SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
---------------------
April 3, 2000
Date of Report
(Date of earliest event reported)
SOUTHLAND FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Suite 2, 25 Prospect Street
Box Hill, VIC 3128, Australia
(Address of principal executive offices, including zip code)
612 9999 3884
Registrant's telephone number
612 9999 0828
Registrant's fax number
Cactus Multimedia I, Inc.
(Former name or former address, if changed since last report)
Delaware 0-28645 65-0907796
- ----------------------- ----------------- ---------------
(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Agreement and Plan of Reorganization (the
"Acquisition Agreement") dated April 3, 2000, Southland Financial, Inc.
("Southland" or the "Company"), a Nevada corporation, acquired all the
outstanding shares of common stock of Cactus Multimedia I, Inc. ("Cactus"), a
Delaware corporation, from shareholders thereof in an exchange for an aggregate
of 500,000 shares of common stock of Southland (the "Acquisition"). As a result,
Cactus became a wholly-owned subsidiary of Southland.
The Acquisition was adopted by the unanimous consent of the
Board of Directors of Southland on April 3, 2000. The Acquisition is intended to
qualify as a reorganization within the meaning of Section 368(a)(2)(B) of the
Internal Revenue code of 1986, as amended.
Prior to the Acquisition, Southland had 15,306,384 shares of
common stock issued and outstanding, and 15,806,384 shares issued and
outstanding following the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule
12g-3(a) of the General Rules and Regulations of the Securities and Exchange
Commission, Southland became the successor issuer to Cactus for reporting
purposes under the Securities Exchange Act of 1934 (the "Act") and elects to
report under the Act effective January 5, 2000.
A copy of the Acquisition Agreement is filed as an exhibit to
this form 8-K and is incorporated in its entirety herein. The foregoing
description is modified by such reference.
(b) The following table contains information regarding the
shareholdings of Southland's current directors and executive officers and those
persons or entities who beneficially own more than 5% of its common stock
(giving effect to the exercise of the warrants held by each person or entity):
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Percent of
Common Stock Common Stock
Name Beneficially Owned Beneficially Owned
- ---- ------------------ ------------------
<S> <C> <C>
David A. Turik 2,500,000(1) 16.3%
Chairman and Chief
Executive Officer
Director
Willie Lo(2) - 0 - 0%
Director
Robert Talbot-Stern(2) - 0 - 0%
Director
Martin Dougherty(2) - 0 - 0%
Director
Robert Hogarth 2,000,000 12.9%
JBF Management Inc. 2,000,000 12.9%
</TABLE>
(1) Does not include 500,000 shares of Common Stock held by the Turik
Discretionary Trust. These shares are held in trust for the benefit of Mr.
Turik's children. Includes 500,000 shares of Common Stock with are held by
Capital Advantage International Propriety Limited, a company in which Mr. Turik
is a 33% shareholder.
(2) Does not include an aggregate of 2,000,000 options to purchase shares of
Common Stock which may be issued to certain directors as compensation for
services performed.
(c) Summary of the Company. The economic progress and prosperity of
Hong Kong has long been underpinned by an efficient and cost-effective
telecommunications sector. While the mobile telecom market in Hong Kong is
highly competitive, the three new local fixed line carriers (Hutchinson, New T&T
and New World) have only made slight inroads into Hong Kong Telecom's local
market share.
The Hong Kong government has recently released its proposed
broadcasting and telecommunications liberalization policies which are presented
as a micro-economic reform designed to reduce prices and increase innovation,
and as an industry development policy aimed at attracting regional hubbing
business.
3
<PAGE>
Business Strategy
-----------------
The strategic objective of Southland Financial, Inc. ("Southland") and
its subsidiary, United Telecom International Ltd., ("UTI") is to become a
network service provider of the Customer Access Network ("CAN") services in Hong
Kong:
The business strategy is based on the following worldwide developments:
o The continuing viability and growth of telecom carriers will
increasingly be dependent on having direct access and thus
relationships with consumers.
o This direct access will enable carriers to provide integrated
telecom services to customers and these services include
telephony, Pay TV, fast Internet access and other interactive
services.
o The demand for high quality transmission capacity that is
required to handle complex voice, data and video
telecommunications, will continue to increase and will require
higher bandwidth digital optical fiber networks.
