SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission file number 0-26317
GARNER INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Wyoming 84-1384961
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(State of incorporation) (I.R.S. Employer
Identification No.)
214 South Center Street, Casper, Wyoming, 82601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (307)472-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common No Par Value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange 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 the filing
requirements for at least the past 90 days.
Yes X No
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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not 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
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State issuer's revenues for its most recent fiscal year. $0
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Transitional Small Business Disclosure Format:
Yes ______ No X
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1999 was $0, based upon the closing price of $0 of
the common stock on December 31, 1999.
Number of outstanding shares of the registrant's no par value common stock, as
of December 31, 1999: 780,000
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the Part of this Form 10-K into which the document is incorporated: (1) Any
annual report to security holders None; (2) Any proxy or information statement -
None; (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the
Securities Act of 1933. - None.
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TABLE OF CONTENTS
PART I
Page
Item 1. Business .................................. 4
Item 2. Properties ................................ 21
Item 3. Legal Proceedings.......................... 21
Item 4. Submission of Matters to a Vote of
Security Holders.......................... 21
PART II
Item 5. Market for Registrant's Common Stock and
Security Holder Matters .................. 22
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 23
Item 7. Financial Statements and Supplementary Data.. 23
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 24
PART III
Item 9. Directors and Executive Officers of the
Registrant................................. 24
Item 10. Executive Compensation...................... 27
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 29
Item 12. Certain Relationships and Related
Transactions............................... 29
PART IV
Item 13. Exhibits, Financial Statement Schedule
and Reports on Form 8-K.................... 31
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ITEM 1. BUSINESS
General
The Company was incorporated under the laws of the State of Wyoming on
February 14, 1997, and is in the developmental stage. In 1997, the Company
raised $1,500 in a private placement. For the period of 1997 through date
hereof, the Company had no revenues or business. The Company has no commercial
operations as of date hereof. The Company has no full-time employees and owns no
real estate.
The Company's current business plan is to seek, investigate, and, if
warranted, acquire one or more properties or businesses, and to pursue other
related activities intended to enhance shareholder value. The acquisition of a
business opportunity may be made by purchase, merger, exchange of stock, or
otherwise, and may encompass assets or a business entity, such as a corporation,
joint venture, or partnership. The Company has no capital, and it is unlikely
that the Company will be able to take advantage of more than one such business
opportunity. The Company intends to seek opportunities demonstrating the
potential of long-term growth as opposed to short-term earnings.
At the present time the Company has not identified any business opportunity
that it plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition. The Company filed Form
10-SB on a voluntary basis in 1999 in order to become a 12(g) registered company
under the Securities Exchange Act of 1934. As a "reporting company," the Company
may be more attractive to a private acquisition target because it may be listed
to trade its shares on the OTCBB.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
in corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses they represent have an interest in
considering a merger or acquisition with the Company. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, given that no funds that are available for acquisitions, or that
any acquisition that occurs will be on terms that are favorable to the Company
or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
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the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity
which has an interest in being acquired by, or merging into the Company, is
expected to be an entity that desires to become a public company and establish a
public trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is very
likely to result in substantial gains to them relative to their purchase price
for such stock. In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of the Section 2(11) of
the Securities Act of 1933, as amended. The sale of a controlling interest by
certain principal shareholders of the Company could occur at a time when the
other shareholders of the Company remain subject to restrictions on the transfer
of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
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It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officer and director,
its other stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Wyoming law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
2. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment management, or make
other changes. The Company will be dependent upon the owners of a business
opportunity to identify any such problems which may exist and to implement, or
be primarily responsible
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for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, no policies
have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be paid.
However, because of the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
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2. The Company's perception of how any particular business opportunity will
be received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition of
the business opportunity would be, or would have a significant prospect in
the foreseeable future of becoming sufficient to enable the securities of
the Company to qualify for listing on an exchange or on a national
automated securities quotation system, such as NASDAQ, so as to permit the
trading of such securities to be exempt from the requirements of Rule
15c2-6 recently adopted by the Securities and Exchange Commission. See
"Risk Factors - The Company - Regulation of Penny Stocks."
4. Capital requirements and anticipated availability of required funds, to
be provided by the Company or from operations, through the sale of
additional securities, through joint ventures or similar arrangements, or
from other sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the requirements
that the issuer of the securities that are sought to be listed have total assets
of at least $4,000,000 and total capital and surplus of at least $2,000,000.
Many, and perhaps most, of the business opportunities that might be potential
candidates for a combination with the Company would not satisfy the NASDAQ
listing criteria.
