SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended September 30, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ------------to --------------.
Commission file number: 000-27831
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GENESIS CAPITAL CORPORATION OF NEVADA
(Exact name of small business issuer as specified in its charter)
Nevada 91-1947468
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11701 South Freeway, Burleson, Texas 76028
------------------------------------------
(Address of principal executive office) (Zip Code)
(817) 293-9334
--------------
(Issuer's telephone number)
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 XX No
As of January 8, 2001, the number of outstanding shares of the issuer's
common stock, $0.001 par value, was 2,217,911, and the number of outstanding
shares of preferred stock, $0.001 par value, was 77,755.
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS...............................................3
ITEM 2. DESCRIPTION OF PROPERTY...............................................9
ITEM 3. LEGAL PROCEEDINGS.....................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................10
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
or PLAN OF OPERATIONS.......................................15
ITEM 7. FINANCIAL STATEMENTS.................................................17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS........................18
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS............18
ITEM 10. EXECUTIVE COMPENSATION..............................................18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT........19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................20
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................21
SIGNATURES....................................................................21
INDEX TO EXHIBITS.............................................................22
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
The Company was formed as a Colorado corporation on September 19, 1983, under
the name Bugs, Inc., for the purpose of using microbial and other agents,
including metallurgy, to enhance oil and natural gas production and to
facilitate the recovery of certain metals. Its initial capitalization was
100,000,000 shares of $.001 par value common stock. In July 1989, the Company
approved Articles of Amendment changing its name to Genesis Services, Inc. In
September 1990, the Company approved additional Articles of Amendment changing
its name to Genesis Capital Corporation (sometimes referred to as the "Colorado
Corporation"). In July 1993, the Company decreased its authorized capital from
100,000,000 shares of $.001 par value common stock to 10,000,000 shares of $.01
par value common stock. At that same time, the Company created a class of
10,000,000 shares of no par value preferred stock.
Since 1994 the activities of the Company have been quite limited, because it
sold its wholly owned subsidiary, U.S. Staffing, Inc., during the 1994-95 fiscal
year. In January of 1996--after its sale--U.S. Staffing, Inc. filed for
bankruptcy and restrained the Colorado Corporation from collecting its note
receivable and claimed to own stock in the Colorado Corporation through its U.S.
Benefit Trust. The Company itself has never declared bankruptcy. In December
1997, the Colorado Corporation's shareholders voted unanimously to settle this
claim by issuing 4,500,000 shares of its common stock, restricted under Rule 144
of the Securities Act of 1933, to be held in trust for U.S. Benefit Trust (U.S.
Benefit Trust still owns these shares, though they have been reduced to 113
shares due to a 1:20 reverse stock split in 1997 and a 1:2000 reverse stock
split in 1999). Also at this time, the Company merged with Lincoln Health Fund,
Inc. (which owned land in Tarrant County, Texas which it planned to use in
building a retirement center), increased its authorized capital to 50,000,000
shares of common stock, and authorized a post-merger reverse split of its common
stock on a 1:20 basis. In December 1997 the current management, Reginald Davis
and Jerry Conditt, joined the Company. For the past three years, the Company has
had no operations. The Company is a shell corporation seeking a business to
acquire.
On December 22, 1998, Genesis Capital Corporation of Nevada (sometimes referred
to as the "Nevada Corporation") was incorporated in Nevada for the purpose of
merging with the Colorado Corporation so as to effect a redomicile to Nevada and
a reverse split of the Company's common stock. The Nevada Corporation was
authorized to issue 50,000,000 shares of $.001 par value common stock and
10,000,000 shares of $.001 par value preferred stock. As part of the Company's
plan to seek an acquisition candidate, on January 11, 1999, the Company paid a
total of 600,000 shares of preferred stock to 5 persons, Ronald Welborn, Henry
Simon, David Newren, Richard Surber, and A-Z Professional Consultants, Inc., for
consulting services related to the redomicile and reverse split of the Company's
stock
On March 9, 1999, both the Colorado Corporation and the Nevada Corporation
signed Articles of Merger by which the Colorado Corporation's shareholders
received one share of new (Nevada) common stock for every 2,000 shares of old
(Colorado) common stock they owned. The shareholders of both corporations had
previously approved this proposal on due notice, and all outstanding shares of
the Colorado Corporation's common stock were purchased by the new Nevada
Corporation, effectively merging the
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Colorado Corporation into the Nevada Corporation, reverse-splitting the
Company's stock, and making the Nevada Corporation the surviving entity. Holders
of preferred stock in the old Colorado Corporation received preferred stock in
the new Nevada Corporation on a 1:1 basis. In March 1999, the Company entered
into Consulting Agreements with Hudson Consulting Group, Inc. and Global
Universal, Inc. to obtain additional assistance in finding and completing an
acquisition.
Later in March 1999, the Company began discussions about acquiring Motor Sports
on Dirt, Inc. ("Motor Sports"), which claimed to own NASCAR race tracks in the
South. The parties reached a preliminary agreement on the terms of acquisition,
in anticipation of which, on March 25, the Company authorized an offering for
10,000,000 shares of common stock under Rule 504 of Regulation D. The shares
were offered at Ten Cents ($.10) per share to raise up to but not more than
$1,000,000, and a Form D to that effect was filed with the SEC on March 26,
1999. Proceeds were to be used to pay expenses related to the acquisition of
Motor Sports and to pay off the Company's debts. By April 6, 1999, the Company
had sold 4,100,000 shares to five investors. 215,000 shares were sold for a
$100,000 check delivered before April 6, 1999 (this check was to buy 1,000,000
shares; it was later dishonored, but not before the purchaser absconded with
215,000 shares -- the Company canceled the remaining 785,000 shares and is
considering legal action, though it currently cannot afford to do so). 3,885,000
shares were paid toward debts owed to consultants, Arce International, Inc.,
Hudson Consulting Group, Inc., Chartwell Investments, Inc., and Global
Universal, Inc., incurred for services rendered before April 6, 1999 by
introducing Motor Sports to the Company and handling various accounting,
corporate cleanup, and compliance issues.
On April 6, 1999, the Company signed an Acquisition Agreement with Motor Sports
which would have effected the Company's acquisition of Motor Sports. According
to the Acquisition Agreement, a total of 11,790,000 shares of the Company's
common stock were to be issued to Motor Sports shareholders. However, Motor
Sports and/or its financial backers did not perform certain conditions of the
Acquisition Agreement, which led to extensive negotiations between the parties.
These negotiations yielded an Addendum #1 to the Acquisition Agreement dated May
10, a Debt Settlement Agreement dated June 11 (relating to matters raised in the
Acquisition Agreement), and a Settlement Agreement dated July 19, 1999 (which
the parties intended to resolve all outstanding issues). As a result of these
negotiations and agreements, the contemplated merger with Motor Sports was
finally canceled on or about September 28, 1999. As a result of the canceled
merger, all 11,790,000 shares of common stock, as well as all but 502,360 shares
of the stock issued under Rule 504, were canceled on September 28, 1999.
Also on September 28, 1999, the Company issued 250,000 shares of its common
stock, restricted under Rule 144, to Donald Walker as a settlement of all claims
under the Settlement Agreement dated July 19, 1999; 550,000 shares of common
stock, restricted under Rule 144 to Global Universal for new services relating
to new acquisition opportunities; and 532,640 shares of common stock, restricted
under Rule 144, to Hudson Consulting Group, Inc. for new assistance in preparing
the documents necessary to become a reporting company under the Securities
Exchange Act of 1934 as well as assistance relating to new acquisition
opportunities.
