SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File No. 0-25369
THE CZECH CONNECTION, INC.
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(Name of small business issuer in its charter)
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(Former name of small business issuer)
Nevada 33-0849223
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
6 Venture, Suite 207
Irvine, CA 92618
(949) 453-9262
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(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
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(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 of 1934 during the preceding 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
---
(Continued on Following Page)
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Issuer's revenues 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 prices of such stock, as of a specified date within the past 60
days: As of December 31, 1999:
$0.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of December 31, 1999, there were
500,000 shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
This Form 10-KSB consists of Thirty Two Pages.
Exhibit Index is Located at Page Twenty Eight.
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
THE CZECH CONNECTION, INC.
PAGE
Facing Page
Index
PART I
Item 1. Description of Business......................... 4
Item 2. Description of Property......................... 13
Item 3. Legal Proceedings............................... 14
Item 4. Submission of Matters to a Vote of
Security Holders........................... 14
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............ 14
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 15
Item 7. Financial Statements............................ 16
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure................... 25
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.......... 25
Item 10. Executive Compensation.......................... 26
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 27
Item 12. Certain Relationships and Related
Transactions............................... 28
PART IV
Item 13. Exhibits and Reports of Form 8-K................ 28
SIGNATURES................................................ 30
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
The Czech Connection, Inc. (the "Company") was incorporated on March 15,
1993, under the laws of the State of Nevada to engage in any lawful corporate
undertaking, including but not limited to selected mergers and acquisitions. The
Company has been in the developmental stage since inception and has undertaken
no business operations to date. Other than issuing shares to its original
shareholders, the Company has never commenced any operational activities. As
such, the Company can be defined as a "shell" company, whose sole purpose at
this time is to locate and consummate a merger, acquisition, or asset purchase
with a private entity. The Board of Directors of the Company has elected to
commence implementation of the Company's principal business purpose, described
below under "PART II, Item 6(a), Plan of Operation."
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. In order to comply with these various limitations, management
does not intend to undertake any efforts to sell any additional securities of
the Company, either debt or equity, or cause a market to develop in the
Company's securities until such time as the Company has successfully implemented
its business plan described herein. Relevant thereto, each shareholder of the
Company has executed and delivered a "lock-up" letter agreement, affirming that
they shall not sell their respective shares of the Company's common stock until
such time as the Company has successfully consummated a merger or acquisition
and the Company is no longer classified as a "blank check" company. In order to
provide further assurances that no trading will occur in the Company's
securities until a merger or acquisition has been consummated, each shareholder
has agreed to place their respective stock certificate with the Company's legal
counsel who will not release these respective certificates until such time as
legal counsel has confirmed that a merger or acquisition has been successfully
consummated. However, while management believes that the procedures established
to preclude any sale of the Company's securities prior to closing of a merger or
acquisition will be sufficient, there can be no assurances that the procedures
established relevant herein will unequivocally limit any shareholder's ability
to sell their respective securities before such closing.
As such, the Company can be defined as a "shell" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The Board of Directors of the Company has elected to commence
implementation of
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the Company's principal business purpose, described below under "PART II, Item
6(a) - Plan of Operation."
The Company's business is subject to numerous risk factors, including the
following:
Going Concern; No Operating History or Revenue and Minimal Assets. The
Company's financial statements accompanying this report have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The financial statements do not include any adjustment that might
result from the outcome of this uncertainty. The Company has had no operating
history nor any revenues or earnings from operations. The Company has no
significant assets or financial resources. The Company will, in all likelihood,
sustain operating expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in the Company incurring
a net operating loss which will increase continuously until the Company can
consummate a business combination with a profitable business opportunity. There
is no assurance that the Company can identify such a business opportunity and
consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance that
the Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well-financed
entities, including venture capital firms, are active in mergers and
acquisitions of companies which may be desirable target candidates for the
Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. Moreover, the Company will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
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No Agreement for Business Combination or Other Transaction-No Standards for
Business Combination. The Company has no arrangement, agreement or understanding
with respect to engaging in a merger with, joint venture with or acquisition of,
a private or public entity. There can be no assurance the Company will be
successful in identifying and evaluating suitable business opportunities or in
concluding a business combination. Management has not identified any particular
industry or specific business within an industry for evaluation by the Company.
