United States 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
For the fiscal year ended February 28, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______________to_______________
Commission file Number: 0-25429
FAIRFAX GROUP, INC.
(Name of small business issuer in its charter)
Florida 65-0832025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6758 N. Military Trail, Unit 303 West Palm Beach, Florida 33407
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (561) 840-9100
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of exchange on
which registered
None None
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value
(Title of Class)
<PAGE>
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__
<PAGE>
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-K [ X ]
State issuer's revenues for its most recent fiscal year....$00.00
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was sold, or the average bid and
asked prices of such common equity, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of
the Exchange Act).
As of May 26, 1999, the aggregate market value of common stock,
$0.01 par value, held by non-affiliates was approximately
$8,750.00 (350,000 shares at $0.025, which is the last price
which the registrant's common equity was sold).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date.
As of May 26, 1999, there were 6,150,000 shares of common stock,
$0.01 par value, issued and outstanding.
<PAGE>
PART I
Item 1. Description of Business
(a) Business Development
Fairfax Group, Inc. (the "Registrant"), was incorporated
under the laws of the State of Florida on April 23, 1998 as a
wholly owned subsidiary of Fairfax Group, Inc., a Nevada
corporation ("Fairfax Nevada"). On September 8, 1998, the
Registrant became the successor corporation to a merger between
Fairfax Nevada and the Registrant.
Fairfax Nevada was incorporated under the laws of the State
of Nevada on March 9, 1982 as Resorts Marketing Unlimited, Inc.
It was authorized to issue Twenty Five Million (25,000,000)
shares of common stock, $0.001 par value. Since its inception,
Fairfax Nevada never engaged in any substantive commercial
business or other business operations. In June, 1995, Fairfax
Nevada had a shareholder base of approximately 500 shareholders
with approximately 2,050,000 shares outstanding. On July 11,
1995, Mr. Fred Keller, an individual, made his initial purchase
of an aggregate of 1,800,000 shares from 12 Fairfax Nevada
affiliate shareholders and, as a result, became the only
affiliate shareholder out of the approximately 500 shareholders
of Fairfax Nevada. In September 1995, Fred Keller, Trustee,
Keller Trust, assigned certain judgments (the "Judgements") to
Fairfax Nevada in Exchange for 4,000,000 shares of Fairfax Nevada
valued at $100,000 or $0.025 per share issued to Fred Keller, an
individual. Fairfax Nevada never successfully collected on the
Judgments, and on February 24, 1998, Fairfax Nevada reassigned
the Judgements to Fred Keller in exchange for $1,000 cash and
Fred Keller making a $1,000 loan to the Registrant.
As described above, on September 8, 1998, the Registrant and
Fairfax Nevada merged, and the Registrant is the successor
corporation to the merger. The primary purpose of the merger was
to redomicile Fairfax Nevada to the State of Florida in order for
Fairfax Nevada to become a Florida corporation. Among other
things, the plan of merger provided that each share of the
Registrant's capital stock issued and outstanding prior to the
merger, and each share of the Registrant's capital stock held in
treasury prior to the merger, would cease to exist; and each
share of Fairfax Nevada's capital stock issued and outstanding
prior to the merger, and each share of the Fairfax Nevada's
capital stock held in treasury prior to the merger, would cease
to exist and be converted into an equal number of shares of the
Registrant's capital stock identical with the Fairfax Nevada
shares being exchanged.
(b) Business of Registrant
The Registrant's present officers and directors are the
Registrant's only employees who devote approximately 10% of their
time to the business of the Registrant. The Registrant has no
full time employees and owns no real estate.
The Registrant is in its early developmental and promotional
s tages. The Registrant is a "shell" company conducting virtually
no business operation, other than its efforts to seek merger
partners or acquisition candidates. The Registrant does not
engage in any substantive commercial business or other business
<PAGE> 2
operations.
