SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, for the fiscal year ended March 31, 2000
Commission File No.000-27613
SUN WEST ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2505 Rancho Bel Air, Las Vegas, Nevada 89107
(Address of registrant's principal executive offices) (Zip Code)
702.878.8310
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $0.00
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 price 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 June 30, 2000, approximately $10,000.00.
The number of shares outstanding of the issuer's only class of Common Stock,
$.001 par value, was 2,650,000 on March 31, 2000.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
Yes [ ] No [X]
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PART I.
Item 1. Description of Business.
Overview of the Vitamin and Health Supplement Industry. The retail market for
vitamins and nutritional supplements in the United States presently exceeds $7
billion annually. Approximately 45% of adults in the United States take some
form of vitamin or nutritional supplement. We believe this market will continue
to expand due to increasing consumer awareness of the health benefits of
vitamins and nutritional supplements. We also believe that the market for
vitamins and other nutritional supplements will continue to grow as the nation's
demographics continue to shift towards a more senior-aged population, who have a
greater tendency to use vitamins on a regular basis. Industry sources report
that approximately 55% of Americans aged 50 and over are regular vitamin users.
It is anticipated that the 50 and over age group will be the fastest growing
segment of the United States population as the baby boom generation continues to
mature.
Overview of Our Business. We were incorporated on March 5, 1999, pursuant to the
provisions of General Corporation Law of Nevada. Our executive offices are
located at 2505 Rancho Bel Air, Las Vegas, Nevada 89107. Our telephone number is
(702)240-0124. We were organized to engage in the manufacturing, packaging and
sale and distribution of vitamins and nutritional supplements. We plan to
distribute vitamin brands of other vitamin producers, as well as developing our
own vitamin brands. We plan to develop, or acquire a license to distribute, many
different vitamin products. For example, vitamin products can be sold in single
vitamin and in multivitamin combinations with varying potency levels in various
forms, including tablets (both chewable and time released tablets), powders,
two-piece hard shell capsules, and soft gelatin encapsulated capsules, which are
known in the industry as "soft gels". We may produce our own products or
subcontract out production and packaging to others.
Some of our shareholders are friends and business associates of Dr. Robert
Milne. Dr. Milne is a board-certified family practice physician with extensive
experience in alternative health care, allergy testing and preventative
medicine. He is also the inventor of a patented allergy-testing device. Before
starting his own practice at the Milne Medical Center in Las Vegas, Nevada, Dr.
Milne was Medical Director at the Omni Medical Center and also practiced
medicine at the Nevada Clinic after previous assignments in emergency medicine
and a family practice. Dr. Milne is the author of numerous papers in the medical
field and has authored several books, including The Definitive Guide to
Headaches and The Photon Connection - Energy for the New Millennium. Dr. Milne
has been developing various vitamin and health-supplement products for many
years.
In December, 1999 we entered into a licensing agreement with Dr. Milne to
acquire the rights to produce and market a photon-activated food supplement that
will provide consumers with the benefits of eating green vine- ripened fruit and
vegetables in a small package.
Private Label Industry. We will attempt to participate in the growing market for
private label, also called "store brand", vitamins. Sales of store brand
vitamins have grown significantly in chain drug stores. From the consumer's
standpoint, store brand products offer lower-priced and equal if not better
quality alternatives to nationally advertised brand name products. From the
retailer's standpoint, such products allow for lower retail pricing than
national brands and yet provide retailers with higher profit margins. Industry
analysts predict that private label's share of the overall market should grow
significantly over the next 10 years. We will try to market some of our products
directly to retail chain stores or to sublicense the rights to those products to
those retail chain stores.