Since that time, the Company has continued to seek a suitable acquisition
candidate. Although the Company has been close to closing an acquisition on
several occasions, no transaction has been closed to date, and the company
currently has no definite commitments from any new acquisition candidates. The
Company's business plan remains that of seeking an appropriate acquisition
candidate.
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General
During the past three years, the Company has attempted to identify and acquire a
favorable business opportunity. The Company has reviewed and evaluated a number
of business ventures for possible acquisition. The Company has not entered into
any agreement, nor does it have any commitment or understanding to enter into or
become engaged in a transaction, as of the date of this filing. The Company
continues to investigate, review, and evaluate business opportunities as they
become available and will seek to acquire or become engaged in business
opportunities when specific opportunities warrant.
To date, opportunities have been made available to the Company through its
officers and directors and through professional advisors including securities
broker-dealers and through members of the financial community. It is anticipated
that business opportunities will continue to be available primarily from these
sources.
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis regarding the quality of the other firm's
management and personnel, the asset base of such firm or enterprise, the
anticipated acceptability of new products or marketing concepts, the merit of
the firm's business plan, and numerous other factors which are difficult, if not
impossible, to analyze through the application of any objective criteria.
For the past three years, the Company has had no active business operations, and
has been seeking to acquire an interest in a business with long-term growth
potential. The Company currently has no commitment or arrangement to participate
in a business and cannot now predict what type of business it may enter into or
acquire. It is emphasized that the business objectives discussed herein are
extremely general and are not intended to be restrictive on the discretion of
the Company's management.
There are no plans or arrangements proposed or under consideration for the
issuance or sale of additional securities by the Company prior to the
identification of an acquisition candidate. Consequently, management anticipates
that it may be able to participate in only one potential business venture, due
primarily to the Company's limited capital. This lack of diversification should
be considered a substantial risk, because it will not permit the Company to
offset potential losses from one venture against gains from another.
Selection of a Business
The Company anticipates that businesses for possible acquisition will be
referred by various sources, including its officers and directors, professional
advisors, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited proposals. The
Company will not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its officers and
directors and their affiliates, as well as indirect associations between them
and other business and professional people. By relying on "word of mouth," the
Company may be limited in the number of potential acquisitions it can identify.
While it is not presently anticipated that the Company will engage unaffiliated
professional firms specializing in business acquisitions or reorganizations,
such firms may be retained if management deems it in the best interest of the
Company.
Compensation to a finder or business acquisition firm may take various forms,
including one-time cash payments, payments based on a percentage of revenues or
product sales volume, payments involving
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issuance of securities (including those of the Company), or any combination of
these or other compensation arrangements. Consequently, the Company is currently
unable to predict the cost of utilizing such services.
The Company will not restrict its search to any particular business, industry,
or geographical location, and management reserves the right to evaluate and
enter into any type of business in any location. The Company may participate in
a newly organized business venture or a more established company entering a new
phase of growth or in need of additional capital to overcome existing financial
problems. Participation in a new business venture entails greater risks since in
many instances management of such a venture will not have proved its ability;
the eventual market of such venture's product or services will likely not be
established; and the profitability of the venture will be unproved and cannot be
predicted accurately. If the Company participates in a more established firm
with existing financial problems, it may be subjected to risk because the
financial resources of the Company may not be adequate to eliminate or reverse
the circumstances leading to such financial problems.
In seeking a business venture, the decision of management will not be controlled
by an attempt to take advantage of any anticipated or perceived appeal of a
specific industry, management group, product, or industry, but will be based on
the business objective of seeking long-term capital appreciation in the real
value of the Company.
The analysis of new businesses will be undertaken by or under the supervision of
the officers and directors. In analyzing prospective businesses, management will
consider, to the extent applicable, the available technical, financial, and
managerial resources; working capital and other prospects for the future; the
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; the potential for
growth and expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trade or service marks; name
identification; and other relevant factors. It is anticipated that the results
of operations of a specific firm may not necessarily be indicative of the
potential for the future because of the requirement to substantially shift
marketing approaches, expand significantly, change product emphasis, change or
substantially augment management, and other factors.
The Company will analyze all available factors and make a determination based on
a composite of available facts, without reliance on any single factor. The
period within which the Company may participate in a business cannot be
predicted and will depend on circumstances beyond the Company's control,
including the availability of businesses, the time required for the Company to
complete its investigation and analysis of prospective businesses, the time
required to prepare appropriate documents and agreements providing for the
Company's participation, and other circumstances.
Acquisition of a Business
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, or other reorganization with
another corporation or entity; joint venture; license; purchase and sale of
assets; or purchase and sale of stock, the exact nature of which cannot now be
predicted. Notwithstanding the above, the Company does not intend to participate
in a business through the purchase of minority stock positions. On the
consummation of a transaction, it is
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likely that the present management and shareholders of the Company will not be
in control of the Company. In addition, a majority or all of 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.
In connection with the Company's acquisition of a business, the present
shareholders of the Company, including officers and directors, may, as a
negotiated element of the acquisition, sell a portion or all of the Company's
Common Stock held by them at a significant premium over their original
investment in the Company. As a result of such sales, affiliates of the entity
participating in the business reorganization with the Company would acquire a
higher percentage of equity ownership in the Company. Management does not intend
to actively negotiate for or otherwise require the purchase of all or any
portion of its stock as a condition to or in connection with any proposed merger
or acquisition. Although the Company's present shareholders did not acquire
their shares of Common Stock with a view towards any subsequent sale in
connection with a business reorganization, it is not unusual for affiliates of
the entity participating in the reorganization to negotiate to purchase shares
held by the present shareholders in order to reduce the amount of shares held by
persons no longer affiliated with the Company and thereby reduce the potential
adverse impact on the public market in the Company's common stock that could
result from substantial sales of such shares after the business reorganization.
Public investors will not receive any portion of the premium that may be paid
in the foregoing circumstances. Furthermore, the Company's shareholders may not
be afforded an opportunity to approve or consent to any particular stock buy-out
transaction.
In the event sales of shares by present shareholders of the Company, including
officers and directors, is a negotiated element of a future acquisition, a
conflict of interest may arise because directors will be negotiating for the
acquisition on behalf of the Company and for sale of their shares for their own
respective accounts. Where a business opportunity is well suited for acquisition
by the Company, but affiliates of the business opportunity impose a condition
that management sell their shares at a price which is unacceptable to them,
management may not sacrifice their financial interest for the Company to
complete the transaction. Where the business opportunity is not well suited, but
the price offered management for their shares is high, Management will be
tempted to effect the acquisition to realize a substantial gain on their shares
in the Company. Management has not adopted any policy for resolving the
foregoing potential conflicts, should they arise, and does not intend to obtain
an independent appraisal to determine whether any price that may be offered for
their shares is fair. Stockholders must rely, instead, on the obligation of
management to fulfill its fiduciary duty under state law to act in the best
interests of the Company and its stockholders.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration under applicable federal and
state securities laws. In some circumstances, however, as a negotiated element
of the transaction, the Company may agree to register such securities either at
the time the transaction is consummated, under certain conditions, or at
specified times thereafter. Although the terms of such registration rights and
the number of securities, if any, which may be registered cannot be predicted,
it may be expected that registration of securities by the Company in these
circumstances would entail substantial expense to the 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 such market.