The Registrant is a corporate vehicle created to seek to
effect a merger, exchange of capital stock, asset acquisition or
other similar business combination (a "Business Combination")
with an operating or development stage business (the "Target
Business") which desires to employ the Registrant to become a
reporting corporation under the Securities Exchange Act of 1934
("Exchange Act"). On February 5, 1999, the Registrant elected to
register the Registrant's common stock, par value $0.01 (the
"Common Stock") pursuant to a Form 10-SB registration statement
on a voluntary basis in order to create a reporting "shell"
company. The Registrant has a shareholder base of approximately
500 shareholders and 6,150,000 shares of Common Stock
outstanding, 5,800,000 of which are restricted pursuant to Rule
144 of the Securities Act of 1933, as amended (the "Securities
Act"). See "Description of Securities". Pursuant to resolution
of the Registrant's board of directors, no Business Combination
may occur prior to the Registrant obtaining the requisite audited
financial statements required pursuant to Form 8-K (or its
equivalent) promulgated under the Exchange Act.
The Registrant intends to seek potential business
opportunities and effectuate a Business Combination with a Target
Business with significant growth potential which, in the opinion
of management, could provide a profit to the Registrant and its
shareholders. The Registrant intends to seek opportunities
demonstrating the potential of long term growth as opposed to
short term earnings. The Registrant's efforts in identifying a
prospective Target Business are expected to emphasize businesses
primarily located in the United States; however, the Registrant
reserves the right to acquire a Target Business located primarily
elsewhere. While the Registrant may, under certain circumstances,
seek to effect Business Combinations with more than one Target
Business, as a result of its limited resources, the Registrant
will, in all likelihood, have the ability to effect only a single
Business Combination. The Registrant may effect a Business
Combination with a Target Business which may be financially
unstable or in its early stages of development or growth. The
Registrant will not restrict its search to any specific business,
industry or geographical location, and the Registrant may
participate in a business venture of virtually any kind or
nature. Present management of the Registrant may become involved
in management of the Target Business and/or may hire qualified
but as yet unidentified individuals to manage such Target
Business. Presently, the Registrant has no plan, proposal,
agreement, understanding or arrangement to acquire or merge with
any specific business or Registrant, and the Registrant has not
identified any specific business or Registrant for investigation
and evaluation.
The Registrant encounters intense competition from other
entities having a business objective similar to that of the
Registrant. Many of these entities are well-established and have
extensive experience in connection with identifying and effecting
Business Combinations directly or through affiliates. Many of
these competitors possess greater financial, marketing,
technical, personnel and other resources than the Registrant and
there can be no assurances that the Registrant will have the
ability to compete successfully. The Registrant's financial
resources are limited in comparison to those of many of its
competitors. This inherent competitive limitation could compel
the Registrant to select certain less attractive acquisition
prospects. There can be no assurances that such prospects will
permit the Registrant to meet its stated business objectives.
The Registrant believes, however, that the Registrant's status as
a reporting public entity could give the Registrant a competitive
advantage over privately held entities having a similar business
objective to that of the Registrant in acquiring a business with
<PAGE> 3
significant growth potential.
Item 2. Properties.
The executive and business office of the Registrant
consist of leased office space located at 6758 N. Military Trail,
Unit 303 West Palm Beach, Florida 33407 which is leased at fair
market prices.
Item 3. Legal Proceedings.
No material legal proceedings are pending of which the
Registrant is a party.
Item 4. Submission of Matters to a Vote of Security Holders.
On February 5, 1999 the Registrant received written consents
without a shareholders' meeting from 5,800,000 of 6,150,000
shares entitled to vote to (i) authorize an increase in the
authorized number of shares of the Registrant from 20,000,000,
par value $0.001 to 50,000,000, par value $0.01; (ii) effectuate
a registration statement on Form 10-SB with the Securities and
Exchange Commission on behalf of the Registrant to register the
Registrant's outstanding class of common stock, $0.01 par value;
and (iii) elect out of the Florida Anti-Takeover Statutes
relating to affiliated transactions and control-share
acquisitions. No votes were cast against the above action.