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Our Competition Has More Money Than We Do And Will Continue To Introduce New
Products. The vitamin and nutrient supplement industry is rapidly changing
through the continuous development and introduction of new products. Many of our
established competitors currently sell their vitamin products directly to the
public over the Internet. We therefore are competing not only with existing
store brand vitamins and giant vitamin manufacturers, but with a host of smaller
manufacturers which compete with us more directly because they, too, claim to
have products on the leading edge of natural supplements. Our competition
includes such manufacturers as Apothecary, Boiron, Country Life, Enzymatic
Therapy, Earths Lands & Seas, EAS, Flora, Forest Herbs , Futurebiotics, Grifron,
Healthcomm International, HFS, Lane Lab, MAX, Menuco, Natrol, Nature's Bounty,
Nature's Herbs, Nature's Secret, Nature's Way, NOW, Nutramax, Osmo, Pathway,
ProBiologic, Rezei Bar Ltd., Source Naturals, Twin Lab, and Zand.
Our strategy for growth depends on our ability to continually improve and
enhance our existing products and introduce new products. In some cases, we will
be able to license the rights to use a product someone else has paid to develop.
However, we may be required to spend our own funds to enhance or improve our
product line to keep pace with evolving industry standards. This could require
the expenditure of significant funds and resources, and we do not presently have
a source or commitment for any such funds and resources.
Item 2. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
================================================================================
Property March 31, 1999 March 31, 2000
--------------------------------------------------------------------------------
Cash and equivalents 0.00 $940.00
--------------------------------------------------------------------------------
The Company defines cash equivalents as all highly liquid investments with a
maturity of 3 months or less when purchased.
Item 3. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
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PART II.
Item 5. Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, commonly referred to as the SEC. The public may read and
copy any materials filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is http://www.sec.gov. We
do not currently maintain our own Internet address.
We have applied for participation on the OTC Bulletin Board, an electronic
quotation medium for securities traded outside the Nasdaq Stock Market. There
can be no assurance that we will be approved for participation on the OTC
Bulletin Board. There is presently no public market for our stock.
We are authorized to issue 10,000,000 shares of common stock, $.001 par value,
each share of common stock having equal rights and preferences, including voting
privileges. The shares of our common stock constitute equity interests in the
Company. Our common stock shareholders are entitled to one vote for each share
of record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors of the Company or any other
matter, with the result that the holders of more than 50% of the shares voted
for the election of those directors can elect all of the Directors. The holders
of our common stock are entitled to receive dividends when, as and if declared
by our Board of Directors from funds legally available for dividend payments,
provided, however, that cash dividends are at the sole discretion of our Board
of Directors. In the event of liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities of the
Company and after provision has been made for each class of stock, if any,
having preference in relation to the common stock. Holders of the shares of our
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to our common stock. All of the
outstanding shares of our common stock are duly authorized, validly issued,
fully paid and non-assessable.
Dividend Policy. We have never declared or paid a cash dividend on our common
stock and we do not expect to pay cash dividends on our common stock. We
currently intend to retain our earnings, if any, for use in our business. Any
dividends declared in the future will be at the discretion of our Board of
Directors.
Stock Option Plan. We have not approved or adopted any stock option plan. Many
company's adopt stock option plans to provide compensation to officers,
employees, and directors. We may adopt such a plan in the future but have no
plans to do so currently.
Item 6. Plan of Operation
THIS REPORT SPECIFIES FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY
("FORWARD-LOOKING STATEMENTS") INCLUDING, WITHOUT LIMITATION, FORWARD-LOOKING
STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS AND FUTURE
STRATEGIES. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACTS.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-
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LOOKING TERMINOLOGY, SUCH AS "COULD", "MAY", "WILL", "EXPECT", "SHALL",
"ESTIMATE", "ANTICIPATE", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", "INTEND"
OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD- LOOKING STATEMENTS SPECIFIED IN THIS REPORT HAVE BEEN COMPILED BY
MANAGEMENT OF THE COMPANY ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. FUTURE OPERATING RESULTS OF THE
COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR
WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THIS REPORT REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY
AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER
CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND
OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND
AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT
THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM
ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON
THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. IN ADDITION, THOSE
FORWARD-LOOKING STATEMENTS HAVE BEEN COMPILED AS OF THE DATE OF THIS REPORT AND
SHOULD BE EVALUATED WITH CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE
OF THIS REPORT. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING
TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS REPORT ARE ACCURATE, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
Our Plan of Operation for Next 12 Months. Over the next 12 months we plan to
establish relationships with health food stores, retail vitamin chains and even
Internet vitamin wholesalers and suppliers. We may also try some direct selling
efforts, either by establishing a website on the Internet or marketing our
products by distributing brochures and price lists through the mails. We may
place advertisements in magazines that promote various sports and activities.
