qualified Employee Stock Option Plan; and, (7) a company seeking one or more of
the other benefits believed to attach to a public company.
8
<PAGE>
The Company is authorized to enter into a definitive agreement with a wide
variety of private businesses without limitation as to their industry or
revenues. It is not possible at this time to predict with which private
company, if any, the Company will enter into a definitive agreement or what will
be the industry, operating history, revenues, future prospects or other
characteristics of that company.
As of the date hereof, management has not made any final decision
concerning or entered into any agreements for a business combination. When any
such agreement is reached or other material fact occurs, the Company will file
notice of such agreement or fact with the Securities and Exchange Commission on
Form 8-K. Persons reading this Form 10-QSB are advised to see if the Company
has subsequently filed a Form 8-K.
Each of the current shareholders of the Company have agreed not to sell or
otherwise transfer any of their common stock of the Company until after such
time as the Company has completed a business combination transaction.
As soon as the Company is eligible, it intends to apply to have its common
stock listed or admitted to quotation on the NASD OTC Bulletin Board or, if it
meets the financial and other requirements thereof, on the Nasdaq Small Cap
Market, National Market System, or other regional or national exchange.
Liquidity
In January 1999, the Company completed a private placement of 5,000 Units,
each Unit consisting of one share of Series A Preferred Stock and one common
stock purchase warrant. The net proceeds to the Company was $30,000, of which
$20,000 went to the Company's President and securities counsel for legal
services related to the offering and the drafting and filing of a Form 10-SB
Registration Statement.
Other than the balance of the funds from the private placement, the Company
has no other funds available and does not anticipate having any funds available
until a merger transaction is consummated. In the event that no transaction is
consummated, the Company will have a very limited amount of funds with which to
operate and may not be able to operate in the future.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings against the Company and the Company is
unaware of such proceedings contemplated against it.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the security holders for a vote.
Item 5. Other Information
There is no other information deemed material by management for disclosure
herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WELLSPRING INVESTMENTS, INC.
Dated: November 19, 1999 /s/ M. Richard Cutler
--------------------------
By: M. Richard Cutler
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited statements of operations, balance sheets and statements of
cash flows and is qualified by reference to such financial statements contained
within the Company's Form 10-QSB for the period ended March 31, 1999.
</LEGEND>
<CIK> 0001077038
<NAME> Wellspring Investments, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2936
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2936
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2936
<CURRENT-LIABILITIES> 1040
<BONDS> 0
0
1
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2936
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (26632)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26632)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