Pursuant to Florida Statute 607.0704, a Notice of Action
Taken By Shareholder's Written Consent was provided to all
shareholders of the Registrant with respect to the above action
taken on February 5, 1999.
PART II
Item 5. Market for Common Equity and Related Stockholders
Matters.
Approximately 500 shareholders hold the Registrant's Common
Stock. No public trading market presently exists for the
Registrant's Common Stock, and there are no present plans,
proposals, arrangements or understandings with any person with
regard to the development of any trading market in any of the
Registrant's securities. No shares of Common Stock have been
registered for resale under the blue sky laws of any state. The
holders of shares of Common Stock and persons who may desire to
purchase shares of Common Stock in any trading market that might
develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of
shareholders to sell their shares and of purchasers to purchase
the shares of Common Stock. Some jurisdictions may not allow the
trading or resale of blind-pool or "blank-check" securities under
any circumstances. Accordingly, shareholders should consider the
secondary market for the Registrant's securities to be a limited
one.
The Registrant has not paid any dividends on its Common
Stock to date and does not presently intend to pay cash dividends
prior to the consummation of a Business Combination. The payment
of cash dividends in the future, if any, will be contingent upon
the Registrant's revenues and earnings, if any, capital
requirements and general financial condition subsequent to
<PAGE> 4
consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the
discretion of the Registrant's then board of directors. It is the
present intention of the board of directors to retain all
earnings, if any, for use in the Registrant's business operations
and, accordingly, the board of directors does not anticipate
paying any cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
(a) Plan of Operation
The Registrant is presently a development stage company
conducting virtually no business operation, other than its
efforts to effect a Business Combination with a Target Business
which the Registrant considers to have significant growth
potential. To date, the Registrant has neither engaged in any
operations nor generated any revenue. It receives no cash flow.
The Registrant will carry out its plan of business as discussed
above. See "Description of Business". The Registrant cannot
predict to what extent its liquidity and capital resources will
be diminished prior to the consummation of a Business Combination
or whether its capital will be further depleted by the operating
losses, if any, of the Target Business which the Registrant
effectuates a Business Combination with.
The Registrant does not generate any cash revenue or receive
any type of cash flow. Since February of 1997, Fred Keller,
Trustee, Fred Keller Trust, an affiliate shareholder of the
Registrant, has made loans to the Registrant on an almost month
by month basis in the form of demand notes payable bearing
interest at the prime rate plus two percent adjusted quarterly.
The Registrant has obtained a written commitment from Fred
Keller, Trustee, Fred Keller Trust, to continue to make such
loans to the Registrant during the next 12 months, and management
considers this commitment sufficient to enable the Registrant to
meet its cash requirements for the next 12 months. The
Registrant's operating costs, which includes professional fees
and costs related to a Business Combination, are likely to
approximate $100,000 during the next 12 months.
As of the date of this report, the Registrant has not yet
identified a Target Business to effectuate a Business Combination
with. Therefore, the Registrant is unable predict its cash
requirements subsequent to a Business Combination with the
unidentified Target Business. Subsequent to the occurrence of a
Business Combination, the Registrant may be required to raise
capital through the sale or issuance of additional securities in
order to ensure that the Registrant can meet its operating costs
for the remainder of its fiscal year. No commitments of any kind
to provide additional funds to the Registrant subsequent to a
Business Combination have been made by management, other
shareholders or any other third person. Accordingly, there can be
no assurance that additional funds will be available to the
Registrant to allow it to cover its expenses subsequent to a
Business Combination. If the Registrant cannot meet its operating
costs subsequent to a Business Combination, unless the Registrant
can obtain additional capital, the Registrant may cease
operations.
<PAGE> 5
Item 7. Financial Statements
Financial Statements of the Registrant are attached as
Appendix A (following Exhibits) and included as part of this Form
10-KSB Report. A list of said Financial Statements is provided
in response to Item 13 of this Form 10-KSB Report.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act.
(a) Identity of directors and executive officers.