These sources, as well as magazines promoting health products and targeted to
the alternative medicine practitioner, will be the main focus of our magazine
advertising. We may also enter into joint venture agreements or distribution
agreements with existing vitamin retailers or wholesalers if the opportunity
arises.
Liquidity and Available Cash for Operations. We believe our current cash
resources are sufficient to fund our marketing and promotion activities relating
to our vitamin products for the next 9 months. Specifically, at March 31, 2000,
we had cash and equivalents of $9,417.00, with no outstanding liabilities except
for the annual fees for maintaining the corporation's status required by the
State of Nevada. We are not currently generating any revenues from the sale or
licensing of our vitamin products. Our only external source of liquidity is the
sale of our capital stock. Fortunately, because Dr. Milne developed the vitamin
products we are licensing, he, and not the company, paid the research costs and
other costs of development.
We Have No Employees. We do not currently have any employees. We anticipate
using consultants for business, accounting, marketing and legal services on an
as-needed basis. Because we plan to enter into licensing and manufacturing
agreements with third parties, we anticipate that we will require very few
employees, if any, during the next fiscal year.
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Producing Our Vitamin Products. We do not own production equipment and we do not
intend to purchase any production equipment or lease a production facility until
we have completed our initial marketing efforts. We do not believe we will have
any problems purchasing the ingredients necessary to produce our vitamin
products in commercial quantities or that availability of those ingredients will
be significantly effected by seasonal factors. The principal raw materials used
in the manufacturing process are natural and synthetic vitamins, purchased from
manufacturers primarily in the United States, with certain materials imported
from Japan and Europe. We intend to purchase our raw materials from numerous
sources, both foreign and domestic, so that we do not become dependent on any
one supplier.
We Have Potential Product Liability Risks. Any time you sell a product which is
consumed by the public, you are exposed to potential product liability risks
that are inherent in the testing, manufacturing and marketing of nutritional
supplement products. We do not currently have product liability insurance, and
there can be no assurance that we will be able to obtain or maintain such
insurance on acceptable terms or, if obtained, that such insurance will provide
adequate coverage against potential liabilities. We face an inherent business
risk of exposure to product liability and other claims in the event that the
development or use of our technology or products is alleged to have resulted in
adverse effects.
Changes in Number of Employees. During the next 12 months, depending on the
success of the Company's market expansion plan, the Company may be required to
hire additional employees; however, the Company is not able to provide a
reasonable estimate of the number of such additional employees which may be
required at this time.
Item 7. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The directors and principal executive officers of the Company are as specified
on the following table:
================================================================================
Name Age Position
--------------------------------------------------------------------------------
Ronald Almadova 60 President
--------------------------------------------------------------------------------
Richard Reincke 43 Secretary and Director
--------------------------------------------------------------------------------
Ronald Almadova is the president and sole director of the Company. Mr. Almadova
owns and operates two tourist-services businesses located on the Strip in Las
Vegas, Nevada. He has been an entrepreneur and business owner for the last 25
years, operating small businesses in Arizona, California, Oregon and Nevada.
Richard Reincke, age 43, is the secretary and sole director of the company. Mr.
Reincke was a National Merit Scholar at Michigan State University in 1976. From
1979 through 1984 he was employed by Sullivan & Associates as a labor-relations
consultant to management, representing clients in the construction and
manufacturing industries in administrative law hearings before the National
Labor Relations Board. From 1982 through 1988 he developed and manufactured the
Afford-A-House, a containerized manufactured housing kit which was manufactured
in San Bernardino, California and Vancouver, Washington and shipped to such
diverse markets as the Pribilof Islands and the Bahamas. From 1989 through the
present he has been a self-employed paralegal. He currently resides in Orange,
California.
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There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any officer or director of the company from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting such person of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony, nor are any of the officers or directors of any corporation or
entity affiliated with the company so enjoined.