There is no assurance the Company will be able to negotiate a business
combination on terms favorable to the Company. The Company has not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which it will require a target business opportunity
to have achieved, and without which the Company would not consider a business
combination in any form with such business opportunity. Accordingly, the Company
may enter into a business combination with a business opportunity having no
significant operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other negative characteristics.
Continued Management Control, Limited Time Availability. While seeking a
business combination, management anticipates devoting up to twenty hours per
month to the business of the Company. None of the Company's officers has entered
into a written employment agreement with the Company and none is expected to do
so in the foreseeable future. The Company has not obtained key man life
insurance on any of its officers or directors. Notwithstanding the combined
limited experience and time commitment of management, loss of the services of
any of these individuals would adversely affect development of the Company's
business and its likelihood of continuing operations. See "PART III, Item 9 -
Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(a) of the Exchange Act."
Conflicts of Interest - General. Officers and directors of the Company may
in the future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. Management has adopted a policy that the Company will not
seek a merger with, or acquisition of, any entity in which management serve as
officers, directors or partners, or in which they or their family members own or
hold any ownership interest.
Reporting Requirements May Delay or Preclude Acquisition. Sections 13 and
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), require
companies subject thereto to provide certain information about significant
acquisitions, including certified financial statements for the company acquired,
covering
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one, two, or three years, depending on the relative size of the acquisition. The
time and additional costs that may be incurred by some target entities to
prepare such statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the Company. Acquisition
prospects that do not have or are unable to obtain the required audited
statements may not be appropriate for acquisition so long as the reporting
requirements of the 1934 Act are applicable.
Lack of Market Research or Marketing Organization. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, the Company's activities
may be limited to those engaged in by business opportunities which the Company
merges with or acquires. The Company's inability to diversify its activities
into a number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
Regulation. Although the Company is subject to regulation under the
Securities Exchange Act of 1934, management believes the Company will not be
subject to regulation under the Investment Company Act of 1940, insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business combinations which
result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act of 1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant registration
and compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940 and, consequently, any violation of such Act
would subject the Company to material adverse consequences.
Probable Change in Control and Management. A business combination involving
the issuance of the Company's Common Shares will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's Common Shares held by
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them, or resign as members of the Board of Directors of the Company. The
resulting change in control of the Company could result in removal of one or
more present officers and directors of the Company and a corresponding reduction
in or elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. The issuance of
previously authorized and unissued Common Shares of the Company would result in
reduction in percentage of shares owned by present and prospective shareholders
of the Company and may result in a change in control or management of the
Company.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public trading
market for its shares. A business opportunity may attempt to avoid what it deems
to be adverse consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
be incurred in such an offering, loss of voting control to public shareholders
and the inability or unwillingness to comply with various federal and state laws
enacted for the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential business
opportunity must provide audited financial statements for review, for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses associated with
preparing audited financial statements.
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The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry, or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. See "PART II, Item 7
- - Financial Statements." This lack of diversification should be considered a
substantial risk to shareholders of the Company because it will not permit the
Company to offset potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all shareholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with acquisition of a business
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opportunity, including the costs of preparing Form 8-K's, 10-K's or 10-KSB's,
agreements and related reports and documents. The Securities Exchange Act of
1934 (the "34 Act"), specifically requires that any merger or acquisition
candidate comply with all applicable reporting requirements, which include
providing audited financial statements to be included within the numerous
filings relevant to complying with the 34 Act. Nevertheless, the officers and
directors of the Company have not conducted market research and are not aware of
statistical data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition of acceptance of products, services, or trades;
name identification; and other relevant factors. Officers and directors of the
Company expect to meet personally with management and key personnel of the
business opportunity as part of their investigation. To the extent possible, the
Company intends to utilize written reports and personal investigation to
evaluate the above factors. The Company will not acquire or merge with any
company for which audited financial statements cannot be obtained within a
reasonable period of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated that
any outside consultants or advisors will be utilized by the Company to
effectuate its business purposes described herein. However, if the Company does
retain such an outside consultant or advisor, any cash fee earned by such party
will need to be paid by the prospective merger/ acquisition candidate, as the
Company has no cash assets with which to pay such obligation. There have been no
contracts or agreements
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with any outside consultants and none are anticipated in the future.