The principle elements of the Company's business strategy include the
following:
o The Company intends to invest and build a highly reliable and
versatile telecommunications network in Hong Kong that will
provide local access to the homes and offices of customers.
o Carriers in Hong Kong will lease transmission capacity and
lines from the Company as the demand is required on a "pay as
you use" principle.
o The Company will build the infrastructure in partnership with
the carriers who are the direct customers to the Company,
adopting a "just in time" format.
o Carriers themselves do not have to invest in building
infrastructures, thus saving on capital investments. The
carriers can focus on what they do best to develop new
products and services to meet market demand. There is,
therefore, little duplication of infrastructures and waste of
scarce resources.
Strategic Partnerships
----------------------
To ensure the viability of the project, the Company has undertaken a
significant amount of work in Hong Kong to establish strategic relationships
with the carriers and the government regulator, OFTA.
4
<PAGE>
The Network
-----------
The Company plans to construct and operate state of the art,
competitive local telecommunications networks employing the latest SDH
transmission technology with dual ring architectures and centralized network
management and maintenance.
The Company's advanced networks will, through other carriers, offer
cost effective access to residential subscribers and provide uniform, high
reliable quality services to large corporate customers.
The Company's network configuration consists of the following key
elements:
o Interface to the carriers
The Electronics that interface to the carriers'
exchange equipment
o Ducting and optical fibers
The optical fiber rings, along with the cables in
ducts, running between exchanges, providing for
robust and self-healing networks.
o Electronic equipment
The transmission equipment and the necessary
electronics required to terminate the traffic at the
buildings.
o Block-wiring
These are the horizontal and vertical cablings within
buildings leading to the subscribers' terminating
blocks.
o Network management
The computer systems that provide centralized
monitoring of the network. The aims is to minimize
network down-time, thereby providing a highly
reliable and competitive service.
Marketing
---------
The Company intends to focus its marketing efforts to all existing
carriers and service providers in Hong Kong. Mr. Lo and Mr. Turik have regularly
traveled to Hong Kong during the past 12 months to discuss the Company's plans
with senior executives of certain carriers as well as the government regulator,
OFTA. Pending adequate funding,
5
<PAGE>
which cannot be assured, the Company will then finalize further appropriate
agreements and relevant implementation timetables.
Management
----------
The executive officers of the Company are as follows:
Name Title
---- -----
David Turik Chairman and Chief Executive
Willie Lo Chairman of UTI, Executive Director
Robert Talbot-Stern Director
Martin Dougherty Director
David A. Turik, President and Chairman of the Board
Mr. Turik has previously held senior executive management positions
with currently publicly listed Australian companies, NetComm Australia, Telstra,
(the former national carrier, Telecom Australia), AAP Telecommunications and
Spectrum Network Systems, as well as Toronto Stock Exchange listed, TSB
International. In the past 5 years, he has predominantly focused on business
development, mergers and acquisitions and project specific capital raisings. Mr.
Turik is responsible for identifying and negotiating the Company's
telecommunications infrastructure based project in Hong Kong. Mr. Turik has held
many private board appointments across a wide range of telecommunications
related organizations.
Willie Lo, Executive Director, Chairman of United Telecom Inc. (Hong Kong)
Mr. Willie Lo is a veteran of the telecommunications and information
technology industries. He has held senior technical management positions for
over 18 years, with Hong Kong Telecom, Telstra, (Telecom Australia) and PRACOM
Pty Ltd. Mr. Lo has successfully managed a broad range of projects from cable
network roll-outs to systems development and implementation. For 8 years, Mr. Lo
was a project manager for Hong Kong Telecom, managing the deployment of major
cable networks. Mr. Lo was the IT Manager, Media & Broadcasting, for Telstra,
prior to becoming IT Manager for PRACOM and an Executive Director, for Pacific
Communications Research P/L. Mr. Lo holds a Masters Degree in Systems
Engineering, (RMIT), a diploma in Business Studies from Hong Kong Polytechnic
and a bachelor of Applied Sciences from the University of Melbourne.