No one of the factors described above will be controlling in the
selection of a business opportunity, and management will attempt to analyze all
factors appropriate to each opportunity and make a determination based upon
reasonable investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
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and complex. Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited experience
in business analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity,
the Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive
officers and directors may meet personally with management and key personnel,
may visit and inspect material facilities, obtain independent analysis or
verification of certain information provided, check references of management and
key personnel, and take other reasonable investigative measures, to the extent
of the Company's limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors - - Regulation
of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
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market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing
whatsoever relating to any business opportunities.
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may
participate in a business opportunity. Specific business opportunities will be
reviewed as well as the respective needs and desires of the Company and the
promoters of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure or
method deemed by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements, licenses,
joint ventures and other contractual arrangements. The Company may act directly
or indirectly through an interest in a partnership, corporation or other form of
organization. Implementing such structure may require the merger, consolidation
or reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
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total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific business
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opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Moreover, because many providers of goods and services
require compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate future time
may make it impossible to procure goods and services.
In all probability, upon completion of an acquisition or merger, there
will be a change in control through issuance of substantially more shares of
common stock. Further, in conjunction with an acquisition or merger, it is
likely that management may offer to sell a controlling interest at a price not
relative to or reflective of any value of the shares sold by management, and at
a price which could not be achieved by individual shareholders at the time.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its
common stock are expected to be "restricted securities" within the meaning of
the Securities Act of 1933, as amended (the "Act"). If the Company elects to
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resell such securities, such sale cannot proceed unless a registration statement
has been declared effective by the Securities and Exchange Commission or an
exemption from registration is available. Section 4(1) of the Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company may be in an industry which is
regulated or licensed by federal, state or local authorities. Compliance with
such regulations can be expected to be a time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in its efforts
to locate attractive opportunities, primarily from business development
companies, venture capital partnerships and corporations, venture capital
affiliates of large industrial and financial companies, small investment
companies, and wealthy individuals. Many of these entities will have
significantly greater experience, resources and managerial capabilities than the
Company and will therefore be in a better position than the Company to obtain
access to attractive business opportunities. The Company also will experience
competition from other public "blank check" companies, many of which may have
more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide Company shareholders with
complete disclosure documentation including audited financial statements,
concerning a possible target company prior to acquisition, because Wyoming
Corporate Code vests authority in the Board of Directors to decide and approve
matters involving acquisitions. Any transaction would be structured as an
acquisition, not a merger, with the Registrant being the parent company and the
acquiree being a wholly owned subsidiary. Therefore, a shareholder will have no
right of dissent under Wyoming law.
NO TARGET CANDIDATES FOR ACQUISITION
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
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ADMINISTRATIVE OFFICES
The Company currently maintains a mailing address at 214 South Center
Street, Casper, Wyoming, 82601 which is the office address of its President,
William A. Erickson. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate the need
for maintaining office facilities at any time in the foreseeable future. The
Company pays no rent or other fees for the use of this mailing address. Legal
counsel will not be involved in any day to day activities but will handle
securities related and corporate matters for the Company, so long as he is
engaged to do so.
EMPLOYEES
The Company is a development stage company and currently has no
employees. Management of the Company expects to use consultants, attorneys and
accountants as necessary, and does not anticipate a need to engage any full-time
employees so long as it is seeking and evaluating business opportunities. The
need for employees and their availability will be addressed in connection with
the decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if for. See "Executive Compensation"
and under "Certain Relationships and Related Transactions."
RISK FACTORS
1. Conflicts of Interest. Certain conflicts of interest may exist between
the Company and its officers and directors. They have other business interests
to which they devote their attention, and may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
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2. Need For Additional Financing. The Company has very limited funds, and
such funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The Company
has not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
3. Regulation of Penny Stocks. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act
of 1934, as amended. Because the securities of the Company may constitute "penny
stocks" within the meaning of the rules, the rules would apply to the Company
and to its securities. The rules may further affect the ability of owners of
Shares to sell the securities of the Company in any market that might develop
for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
15
<PAGE>
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
4. Lack of Operating History. The Company was formed in February 1997 for
the purpose of engaging in any lawful business. No revenues have ever been
achieved. The Company is not profitable. The Company has no successful operating
history, revenues from operations, or assets. The Company faces all of the risks
of a new business and the special risks inherent in the investigation,
acquisition, or involvement in a new business opportunity. The Company must be
regarded as a new or "start-up" venture with all of the unforeseen costs,
expenses, problems, and difficulties to which such ventures are subject.
5. No Assurance of Success or Profitability. There is no assurance that the
Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
common stock will be increased thereby.
6. Possible Business - Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity and therefore can disclose the risks and hazards of a business or
opportunity that it may enter into in only a general manner, and cannot disclose
the risks and hazards of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite risky.
