Form 10-QSB
(As last amended in Release No. 33-7505, effective January 1,1999, 63
F.R. 9632)
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 2000
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( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from....................to...............
Commission file number.............................................
Southland Financial, Inc.
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(Exact name of small business issuer as
specified in its charter)
Nevada 94-3346241
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 2, 25 Prospect Street, Box Hill, VIC 3128, Australia
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(Address of principal executive offices)
011 612 9999 3884
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 16,455,299
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Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
SOUTHLAND FINANCIAL, INC.
Part 1. Financial Information
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Item 1. Financial Statements
Balance Sheet
Statement of Operations
Statement of Cash Flows
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
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<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED BALANCE SHEETS
APRIL 30, 2000 AND JANUARY 31, 2000
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ASSETS April 30, 2000 January 31, 2000
(Unaudited)
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<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 5,765 $ 110,168
Accounts receivable - affiliate 34,027 151,995
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TOTAL CURRENT ASSETS AND TOTAL ASSETS $ 39,792 $ 262,163
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LIABILITIES AND DEFICIENCY IN ASSETS
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CURRENT LIABILITIES
Accounts payable and accrued expenses $ 45,982 $ 5,684
Salary payable - stockholder 325,000 -
Due to stockholders 145,718 -
Directors fee payable 75,000 -
Due to directors 115,150 -
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Total current liabilities 706,850 5,684
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LONG TERM DEBT
Salary payable - 250,000
Notes payable - directors - 200,647
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Total long-term debt - 450,647
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TOTAL LIABILITIES 706,850 456,331
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DEFICIENCY IN ASSETS
Common stock, par value $.001 per share; 100,000,000 shares authorized;
Additional paid in capital 4,442,211 2,793,510
Stock subscription receivable (290,000) (290,000)
Deficit accumulated during the development stage (4,836,058) (2,713,168)
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Total deficiency in assets (667,058) (194,168)
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TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ 39,792 $ 262,163
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</TABLE>
See accompanying notes - unaudited
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<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND THE PERIOD
FROM INCEPTION (JANUARY 14, 1998) TO APRIL 30, 2000
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Inception
(January 14, 1998) to
April 30, 2000 April 30, 2000
(Unaudited) (Unaudited)
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<S> <C> <C>
REVENUES $ - $ -
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OPERATING EXPENSES
Consulting 123,172 1,860,213
Directors fees 1,621,875 1,621,875
Licensing fees 81,082 81,082
Management fees - 299,500
Meals and entertainment 986 3,072
Other expenses 6,236 62,938
Organizational expense - 150,000
Professional fees 148,194 180,266
Public relations and advertising 8,000 61,736
Salaries and wages 75,000 325,000
Stock related fees 1,740 41,254
Travel 57,074 150,215
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Total operating expenses 2,123,359 4,837,151
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OTHER INCOME 469 1,093
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NET LOSS $ ( 2,122,890) $ ( 4,836,058)
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Weighted Average Number of Common Shares Outstanding 16,441,254 10,691,807
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Net loss per share - basic and diluted $ ( 0.13) $ ( 0.45)
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</TABLE>
See accompanying notes - unaudited
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<PAGE>
<TABLE>
<CAPTION>
SOUTHLAND FINANCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND THE PERIOD
FROM INCEPTION (JANUARY 14, 1998) TO APRIL 30, 2000
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Inception
(January 14, 1998)
April 30, 2000 to April 30, 2000
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $( 2,122,890) $ ( 4,836,058)
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Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services 1,650,000 3,444,000
Changes in assets and liabilities:
Accounts receivable 117,968 (34,027)
Other assets - -
Accounts payable 40,298 45,982
Salary payable 75,000 325,000
Directors fees payable 75,000 75,000
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Total adjustments 1,958,266 3,855,955
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Net cash used in operating activities (164,624) (980,103)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 725,000
Net borrowings from stockholders 60,071 145,718
Net borrowings from directors 150 115,150
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Net cash provided by financing activities 60,221 985,868
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (104,403) 5,765
CASH AND EQUIVALENTS - BEGINNING 110,168 -
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CASH AND EQUIVALENTS - ENDING $ 5,765 $ 5,765
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</TABLE>
See accompanying notes - unaudited
5
<PAGE>
SOUTHLAND FINANCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements include the accounts of Southland Financial Inc.,
and its wholly owned subsidiary Cactus Multimedia Inc., (the
Company), and have been prepared in accordance with generally
accepted accounting principles for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments considered
necessary for a fair presentation have been included and such
adjustments are of a normal recurring nature. Results for the
three months ended April 30, 2000 are not necessarily
indicative of the results that may be expected for the year
ending January 31, 2001.
The financial data at January 31, 2000 is derived from audited
financial statements which are included in the Company's Form
8-K/A dated April 3, 2000 and should be read in conjunction
with the audited financial statements and the notes thereto.