The Company will not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which the Company may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However, the Company
does not intend to obtain funds in one or more private placements to finance the
operation of any acquired business opportunity until such time as the Company
has successfully consummated such a merger or acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has no
capital with which to pay these anticipated expenses, present management of the
Company will pay these charges with their personal funds, as interest free loans
to the Company. However, the only opportunity which management has to have these
loans repaid will be from a prospective merger or acquisition candidate.
Management has agreed among themselves that the repayment of any loans made on
behalf of the Company will not impede, or be made conditional in any manner, to
consummation of a proposed transaction.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any terms of sale of the shares presently held
by officers and/or directors of the Company will be also afforded to all other
shareholders of the Company on similar terms and conditions. Any and all such
sales will only be made in compliance with the securities laws of the United
States and any applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of
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such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no longer
considered a "shell" company. The issuance of substantial additional securities
and their potential sale into any trading market which may develop in the
Company's securities may have a depressive effect on the value of the Company's
securities in the future.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company, would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition, negotiations with target company
management is expected to focus on the percentage of the Company which the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then shareholders.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written
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agreements. Although the terms of such agreements cannot be predicted, generally
such agreements will require some specific representations and warranties by all
of the parties thereto, will specify certain events of default, will detail the
terms of closing and the conditions which must be satisfied by each of the
parties prior to and after such closing, will outline the manner of bearing
costs, including costs associated with the Company's attorneys and accountants,
will set forth remedies on default and will include miscellaneous other terms.
As stated herein above, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the 34 Act. Included
in these requirements is the affirmative duty of the Company to file independent
audited financial statements as part of its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or acquisition,
as well as the Company's audited financial statements included in its annual
report on Form 10-K (or 10-KSB, as applicable). If such audited financial
statements are not available at closing, or within time parameters necessary to
insure the Company's compliance with the requirements of the 34 Act, or if the
audited financial statements provided do not conform to the representations made
by the candidate to be acquired in the closing documents, the closing documents
will provide that the proposed transaction will be voidable, at the discretion
of the present management of the Company. If such transaction is voided, the
agreement will also contain a provision providing for the acquisition entity to
reimburse the Company for all costs associated with the proposed transaction.
Employees
During the fiscal year ended December 31, 1999, the Company had two
non-salaried employees, its President and its Secretary/Treasurer. See "PART II,
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act."
ITEM 2. DESCRIPTION OF PROPERTY
Facilities. The Company operates from offices located at 6 Venture, Suite
207, Irvine, CA 92618. This space is provided to the Company on a rent free
basis by Bryan A. Gianesin, legal counsel to the Company, and it is anticipated
that this arrangement will remain until such time as the Company successfully
consummates a merger or acquisition. See "PART II, Item 7 - Financial
Statements." The Company reimburses its legal counsel for any out-of-pocket
costs incurred by him on behalf of the Company, such as long distance telephone
toll charges, office supplies and small, miscellaneous expenses, provided that
sufficient funds for the same
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are available. As of the date of this report, the Company has no funds available
to reimburse any person for expenses. However, the Company's attorney has agreed
to continue to advance any necessary costs until the Company successfully
consummates a merger or acquisition.
Other Property. The Company owns no other property.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which management is aware as of the date of
this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no meetings of shareholders during the fiscal year ended
December 31, 1999. The Company's Board of Directors expects that a meeting will
take place before the end of fiscal 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
(a) Market Information. There is presently no trading market for the common
stock of the Company.