The Company's acquisition of or participation in a business opportunity will
likely be highly illiquid and could result in a total loss to the Company and
its stockholders if the business or opportunity proves to be unsuccessful. See
Item 1 "Description of Business."
7. Type of Business Acquired. The type of business to be acquired may be
one that desires to avoid effecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's limited capital, it is more
likely than not that any acquisition by the Company will involve other parties
16
<PAGE>
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
8. Impracticability of Exhaustive Investigation. The Company's limited
funds and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
9. Lack of Diversification. Because of the limited financial resources that
the Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
10. Reliance upon Financial Statements. The Company generally will require
audited financial statements from companies that it proposes to acquire. Given
cases where audited financials are available, the Company will have to rely upon
interim period unaudited information received from target companies' management
that has not been verified by outside auditors. The lack of the type of
independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.
Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
will be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
17
<PAGE>
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.
11. Other Regulation. An acquisition made by the Company may be of a
business that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
12. Dependence upon Management; Limited Participation of Management. The
Company currently has only three individuals who are serving as its officers and
directors. The Company will be heavily dependent upon his skills, talents, and
abilities to implement its business plan, and may, from time to time, find that
the inability of the officers and directors to devote their full time attention
to the business of the Company results in a delay in progress toward
implementing its business plan. See "Management." Because investors will not be
able to evaluate the merits of possible business acquisitions by the Company,
they should critically assess the information concerning the Company's officers
and directors.
13. Lack of Continuity in Management. The Company does not have an
employment agreement with its officers and directors, and as a result, there is
no assurance they will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
officers and directors of the Company may resign subject to compliance with
Section 14f of the Securities Exchange Act of 1934. A decision to resign will be
based upon
18
<PAGE>
the identity of the business opportunity and the nature of the transaction, and
is likely to occur without the vote or consent of the stockholders of the
Company.
14. Indemnification of Officers and Directors. Wyoming Revised Statutes
provide for the indemnification of its directors, officers, employees, and
agents, under certain circumstances, against attorney's fees and other expenses
incurred by them in any litigation to which they become a party arising from
their association with or activities on behalf of the Company. The Company will
also bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
15. Director's Liability Limited. Wyoming Revised Statutes exclude personal
liability of its directors to the Company and its stockholders for monetary
damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action against
its directors than otherwise would be the case. This provision does not affect
the liability of any director under federal or applicable state securities laws.
16. Dependence upon Outside Advisors. To supplement the business experience
of its officers and directors, the Company may be required to employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. The selection of any such advisors will be made by the Company's
President without any input from stockholders. Furthermore, it is anticipated
that such persons may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company. In the event the President of the
Company considers it necessary to hire outside advisors, he may elect to hire
persons who are affiliates, if they are able to provide the required services.
17. Leveraged Transactions. There is a possibility that any acquisition of
a business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
19
<PAGE>
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
18. Competition. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than the Company. These
competitive conditions will exist in any industry in which the Company may
become interested.
19. No Foreseeable Dividends. The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future.
20. Loss of Control by Present Management and Stockholders. The Company may
consider an acquisition in which the Company would issue as consideration for
the business opportunity to be acquired an amount of the Company's authorized
but unissued common stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result of such an
acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's major shareholders could sell control blocks of stock at a premium
price to the acquired company's stockholders.
21. No Public Market Exists. There is no public market for the Company's
common stock, and no assurance can be given that a market will develop or that a
shareholder ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
22. Rule 144 Sales. All of the outstanding shares of common stock held by
present officers, directors, and stockholders are "restricted securities" within
the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold into the market, if any, only
pursuant to an effective registration statement or under the requirements of
Rule 144 or other applicable exemptions from registration under the Act, if any,
and as required under applicable state securities laws.
20
<PAGE>
23. Blue Sky Considerations. Because the securities registered hereunder
have not been registered for resale under the blue sky laws of any state, the
holders of such shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of investors to
sell the securities and of purchasers to purchase the securities. Some
jurisdictions may not under any circumstances allow the trading or resale of
blind-pool or "blank-check" securities. Accordingly, investors should consider
the secondary market for the Company's securities to be a limited one.
ITEM 2. PROPERTY
-----------------
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
214 South Center Street, Casper, Wyoming, 82601, which is the office address of
its President, William A. Erickson. The Company pays no rent for the use of this
mailing address. The Company does not believe that it will need to maintain an
office at any time in the foreseeable future in order to carry out its plan of
operations described herein.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
any litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
No matters were submitted during the fiscal year covered by this report to
a vote of security holders of the Company, through the solicitation of proxies
or otherwise.