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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 structure the acquisition as a so-called
"tax-free" event under sections 351 or 368(a) of the Internal Revenue Code of
1986 (the "Code"). In order to obtain tax-free treatment under section 351 of
the Code, it would 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. Section 368(a)(1) of the Code
provides for tax- free treatment of certain business reorganizations between
corporate entities where one corporation is merged with or acquires the
securities or assets of another corporation. Generally, the Company will be the
acquiring corporation in such a business reorganization, and the tax-free status
of the transaction will not depend on the issuance of any specific amount of the
Company's voting securities. It is not uncommon, however, that as a negotiated
element of a transaction completed in reliance on section 368, the acquiring
corporation will issue securities in such an amount that the shareholders of the
acquired corporation will hold 50% or more of the voting stock of the surviving
entity. Consequently, there is a substantial possibility that the shareholders
of the Company immediately prior to the transaction would retain less than 50%
of the issued and outstanding shares of the surviving entity. Therefore,
regardless of the form of the business acquisition, it may be anticipated that
stockholders immediately prior to the transaction will experience a significant
reduction in their percentage of ownership in the Company.
Notwithstanding the fact that the Company is technically the acquiring entity in
the foregoing circumstances, generally accepted accounting principles will
ordinarily require that such transaction be accounted for as if the Company had
been acquired by the entity owning the other business and, therefore, will not
permit a write-up in the carrying value of the assets of the other company.
The manner in which the Company participates in a business will depend on the
nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require 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 such closing, will
outline the manner of bearing costs if the transaction is not closed, will set
forth remedies on default, and will include miscellaneous other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business will be
dependent on the nature of the business and the interest acquired. The Company
is unable to predict whether the Company will be in control of the business or
whether present management will be in control of the Company following the
acquisition. It may be expected that the business will present various risks,
which cannot be predicted at the present time.
Governmental Regulation
It is impossible to predict the government regulation, if any, to which the
Company may be subject until it has acquired an interest in a business. The use
of assets and/or conduct of businesses which the
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Company may acquire could subject it to environmental, public health and safety,
land use, trade, or other governmental regulations and state or local taxation.
In selecting a business in which to acquire an interest, management will
endeavor to ascertain, to the extent of the limited resources of the Company,
the effects of such government regulation on the prospective business of the
Company. In certain circumstances, however, such as the acquisition of an
interest in a new or start-up business activity, it may not be possible to
predict with any degree of accuracy the impact of government regulation. The
inability to ascertain the effect of government regulation on a prospective
business activity will make the acquisition of an interest in such business a
higher risk.
Competition
The Company will be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by virtue
of their stronger financial resources and prior experience in business. There is
no assurance that the Company will be successful in obtaining suitable
investments.
Employees
The Company is a development stage company and currently has no employees.
Executive officers will devote only such time to the affairs of the Company as
they deem appropriate, which is estimated to be approximately 20 hours per month
per person. Management of the Company expects to use consultants, attorneys, and
accountants as necessary, and does not anticipate a need to engage any full-
time employees so long as it is seeking and evaluating businesses. The need for
employees and their availability will be addressed in connection with a decision
whether or not to acquire or participate in a specific business industry.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently owns no real property. The Company has a verbal agreement
with Global Universal, Inc., one of its major shareholders, permitting it to
maintain office space and a phone number at Global's headquarters at 11701 South
Freeway in Burleson, Texas.
The Company does not currently have any policy with respect to real estate
investment, as it does not plan to engage in the business of real estate
investment. The Company does not plan to invest in other pieces of real property
except as integral to the operations of a business it acquires.
ITEM 3. LEGAL PROCEEDINGS
In January, 2000, the Company fully settled the claims raised by Biorelease
Corporation in its petition filed in the district court of Harris County, Texas,
269th judicial district, on September 30, 1999. The case involved a March 1994
contract with Genesis by which 150,000 shares of Genesis preferred stock were
given to Biorelease in exchange for 1.5 million shares of its common stock.
Biorelease sought relief in the form of an injunction preventing transfer of its
1.5 million shares, or rescission of the contract, or damages of $1,300,000. As
part of the settlement and stipulation by the parties, on or about January 13,
2000, a Final Judgement was entered rescinding the contract, and the parties
gave back to each other the shares which had been the subject of the contract.
No other relief was granted by the Final Judgment, and in fact all other claims
for relief sought in the complaint were dismissed with prejudice.
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In 1998, the county of Tarrant County, Texas and the city of Fort Worth, Texas
filed a lawsuit in the district court for Tarrant County, Texas seeking relief
in the form that Lincoln Health Fund, Inc. pay approximately $36,000 in
allegedly unpaid ad valorem and property taxes. The suit has been settled
subject to a payment plan, and the land was sold to Power Exploration, Inc., a
publicly traded company, in February of 2000 in exchange for 600,000 shares of
Power Exploration's common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the OTC Bulletin Board under the symbol
"GNCP."
The table below sets forth the high and low bid prices for the Company's Common
Stock for each quarter of fiscal 1999 and fiscal 2000 (for fiscal years ended
September 30, 1999 and 2000). The quote given for the quarter ended June 30,
1999 reflects a 1 for 2000 reverse split which the Company effected on or about
March 9, 1999. The quotations below reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions:
Quarter Ended High Low
------- ----- ---- ---
F.Y. 1999 12/31/98 $1.06 $0.19
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3/31/99 $0.13 $0.06
6/30/99 $7.001 $1.00
9/30/99 $3.50 $.88
Quarter Ended High Low
------- ----- ---- ---
F.Y. 2000 12/31/99 $3.44 $2.25
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3/31/00 $7.44 $2.50
6/30/00 $5.25 $1.50
9/30/00 $2.50 $1.25
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(1) Prices reflect a 1 for 2000 reverse split effective March 9, 1999.
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Record Holders
There is only one class of common stock. As of January 8, 2001 there were 239
shareholders of record for the Company's common stock, holding a total of
2,217,911 shares. An additional 241,000 shares of common stock were issued to
Charles Barnhill in April 2000 as part of an acquisition that never closed and
has since been rescinded, but both Mr. Barnhill and the Company have placed stop
orders on those shares. It is the Company's position that these shares are not
validly issued or outstanding. If these shares were included, the total shares
of common stock issued and outstanding would be 2,458,911.
The holders of the common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of the common
stock have no preemptive rights and no right to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock.
Dividends
The Company has not declared any dividends since inception and does not
anticipate paying any dividends in the foreseeable future. The payment of
dividends is within the discretion of the Board of Directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its common stock other than those generally imposed
by applicable state law.
Recent Sales of Unregistered Securities
The following is a list of unregistered securities sold by the Company within
the last three years including the date sold, the title of the securities, the
amount sold, the identity of the person who purchased the securities, the price
or other consideration paid for the securities, and the section of the
Securities Act of 1933 under which the sale was exempt from registration as well
as the factual basis for claiming such exemption.
On November 30, 1996, the Company issued 20,000 shares of preferred stock to
Zeros USA, Inc. in exchange for services rendered, exempt pursuant to section
4(2) of the Securities Act of 1933, based on the facts that the issuance was an
isolated private transaction by the Company which did not involve a public
offering, there was only one offeree, the offeree did not resell the stock but
continues to hold the stock to this day, there was no subsequent or
contemporaneous public offering of the preferred stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offeree and the Company.
On January 31, 1997, the Company issued a total of 15,000 shares of its
preferred stock to REP TRUST, in exchange for services rendered, exempt pursuant
to section 4(2) of the Securities Act of 1933, based on the facts that the
issuance was an isolated private transaction by the Company which did not
involve a public offering, there was only one offeree, the offeree did not
resell the stock but continues to hold the stock to this day, there was no
subsequent or contemporaneous public offering of the preferred stock, the stock
was not broken down into small denominations, and the negotiations for the sale
took place directly between the offeree and the Company.