(b) Holders. There are ten (10) holders of the Company's Common Stock.
As of the date of this report all 500,000 shares of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the Securities Act
of 1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose shares are aggregated), who
has satisfied a one year holding period, under certain circumstances, may sell
within any three-month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
(c) Dividends.
(1) The Company has not paid any dividends on its Common Stock. The Company
does not foresee that the Company will have the ability to pay a dividend on its
Common Stock in the future until such time as the Company successfully
consummates a merger or
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acquisition, of which there can be no assurance. In addition, once such a merger
or acquisition is so consummated, there can be no assurance that the Company
will pay any dividends on its securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
audited financial statements and notes thereto included herein. In connection
with, and because it desires to take advantage of, the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward looking statements in the following discussion
and elsewhere in this report and in any other statement made by, or on the
behalf of the Company, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update forward
looking statements.
(a) Plan of Operation.
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business, in exchange for its securities. As of the date of
this report, management of the Company has had preliminary discussions with
potential merger or acquisition candidates, but there is no definitive agreement
between the Company and any third party relevant thereto. In the event the
Company does enter into an agreement with such a third party, the Board of
Directors does intend to obtain certain assurances of value of the target entity
assets prior to consummating such a transaction, with further assurances that an
audited financial statement would be provided within sixty days after closing of
such a transaction. Closing documents relative thereto will include
representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
The Company has no full time employees. The Company's President and
Secretary/Treasurer have agreed to allocate a portion
15
<PAGE>
of their time to the activities of the Company, without compensation. These
officers anticipate that the business plan of the Company can be implemented by
their devoting approximately 20 hours per month to the business affairs of the
Company and, consequently, conflicts of interest may arise with respect to the
limited time commitment by such officers.
Because the Company presently has nominal overhead and no material
financial obligations, management of the Company believes that the Company's
short term cash requirements can be satisfied by management injecting whatever
nominal amounts of cash into the Company to cover these incidental expenses.
There are no assurances whatsoever that any additional cash will be made
available to the Company through any means.
Year 2000 Disclosure
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. As a result, many companies will be required to undertake major projects
to address the Year 2000 issue. Because the Company has no assets, including any
personal property such as computers, it is not anticipated that the Company will
incur any negative impact as a result of this potential problem. However, it is
possible that this issue may have an impact on the Company after the Company
successfully consummates a merger or acquisition. Management intends to address
this potential problem with any prospective merger or acquisition candidate.
There can be no assurances that new management of the Company will be able to
avoid a problem in this regard after a merger or acquisition is so consummated.
ITEM 7. FINANCIAL STATEMENTS
16
<PAGE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
For the Years Ended December 31, 1999
and December 31, 1998
and For the Period March 15, 1993 (inception)
through December 31, 1999
17
<PAGE>
INDEX
Page
----
Independent Auditor's Report 1
Balance Sheets 2
Statements of Revenues and Expenses 3
Statement of Changes in Stockholders' Equity (Deficit) 4
Statements of Cash Flows 5
Notes to Financial Statements 6
18
<PAGE>
GARY A. CASE
Certified Public Accountant
3230 E. Imperial Highway, Ste. 200
Brea, CA 92821-6734
Tel: (714)986-1850
Fax: (714)986-1855
INDEPENDENT AUDITOR'S REPORT
- ----------------------------
TO THE BOARD OF DIRECTORS OF
THE CZECH CONNECTION, INC.
We have audited the accompanying balance sheets of The Czech Connection, Inc. (a
Development State Company) as of December 31, 1999 and December 31, 1998, the
related statements of Revenues and Expenses, Changes in Stockholders'
Equity/(Deficit) and Cash Flows for the Years ended December 31, 1999, December
31, 1998, and the period March 15, 1993 (inception) through December 31, 1999.
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 the 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 presentations.