21
<PAGE>
PART II
ITEM 5. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
--------------------------------------------------------------------------------
As of the date of this report, there has been no trading or quotation of
the Company's common stock. The range of high and low trade quotations for each
fiscal quarter since the last report, as reported by the National Quotation
Bureau Incorporated, was as follows
1999 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1998 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1997 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
* No quotations
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
As of December 31, 1999, there were 44 record holders of the Company's
common stock.
The Company has not declared or paid any cash dividends on its common stock
and does not anticipate paying dividends for the foreseeable future.
22
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition and Changes in Financial Condition
--------------------------------------------------------------------------------
No operations were conducted and no revenues were generated in the fiscal
year. The Company had no income in 1999. The Company at year end had no capital,
no cash, and no other assets. The Company at year end was totally illiquid and
needed cash infusions from shareholders to provide capital, or loans from any
sources.
Results of Operations for the year ended December 31, 1999, compared to
year ended December 31, 1998
--------------------------------------------------------------------------------
The Company incurred expenses totalling $240 in 1999 compared to $1,557 in
1998. The Company had no operations or revenues in 1999 or 1998. The net loss
for 1999 was $240 and for 1998 was $1,557. The net loss per share was less than
($.01) in 1999 and 1998. A continuation of the trend of net losses should be
expected to continue in the future until some profitable operations are
achieved, if ever any are acquired or developed.
Liquidity & Capital Resources
-----------------------------
The company had nominal cash at year end and no other capital resources.
the company will be dependent on its shareholders for loans for expenses, and
has no capital availability except through private sales of treasure stocks,
none of which has been arranged.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------------
Please refer to pages F-1 through F-8.
23
<PAGE>
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
-----------------------------------------------------
Not applicable.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT IN COMPLIANCE WITH
SECTION 16(a).
------------------------------------------------------------
The directors and executive officers currently serving the Company are
as follows:
Name Position Tenure
--------------------------------------------------------------------------------
William A. Erickson President and Director Annual
Michael R. Butler Secretary, Treasurer, and Annual
Director
Donn C. Douglass Director Annual
(Mr. Douglass died in early 2000)
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time which they will devote to the Company's affairs is unknown and is likely to
vary substantially from month to month.
Biographical Information
WILLIAM A. ERICKSON, age 67, is the President and a Director of the
Company. Mr. Erickson graduated from the University of Wyoming in 1959 with a
Bachelor of Science degree in Education. Mr. Erickson served in the Armed Forces
from 1950 to 1955. Mr. Erickson has been associated with the real estate
business starting in 1960 when he received his Real Estate License. Mr. Erickson
qualified as a Real Estate Broker in 1986 and currently holds a Broker License.
Mr. Erickson has specialized in recreational and commercial properties for the
past 17 years, especially on Federal Park Service land and Wyoming state leases.
Mr. Erickson has taken classes in Cash Flow Analysis, CMA Reporting, and
Capitalization and Financing of Commercial business. Mr. Erickson was a Director
and Secretary/Treasurer of Bird-Honomichl, Inc. (1994-1998). Mr. Erickson is
currently the President and Director of The Art Boutique, Inc. (since 1986) and
is President and Director of Tempus, Inc. (since 1997).
MICHAEL R. BUTLER, age 45, is Secretary/Treasurer and a Director of the
Company. Mr. Butler was employed for 19 years by Amoco Production Company, an
oil and gas producing company operating in the state of Wyoming. In 1997 and
1998, Mr. Butler has owned and operated a farm/ranch west of Casper, Wyoming.
Mr. Butler has been trained in and has experience in waterflood injection, oil
and gas producing operations, maintenance, and wetland development. Mr. Butler
is a Director of Hindsight, Inc. dba Oil City Printers, a commercial printing
business (since 1988). Mr. Butler is a Director and Secretary/Treasurer of The
Art Boutique, Inc. (since 1996), Phillips 44, Inc., (since 1998) and Tempus,
Inc. (since 1997).
24
<PAGE>
Management will devote minimal time to the operations of the Company,
and any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors receives any
compensation for their respective services rendered to the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. As of the date of filing this report,
the Company has no funds available to pay officers or directors. Further, none
of the officers or directors is accruing any compensation pursuant to any
agreement with the Company. No retirement, pension, profit sharing, stock option
or insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
25
<PAGE>
Certain of the officers and directors of the Company are directors and
principal shareholders in other blank check companies, and officers and
directors of the Company may in the future become shareholders, officers or
directors of other companies which may be formed for the purpose of engaging in
business activities similar to those conducted by the Company. Accordingly,
direct conflicts of interest may arise in the future with respect to such
individuals acting on behalf of the Company or other entities. Conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities contemplated
by the Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company and
the companies with which the officers and directors are affiliated both desire
to take advantage of an opportunity, then the Board of Directors has agreed that
said opportunity should be available to each such company in the order in which
such companies registered or became current in the filing of annual reports
under the Exchange Act subsequent to January 1, 1997. All directors may still
individually take advantage of opportunities if the Company should decline to do
so. Except as set forth above, the Company has not adopted any other conflict of
interest policy with respect to such transactions.