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On March 7, 1997, the Company issued a total of 15,000 shares of its preferred
stock to ECO PAL, Inc. in exchange for services rendered, exempt pursuant to
section 4(2) of the Securities Act of 1933, based on the facts that the issuance
was an isolated private transaction by the Company which did not involve a
public offering, there was only one offeree, there was no subsequent or
contemporaneous public offering of the preferred stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offeree and the Company.
On April 14, 1997, the Company issued a total of 20,000 shares of its preferred
stock to Zeros USA, Inc. in exchange for services rendered, exempt pursuant to
section 4(2) of the Securities Act of 1933, based on the facts that the issuance
was an isolated private transaction by the Company which did not involve a
public offering, there was only one offeree, the offeree did not resell the
stock but continues to hold the stock to this day, there was no subsequent or
contemporaneous public offering of the preferred stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offeree and the Company.
On December 8, 1997, the Company issued a total of 85,495,184 shares of common
stock (pre-1:20 reverse split) to Churchill Advancements, Inc., the sole
shareholder of the Lincoln Health Fund, Inc., whereby the Company acquired 100%
ownership of the Lincoln Health Fund, Inc. exempt pursuant to section 4(2) of
the Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering,
there was only one offeree, there was no subsequent or contemporaneous public
offering of the common stock, the stock was not broken down into small
denominations, and the negotiations for the sale took place directly between the
offeree and the Company.
On February 10, 1998 the Company issued a total of 175,000 shares of its common
stock (150,000 shares to its President, Reginald Davis, as compensation for
services rendered in managing the Company; and 25,000 shares to its Vice
President, Jerry Conditt, for the same consideration), exempt pursuant to
section 4(2) of the Securities Act of 1933, based on the facts that the issuance
was an isolated private transaction by the Company which did not involve a
public offering, there were only two offerees, both offerees had a special
status as officers or directors of the Company, the offerees did not resell the
stock but continue to hold the stock to this day, there was no subsequent or
contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offeree and the Company.
On March 11, 1998, the Company issued a total of 28,500 shares of its common
stock to 4 individuals (200 shares to the Susan Smith IRA; 20,000 shares to
Larry Hillis; and 8,300 shares to Jim and Judy Cornett) according to the terms
of its convertible preferred stock. Each of the foregoing had held shares of the
convertible preferred stock and elected to convert the shares into common stock,
exempt pursuant to section 4(2) of the Securities Act of 1933, based on the
facts that the issuance was an isolated private transaction by the Company which
did not involve a public offering, there were only four offerees, the offerees
were part of a special, well-defined class of previous preferred stock holders,
the offerees did not resell the stock but continue to hold the stock to this
day, there was no subsequent or contemporaneous public offering of the common
stock, the stock was not broken down into small denominations, and the
negotiations for the sale took place directly between the offerees and the
Company.
On April 30, 1998, the Company issued a total of 27,000 shares to Country Maid
Farms, Inc. according to the terms of its convertible preferred stock. The
foregoing shareholder had held shares of the convertible
12
<PAGE>
preferred stock and elected to convert the shares into common stock exempt
pursuant to section 4(2) of the Securities Act of 1933, based on the facts that
the issuance was an isolated private transaction by the Company which did not
involve a public offering, there was only one offeree, the offeree was part of a
special, well-defined class of previous preferred stock holders, the offeree did
not resell the stock but continues to hold the stock to this day, there was no
subsequent or contemporaneous public offering of the common stock, the stock was
not broken down into small denominations, and the negotiations for the sale took
place directly between the offeree and the Company.
On May 19, 1998, the Company issued a total of 105,000 shares of its common
stock to Agri Capital Trust according to the terms of its convertible preferred
stock. The foregoing shareholder had held shares of the convertible preferred
stock and elected to convert the shares into common stock exempt pursuant to
section 4(2) of the Securities Act of 1933, based on the facts that the issuance
was an isolated private transaction by the Company which did not involve a
public offering, there was only one offeree, the offeree was part of a special,
well-defined class of previous preferred stock holders, the offeree did not
resell the stock but continues to hold the stock to this day, there was no
subsequent or contemporaneous public offering of the common stock, the stock was
not broken down into small denominations, and the negotiations for the sale took
place directly between the offeree and the Company.
On May 28, 1998, the Company issued a total of 182,500 shares of its common
stock to 3 persons (25,000 shares to Agri Capital Trust; 150,000 shares to
American National Financial Services, and 7,500 shares to Trade Americas, Inc.)
according to the terms of its convertible preferred stock. The foregoing
shareholders had held shares of the convertible preferred stock and elected to
convert the shares into common stock exempt pursuant to section 4(2) of the
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering,
there were only three offerees, the offerees were part of a special,
well-defined class of previous preferred stock holders, all 3 of the offerees
did not resell the stock but continue to hold the stock to this day, there was
no subsequent or contemporaneous public offering of the common stock, the stock
was not broken down into small denominations, and the negotiations for the sale
took place directly between the offerees and the Company.
On June 5, 1998, the Company issued a total of 10,000 shares of its common stock
to Zeros USA, Inc. according to the terms of its convertible preferred stock.
The foregoing shareholder had held shares of the convertible preferred stock and
elected to convert the shares into common stock exempt pursuant to section 4(2)
of the Securities Act of 1933, based on the facts that the issuance was an
isolated private transaction by the Company which did not involve a public
offering, there was only one offeree, the offeree was part of a special,
well-defined class of previous preferred stock holders, the offeree did not
resell the stock but continues to hold the stock to this day, there was no
subsequent or contemporaneous public offering of the common stock, the stock was
not broken down into small denominations, and the negotiations for the sale took
place directly between the offeree and the Company.
On June 10, 1998 the Company issued a total of 1,500 shares of its common stock
to Roscoe Hill Hatchery, Inc. according to the terms of its convertible
preferred stock. Roscoe Hill had held shares of the convertible preferred stock
and elected to convert the shares into common stock exempt pursuant to section
4(2) of the Securities Act of 1933, based on the facts that the issuance was an
isolated private transaction by the Company which did not involve a public
offering, there was only one offeree, the offeree was part of a special,
well-defined class of previous preferred stock holders, there was no subsequent
or contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and negotiations for the sale took place directly
between the offeree and the Company.
13
<PAGE>
On February 9, 1999, the Company issued a total of 600,000 shares of its
preferred stock to 5 persons (150,000 shares to Henry Simon, Esq.; 150,000
shares to David Newren; 150,000 shares to Ronald Welborn; 75,000 shares to
Richard Surber; and 75,000 shares to A Z Professional Consultants, Inc.) in
exchange for consulting services rendered, exempt pursuant to section 4(2) of
the Securities Act of 1933, based on the facts that the stock was offered in an
isolated private transaction by the Company and did not involve a public
offering of stock, there were only five offerees, all offerees were part of a
special, well- defined class of sophisticated financial advisors with special
knowledge of the Company, none of the offerees resold their stock to outsiders
or to the public markets - rather, they have all allowed the Company to buy back
their stock pursuant to the Debt Settlement Agreement attached as Exhibit
6(viii), there was no subsequent or contemporaneous public offering of the
preferred stock, the stock was not broken down into small denominations, and the
negotiations for the sale took place directly between the offerees and the
Company.