Resignations. Thomas Krucker, an officer of the company, resigned as President
in January, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance. The company does not
presently have knowledge as to whether all of its officers, directors, and
principal shareholders have filed all reports required to be filed by those
persons on, respectively, Form 3 ( Initial Statement of Beneficial Ownership of
Securities), a Form 4 (Statement of Changes of Beneficial Ownership of
Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).
Item 10. Executive Compensation.
Any compensation received by officers, directors, and management personnel of
the company will be determined from time to time by our board of directors.
Officers, directors, and management personnel of the Company may be reimbursed
for any out-of-pocket expenses incurred on behalf of the company. No officers or
directors of the company has received any compensation since the inception of
the company. Thomas Krucker was the president of the company until he resigned
on January 15, 2000 and was replaced by Ronald Almadova.
<TABLE>
<CAPTION>
Cash Auto Meals & Total
Compensation Expense Insurance Entertainment Travel Housing Compensation
------------ ------- --------- ------------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. Krucker $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
R. Almadova $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
R. Reincke $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Totals $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
</TABLE>
Shares Issued as Compensation for Services. In March 1999, we issued at total of
550,000 shares of our common stock as compensation for legal services provided
to the company by Thomas E. Stepp, Jr. and his paralegal, Richard Reincke.
Richard Reincke was the initial director and secretary of the company, but those
shares were not issued to him as compensation for services as either an officer
or director of the company. Those shares were valued at what we believe was the
fair market value at the time of issuance, which was $0.001 per share. Also in
March 1999, we issued 1,100,000 shares of our common stock to Thomas Krucker
because he had expended the funds to incorporate the company and provided
services in connection with the incorporation of the company. Those shares were
valued at what we believe was the fair market value at the time he expended
those funds, which was par value.
Sale of Our Common Stock. In March 10, 1999, we sold unregistered shares of our
common stock in reliance on an exemption from registration provided by Rule 504
of Regulation D of the Securities Act of 1933. We sold
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a total of 1,000,000 shares of our common stock and received gross proceeds
totaling $10,000 in cash from approximately 24 non-accredited investors.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of March 31, 2000, by (i) each person
or entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive officers of the
Company as a group. The number of shares outstanding of our only class of common
stock was 2,650,000 at March 31, 2000.
(a) Security Ownership of Certain Beneficial Owners. Other than officers and
directors, only one person, Thomas E. Stepp, Jr., is the owner of 5% or more of
the Company's issued and outstanding common stock. Mr. Stepp owns 366,667 shares
of our common stock, which he received in lieu of payment for legal services he
provided to the Company.
(b) Security Ownership of Management. Ronald Almadova, the current president of
the company, does not own any of the company's securities. The present and
former principal executive officers of the Company directly or beneficially own,
in the aggregate, 1,283,333 shares of the Company's common stock, or
approximately 48.4 % of the issued and outstanding common shares, as set forth
on the following table (percentages are rounded off to the nearest one-tenth of
one percent).
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Percent of
Title of Class of Owner Owner Class (approx.)
-------------- ---------------- --------- ---------------
<S> <C> <C> <C>
$.001 par value Thomas Krucker* 1,100,000 41.5%
Common Stock 2505 Rancho Bel Air President and Director
Las Vegas, NV 89107
$.001 par value Richard Reincke 183,333 6.9%
Common Stock 4900 E. Chapman Ave. Secretary and Director
Orange, CA 92869
Total shares beneficially
owned by all officers and directors
as a group 1,283,333 48.4%
</TABLE>
*Thomas Krucker was the president of the company until January 15, 2000.
Beneficial Ownership. The chart above includes all beneficial ownership of
securities, which has been determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of our common stock
which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
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property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of our
common stock indicated as beneficially owned by them.
Changes in Control. Management is not aware of any arrangements which may result
in "changes in control" as that term is defined by the provisions of Item 403(c)
of Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
Licensing Agreement Was Not the Result of Arms-Length Negotiations. As set forth
above, in December, 1999, we acquired a license to acquire the rights to produce
and market light activated vitamin supplements from Robert D. Milne, M.D., who
was, at that time, a director and major shareholder of Elast Technologies, Inc.,
a Nevada corporation. Thomas Krucker, our president, was also a major
shareholder and a director of Elast Technologies, Inc. at the time the license
was acquired.