We believe that the audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage of operations and
has not generated revenues from operations. Because the Company is in the
development stage of operations, substantial doubt is raised about is ability to
continue as a going concern. The Company's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Czech Connection, Inc. as
of December 31, 1999, and December 31, 1998 and the results of its operations
and its cash flows for the Years ended December 31, 1999, December 31, 1998, and
the period March 15, 1993 (inception) through December 31, 1999 in conformity
with generally accepted accounting principles.
w/Gary A. Case
- --------------------------------
GARY A. CASE, CPA
Brea, California
January 25, 2000
-1-
19
<PAGE>
<TABLE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
BALANCE SHEETS
<CAPTION>
December 31, December 31,
ASSETS: 1999 1998
--------- ---------
<S> <C> <C>
Current Assets $ 0 $ 0
Organization Costs 500 500
--------- ---------
Total Assets $ 500 $ 500
========= =========
LIABILITIES:
Current Liabilities
Accounts Payable $ 600 $ 500
--------- ---------
Total Current Liabilities 600 500
--------- ---------
Total Liabilities 600 500
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock - Par Value $.001 per share;
15,000,000 Shares Authorized,
500,000 Shares Issued and Outstanding 500 500
Additional Paid-In Capital -- --
Retained Deficit, accumulated in the
development stage (600) (500)
--------- ---------
Total Stockholders' Equity (100) 0
--------- ---------
Total Liabilities and Stockholders' Equity $ 500 $ 500
========= =========
See accompanying notes and accountant's report.
</TABLE>
-2-
20
<PAGE>
<TABLE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
STATEMENTS OF REVENUES AND EXPENSES
<CAPTION>
Period
3/15/93
(Inception)
Year Ended Year Ended to
12/31/99 12/31/98 12/31/99
-------- -------- --------
<S> <C> <C> <C>
REVENUE:
Total Revenue $ 0 $ 0 $ 0
-------- -------- --------
EXPENSES:
Taxes and Licenses 100 100 600
-------- -------- --------
Total Expenses 100 100 600
-------- -------- --------
Net Income/(Loss) $ (100) $ (100) $ (600)
======== ======== ========
Net loss per share $ .0002 $ .20 $ .0012
======== ======== ========
See accompanying notes and accountant's reports.
</TABLE>
-3-
21
<PAGE>
<TABLE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
<CAPTION>
Number of Additional Retained
Common Common Paid-In Earnings
Shares Stock Capital (Deficit) Total
-------- ------ ------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance as at
March 15, 1993 -- -- -- -- --
Issuance of Common Stock 500 $ 500 $ 500
Net Income (Loss)
from March 15, 1993
(inception) to
December 31, 1993 0 0
-------- ------ ------- --------- -------
Balance as at
December 31, 1993 500 500 0 0 500
Net Income (Loss)
December 31, 1994 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1994 500 500 0 (100) 400
Net Income (Loss)
December 31, 1995 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1995 500 500 0 (200) 300
Net Income (Loss)
December 31, 1996 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1996 500 500 0 (300) 200
Net Income (Loss)
December 31, 1997 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1997 500 500 0 (400) 100
Net Income (Loss)
December 31, 1998 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1998 500 500 0 (500) 0
Stock Split (1000 to 1) 499,500
Net Income (Loss)
December 31, 1999 (100) (100)
-------- ------ ------- --------- -------
Balance as at
December 31, 1999 500,000 500 0 (600) (100)
See accompanying notes and accountant's report.