On March 25, 1999, the Company issued a total of 502,360 shares (post 1:2000
reverse stock split) of its common stock at a price of $.10 per share--an
aggregate of $50,236--pursuant to Rule 504 of Regulation D of the Securities Act
of 1933 to 4 persons (215,000 shares to Erie Holdings, Ltd; 150,000 to Chartwell
Investments, Inc.; 100,000 to Arce International, Inc.; and 37,360 to Hudson
Consulting Group, Inc.). The Company relied on the following facts in
determining that Rule 504 Regulation D was available: (a) an opinion letter from
counsel to the effect that the stock was exempt from registration under federal
law and state law because Erie and Arce were offshore entities not subject to
state blue sky laws, Hudson was a Nevada Corporation exempt under Nevada Statute
Section 90.503(11) limiting the offering to 25 purchasers, and Chartwell was a
Texas corporation exempt under Texas Statute Section 581-5(I)(3) limiting the
offering to 15 persons; (b) the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act; (c) the Company had a
specific business plan at the time to acquire a specific company, Motor Sports
on Dirt, Inc., to operate Nascar-style race tracks; (d) the aggregate offering
price of all shares offered under Rule 504 in the preceding 12 months did not
exceed $1,000,000 and (e) the Company filed a Form D within 15 days of the first
sale of the shares subject to the offering. The Company also offered to allow
investors to inspect the books and records of the Company.
On April 2, 1999, the Company issued a total of 230,000 shares of its common
stock (post 1:2000 reverse split) to five individuals (100,000 shares to David
Newren; 60,000 shares to Reginald Davis; 35,000 shares to Jerry Conditt; 20,000
shares to Fauniel Rowland, Esq.; and 15,000 shares to Jim Rolfe, Esq.) in
exchange for services rendered, exempt pursuant to section 4(2) of the
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering,
there were only five offerees, the offerees were part of a special, well-defined
class of attorneys, consultants, and corporate officers who had rendered
services directly to the Company, none of the offerees have resold the stock but
all continue to hold the stock to this day, there was no subsequent or
contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offerees and the Company.
On September 28, 1999, the Company issued a total of 1,332,640 shares of its
common stock to 3 persons (550,000 shares to Global Universal, Inc.; 532,640
shares to Hudson Consulting Group, Inc.; and 250,000 shares to Donald Walker) in
exchange for the following consideration: Global and Hudson for services
rendered in assisting with location and negotiation of mergers and acquisitions
for the Company, and Donald Walker in full and final settlement of disputed
claims relating to the failed merger with Motor Sports on Dirt, Inc. All
issuances were exempt pursuant to section 4(2) of the Securities Act of 1933,
14
<PAGE>
based on the facts that the issuance was an isolated private transaction by the
Company which did not involve a public offering, there were only three offerees,
the offerees were part of a special, well-defined class of sophisticated
financial consultants and officers of Motor Sports, the offerees did not resell
the stock but continue to hold the stock to this day, there was no subsequent or
contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offerees and the Company.
On February 4, 2000, the Company issued a total of 15,000 restricted shares of
its common stock to an attorney, Charles Barnhill, in exchange for legal
services rendered, exempt pursuant to section 4(2) of the Securities Act of
1933, based on the facts that the issuance was an isolated private transaction
by the Company which did not involve a public offering, there was only one
offeree, the offeree was part of a special, well-defined class of attorneys who
had rendered legal services directly to the Company, the offeree has not resold
the stock but continues to hold the stock to this day, there was no subsequent
or contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and the negotiations for the sale took place
directly between the offeree and the Company.
On February 11, 2000, the Company issued a total of 100,000 shares of restricted
common stock to Larry Austin in exchange for a waiver of all his rights as a
holder of the Company's preferred stock, exempt pursuant to section 4(2) of the
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering,
there was only one offeree, the offeree was part of a special, well-defined
class of previous preferred stock holders, there was no subsequent or
contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and negotiations for the sale took place directly
between the offeree and the Company.
On April 13, 2000, the Company issued a total of 30,000 shares of restricted
common stock to Crestline according to the terms of its convertible preferred
stock. Crestline had held shares of the convertible preferred stock and elected
to convert the shares into common stock, exempt pursuant to section 4(2) of the
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering,
there was only one offeree, the offeree was part of a special, well-defined
class of previous preferred stock holders, there was no subsequent or
contemporaneous public offering of the common stock, the stock was not broken
down into small denominations, and negotiations for the sale took place directly
between the offeree and the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Plan of Operations
The Company's plan of operation for the coming year is to identify and acquire a
favorable business opportunity. The Company does not plan to limit its options
to any particular industry, but will evaluate each opportunity on its merits.
The Company anticipates that its owners, affiliates, and consultants will
provide it with sufficient capital to continue operations until the end of the
fourth quarter of 2000, but there can be no assurance that this expectation will
be fully realized.
The Company does not expect to generate any meaningful revenue or incur
operating expenses unless and until it acquires an interest in an operating
company.
15
<PAGE>
Results of Operations
Fiscal Years ending September 30, 2000 and 1999
The Company had no revenue from continuing operations for the periods ended
September 30, 2000 and 1999.
The Company received a property tax benefit of $32,158 for the year ended
9/30/00, because it sold its land and the buyer assumed the taxes, as compared
to a property tax liability of $15,236 for the year ended 9/30/99. General and
administrative expenses for the period ended September 30, 2000 were $45,
compared to $15,558 for the year ended September 30, 1999. General and
administrative expenses for fiscal 1999 consisted of expenses to keep the
Company in good corporate standing, fees to transfer agents, and minimal
expenses for office and bank account administration. In the year ended 9/30/00,
the Company incurred expenses of $36,000 for rent, $18,000 for directors' fees,
and $18,500 for management fees, compared to $0.00 for each of these categories
in the year ended 9/30/99.
The Company had a net loss of $26,655 for the period ended September 30, 2000,
and a net loss of $26,175 for the year ended September 30, 1999. The Company's
net losses for fiscal 2000 and 1999 were attributable to property taxes, general
and administrative expenses, rent and fees to directors and managers.
The Company does not expect to generate any meaningful revenue or incur
operating expenses unless and until it acquires an interest in an operating
company.
Liquidity and Capital Resources
At September 30, 2000 the Company had one major asset, 600,000 shares of the
restricted common stock of Power Exploration, Inc., a publicly traded company
(OTCBB: PWRX). The Company is currently authorized to issue 50,000,000 shares of
common stock, of which 2,217,911 shares were validly issued and outstanding as
of January 8, 2001. In 1999, the Company issued 532,640 shares of common stock,
restricted pursuant to Rule 144, to Hudson Consulting Group, Inc. in order to
pay the costs of becoming a reporting company under the Securities Exchange Act
of 1934. Management is hopeful that being a reporting company will increase the
number of prospective business ventures that may be available to the Company.
Management believes that the Company has sufficient resources to meet the
anticipated needs of the Company's operations through at least the first half of
2001. However, there can be no assurances to that effect, as the Company has no
revenues and the Company's need for capital may change dramatically if it
acquires an interest in a business opportunity during that period.
The Company's current operating plan is to (i) handle the administrative and
reporting requirements of a public company; and (ii) search for potential
businesses, products, technologies and companies for acquisition. At present,
the Company has no understandings, commitments or agreements with respect to the
acquisition of any business, product, technology or company and there can be no
assurance that the Company will identify any such business, product, technology
or company suitable for acquisition in the future. Further, there can be no
assurance that the Company would be successful in consummating any acquisition
on favorable terms or that it will be able to profitably manage the business,
product, technology or company it acquires. If the Company is unable to
participate in a business venture by the end of the first half of 2001, it may
require additional capital to continue its search for a business venture and
avoid dissolution. There is no assurance additional capital will be available to
the Company on acceptable terms.