Item 13. Exhibits and Reports on Form 8-K
a) Exhibits
1 Underwriting Agreement (not applicable)
2 Plan of Merger (not applicable)
3.1 Articles of Incorporation* (Charter Document)
3.2 Certificate of Amendment to Articles of Incorporation* (Charter Document)
3.3 Bylaws*
4. Instruments Defining the Rights of Holders (not applicable)
9. Voting Trust Agreement - Not Applicable
10.1 Material Contracts - License Agreement dated December 21, 1999 with Dr.
Robert Milne
11. Statement Re: Computation of Per Share Earnings (included in Footnote 5 of
the Financial Statements in this Annual Report on Form 10-KSB)
15. Letter on Unaudited Interim Financial Information(not applicable)
16. Letter on change in certifying accountant (Not applicable)
18. Letter on Change in Accounting Principles (not applicable)
19. Reports Furnished to Security Holders (not applicable)
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21. Subsidiaries of the Registrant (not applicable)
22. Published Report Regarding Matters Submitted to Vote (not applicable)
23.1 Consent of Auditors
24. Power of Attorney
27. Financial Data Schedule
99 Other (not applicable)
*Previously filed as exhibits to Registration Statement on Form 10-SB filed with
the Securities and Exchange Commission on October 13, 1999.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Newport Beach, State of California, on July 14, 2000.
Sun West Enterprises, Inc.,
a Nevada corporation
/s/ Ronald Almadova
By: Ronald Almadova
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
SUN WEST ENTERPRISES, INC.
/s/ Richard Reincke July 14, 2000
------------------------------
Director
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Sun West Enterprises, Inc.
(A Development Stage Company)
Financial Statements
As of March 31, 2000 and 1999 and
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Index to the Financial Statements
As of March 31, 2000 and 1999 and
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) To March 31, 2000
Report of Independent Auditors 1
Financial Statements of Sun West Enterprises, Inc.:
Balance Sheets, as of March 31, 2000 and 1999 2
Statements of Operations for the Year Ended March 31,
2000, for the Period from March 5, 1999 (Inception) to
March 31, 1999 and for the Period From March 5, 1999
(Inception) to March 31, 2000 3
Statement of Shareholders' Equity for the Year Ended
March 31, 2000, the Period from March 5, 1999
(Inception) to March 31, 1999, and the Period from
March 5, 1999 (Inception) to March 31, 2000 4
Statement of Cash Flows or the Year Ended March 31,
2000, for the Period from March 5, 1999 (Inception) to
March 31, 1999 and for the Period From March 5, 1999
(Inception) to March 31, 2000. 5
Notes to Financial Statements 6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Sun West Enterprises, Inc.