Robert Talbot-Stern, Non Executive Director
Mr. Talbot-Stern, B.S. Econ. (Wharton), J.D. (Penn.), LL.M. (London),
has had a distinguished corporate, academic and public career, having been group
counsel for
6
<PAGE>
UNISYS and Assistant General Counsel for Chrysler. While at Chrysler
Talbot-Stern held Board directorships with Mitsubishi Motors and Peugeot, while
coordinating Chrysler Canada's rescue effort. Mr. Talbot-Stern is on a current
White House Task Force on Deregulation and Competition, has been a guest
columnist for the Australian Financial Review and business commentator for
CNBC-TV. He has worked as a Management and Legal consultant in affiliation with
consulting and law firms in Washington (National Academy of Sciences, McKinsey &
Co., Herzfeld & Rubin, and Boston Consulting Group). He has been a past adviser
to the Business Roundtable and Federal Reserve Board on interest rates.
Martin Dougherty, Non Executive Director
Mr. Dougherty has had a long career in the media and communications
field having held senior executive positions with both the John Fairfax Group
and News Limited. Mr. Dougherty has also held board directorships with the John
Fairfax Group, the Australian Associated Press, (AAP) and David Syme Pty Ltd.,
(publishers of the Melbourne Age and Business Review Weekly). For over 17 years,
Mr. Dougherty has also been Chairman of Dougherty Communications; public affairs
consultants, specializing in strategic public relations, issues management,
telecommunications, government and media relations. This company became a member
of the Ogilvy Public Relations Group. Mr. Dougherty was a member of the
International Management Group of Olgilvy Public Relations during the 1980's. He
resumed private practice as a consultant in 1989.
ITEM 2. ACQUISITION OR DISPOSITION ASSETS
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, upon effectiveness of the Acquisition, the
Company became the successor issuer to Cactus for reporting purposes under the
Securities Exchange Act of 1934 and elects to report under the Act effective
January 5, 2000.
7
<PAGE>
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The sole officer and director of Cactus has resigned upon closing of
the Acquisition.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
Audited financial statements for Southland Financial, Inc. Years Ended
January 31, 2000 and 1999, along with Unaudited Proforma Consolidated
Financial Statements are included herein.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable. The Company has a fiscal year ending on January 31.
8
<PAGE>
EXHIBITS
2.1 Agreement and Plan of Reorganization between Southland Financial, Inc.
and Cactus Multimedia I, Inc. dated April 3, 2000*
99 Press Release dated April 4, 2000*
* Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
SOUTHLAND FINANCIAL, INC.
By: /s/ David Turik
-------------------
David A. Turik
Chairman and Chief Operating
Officer
Date: April 18, 2000
9
<PAGE>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Stage Corp.)
A Development Stage Company)
FINANCIAL STATEMENTS
--------------------
Years Ended January 31, 2000 and 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
--------
<S> <C>
Independent Auditor's Report................................................................. F-1
Audited Financial Statements:
Balance Sheets............................................................................... F-2 - 3
Statements of Operations..................................................................... F-4
Schedules of Administrative Expenses......................................................... F-5
Statements of Cash Flows..................................................................... F-6
Statements of Stockholders' Equity........................................................... F-7
Notes to Financial Statements................................................................ F-8 - 11
Introduction to Unaudited Pro Forma Consolidated Financial Statements........................ F-12
Unaudited Pro Forma Consolidated Statement of Operations for the
for the Year Ended January 31, 2000.................................................... F-13
Notes to Unaudited Pro Forma Consolidated Statement of Operations............................ F-14
Unaudited Pro Forma Consolidated Balance Sheet as of January 31, 2000........................ F-15
Notes to Unaudited Pro Forma Consolidated Balance Sheet...................................... F-16
</TABLE>
<PAGE>
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANTS
(A Professional Corporation)
Armando C. Ibarra, C.P.A. Members of the California Society of
Armando Ibarra, Jr., C.P.A. Certified Public Accountants
REPORT OF INDEPENDENT AUDITOR
To the Board of Directors
Southland Financial, Inc.
(Formerly Equishare Development Corp.)
(A Delaware Stage Company)
We have audited the accompanying balance sheets of Southland Financial, Inc.
(Formerly Equishare Development Corp.) (A Development Stage Company) as of
January 31, 2000 and 1999, and the related statements of operations, changes to
stockholders' equity and cash flows for the years then ended; and for the
cumulative period from January 14, 1998 (reinstatement) through January 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 Southland Financial, Inc. (Formerly
Equishare Development Corp.) (A Development Stage Company) as of January 31,
2000 and 1999 and the result of its operations and its cash flows for the years
then ended; and for the cumulative period form January 14, 1998 (reinstatement)
through January 31, 2000 in accordance with generally accepted accounting
principles.