The current directors and executive officers of the
Registrant are as follows:
<TABLE>
<CAPTION>
Name Age Position Term
<S> <C> <C> <C>
Ernest L. Porter 60 Director, Chmn. Of Since 4/98
the Board, Chief
Executive Officer,
President
William H. Ritts, III 55 Director, Chief Since 12/98
Financial Officer,
Secretary
Kember C. Korte 47 Director Since 2/99
___________________________
</TABLE>
Each director is elected until the next Annual Meeting of
shareholders and until his successor is qualified.
(b) Business experience of directors and executive
officers.
Mr. Porter has served as a Director and Chief Executive
Officer of the Registrant since its inception in April of 1998.
From September 1997 to April 1998, Mr. Porter worked as a Senior
Loan Officer at Flagship Mortgages Services, a division of
Republic Bank, West Palm Beach, Florida. From June 1988 to
September 1998, Mr. Porter served as the President and Chief
Executive Officer of Florida Realty Group, Inc. a private real
estate investment company. Mr. Porter received his Bachelor of
Arts Degree in English from Stetson University in 1961.
Mr. Ritts has served as a Director, Chief Financial Officer
and Secretary of the Registrant since December 1998. Mr. Ritts
presently also serves as the Chief Financial Officer of Kellway
<PAGE> 6
Company, a private commercial/industrial real estate investment
and management company. From 1996 to December 1998, Mr. Ritts
served as Chief Financial Officer and Senior Vice President of
City Auto Resources, Inc., a private automobile financing
company. From 1994 to 1995, Mr. Ritts served as Treasurer and
Chief Financial Officer of General Acceptance Corporation, a
publically traded automobile financing company. Mr. Ritts
received his Bachelor of Science Degree in Accounting from
Pennsylvania State University in 1965.
Mr. Korte has served as a director of the Registrant since
February 1999. From 1987 to present, Mr. Korte also serves as a
Vice President and General Manager of Kellway Company, a private
commercial/industrial real estate investment and management
company. Mr. Korte received his Bachelor of Arts Degree in
English from Salisbury State University in 1973.
Section 16(a) Beneficial Ownership Reporting Compliance.
To the best of Registrant's knowledge, no officer, director
and/or beneficial owner of more than 10% of the Registrant's
common stock, failed to file reports as required by Section 16(a)
of the Exchange Act during the most recent fiscal year.
Item 10. Executive Compensation.
<TABLE>
<CAPTION>
Executive Compensation.
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------------------------------- ------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Annual Restricted Securities All Other
Name & Compen- Stock Underlying LTIP Compen-
Position Year Salary($) Bonus($) sation Award(s) Options/ Payouts sation
($) ($) Sars(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rose Keller.
Director,
President
Secretary(1) 1998 -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------- ------------------------------
Ernest L.
Porter.
Director
Chmn. of the
Board/Presi
dent/CEO 1998 30,000 -0- -0- -0- -0- -0- -0-
____________________________________
</TABLE>
(1) The positions held by Ms. Keller were with respect to
the Registrant's predecessor, Fairfax Group, Inc., a Nevada
Corporation.
Compensation of Directors
During the fiscal year ended February 28, 1999, no other
officer or director received any type of compensation from the
<PAGE> 7
Registrant for serving as such.
For 1999, in consideration for serving as directors of the
Registrant, the Registrant compensates each of its directors
$1,000 per year plus expenses related to serving as a director of
the Registrant. The Registrant has no stock, stock option,
retirement, pension, or profit-sharing programs for the benefit
of directors, officers or other employees, but the board of
directors may recommend adoption of one or more such programs in
the future in order to compensate such persons. No other
arrangements are presently in place regarding compensation to
directors for their services as directors or for committee
participation or special assignments.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of the date hereof, the
names, addresses, amount and nature of beneficial ownership and
percent of such ownership of each person known to the Registrant
to be the beneficial owner of more than five percent (5%) of the
Registrant's Common Stock:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial Owner
<S> <C> <C>
Fred Keller 5,800,000 94.3%
6758 North Military Trail, Suite 303
West Palm Beach, Florida 33407
</TABLE>
The following table sets forth, as of the date hereof, the names,
addresses, amount and nature of beneficial ownership and percent of such
ownership of the Registrant's Common Stock of each of the officers and directors
of the Registrant, and the officers and directors of the Registrant as a
group:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial Owner
<S> <C> <C>
Ernest L. Porter - 0%
6758 North Military Trail, Suite 303
West Palm Beach, FL 33407
William H. Ritts - 0%
6758 North Military Trail, Suite 303
West Palm Beach, FL 33407
Kember C. Korte - 0%
6758 North Military Trail, Suite 301
West Palm Beach, FL 33407
All Officers and Directors
as a Group (3 persons) - 0%
</TABLE>
<PAGE> 8
As of the date of this report, no arrangement exists
regarding a change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions.