We have audited the accompanying balance sheet of Sun West Enterprises, Inc. (a
development stage company) as of March 31, 2000 and 1999, and the related
statement of operations, shareholders' equity, and cash flows for the year ended
March 31, 2000, for the period from March 5, 1999 (inception) to March 31, 1999,
and for the period from March 5, 1999 (inception) to March 31, 2000. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Sun West Enterprises, Inc. (a
development stage company) as of March 31, 2000 and 1999, and the results of its
operations and cash flows for the year ended March 31, 2000, for the period from
March 5, 1999 (inception) to March 31, 1999, and for the period from March 5,
1999 (inception) to March 31, 2000 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has no significant operations, or facilities,
and requires significant resources to implement its plan of operations that
raises substantial doubt about its ability to be a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Kelly & Company
Kelly & Company
Newport Beach, California
July 5, 2000
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Balance Sheet
March 31, 2000 and 1999
--------------------------------------------------------------------------------
ASSETS
2000 1999
-------- --------
Cash $ 940 --
Accrued interest 525 --
Due from shareholder 9,000 --
Stock subscriptions receivable -- $ 10,000
-------- --------
Total assets $ 10,465 $ 10,000
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 513 --
-------- --------
Total liabilities 513 --
-------- --------
Shareholders' equity:
Common stock, $.001 par value;
10,000,000 shares authorized;
2,650,000 and 1,650,000 shares
issued and outstanding at March 31,
2000 and 1999, respectively 2,650 $ 1,650
Common stock subscribed -- 1,000
Additional paid-in capital 9,000 9,000
Accumulated deficit (1,698) (1,650)
-------- --------
Total shareholders' equity 9,952 10,000
-------- --------
Total liabilities and shareholders' equity $ 10,465 $ 10,000
======== ========
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Statement of Operations
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ended (Inception) to (Inception) to
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue -- -- --
Cost of sales -- -- --
Gross profit -- -- --
Other expenses $ (48) $ (1,650) $ (1,698)
------------ ------------ ------------
Net loss $ (48) $ (1,650) $ (1,698)
------------ ------------ ------------
Loss per common share -- -- --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Statement of Shareholders' Equity
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Price Common Additional During the
Common Per Common Stock Paid-in Development
Shares Share Stock Subscribed Capital Stage Total
--------- ------- --------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Formation of corporation,
March 5, 1999 -- -- -- -- -- --
Common stock 1,650,000 $ 0.001 $ 1,650 -- -- -- $ 1,650
Common stock subscribed -- $ 0.010 -- $ 1,000 $ 9,000 -- 10,000
Net loss -- -- -- -- $ (1,650) (1,650)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 1999 1,650,000 1,650 1,000 9,000 (1,650) 10,000
Issuance of common stock
on collection of stock
subscription receivable 1,000,000 1,000 (1,000) -- -- --
Net loss -- -- -- -- (48) (48)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 2000 2,650,000 $ 2,650 -- $ 9,000 $ (1,698) $ 9,952
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Year Ended March 31, 2000,
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ended (Inception) to (Inception) to
March 31,2000 March 31, 1999 March 31, 2000
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (48) $ (1,650) $ (1,698)
Adjustments to reconcile net loss to net
cash
Increase in assets:
Accrued Interest (525) -- (525)
Due from shareholder (9,000) -- (9,000)
Increase in liabilities:
Accounts payable 513 -- 513
------------ ------------ ------------
Cash used in operating activities (9,060) (1,650) (10,710)
------------ ------------ ------------
Cash flows used in investing activities:
Cash used in investing activities -- -- --
------------ ------------ ------------
Cash flows provided by financing activities:
Issuance of common stock 10,000 1,650 11,650
------------ ------------ ------------
Cash provided by financing activities 10,000 1,650 11,650
------------ ------------ ------------
Net increase (decrease) in cash 940 -- 940
Cash at inception -- -- --
------------ ------------ ------------
Cash at end of period $ 940 -- $ 940
============ ============ ============
Supplemental Disclosure of Cash Flow Information
Interest paid -- -- --
Income taxes paid -- -- --
Supplemental Schedule of Non-cash Investing and Financing Activities
Common stock subscriptions:
Stock subscriptions receivable -- $ 10,000 --
Common stock subscribed -- $ (1,000) --
Additional paid-in capital -- $ (9,000) --
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
1. Development Stage Operations
Sun West Enterprises, Inc. (a development stage company) (the "Company")
was incorporated in the state of Nevada on March 5, 1999 and has no
operating history with no revenues and no products or technology ready for
the market. The Company's initial business plan anticipates engaging in the
manufacture and/or sale of vitamins and nutritional supplements and to that
end, has obtained an exclusive license to manufacture and market a photon
light activated food supplement. The implementation of these plans
requires, among other things, significant resources and may involve the use
of leased facilities and equipment, subcontract manufacturing, consultants,
outside sales representatives, and/or merger with an operating entity.
While management believes the Company has adequate cash resources to meet
its immediate liquidity needs, the Company's ability to be a going concern
is predicated on its ability to raise additional necessary capital to
implement its plans, achievement of successful operations, and/or the
completion of a merger with an operating entity. There is no assurance that
any of these will occur or be successful.