/s/Armando C. Ibarra, CPA-APC
ARMANDO C. IBARRA, CPA-APC
F-1
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Balance Sheets
As January 31, 2000 and 1999
- ---------------------------------------------------------------------------------------------------------
Restated
2000 1999
------------ --------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 110,168 $ 0
Accounts receivable 151,995 0
------------ ---------------
Total Current Assets 262,163 0
TOTAL ASSETS $ 262,163 $ 0
============ ===============
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Balance Sheets
As January 31, 2000 and 1999
- --------------------------------------------------------------------------------------------------------
Restated
2000 1999
------------ --------------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 5,684 $ 0
--------------- ------------------
Total Current Liabilities 5,684 0
Long-Term Debt
Salary Payable - David Turik 250,000 97
Management Fees Payable 0 137,500
Note Payable - David Turik 72,781 0
Loan Payable - B. Hogarth 115,000 0
Loan Payable - Willie Lo 12,866 0
--------------- ------------------
Total Long-Term Debt 450,647 137,597
--------------- ------------------
TOTAL LIABILITIES 456,331 0
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value; authorized 100,000,000 Shares; 15,489,569
and 15,210,998 shares issued and outstanding in 2000 and
1999, respectively 15,490 15,211
Additional Paid in Capital 2,793,510 2,518,789
Stock Subscription Receivable (290,000) (750,000)
(Deficit) Accumulated During
Development Stage (2,713,168) (1,921,597)
--------------- ------------------
TOTAL STOCKHOLDERS' EQUITY (194,168) (137,597)
--------------- ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 262,163 $ 0
============== =================
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Statements of Operations
For the Twelve Months Ended January 31, 2000 and 1999
- --------------------------------------------------------------------------------------------------------
Restated
2000 1999
------------------ -----------------
<S> <C> <C>
REVENUES
Revenues $ 0 $ 0
------------------- -----------------
Total Net Revenues 0 0
COST OF SALES
Cost 0 0
------------------- -----------------
Total Cost of Sales 0 0
------------------- -----------------
GROSS PROFIT (LOSS) 0 0
OPERATING EXPENSES 792,195 1,921,092
------------------- -----------------
NET OPERATING LOSS (792,195) (1,921,092)
OTHER INCOME (EXPENSES)
Interest Income 624 0
------------------- -----------------
Total Other Income (expenses) 624 0
------------------- -----------------
NET INCOME/(LOSS) BEFORE TAXES $ (791,571) $(1,921,092)
BASIC EARNINGS (LOSS) PER SHARE (0.06) (0.13)
=================== =================
WEIGHTED AVERAGE EARNINGS (LOSS)
PER SHARE (0.05) (0.37)
=================== =================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 15,270,978 5,229,996
=================== =================
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Schedules of Administrative Expenses
For the Twelve Months Ended January 31, 2000 and 1999
- --------------------------------------------------------------------------------------------------------
Restated
2000 1999
--------------- -----------------
<S> <C> <C>
Advertising $ 4,836 $ 0
Amortization Expense 1,210 0
Automobile Expense 1,011 0
Bank Charges 87 1,814
Bad debts expense 9 14,495
Consulting 137,041 1,600,000
Currency (gain)/loss (618) 0
Management Fees 162,000 137,500
Office Expense 13,525 0
Organization expense 0 150,000
Parking 833 641
Postage & delivery 0 42
Legal Fees 29,002 0
Accounting 3,070 0
Public Relations 48,900 0
Repairs 1,382 286
Stock Transfer Fees 12,014 0
Telephone 10,598 4,099
Meals 2,086 0
Travel 81,543 11,598
Office Supplies 2,758 617
Salaries and Wages 250,000 0
Underwriting Fees 27,500 0
Web Design 3,335 0
Wire Fees 84 0
---------------- ----------------
Total General & Administrative Expenses $ 792,195 $ 1,921,092
================ ================
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-5
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Statements of Cash Flows
For the Twelve Months Ended January 31, 2000 and 1999
- -------------------------------------------------------------------------------------------------------------
Restated
2000 1999
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss $ (791,571) $(1,921,092)
Adjustments to reconcile net loss to cash