The Registrant was incorporated under the laws of the State
of Florida on April 23, 1998 as a wholly owned subsidiary of
Fairfax Group, Inc., a Nevada corporation ("Fairfax Nevada").
On September 8, 1998, the Registrant became the successor
corporation to a merger between Fairfax Nevada and the
Registrant. The primary purpose of the merger was to redomicile
Fairfax Nevada to the State of Florida in order for Fairfax
Nevada to become a Florida corporation. Among other things, the
plan of merger provided that each share of the Registrant's
capital stock issued and outstanding prior to the merger, and
each share of the Registrant's capital stock held in treasury
prior to the merger, would cease to exist; and each share of
Fairfax Nevada's capital stock issued and outstanding prior to
the merger, and each share of the Fairfax Nevada's capital stock
held in treasury prior to the merger, would cease to exist and
be converted into an equal number of shares of the Registrant's
capital stock identical with the Fairfax Nevada shares being
exchanged. All assets and liabilities of Fairfax Nevada were
transferred to the Registrant.
During the fiscal year ended 1999, Fred Keller, Trustee,
Fred Keller Trust, an affiliate shareholder of the Registrant,
made loans to the Registrant on an almost month by month basis
in the form of demand notes payable bearing interest at the
prime rate plus two percent (2%) adjusted quarterly. During this
period, the aggregate value of the principal on such loans
approximated $91,500.
No officer, director promoter or affiliate of the
Registrant has or proposes to have any direct or indirect
material interest in any asset proposed to be acquired by the
Registrant through security holdings, contracts, options, or
otherwise.
Although management has no current plans to cause the
Registrant to do so, the officers and directors of the
Registrant may actively negotiate for or otherwise consent to
the disposition of any portion of their Common Stock as a
condition to or in connection with a Business Combination.
Therefore, it is possible that the terms of any Business
Combination will provide for the sale of some shares of Common
Stock held by management or affiliates of management. Thus, it
is likely that no other shareholder of the Registrant will be
afforded the right to sell their shares of Common Stock in
connection with a Business Combination pursuant to the same
terms that such selling officers, directors or affiliates will
be provided. Also, such shareholders will not be afforded an
opportunity to approve or consent to such management or
affiliate's stock purchase. It is more likely than not that any
sale of securities by the Registrant's current stockholders to
an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any
payment to current stockholders in the context of an acquisition
involving the Registrant would be determined entirely by the
largely unforeseeable terms of a future agreement with an
unidentified business entity.
Pursuant to Section 607.0901(5) of the Florida Business
Corporation Act, the Registrant has inserted certain provisions
in its articles of incorporation, as amended, which has the
effect of removing the Registrant from the purview of the
affiliated transaction statute promulgated under Section
<PAGE> 9
607.0901 of the Florida Business Corporation Act and hence, the
protection afforded by such statute. Section 607.0901 applies
to transactions between a corporation and an "interested
shareholder" (i.e., generally speaking, a "beneficial owner" of
more than 10% of the outstanding voting shares of such
corporation) or any "affiliate" or "associate" of the interested
shareholder, as defined in the statute. In general, the statute
requires that either a majority of the disinterested directors
or a super majority of the disinterested shareholders of the
corporation approve certain significant corporate transactions
with certain related or "affiliated" parties -- "affiliated
transactions". By removing the Registrant from the purview of
Florida's affiliated transaction statute, the special
shareholder and director voting requirements of the statute do
not apply to affiliated transactions with the Registrant.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(3) Charter and Bylaws.