2. Summary of Significant Accounting Policies
Management 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 of 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.
Disclosures about Fair Value of Financial Instruments
The Company accounts for the value of financial instruments using the fair
value method.
Start-up Costs
The Company expenses start-up costs as they are incurred.
Income Taxes
5
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies, Continued
Income Taxes, Continued
The Company accounts for deferred income taxes using the liability method
in accordance with Statement of Financial Accounting Standards No. 109.
Deferred income taxes are computed based on the tax liability or benefit in
future years of the reversal of temporary differences in the recognition of
income or deduction of expenses between financial and tax
reporting purposes. The net difference between tax expense and taxes
currently payable will be reflected in the financial statements as deferred
taxes. Deferred tax assets and/or liabilities will be classified as current
and noncurrent based on the classification of the related asset or
liability for financial reporting purposes, or based on the expected
reversal date for deferred taxes that are not related to an asset or
liability. For tax purposes the Company will be all capitalizing incurred
during the development stage.
3. Income Taxes
The components of the provision for income taxes are as follows:
2000 1999
------------ ------------
Current tax expense:
Federal -- --
State -- --
------------ ------------
Deferred tax expense:
Federal -- --
State -- --
------------ ------------
-- --
------------ ------------
Total provision -- --
============ ============
Significant components of the Company's deferred income tax asset at March
31, 2000 and 1999 are as follows:
2000 1999
------------ ------------
Deferred income tax asset:
Capitalized start-up expenses $ 577 $ 561
------------ ------------
Total deferred income tax asset 577 561
6
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
Valuation allowance (577) (561)
------------ ------------
Net deferred income tax asset -- --
============ ============
7
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
3. Income Taxes, Continued
The Company, based upon its history of losses and management's assessment
of when operations are anticipated to generate taxable income, has
concluded that it is more likely than not that none of the net deferred
income tax assets will be realized through future taxable earnings and has
established a valuation allowance for them.
Reconciliation of the effective tax rate to the U.S. statutory rate is as
follows:
2000 1999
------------ ------------
Tax expense at U.S. statutory rate 34% 34%
Change in the valuation allowance (34) (34)
------------ ------------
Effective income tax rate -% -%
============ ============
4. Loss Per Common Share
The loss per common share has been computed by dividing the loss available
to common shareholders by the weighted-average number of common shares for
the period.
The Company does not have any potentially dilutive securities.
The computations of loss per common share for the year ended March 31,
2000, the period ended December 31, 1999, and the period from March 5, 1999
(inception) to March 31, 2000 are as follows:
<TABLE>
<CAPTION>
For the Period For the Period
From March 5, 1999 From March 5, 1999
For the Year Ended (Inception) to (Inception) to
March 31,2000 March 31, 1999 March 31, 2000
<S> <C> <C> <C>
Net loss available to common
shareholders $ 573 $ 1,650 $ 2,223
Weighted-average shares, basic
and diluted 2,650,000 1,000,000 2,523,076
------------ ------------ ------------
Loss per common share -- -- --
============ ============ ============
</TABLE>
8
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2000 and 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 1999 and
For the Period from March 5, 1999 (Inception) to March 31, 2000
--------------------------------------------------------------------------------
5. Stock Transactions
The Company issued a total of 1,650,000 common shares to founders and legal
consultants in connection with their formation of the Company. The Company
has recorded this transaction at the par value of the shares issued and
correspondingly recognized other expense of $1,650.
In 1999, the Company, in a private placement offering, sold 1,000,000
shares of its common stock at $.01 per share under Regulation D of the
securities laws and recorded a stock subscription receivable and in 2000
collected the total stock subscription receivable proceeds of $10,000 from
twenty-four investors.
6. License Agreement
In December 1999, the Company entered into an agreement to license a photon
light activated food supplement. Under this agreement, the Company has the
exclusive right to the manufacture and market this health supplement. In
exchange for this exclusive licensing agreement, the Company is required to
pay a fee in the amount of $.10 for each 100 capsules of product sold. The
license has a term of five years with automatic renewals for three years
unless either party provides notice prior to its expiration.
9