used in operations:
Account Receivable - United Telecom (151,995) 0
Accounts Payable 5,684 0
Loan Payable - David Turik 72,684 97
Salary Payable - David Turik 250,000 0
Management Fees Payable (137,500) 137,500
Loan Payable - B. Hogarth 115,000 0
Loan Payable - Willie Lo 12,866 0
-------------- ------------------
Net Cash Provided (used) by
Operating Activities 624,832 1,783,495
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Net Cash Used by Investing Activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Common Stock 279 15,211
Stock Subscription Receivable 460,000 (750,000)
Paid in Capital 274,721 2,518,789
Deficit Accumulated During Development Stage (505)
-------------- ------------------
Net cash provided by financing activities 735,000 1,783,495
-------------- ------------------
Net increase (decrease) in cash 110,168 0
Cash at beginning of year 0 0
-------------- ------------------
Cash at end of year $ 110,168 $ 0
-------------- ------------------
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
For the Years Ended January 31, 2000, January 31, 1999, and Period from
January 14, 1998 (reinstatement) through January 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Additional Stock Total
Common Common Paid-In Subscriptions Deficit Stockholders
Shares Stock Capital Receivable Accumulated Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 14, 1998 18,050,906 18,051 (18,051) 0 0 0
(reinstatement)
Shares issued in exchange
for note receivable 20,000,000 20,000 (5,000) 0 0 15,000
One-for-2,000 shares
revenue stock split (37,891,756) (37,892) 37,892 0 0 0
Net Loss 0 0 0 0 0(505) (505)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1998 159,150 159 14,841 0 (505) 14,496
Stock Issued 4/01/98 6,000,000 6,000 144,000 0 0 150,000
Stock Issued 10/11/98 51,848 52 18,948 0 0 19,000
Stock Issued 1/31/99 6,000,000 6,000 1,594,000 0 0 1,600,000
Stock Issued 1/31/99 3,000,000 3,000 747,000 (750,000) 0 0
Net Loss 1/31/99 0 0 0 0 (1,921,092) (1,921,092)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1999 15,210,998 15,211 15,213 (750,000) (1,921,092) (137,597)
Stock Issued 6/07/99 50,000 50 12,450 0 0 12,500
Stock Issued 12/16/99 178,571 179 249,821 0 0 250,000
Stock Issued 12/31/99 50,000 50 12,450 0 0 12,500
Cash Received on Subscription
Receivable:
6/7/1999 0 0 0 50,000 0 50,000
12/31/1999 0 0 0 50,000 0 50,000
1/31/1999 0 0 0 360,000 0 360,000
Net Loss 1/31/00 0 0 0 0 (791,571) (791,571)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2000 15,489,569 15,490 2,793,510 (290,000) (2,713,168) (194,168)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Auditor's Report and Notes to Financial Statements
F-7
<PAGE>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended January 31, 2000 and 1999
NOTE 1. OPERATIONS AND DESCRIPTION OF BUSINESS
Operations
- ----------
Southland Financial, Inc. (the "Company") was organized as a Nevada corporation
on May 31, 1990, under the name Equishare Development Corp. On May 31, 1991, the
Company was involuntarily dissolved; on July 30, 1992 it was reinstated. The
Company was again involuntarily dissolved on May 31, 1994, then reinstated March
13, 1995. As the surviving corporation of a merger with a California
corporation, the name was changed to Southland Financial, Inc. on April 24,
1995. On May 31, 1996 the Company once again was involuntarily dissolved. On
January 14, 1998 the Company was reinstated to a corporation of good standing
with the State of Nevada.
Development stage enterprise
- ----------------------------
The Company is currently considered to be in the development stage and therefore
has adopted the accounting and reporting standards of Financial Accounting
Standards Board Statement No. 7, "Accounting and Reporting by Development Stage
Enterprises".
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Method
- -----------------
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a January 31, year end.
Use of Estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reports of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-8
<PAGE>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended January 31, 2000 and 1999
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Cash and Cash Equivalents
- -------------------------
For purposes of reporting cash flows, the Company considers all liquid
investments with an initial maturity of three months or less to be cash
equivalents.