(i) Articles of Incorporation and Amendment
to Articles of Incorporation.**
(ii) Bylaws.**
(4) Instruments defining the rights of security
holders.
(i) Articles of Incorporation and Amendment
to Articles of Incorporation.**
(ii) Bylaws.**
(10) Material Contracts.
10.1 Articles of Merger (Agreement and Plan of Merger
incorporated therein).**
10.2 Business Lease.**
10.3 Ernest Porter Employment Contract.**
10.4 Specimen Sample of Demand Promissory Notes made
by the Registrant to Fred Keller.**
(27) Financial Data Schedule.
(i) Financial Data Schedule.
**Incorporated by reference to Registrant's Form 10-SB filed
February 23, 1999.
<PAGE> 10
(b) Reports on Form 8-K.
During the last quarter of the year ended February
28, 1999, no reports on Form 8-K were filed by the
Registrant.
Appendix A
Financial Statements.
The following Audited Financial Statements of Registrant
are filed as part of this Form 10-KSB Report:
1. Balance Sheets dated February 28, 1999 and 1998.
2. Statement of Operations for the Years ended February
28, 1999 and 1998 and the period from March 1, 1991
(date of quasi-reorganization) through February 28,
1999.
3. Statements of Changes in Stockholders' Deficit for the
period from March 1, 1991 (date of quasi-
reorganization) through February 28, 1999.
4. Statements of Cash Flows for the Years ended February
28,1999 and 1998 and the period from March 1, 1991
(date of quasi-reorganization) through February 28,
1999.
5. Notes to Financial Statements for the Years ended
February 28,1999 and 1998 and the period from March 1,
1991 (date of quasi-reorganization) through February
28, 1999.
APPENDIX A
===========
FAIRFAX GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
EXAMINATION OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED
FEBRUARY 28, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
Page
Independent Auditor's Report 1
Financial Statements:
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholders' Deficit 4
Statements of Cash Flows 5
Notes to Financial Statements 6-7
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders
of Fairfax Group, Inc.
West Palm Beach, Florida
We have audited the accompanying balance sheets of Fairfax Group, Inc. (a
development stage company) as of February 28, 1999 and 1998 and the
related statements of operations, changes in stockholders' deficit, and
cash flows for the years then ended and for the period from March 1, 1991
(date of quasi-reorganization) through February 28, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fairfax
Group, Inc. as of February 28, 1999 and 1998, and the results of its
operations and its cash flows for the fiscal years then ended and for the
period from March 1, 1991 (date of quasi-reorganization) through February
28, 1999, in conformity with generally accepted accounting principles.
Michaelson & Co., P.A.
May 21, 1999
<PAGE> F-1
FAIRFAX GROUP, INC.
(A Development Stage Company)
BALANCE SHEETS
FEBRUARY 28, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,706 $ 2,758
--------- ---------
1,706 2,758
--------- ---------
TOTAL ASSETS $ 1,706 $ 2,758
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,072 $ 537
Stockholder notes payable 111,814 14,301
--------- ---------
112,886 14,838
========= =========
STOCKHOLDERS' DEFICIT:
Common stock; $.01 par value, authorized
50,000,000 shares at February 28, 1999 and
$.001 par value, authorized 25,000,000
shares at February 28, 1998, 6,150,000 shares 61,500 6,150
issued and outstanding at February 28, 1999
and 1998.