</TABLE>
-4-
22
<PAGE>
<TABLE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
STATEMENTS OF CASH FLOWS
<CAPTION>
Period
3/15/93
Year Year (inception)
Ended Ended to
12/31/99 12/31/98 12/31/99
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Operating Activities $ 0 $ 0 $ 0
Cash Paid for Operating Activities 0 0 0
-------- -------- --------
Net Cash Provided by Operating Activities 0 0 0
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Cash Used in Investing Activities 0 0 (500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Cash from Financing Activities 0 0 500
-------- -------- --------
Net Decrease in Cash and Cash Equivalents 0 0 0
Cash and Cash Equivalents at
Beginning of Period 0 0 0
-------- -------- --------
Cash and Cash Equivalents at End of Period 0 0 0
======== ======== ========
Reconciliation of Net Profit to Net
Cash Provided by Operating Activities:
Net Income/(Loss) $ (100) $ (100) $ (600)
-------- -------- --------
Adjustments to reconcile net income to net Provide by Operating Activities:
Increase in Accounts Payable 100 100 600
-------- -------- --------
Total Adjustments 100 100 600
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 0 $ 0 $ 0
======== ======== ========
See accompanying notes and accountant's report.
</TABLE>
-5-
23
<PAGE>
THE CZECH CONNECTION, INC.
(a Development Stage Company)
(a Nevada Corporation)
NOTES TO FINANCIAL STATEMENTS
as of December 31, 1999 and December 31, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
The Czech Connection, Inc., a Nevada Corporation, was incorporated on March 15,
1993. The Company intends to engage in one or more mergers with or acquisitions
of target entities which may be private companies, partnership, or sole
proprietorship.
The Company is in the development stage, not yet commencing its planned
principal operations. The Company has not yet generated revenue. The Company is
currently negotiating to merge or acquire certain target entities with
profitable operations or substantial capital.
Net loss per common share is based on the weighted average of common shares
outstanding during the period. As of December 31, 1999 there were 500,000
outstanding shares of common stock and as of December 31, 1998 there were 500
outstanding shares of common stock.
NOTE 2: INCOME TAXES
- ---------------------
The Company has not filed required federal income tax returns from inception
through 1998. Due to the late filing of these tax returns a minimum penalty of
$600.00 has been accrued and included in accounts payable on the balance sheet.
NOTE 3: CAPITALIZATION
- -----------------------
The Czech Connection, Inc. initially authorized 2,500 shares of common stock
without a par value. On September 21, 1993, the company issued 500 shares of
stock at $1.00 per share for $500. On January 6, 1999 the Company approved a
1000 to 1 forward stock split of its common stock and approved an increase in
its total authorized common stock to 15,000,000 shares.
NOTE 4: RELATED PARTY EVENTS
- -----------------------------
The Company maintains its principle offices in space provided by an officer of
the company on a rent free basis. The office is located at 6 Venture, Suite 207,
Irvine, California.
NOTE 5: YEAR END DATE
- ----------------------
The Company's year end is December 31.
-6-
24
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Officers continue in office at the pleasure of the Board of Directors.
The Directors and Officers of the Company as of the date of this report are
as follows:
Name Age Position
---- --- --------
Richard Unwin 58 President, Director
Ronald J. Baer 38 Secretary, Treasurer, Director
Ken Barnes 60 Director
All Directors of the Company will hold office until the next annual meeting
of the shareholders and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors and hold office
until their death or until they resign or are removed from office.
There are no family relationships among the officers and directors. There
is no arrangement or understanding between the Company (or any of its directors
or officers) and any other person pursuant to which such person was or is to be
selected as a director or officer.
(b) Resumes
Richard Unwin, President and a director. Mr. Unwin held the his positions
of President, Secretary, Treasurer and sole Director from the inception of the
Company to January 1999. In January 1999, Mr. Unwin was elected as President and
a Director of the Company. Mr. Unwin has been the owner of Emergi-Cash, a
payroll and emergency cash business in Santa Ana, California since 1993. Mr.
Unwin received a Bachelor of Arts Degree from the University of California at
Riverside in 1966. Mr. Unwin will devote approximately 20 hours per month to the
business of the Company.
Ronald J. Baer, Secretary, Treasurer and Director. Mr. Baer has held his
positions as Secretary, Treasurer and a Director of the Company since January
1999. Since 1986, Mr. Baer has been the
25
<PAGE>
owner of ATP Fitness, Lake Forest, California, a physical fitness, nutrition and
training facility. Mr. Baer is a licensed real estate agent in the State of
California and took various general education courses at Moorpark College in
Moorpark, California from 1979- 1981. Mr. Baer will devote approximately 10
hours per month to the business of the Company.