Accounts Receivable
- -------------------
Accounts receivable represents the amount advanced to United Telecom
International Limited. No allowances have been provided on accounts receivable
because management believes all amounts are collectable.
Salary Payable
- --------------
Salary payable consists of a contract for services between Southland Financial,
Inc. (Formerly Equishare Development Corp.) and David Turik, a related party.
Contract is for three years with an option of a further three year renewal.
Compensation is broken down on a three-year base salary paid in monthly
advances.
Year One 01/31/2000 250,000
Year Two 01/31/2001 300,000
Year Three 01/31/2002 350,000
Long-Term Debt
- --------------
As of January 31, 2000 and 1999, notes payable consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Demand note payable to David Turik $ 72,781
Demand note payable to B. Hogarth 115,000
Demand note payable to W. Lo 12,866
-------------
Total notes payable $ 200,647
-------------
</TABLE>
These notes payable to related parties as of January 31, 2000 consist of
unsecured non interest bearing notes payable.
F-9
<PAGE>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended January 31, 2000 and 1999
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Income taxes
- ------------
Income taxes are provided in accordance with Statement of Financial Accounting
Standard No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
<TABLE>
<CAPTION>
Income tax benefit is calculated as follows:
Cumulative Activity
During
Development
Stage
January 14, 1998
(reinstatement)
Year Ended Year Ended through
January 31, 2000 January 31, 1999 January 31, 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Deferred Income Tax $ 257,600 $ 641,400 $ 899,000
Change in Valuation Allowance (257,600) (641,400) (899,000)
------------- ------------- -------------
Benefit for Income Taxes $ 0 0 0
============== ============= =============
</TABLE>
F-10
<PAGE>
SOUTHLAND FINANCIAL, INC.
(Formerly Equishare Development Corp.)
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended January 31, 2000 and 1999
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Net loss per common share
- -------------------------
Net loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the period. The weighted average
number of common stock shares outstanding was 15,270,978 for the year ended
January 31, 2000; and 5,229,996 for the year ended January 31, 1999.
NOTE 3. CONTINGENCY
The state of Nevada's Revised Status provides that a corporation that has been
reinstated to a status of good standing continues to be liable for past acts and
errors and omissions, whether engaged in directly or through its former officers
and directors. Management of the Company does not believe any past acts, errors
and omission, or unasserted claims and assessment exist or have occurred,
however, they are contingently liable for such matters. No provisions for
losses, if any, have been provided in the accompanying financial statements
because of the uncertainty of such matters.
NOTE 4. FINANCIAL STATEMENTS RESTATED
The financial statements for the year ended January 31, 1999 were restated to
record material expenses that were omitted in the audited statements.
NOTE 5. COMMON STOCK
As of January 31, 1998 there were 159,150 shares of common stock outstanding. On
April 1, 1998 the company issued 6,000,000 shares of common stock. On October
11, 1998 the company issued 51,848 shares of common stock. On January, 31 1999
the company issued 9,000,000 shares of common stock. As of January 31, 1999
there were 15,210,998 shares of common stock outstanding. On June 6, 1999 the
company issued 50,000 shares of common stock. On December 16, 1999 the company
issued 178,571 shares of common stock. On December 31, 1999 the company issued
50,000 shares of common stock. As of January 31, 2000 there were 15,489,569
shares of common stock outstanding.
F-11
<PAGE>
================================================================================
SOUTHLAND FINANCIAL, INC.
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
================================================================================
<PAGE>
<TABLE>
<CAPTION>
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Page
----
<S> <C>
Introduction to Unaudited Pro Forma Consolidated Financial Statements F-12
Unaudited Pro Forma Consolidated Statement of Operations for the
for the Year Ended January 31, 2000 F-13
Notes to Unaudited Pro Forma Consolidated Statement of Operations F-14
Unaudited Pro Forma Consolidated Balance Sheet as of January 31, 2000 F-15
Notes to Unaudited Pro Forma Consolidated Balance Sheet F-16
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On April 3, 2000, Southland Financial, Inc. (the Company) acquired all the
outstanding shares of common stock of Cactus Multimedia I, Inc. (CMI) in
consideration for 500,000 shares of the Company's common stock.