(Deficit) accumulated during the development
stage (172,680) (18,230)
-------- --------
(111,180) (12,080)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,706 $ 2,758
======== ========
</TABLE>
See Independent Auditor's Report and Accompanying Notes
<PAGE> F-2
FAIRFAX GROUP, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 1999 AND 1998 AND FOR THE PERIOD FROM
MARCH 1, 1991 (Date of Quasi-Reorganization) THROUGH FEBRUARY 28, 1999
<TABLE>
<CAPTION>
MARCH 1
FOR THE YEAR ENDED 1991 THROUGH
FEBRUARY 28 FEBRUARY 28
1999 1998 1999
--------- -------- ------------
<S> <C> <C> <C>
REVENUES:
Income $ - $ - $ 2,676
--------- --------- ---------
- - 2,676
--------- --------- ---------
COSTS AND EXPENSES:
Advertising and promotion 131 - 180
Licenses,Permits and Filing 1,762 1,153 4,373
Bank service charges 183 165 584
Collection costs - - 1,341
Contract labor 9,364 575 11,439
Dues and subscriptions 408 - 473
Rent 25,652 - 25,652
Interest 6,019 993 7,808
Office expenses 5,720 - 5,871
Organizational expense - amortization - - 2,150
Professional fees 19,887 537 25,158
Salaries and payroll taxes 29,892 - 34,894
Travel & Entertainment 52 - 52
Miscellaneous Expenses 30 - 30
--------- --------- ---------
99,100 3,423 120,005
--------- --------- ---------
NET (LOSS) $ (99,100) $ (3,423) $(117,329)
========= ========= =========
(Loss) per share data:
Basic and diluted $ (0.02) $ (0.00) $ (0.04)
========= ========= =========
Weighted average shares outstanding - basic 6,150,000 6,150,000 2,866,500
========= ========= =========
</TABLE>
See Independent Auditor's Report and Accompanying Notes
<PAGE> F-3
FAIRFAX GROUP, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MARCH 1, 1991 (Date of Quasi-Reorganization)
THROUGH FEBRUARY 28, 1999
<TABLE>
<CAPTION>
(DEFICIT)
ACCUMULATED
DURING THE
COMMON STOCK DEVELOPMENT
SHARES AMOUNT STAGE TOTAL
<S> <C> <C> <C> <C>
BALANCE AT MARCH 1, 1991 2,150,000 $ 2,150 $ - $ 2,150
Net (loss) - - - -
--------- -------- --------- ----------
BALANCE AT FEBRUARY 29, 1992 2,150,000 2,150 - 2,150
Net (loss) - - - -
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1993 2,150,000 2,150 - 2,150
Net (loss) - - - -
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1994 2,150,000 2,150 - 2,150
Net (loss) - - - -
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1995 2,150,000 2,150 - 2,150
Stock issued at par value for
cash and judgements
(9/15/95) 4,000,000 4,000 - 4,000
Net (loss) - - (12,738) (12,738)
--------- -------- --------- ----------
BALANCE AT FEBRUARY 29, 1996 6,150,000 6,150 (12,738) (6,588)
Net (loss) - - (2,069) (2,069)
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1997 6,150,000 6,150 (14,807) (8,657)
Net (loss) - - (3,423) (3,423)
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1998 6,150,000 6,150 (18,230) (12,080)
Change in par value
(Note 2) 55,350 (55,350) -
Net (loss) - - (99,100) (99,100)
--------- -------- --------- ----------
BALANCE AT FEBRUARY 28, 1999 6,150,000 $ 61,500 $(172,680) $ (111,180)
========= ======== ========= ==========
</TABLE>
See Independent Auditor's Report and Accompanying Notes
<PAGE> F-4
FAIRFAX GROUP, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1999 AND 1998 AND FOR THE PERIOD FROM
MARCH 1, 1991 (Date of Quasi-Reorganization) THROUGH FEBRUARY 28, 1998
<TABLE>
<CAPTION>
MARCH 1
FOR THE YEAR ENDED 1991 THROUGH
FEBRUARY 28 FEBRUARY 28
1999 1998 1999
--------- --------- ------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) $ (99,100) $ (3,423) $ (117,329)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Changes in assets and liabilities:
Other assets - 1 4,056
Accounts payable 268 49 268
Accrued expenses 267 1,111 804
--------- -------- ----------
NET CASH (USED IN) OPERATING ACTIVITIES (98,565) (2,262) (112,201)
---------- -------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from stockholder notes payable 97,513 4,000 109,908
Proceeds from issuance of common stock - - 3,999
---------- -------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 97,513 4,000 113,907
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH (1,052) 1,738 1,706
CASH AT BEGINNING OF PERIOD 2,758 1,020 -
---------- -------- ----------
CASH AT END OF PERIOD $ 1,706 $ 2,758 $ 1,706
========== ======== ==========
</TABLE>
See Independent Auditor's Report and Accompanying Notes
<PAGE> F-5
FAIRFAX GROUP, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1999 and 1998 AND FOR THE PERIOD FROM
MARCH 1, 1991 (Date of Quasi-Reorganization) THROUGH FEBRUARY 28, 1999
(See Independent Auditor's Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
Fairfax Group, Inc. (the Company) is a development stage enterprise,
which was incorporated under the laws of the State of Nevada on
March 1982. On September 8, 1998, the Company was merged into a
newly formed Florida Corporation.