16
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Genesis Capital Corporation of
Nevada, a Nevada corporation, and its subsidiaries and predecessors unless
otherwise indicated. Consolidated, audited, condensed financial statements
including a balance sheet for the Company as of the year ended September 30,
2000 and audited statements of income, cash flows and changes in shareholders'
equity up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages F-1 through F-11 and are
incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
17
<PAGE>
INDEX TO FINANCIAL STATMENTS
Auditor's Report.............................................................F-2
Audited Balance Sheet as of September 30, 2000
September 30, 1999......................................................F-3
Audited Statement of Operations for the years ended
September 30, 2000 and September 30, 1999...............................F-4
Audited Statement of Stockholder's Equity for the year
September 30, 2000......................................................F-5
Audited Statement of Cash Flows or the years ended
September 30, 2000 and September 30, 1999...............................F-6
Notes to Condensed Fiancial Statements.......................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
To the Board of Directors
Genesis Capital Corporation of Nevada
(a Nevada corporation)
I have audited the accompanying balance sheet of Genesis Capital Corporation of
Nevada (Company) as of September 30, 2000 and 1999 and the related statement of
operations, statement of stockholders' equity, and the statement of cash flows
for the years then ended September 30, 2000 and 1999. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of September 30,
2000 and 1999 and the results of its operations for the years then ended in
conformity with generally accepted accounting principles.
Clyde Bailey P.C.
/s/ Clyde Bailey P.C.
San Antonio, Texas
January 12, 2001
F-2
<PAGE>
<TABLE>
GENESIS CAPITAL CORPORATION OF NEVADA
Balance Sheets
As of September 30, 2000 and 1999
<CAPTION>
2000 1999
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash in Bank $ - $ -
------------ -------------
Total Current Assets - -
Investments
Marketable Securities, at Market Value 195,000 600,000
Deferred Tax Benefit 156,051 4,619
------------ -------------
Total Assets $ 351,051 $604,619
============ =============
LIABILITIES
Current Liabilities
Accrued Expenses $ 72,500 $ 32,158
Deferred Tax payable - Investments - -
------------ -------------
Total Current Liabilities 72,500 32,158
Commitment and Contigencies - -
STOCKHOLDERS' EQUITY
Preferred Stock, 0.001 par value, 78 933
10,000,000 shares authorized with
77,755 and 932,755 issued and outstanding
Common Stock, .001 par value, 2,218 2,068
50,000,000 authorized with 2,217,911
and 2,067,911 issued and outstanding
Accumulated Other Comprehensive Income (Loss) (267,300) -
Additional paid in capital 9,195,579 9,194,829
Accumulated Deficit (8,652,024) (8,625,369)
------------ -------------
Total Stockholders' Equity 278,551 572,461
------------ -------------
Total Liabilities and Stockholders' Equity $ 351,051 $ 604,619
============ =============
</TABLE>
See accompanying ssummary of accounting principles and notes to consolidated
financial statements.
F-3
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Statement of Operations
For the Twelve Months Ended September 30
2000 1999
----------- -----------
Revenues:
Revenues $ - $ -
------------- -------------
Total Revenues $ - $ -
------------- -------------
Propery Taxes (32,158) 15,236
Rent 36,000 -
Directors Fees 18,000 -
Management Fees 18,500 -
General & Administrative Expenses: 45 15,558
------------- -------------
Total Expenses $ 40,387 30,794
------------- -------------
Net Income Before Tax (40,387) (30,794)
Income Tax Benefit 13,732 4,619
------------- -------------
Net Income $ (26,655) (26,175)
Earnings Per Share - Basic
Net Income (Loss) per Share $ (0.021) $ (1.325)
Earnings Per Share - Diluted
Net Income (Loss) per Share $ (0.015) $ (0.008)
Weighted Average Shares Outstanding 2,217,911 19,762
Weighted Average Shares Outstanding (Diluted) 2,995,461 3,347,290
(Retroactively Restated)
See accompanying summary of accounting policies and notes to consolidated
financial statements
F-4
<PAGE>
<TABLE>
Genesis Capital Corporation of Nevada
Statement of Stockholders' Equity
<CAPTION>
Accumulated
Common Stock Preferred Stock Additional Other
---------------------------------------------- Paid-in Comprehensive Accumulated
Shares At Par Shares At Par Capital Income (Loss) Deficit Total
--------- --------- ------------ ----------- ------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Ocotober 1, 1998 5,532,016 5,532 $ 332,755 333 $ 9,176,407 - $ (8,599,194) $ 583,078
------------ ------- ------------ --------- ----------- ------------ ------------- -----------
Stock Reverse 2000/1 (5,529,250) (5,529) - - 5,529 - - 0
Effective March 9, 1999
Stock Issued 2,065,145 2,065 600,000 600 12,893 - - 15,558
Net Income (Loss) - - - - - - (26,175) (26,175)
------------ ------- ------------ --------- ----------- ------------ ------------- -----------
Balance, September 30, 1999 2,067,0911 2,068 932,755 933 $9,194,829 - $ (8,625,369) $ 572,461
Comprehensive Income (Loss):
Net Income (Loss) (26,665) (26,665)
Unrealized Gain (Loss) on
Securities - (267,300) (267,300)
(293,955)
Stock Cancelled - (750,000) (750) 750 - - 0
Stock Issuance 150,000 150 (105,000) (105) - - 45
--------- -------- ---------- -------- ----------- ----------- ------------- -----------
Balance, September 30, 2000 2,217,911 $ 2,218 $ 77,755 78 $9,195,579 $ (267,300) $ (8,652,024) $ 278,551
========== ======== =========== ======== =========== =========== ============= ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements
F-5
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Statements of Cash Flows
For the Twelve Months Ended September 30,
2000 1999
------------- -----------
Cash Flows - Operating Activities
Net Income $ (26,655) $ (26,175)
Adjustments:
Accrued Property Taxes (32,158) 15,236
Accrued Expenses 72,500
Deferred Income Tax Benefit (13,732) (4,619)
Accounts Receivable - -
----------- -----------
Total from Operating Activities $ (45) $(15,558)
----------- -----------
Cash Flows - Investing Activities
Fixed Assets -
----------- -----------
Total for Investing Activities $ - $ -
----------- -----------
Cash Flows - Financing Activities
Common Stock/Paid-In-Capital 45 15,558
Other
----------- -----------
Total from Financing Activities 45 $ 15,558
----------- -----------
Increase in Cash - -
Cash Balance, Begin of Year - -
----------- -----------
Cash Balance, End of Year $ - $ -
=========== ===========
Supplement Disclosure:
Cash paid during year for:
Interest - -
Income Taxes - -
See accompanying summary of accounting policies and notes to consolidated
financial statements
F-6
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Notes to Financial Statements
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Genesis Capital Corporation (the "Company") was incorporated in the State of
Colorado in 1983. The Company had no revenues or expenses for the years ended
September 30, 1998 and 1997. In the fiscal year ended September 30, 2000 and
1999 only minimal activity has been recorded. In March of 1999 the Company filed
an Articles of Merger in the State of Nevada to change the name to Genesis
Capital Corporation of Nevada and to change the par value of the common stock.
In December 1997, the Company merged with Lincoln Health Fund Inc. which owned
land in Tarrant County Texas. The company has a total of 50,000,000 authorized
common shares (par value of $.001) with 2,217,911 shares issued and outstanding,
and 10,000,000 authorized preferred stock (par value of $.001) with 77,755
shares issued outstanding as of September 30, 2000.
MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
the Company classifies its investment portfolio according to the provisions of
SFAS 115 as either held to maturity, trading, or available for sale. At June 30,
2000, the Company classified its investment portfolio as available for sale and
held to maturity. Securities available for sale are carried at fair value with
unrealized gains and losses included in stockholders' equity.