Ken Barnes, Director. Mr. Morrison has held his position with the Company
since January 1999. For the past five years, Mr. Barnes has been a licensed real
estate agent for Century 21 Real Estate, Bakersfield, California. Mr. Barnes
attended Redlands College for two years beginning in 1959. Mr. Barnes is a
member of the National Skeet Shooting Hall of Fame and California Skeet Shooting
Hall of Fame. He is the winner of eight world individual skeet shooting titles.
Mr. Barnes will devote approximately 10 hours per month to the business of the
Company.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and person who own more than 10% of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. All of the aforesaid persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. As of the date of this report, the Company has not received any such
filings from the applicable persons responsible for filing these reports.
However, it is believed that there has been no change in each applicable
persons' ownership of the Company's securities since they acquired the same.
ITEM 10. EXECUTIVE COMPENSATION.
Remuneration
The following table reflects all forms of compensation for services to the
Company for the fiscal years ended December 31, 1999 and 1998 of the chief
executive officer of the Company.
26
<PAGE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- ------ ----- ------ -------- ------- ------- ------
Richard
Unwin, (1)
President & 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Director 1998 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
- -------------------------
(1) It is not anticipated that any executive officer of the Company will
receive compensation exceeding $100,000 until such time as the Company
successfully consummates a business combination.
The Company maintains a policy whereby the directors of the Company may be
compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company did not reimburse any director
for such expenses during the fiscal year ended December 31, 1999.
In addition to the cash compensation set forth above, the Company
reimburses each executive officer for expenses incurred on behalf of the Company
on an out-of-pocket basis. The Company cannot determine, without undue expense,
the exact amount of such expense reimbursement. However, such reimbursements did
not exceed, in the aggregate, $1,000 during fiscal year 1999.
There are no bonus or incentive plans in effect, nor are there any
understandings in place concerning additional compensation to the Company's
officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to
27
<PAGE>
be the beneficial owner of more than 5% of such securities, as well as by all
directors and officers of the Company. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to the
shares shown.
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent of
Title of Class Owner Owner Class
- -----------------------------------------------------------------
Common Richard Unwin(1) 125,000 25%
1141 Appian Way
Santa Ana, CA 92705
Common Ronald J. Baer(1) 100,000 20%
21311 Vintage Way
Lake Forest,CA 92630
Common Ken Barnes(1) 100,000 20%
8895 Town Center Dr.#105
San Diego, CA 92122
Common All Officers and 325,000 65%
Directors as a
Group (3 persons)
- -------------------
(1) Officer and/or director.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no related party transactions which occurred during the past two
years and which are required to be disclosed pursuant to the requirements
included under Item 404 of Regulation S-B.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The following Exhibits were filed with the Securities and Exchange
Commission in the Exhibits to Form 10-SB, filed on or about February 10, 1999,
and are incorporated by reference herein:
3.1 Certificate and/or Articles of Incorporation and
Amendments
3.2 Bylaws
28
<PAGE>
The following Exhibits are filed herewith:
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fiscal year
ended December 31, 1999.
29
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 6, 2000.
THE CZECH CONNECTION, INC.
(Registrant)
By:/s/ Richard Unwin
--------------------
Richard Unwin, President
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
indicated on March 6, 2000.
/s/ Richard Unwin
- --------------------------------
Richard Unwin, Director
/s/ Ronald J. Baer
- --------------------------------
Ronald J. Baer, Director
/s/ Ken Barnes
- --------------------------------
Ken Barnes, Director
30
<PAGE>
THE CZECH CONNECTION, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
EXHIBITS Page No.
27 Financial Data Schedule.....................................32
31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 500
<CURRENT-LIABILITIES> 600
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> (600)
<TOTAL-LIABILITY-AND-EQUITY> 500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (100)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