Information relating to inception to April 30, 2000 amounts
included in the consolidated condensed statements of
operations and cash flows have not been reviewed by
independent accountants.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure 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.
Net Loss Per Share
The Company applies Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (FAS 128). Net loss
per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the
reported periods after giving effect to a one-for-239 share
reverse stock split in January 1998. Outstanding stock
equivalents were not considered in the calculation as their
effect would have been anti-dilutive.
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<PAGE>
NOTE 3. GOING CONCERN
The Company has sustained substantial losses and negative cash
flows since inception. In the absence of commencing
operations, achieving profitable operations and positive cash
flows from operations or obtaining additional debt or equity
financing, the Company may have difficulty meeting current
obligations.
In view of these matters, the Company may not have the ability
to continue in existence. Management believes that actions
presently being taken, including efforts to sell common stock,
as more fully described in note 6, provide the opportunity for
the Company to continue as a going concern. In addition, the
stockholders and directors, have agreed to not pursue
collection of amounts due until such time as the Company
achieves profitable operations.
NOTE 4. ACQUISITION
On April 3, 2000, Southland Financial, Inc., a Delaware
corporation, acquired all the outstanding shares of common
stock of Cactus Multimedia I, Inc. (CMI), a Nevada
corporation, in consideration for 500,000 shares of the
Company's common stock. In connection with this acquisition
the Company entered into a consulting agreement with the
former majority shareholder of CMI for one year and paid the
former shareholder of CMI $100,000. As a result, Cactus became
a wholly owned subsidiary of the Company. At the time of the
acquisition, CMI had no operations and nominal net assets. 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. Upon effectiveness of the
acquisition Southland became the successor issuer to Cactus
for reporting purposes, under the Securities Exchange Act of
1934.
NOTE 5. COMMITMENTS
Future annual minimum payments under an employment agreement
with a key executive are as follows:
<TABLE>
<CAPTION>
Year ended January 31,
<S> <C> <C>
2001 $300,000
2002 350,000
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$650,000
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</TABLE>
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<PAGE>
NOTE 6. SIGNIFICANT AGREEMENTS
During March 2000, the Company entered into a contract with
China Changfeng StarBridge Computer Technology Ltd. (CCF), a
leading Chinese corporation to form a Sino-foreign Joint
Venture to develop Internet, Intranet and e-commerce
businesses in China. Under the contract, CCF will initially
retain 55% ownership and the Company will obtain a 45%
ownership in CCF Starbridge, a systems integrator holding an
ISP license in China. Upon final approval of the agreement by
the Ministry of Trade and Economic Cooperation, (MOFTEC), the
Company will acquire a minority equity position in the Joint
Venture, in exchange for two million common stock shares of
the Company. It is management's belief final approval from
MOFTEC will be received within the Company's second fiscal
quarter.
On May 5, 2000, the Company entered into an agreement for the
sale of 1,000,000 shares of its common stock to an unrelated
third party for approximately $700,000 cash based upon the
Company's closing bid price, (as defined), at delivery of
share certificates and cash consideration to a specified trust
account. As of June 16, 2000, 1,000,000 shares certificates
have been delivered to the specified trust accounts. This
transaction is currently pending delivery of the cash
consideration.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Management's discussion and analysis contains various "forward-looking
statements" within the meaning of the Securities and Exchange Act of 1934. Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or use of negative or other
variations or comparable terminology.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
On April 3, 2000, the Company acquired all the outstanding shares of
common stock of Cactus Multimedia I, Inc. in consideration for 500,000 shares of
the Company's common stock. This transaction was reported on Form 8-K on April
3, 2000 and on Form 8-K/A on April 18, 2000.
Management believes comparison of the results of operations for the
quarter and three months ended April 30, 2000 to the quarter and three months
ended April 30, 1999 would not be meaningful as the Company is a developmental
company, has sustained substantial operating losses and has sustained negative
cash flows since inception.
Plan of Operations
Since the inception the Company has sustained a net loss of $4,836,058.
Operating expenses have been principally attributable to consulting expenses and
directors fees, a substantial portion of which has been paid in the Company's
common stock.
Liquidity and Capital Resources
The Company, since its inception, has experienced severe negative cash
flows and has met its cash requirements by issuing its common stock. Additional
funds were generated by borrowings of approximately $260,000 from stockholders
and directors. The Company is seeking additional funding to facilitate its
business plan. While an agreement has been made for the sale of one million
shares for $700,000, no funding has been raised as of this date. As a result of
the lack of funding, Note 3 of the Consolidated Condensed Financial Statements
states that the Company may not be able to continue as a going concern.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. The future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
No legal proceedings terminated during the period covered by this
report.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Requlation S-B
None.
(aa) Reports on Form 8-K
None.
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<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOUTHLAND FINANCIAL, INC.
Date: June 20, 2000 By: /s/ David Turik
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David Turik, Director and President
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