Gain or losses from the sale or redemption of the investments are determined
using the specific identification method calculating deferred income taxes. The
asset and liability approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets and
liabilities.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Fixed assets are stated at cost. Depreciation and amortization using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. The Company does not have any fixed assets at this
time.
EARNINGS PER COMMON SHARE
The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares and dilutive securities outstanding. Dilutive securities
having an anti-dilutive effect on diluted earnings per share are excluded from
the calculation.
F-7
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Notes to Financial Statements
FEDERAL INCOME TAX
The Company has adopted the provisions of Financial Accounting Standards
Board Statement No. 109, Accounting for Income Taxes. The Company accounts
for income taxes pursuant to the provisions of the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to calculating deferred income
taxes. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the
tax basis of assets and liabilities. The Company has a net operating loss
carryover of $52,830 that will expire beginning in 2014.
UNINSURED CASH BALANCES
The Company maintains its cash balances at several financial institutions.
Accounts at the institutions are secured by the Federal Deposit Insurance
Corporation up to $100,000. Periodically, balances may exceed this amount.
At September 30, 2000, there were no uninsured cash balances.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure on contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments including marketable
securities, notes and loans receivables, accounts payable and notes payable
approximate their fair values at September 30, 2000 and 1999.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" (SFAS No. 123), established a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company did not adopt the fair value based method but
instead discloses the effects of the calculation required by the statement.
F-8
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Notes to Financial Statements
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No.130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information," supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for sale security, or a foreign-currency-denominated forecasted
transaction. Because the Company has no derivatives, this accounting
pronouncement has no effect on the Company's financial statements.
F-9
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Notes to Financial Statements
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121 "Accounting for Impairment
of Long-Lived Assets to be Disposed of " requires, among other things,
impairment loss of assets to be held and gains or losses from assets that are
expected to be disposed of be included as a component of income from continuing
operations before taxes on income.
NOTE 2 - ACQUISITION AGREEMENT
In February of 2000, an acquisition agreement was completed between the Company
and Power Exploration, Inc. ("Power") for 100% of the issued and outstanding
shares of the Lincoln Health Fund, Inc. a Delaware Corporation ("Lincoln"), a
wholly owned subsidiary of the Company, for 600,000 shares of Power's common
stock. The major asset of Lincoln was 10.687 acres of vacant land in Ft Worth,
Texas. The value of stock received is being classified as a marketable security,
available for sale.
As a result of this transaction the property taxes that had been accrued for the
land was included in the acquisition agreement and assumed by Lincoln. The
accrued property taxes is being reversed in these financial statements.
NOTE 3- COMMON STOCK
The Company filed a plan of merger in the State of Nevada with an effective date
of March 9, 1999. As part of the agreement, the Board of Directors approved a
2000 to 1 reverse stock split be recorded with any fractional shares rounded up.
Also, the par value of the Nevada corporation was changed to $.001 par value. In
the quarter ended March 31, 2000, 150,000 shares of stock were issued. A total
of 105,000 shares was issued as conversion of preferred stock and 45,000 shares
for legal services during the current fiscal year. The value of the stock issued
for legal services was valued at par value.
NOTE 4- PREFERRED STOCK
The Company's preferred stock contains a designation of $.60 cumulative
convertible Preferred Stock. A total of 10,000,000 shares are authorized with
77,755 and 932,755 issued and outstanding as of June 30, 2000 and September 30,
1999. The holders of the Convertible Preferred Stock shall be entitled to
receive, when declared by the Board of Directors, dividends of $.60 per share
and no more. Also, the preferred stock is eligible to be converted to common
stock at the rate of 10 shares of common stock for each share of preferred
stock. In the year ended September 30, 2000, a total of 105,000 shares of
preferred stock was converted into common stock.
F-10
<PAGE>
GENESIS CAPITAL CORPORATION OF NEVADA
Notes to Financial Statements
NOTE 5- MARKETABLE SECURITIES
The carrying amounts of marketable securities as shown in the accompanying
balance sheet and their approximate market values at September 30, 2000 are as
follows:
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------------------------
Available for sale: Basis Gains Losses
Securities $600,000 $ -0 $ 405,000 $195,000
The securities was valued at the market price per share at the balance sheet
date ($.50) less a discount of 35% due to the small trading volume and the stock
having a restricted legend on the shares.
Unrealized gains and losses on securities available for sale at September 30,
2000 are shown net of income taxes as a component of stockholders' equity.
NOTE 6- ACCRUED EXPENSES
In the year ended September 30, 2000, an amount of $72,500 has been accrued for
rent, directors fees, and management fees for the year ended September 30, 2000.
NOTE 7 - CONTINGENT LIABILITIES
The Company is pursuing a "Reverse Merger" or similar transactions. The Company
recognizes that it will pay consultants or professional fees that are applicable
to the industry. The Company is also indebted to consultants for a total of
400,000 shares of stock for debt negotiation and liability settlements for the
Company.
NOTE 8- SUBSEQUENT EVENTS
No other material subsequent events have occurred that warrant disclosure since
the balance sheet date.
F-11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In its two most recent fiscal years or any later interim period, the Company has
had no disagreements with its independent accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
The following two persons constitute all of the Company's Executive Officers and
Directors as of 9/30/00:
Name Age Position
Reginald L. Davis 45 President/CEO and Director
Jerry Conditt 65 Vice President/Secretary/Treasurer and Director
All executive officers are elected by the Board and hold office until the next
Annual Meeting of stockholders and until their successors are elected and
qualify.
Reginald L. Davis was appointed President and Director of the Company on
December 8, 1997. Mr. Davis is an attorney specializing in international
business and corporate law. He is presently a partner in the law firm of
Martinez, Rodriguez y Asociados, S. C., of Mexico City. Mr. Davis has 20 years
of experience in the legal field. Mr. Davis received a Master of Laws degree in
1984 from Harvard Law School, a Juris Doctor degree in 1983 from the Universidad
Iberoamericana, and a Bachelor of Arts degree, summa cum laude (Government), in
1978 from Georgetown University.
---------------
Jerry Conditt was appointed Vice President, Secretary, Treasurer and
Director of the Company on December 8, 1997. Mr. Conditt has over 30 years of
experience in the business field. His experience includes starting, purchasing,
operating and selling various businesses. He is presently engaged in automobile
sales and financing. Mr. Conditt has a Bachelor of Business Administration
degree from North Texas State University.
ITEM 10. EXECUTIVE COMPENSATION
No cash compensation was paid to any of the Company's executive officers during
the fiscal years ended September 30, 1999 or 2000. No cash compensation has been
paid to any of the executive officers since the beginning of 1999, and it is not
expected any such compensation will be paid during the remainder of 2000. The
executive officers did receive the following issuances of stock only, which may
have been in the nature of compensation: Reginald Davis was issued 150,000
shares of common stock, restricted under Rule 144, on February 10, 1998; he was
issued 60,000 shares of common stock, restricted under Rule 144, on April 2,
1999. Jerry Conditt was issued 25,000 shares of common stock, restricted under
Rule 144, on February 10, 1998; he was issued 35,000 shares of common stock,
restricted under Rule 144, on April 2, 1999.