The following unaudited pro forma consolidated financial information presents a)
the Company's and CMI's unaudited pro forma consolidating statement of
operations for the year ended January 31, 2000, as if the acquisition of CMI
occurred on February 1, 1999; and b) the Company's and CMI's unaudited pro forma
consolidating balance sheet as of January 31, 2000, as if the acquisition of CMI
occurred on January 31, 2000.
This unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if such transactions in fact occurred on those dates, or to project
the Company's financial position or results of operations for any future date or
period. These unaudited pro forma consolidating financial statements should be
read in conjunction with the historical financial statements of the Company and
CMI.
F-12
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 2000
====================================================================================================================================
Historical
-------------------------------------------
Southland Cactus Pro Forma Pro Forma
Financial, Inc. (1) Multimedia I, Inc. (2) Adjustments Combined
====================================================================================================================================
<S> <C> <C> <C> <C>
NET SALES $ - $ 3,690 $ - $ 3,690
GENERAL AND ADMINISTRATIVE EXPENSES 792,195 25,957 - 818,152
- ------------------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (792,195) (22,267) - (814,462)
INTEREST INCOME 624 - - 624
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS (791,571) (22,267) - (813,838)
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHED AVERAGE NUMBER OF SHARES
OUTSTANDING 15,770,978
====================================================================================================================================
LOSS PER SHARE ($ .05)
====================================================================================================================================
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations
F-13
<PAGE>
SOUTHLAND FINANCIAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
================================================================================
NOTE 1 The column includes the historical results of operations of
Southland Financial, Inc. for the year ended January 31, 2000.
NOTE 2 The column includes the historical results of operations of
Cactus Multimedia I, Inc. (CMI) for the year ended December
31, 1999. The changes in CMI's results of operations for the
year ended January 31, 2000 compared to the year ended
December 31, 1999 are not material.
F-14
<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JANUARY 31, 2000
====================================================================================================================================
Historical
-------------------------------------------
Southland Cactus Pro Forma Pro Forma
Financial, Inc. (1) Multimedia I, Inc. (2) Adjustments Combined
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
ASSETS
====================================================================================================================================
CURRENT ASSETS
Cash $ 110,168 $ 18,472 ($100,000)(3) $ 28,640
Accounts receivable, net 151,995 1,890 - 153,885
Other current assets - 191 - 191
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 262,163 $ 20,553 ($100,000) $ 182,716
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================================================================================================================
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,684 $ 18,820 $ - $ 24,504
SALARY PAYABLE - RELATED PARTY 250,000 - - 250,000
LOAN PAYABLE - RELATED PARTY 72,781 - - 72,781
LOANS PAYABLE - RELATED PARTIES 127,866 - - 127,866
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 456,331 18,820 - 475,151
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
Common stock 15,490 1,000 (500)(3) 15,990
Additional paid-in capital 2,793,510 24,000 (122,767)(3) 2,694,743
Stock subscription receivable (290,000) (1,000) 1,000 (3) (290,000)
Deficit (2,713,168) (22,267) 22,267 (3) (2,713,168)
Total stockholders' equity (194,168) 1,733 (100,000) (292,435)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 262,163 $ 20,553 ($100,000) $ 182,716
===================================================================================================================================
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet
F-15
<PAGE>
SOUTHLAND FINANCIAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
================================================================================
NOTE 1. The column includes the historical balance sheet of Southland
Financial, Inc. (the Company) as of January 31, 2000.
NOTE 2. The column includes the historical balance sheet of Cactus
Multimedia I, Inc. (CMI) as of December 31, 1999. The changes
in CMI's balance sheet as of January 31, 2000 compared to
December 31, 1999 are not material.
NOTE 3. The pro forma consolidated balance sheet has been adjusted to
record the fair value of assets acquired and liabilities
assumed of CMI, the cash paid of $100,000 for services
rendered and the issuance of 500,000 shares of common stock of
the Company at $.001 par value to the former owners of CMI in
consideration for all the CMI shares.
The fair value of the assets acquired and liabilities assumed
were determined in accordance with APB 16 paragraph 87 & 88 as
follows:
1. Accounts receivable and other current assets were
valued at the present value of the amounts expected
to be realized.
2. Accounts payable and accrued liabilities, salary
payable and loans payable were valued at the present
value of the amounts expected to be satisfied.
F-16
