SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, for the quarter ended December 31, 1999
Commission File No. 000-27623
SUNWEST 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]
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.
Transitional Small Business Disclosure format (check one):
Yes [ ] No [X]
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Sun West Enterprises, Inc.
(A Development Stage Company)
Financial Statements
As of December 31, 1999 and
For the Three and Nine Month Periods Ended December 31, 1999
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Index to the Financial Statements (Unaudited)
As of December 31, 1999 and
For the Three and Nine Month Periods Ended December 31, 1999
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
Financial Statements of Sun West
Enterprises, Inc.:
Balance Sheet, as of December 31, 1999 (Unaudited) 1
Statements of Operations for the three and nine month
periods ended December 31, 1999 and for the period
from March 5, 1999 (inception) to December 31,
1999 (Unaudited) 2
Statement of Shareholders' Equity for the nine month
period ended December 31, 1999 and for the period
from March 5, 1999 (inception) to December 31,
1999 (Unaudited) 3
Statement of Cash Flows for the three and nine month
periods ended December 31, 1999 and for the period
from March 5, 1999 (inception) to December 31,
1999 (Unaudited) 4
Notes to Financial Statements (Unaudited) 5
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1999
(Unaudited)
--------------------------------------------------------------------------------
ASSETS
Cash $ 970
Accrued interest 300
Due from shareholder 9,000
------------
Total assets $ 10,270
============
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 shares issued
and outstanding 2,650
Additional paid-in capital 9,000
Deficit accumulated during development
stage (1,893)
------------
Total shareholders' equity 9,757
------------
Total liabilities and shareholders' equity $ 10,270
============
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 Three and Nine Month Periods Ended December 31, 1999 and
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
Three Months Nine Months March 5, 1999
Ended Ended (Inception) to
December 31, December 31, December 31,
1999 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue -- -- --
Cost of sales -- -- --
------------ ------------ ------------
Gross profit -- -- --
Other expenses $ (318) $ (243) $ (1,893)
------------ ------------ ------------
Net loss $ (318) $ (243) $ (1,893)
============ ============ ============
Net loss per 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 Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
<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 -- -- -- -- (243) (243)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 2,650,000 $ 2,650 -- $ 9,000 $ (1,893) $ 9,757
========= ========= ========= ========= ========= =========
</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 Three and Nine Month Periods Ended December 31, 1999 and 1998 and
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
Nine Months March 5, 1999
Ended (Inception) to
December 31, December 31,
1999 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (243) $ (1,893)
Adjustments to reconcile net loss
to net cash used in operations:
Decrease in assets:
Accrued Interest (300) (300)
Due from shareholder (9,000) (9,000)
Increase in liabilities:
Accounts payable 513 513
------------ ------------
Cash used in operating activities (9,030) (10,680)
------------ ------------
Cash flows used in investing activities:
Cash used in investing activities -- --
------------ ------------
Cash flows provided by financing activities:
Issuance of common stock 10,000 11,650
------------ ------------
Cash provided by financing activities 10,000 11,650
------------ ------------
Net increase (decrease) in cash 970 970
Cash at beginning of period -- --
------------ ------------
Cash at end of period $ 970 $ 970
============ ============
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 December 31, 1999 and
For the Three and Nine Month Periods Ended December 31, 1999 and
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
--------------------------------------------------------------------------------
1. Basis of Presentation
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments, consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
financial statements, necessary to present fairly its financial position as
of December 31, 1999 and the results of its operations and cash flows for
the period from March 5, 1999 (inception) to December 31, 1999 and the
three and nine month periods ended December 31, 1999.
2. 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.
3. Loss Per Common Share
The loss per common share have been computed by dividing the loss available
to common shareholders by the weighted-average number of common shares for
the period.
5
<PAGE>
Sun West Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
As of December 31, 1999 and
For the Three and Nine Month Periods Ended December 31, 1999 and
For the Period from March 5, 1999 (Inception) to December 31, 1999
(Unaudited)
--------------------------------------------------------------------------------
3. Loss Per Common Share, Continued
The computations of loss per common share for the three and nine month
periods ended December 31, 1999 and the period from March 5, 1999
(inception) to December 31, 1999 follow.
The Company has no potentially dilutive securities.
<TABLE>
<CAPTION>
Period from
Three Months Nine Months March 5, 1999
Ended Ended (Inception) to
December 31, December 31, December 31,
1999 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss available to common
shareholders $ (543) $ (543) $ (2,193)
Weighted-average shares 2,650,000 2,650,000 2,523,076
----------- ----------- -----------
Loss per common share -- -- --
=========== =========== ===========
</TABLE>
4. 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 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.
6
<PAGE>
Item 2. 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- 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.
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.
7
<PAGE>
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.
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.
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.
8
<PAGE>
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.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 2. Changes in Securities
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, who
was, and is, the sole director of the company, and the Secretary of the company.
Those shares were not issued to Mr. Reincke or Mr. Stepp as compensation for
services as either an officer or director. Those shares were valued at what we
believe was the fair market value at the time of issuance, which was one cent
($0.001) per share. Also in March 1999, we issued 1,100,000 shares of our common
stock to Thomas Krucker, the President of the company 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
9
<PAGE>
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 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not Applicable
Item 6. 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*
10.1 Material Contracts - License Agreement dated December 29, 1999 with Dr.
Robert Milne
11. Statement Re: Computation of Per Share Earnings (included in Footnote 3
of the Financial Statements in Item 1 of this Quarterly Report on Form
10-QSB)
15. Letter on Unaudited Interim Financial Information (not applicable)
18. Letter on Change in Accounting Principles (Not applicable)
19. Reports Furnished to Security Holders (Not applicable)
22. Published Report Regarding Matters Submitted to Vote (not applicable)
24. Power of Attorney*
10
<PAGE>
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 3, 2000.
Sun West Enterprises, Inc.,
a Nevada corporation
/s/ Ronald Almadova
By: Ronald Almadova
President
11