18
<PAGE>
The Company has no agreement or understanding, express or implied, with any
officer, director, or principal stockholder, or their affiliates or associates,
regarding employment with the Company or compensation for services. The Company
has no plan, agreement, or understanding, express or implied, with any officer,
director, or principal stockholder, or their affiliates or associates, regarding
the issuance to such persons of any shares of the Company's authorized and
unissued common stock. There is no understanding between the Company and any of
its present stockholders regarding the sale of a portion or all of the common
stock currently held by them in connection with any future participation by the
Company in a business. There are no other plans, understandings, or arrangements
whereby any of the Company's officers, directors, or principal stockholders, or
any of their affiliates or associates, would receive funds, stock, or other
assets in connection with the Company's participation in a business. No advances
have been made or contemplated by the Company to any of its officers, directors,
or principal stockholders, or any of their affiliates or associates.
There is no policy that prevents management from adopting a plan or agreement in
the future that would provide for cash or stock based compensation for services
rendered to the Company.
On acquisition of a business, it is possible that current management will resign
and be replaced by persons associated with the business acquired, particularly
if the Company participates in a business by effecting a stock exchange, merger,
or consolidation as discussed under the "BUSINESS" heading above. In the event
that any member of current management remains after effecting a business
acquisition, that member's time commitment and compensation will likely be
adjusted based on the nature and location of such business and the services
required, which cannot now be foreseen.
Compensation of Directors
There is no standard arrangement to compensate directors for their services as
directors of the Company. The Company made a 1-time arrangement to accrue an
$18,000 payment to directors for working on attempted (but failed) mergers
during the past year, and there are no plans to repeat payment in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS &
MANAGEMENT
The following table sets forth, as of January 8, 2001, the number and percentage
of outstanding shares of common stock which, according to the information
supplied to the Company, were beneficially owned by (i) each current director of
the Company, (ii) each current executive officer of the Company, (iii) all
current directors and executive officers of the Company as a group, and (iv)
each person who, to the knowledge of the Company, is the beneficial owner of
more than 5% of the Company's outstanding common stock. Except as otherwise
indicated, the persons named in the table below have sole voting and dispositive
power with respect to all shares beneficially owned, subject to community
property laws (where applicable).
19
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and nature of Percent of Class
Ownership Beneficial Ownership
<S> <C> <C> <C>
Common Global Universal, Inc.(1) 542,500 24.5%
Stock P.O. Box 6653
Fort Worth, TX 76115
Common Hudson Consulting Group, Inc. 532,640 24.0%
Stock 268 West 400 South, Ste. 300
Salt Lake City, UT 84101
Common Donald Walker 250,000 11.3%
Stock 1501 Azure Hills
Van Buren, AR 72956
Common Chartwell Investments, Inc. 150,126 6.8%
Stock 303 West 10th Street
Fort Worth, TX 76102
Common Reginald Davis 60,076 2.7%
Stock (President & Director) (602,576)(2) (27.2%)(2)
11701 South Freeway
Burleson, TX 76028
Common Jerry Conditt 12,872 0.6%
Stock (Vice Pres. & Director)
11701 South Freeway
Burleson, TX 76028
Common All Executive Officers and 72,948 3.3%
Stock Directors as a Group (615,448)(2) (27.7%)(2)
(Davis & Conditt)
</TABLE>
(1) Global Universal, Inc. is controlled by Reginald Davis.
(2) Including the Global Universal stock with Mr. Davis' personal stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has made several issuances of stock to its President, Reginald
Davis, or to entities controlled by him. On February 10, 1998, the Company
issued 150,000 shares of common stock, restricted under Rule 144, to Mr. Davis
as compensation for services rendered in managing Genesis. On April 2, 1999, the
Company issued 60,000 shares of common stock, restricted under Rule 144, for
additional services rendered to Genesis. On April 6, 1999, the Company issued
1,305,000 shares of its common stock under Rule 504 to Global Universal, Inc., a
corporation which is more than 50% owned by a trust of which Mr. Davis is the
trustee, in exchange for consulting services rendered pursuant to a written
contract (all of these shares were subsequently canceled on September 28, 1999
when the merger with Motor Sports was canceled). On September 28, 1999, the
Company issued 550,000 shares of its common stock, restricted under Rule 144, to
Global Universal, Inc. for additional services rendered pursuant to a consulting
contract.
The Company has made several issuances of stock to its Vice President, Jerry
Conditt, and a relative of his. On February 10, 1998, the Company issued 25,000
shares of common stock, restricted under Rule 144, to Mr. Conditt for services
rendered in managing Genesis. Also on February 10, 1998, the Company issued
5,000 shares of common stock, restricted under Rule 144, to Mitchell Conditt,
the son of Jerry Conditt, for services rendered on behalf of Lincoln Health
Fund. On April 2, 1998, the Company issued 35,000 shares of common
20
<PAGE>
stock, restricted under Rule 144, to Mr. Conditt for additional services
rendered pursuant to a consulting contract.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page 22 of this Form 10-KSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the period
covered by this Form 10- KSB.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized, this 10th day of January, 2001.
GENESIS CAPITAL CORPORATION OF NEVADA
/s/ Reginald L. Davis
--------------------------
Reginald L. Davis
President and Director
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.
Signature Title Date
/s/ Reginald L. Davis President, Chief Executive
Officer and Director Jan. 10, 2001
------------------------
Reginald L. Davis
/s/ Jerry Conditt Director Jan. 10, 2001
------------------------
Jerry Conditt
21
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
Charter and By-laws
2(i) * Articles of Incorporation of Genesis Capital Corporation of
Nevada, a Nevada corporation, filed with the State of Nevada
on December 22, 1998.
2(ii) * By-laws of the Company adopted on December 18, 1998.
Material Contracts
6(i) * Consulting Agreement between the Company and Reginald Davis,
Esq., dated March 19, 1999.
6(ii) * Consulting Agreement between the Company and Jerry Conditt,
dated March 19, 1999.
6(iii) * Consulting Agreement between the Company and Global
Universal, Inc., dated March 19, 1999 (including secured
promissory note for $133,000).
6(iv) * Consulting Agreement between the Company and Hudson
Consulting Group, Inc., dated March 19, 1999 (including
secured promissory note for $67,000).
6(v) * Security Agreement between the Company and Global Universal,
Inc., dated March 19, 1999, in which the Company granted
Global a security interest in 830,000 shares of its common
stock to secure its promissory note for $133,000.
6(vi) * Security Agreement between the Company and Hudson Consulting
Group, Inc., dated March 19, 1999, in which the Company
granted Hudson a security interest in 670,000 shares of
common stock to secure its promissory note for $67,000.
6(vii) * Addendum #1 (dated May 10, 1999) to the Acquisition
Agreement of April 6, 1999 between the Company and Motor
Sports on Dirt, Inc.
6(viii) * Debt Settlement Agreement (dated June 11, 1999) between the
Company and Motor Sports on Dirt, Inc., as well as several
other parties, settling the debts the Company owed to Global
and Hudson.
6(ix) * Settlement Agreement (dated July 19, 1999) between the
Company and Motor Sports on Dirt, Inc., as well as several
other parties, releasing all claims to stock of Genesis
Capital Corporation and effectively canceling the Company's
acquisition of Motor Sports on Dirt, Inc.
22
<PAGE>
Plans of Acquisition
8(i) * Letter agreement between the Company and the Lincoln Health
Fund, Inc, dated November 14, 1997, regarding the Company's
acquisition of Lincoln Health Fund, Inc.
8(ii) * Merger Agreement and Plan of Merger between Genesis Capital
Corporation of Nevada and Genesis Capital Corporation, dated
March 9, 1999.
8(iii) * Acquisition Agreement between the Company and Motor Sports
on Dirt, Inc., dated April 6, 1999.
27 Financial Data Schedule "CE"
* Incorporated herein by reference from the referenced filings previously made
by the Company.
23