Method of Accounting:
The company reports the results of its operations using the accrual
method of accounting for both financial and income tax purposes.
Under this method, income is recognized when earned and expenses are
deducted when incurred. The accounting policies of the Company are
in accordance with generally accepted accounting principles and
conform to the standards applicable to development stage companies.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Reclassification of Financial Statement Presentation:
Certain reclassifications have been made to the 1998 financial
statements to conform with the 1999 financial statement
presentation. Such reclassification had no effect on net loss as
previously reported.
Stockholder Notes Payable:
The stockholder notes payable consists of demand notes to the
majority stockholder bearing interest at the prime rate plus two
percent adjusted quarterly.
Income Taxes:
The Company has no taxable income to date; therefore, no provision
for federal or state taxes has been made. The Company may have a
net operating loss carryforward at February 28, 1999. No tax assets
have been recognized due to the uncertainty of future recovery for
tax purposes.
<PAGE> F-6
FAIRFAX GROUP, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1999 and 1998 AND FOR THE PERIOD FROM
MARCH 1, 1991 (Date of Quasi-Reorganization) THROUGH FEBRUARY 28, 1998
(See Independent Auditor's Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Computation of Net Loss Per Share:
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, Earnings Per Share. The Company has reflected the
provisions of SFAS No. 128 in the accompanying consolidated
financial statements for all periods presented. SFAS 128 replaces
the presentation of primary Earnings Per Share (EPS) with a
presentation of basic EPS, which excludes dilution and is computed
by dividing income or loss available to common shareholders by the
weighted average number of common shares outstanding for the period.
The Statement also requires the dual presentation of basic and
diluted EPS on the face of the income statement for all entities
with complex capital structures. During the periods presented, the
Company did not have a complex capital structure.
Related Party Transactions:
The Company entered into a business lease agreement with an entity
affiliated with the majority shareholder as of April 8, 1998. The
one-year lease includes an annual base rent of $26,400 plus sales
tax for office facilities and equipment with an effective date of
April 15, 1998. Before this date, the majority shareholder allowed
the Company to utilize the office space and equipment for free.
2. PAR VALUE
On February 5, 1999, par value was changed from $.001 to $.01 per
share.
<PAGE> F-7
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized:
FAIRFAX GROUP, INC.
By:/s/Ernest L. Porter
Ernest L. Porter, President
Date: May 26, 1999
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By:/s/Ernest L. Porter
Ernest L. Porter, President,
Director
<PAGE> 11
By:/s/William H. Ritts
William H. Ritts, Chief
Financial Officer, Director
By:/s/Kember C. Korte
Kember C. Korte, Director
Date: May 26, 1999
<PAGE> 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAR-01-1998
<CASH> 1,706
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,706
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,706
<CURRENT-LIABILITIES> 112,886
<BONDS> 0
0
0
<COMMON> 61,500
<OTHER-SE> (172,680)
<TOTAL-LIABILITY-AND-EQUITY> 1,706
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,019
<INCOME-PRETAX> (99,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (99,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,100)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