The Company's Board of Directors has adopted a policy that the Company will
not seek a merger with, or acquisition of, any entity in which any officer or
director serves as an officer or director or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
26
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
---------------------------------
The Company accrued no compensation to the executive officers as a group
for services rendered to the Company in all capacities during the 1999 fiscal
year. No one executive officer received, or has accrued for his benefit, in
excess of $60,000 for the year. No cash bonuses were or are to be paid to such
persons.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was paid
or distributed during the last fiscal year, or is proposed to be paid or
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S> <C> <C> <C> <C> <C>
Annual Compensation Awards
====================================================================================================================================
Name and Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) Options/
($) SARs (#)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
William A. 1997 0 0 0 0 0
Erickson, ------------------------------------------------------------------------------------------------------------------
President 1998 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------
1999 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Michael R. 1997 0 0 0 0 0
Butler, ------------------------------------------------------------------------------------------------------------------
Secretary 1998 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------
1999 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Donn C. 1997 0 0 0 0 0
Douglass, ------------------------------------------------------------------------------------------------------------------
Vice President 1998 0 0 0 0 0
(deceased) ------------------------------------------------------------------------------------------------------------------
1999 0 0 0 0 0
====================================================================================================================================
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Directors' Compensation
<S> <C> <C> <C> <C> <C>
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Shares Securities
Fee($) Fees ($) (#) Underlying
Options SARS
(#)
------------------------------------------------------------------------------------------------------------------
A. Director 0 0 0 0 0
William A. Erickson
B. Director 0 0 0 0 0
Michael R. Butler
C. Director 0 0 0 0 0
Donn C. Douglass
(deceased)
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End
Option/SAR value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
No officer or director has received any other remuneration in the three
year period prior to the filing of this registration statement. Although there
is no current plan in existence, it is possible that the Company will adopt a
plan to pay or accrue compensation to its officers and directors for services
related to seeking business opportunities and completing a merger or acquisition
transaction. See "Certain Relationships and Related Transactions." The Company
has no stock option, retirement, pension, or profit-sharing programs for the
benefit of directors, officers or other employees, but the Board of Directors
may recommend adoption of one or more such programs in the future.
28
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------------------------------------------------------------------------
The following table sets forth, as of December 31, 1999, the number of
shares of common stock owned of record and beneficially by executive officers,
directors and persons who hold 5.0% or more of the outstanding common stock of
the Company. Also included are the shares held by all executive officers and
directors as a group.
NUMBER OF
SHAREHOLDERS BENEFICIAL OWNERS SHARES PERCENTAGE
--------------------------------------------------------------------------------
William A. Erickson, President & Dir. 140,000 17.9%
2300 E. 18th Street, #224
Casper, WY 82609
Michael R. Butler, Secretary/Tres/Dir. 140,000 17.9%
13750 Bessemer Bend Rd.
Alcova Route
Casper, WY 82604
Maureen Douglass, Director 140,000 17.9%
6445 E. Ohio, Suite 150
Denver, CO 80224
All directors and executive 420,000 53.7%
officers as a group (3 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------------------------------------------------------
Prior to the date of this filing, the Company issued to its founders,
officers, and directors, and to other shareholders, a total of 780,000 shares of
common stock for a total of $2,250 in cash. Certificates evidencing the common
stock issued by the Company to these persons have all been stamped with a
restrictive legend, and are subject to stop transfer orders by the Company
unless resale is exempt under Section 4(1) or Rule 144 of the Securities Act of
1933. For additional information concerning restrictions that are imposed upon
the securities held by current stockholders, and the responsibilities of such
stockholders to comply with federal securities laws in the disposition of such
common stock, see "Risk Factors - Rule 144 Sales."
No officer, director, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
29
<PAGE>
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate for consulting services to
assist management in evaluating a prospective business opportunity would be paid
in stock or in cash. Any such issuance of stock would be made on an ad hoc
basis. Accordingly, the Company is unable to predict whether or in what amount
such a stock issuance might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and completing
a merger or acquisition transaction.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the common stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
30
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------------
The following documents are filed as part of this report:
1. Reports on Form 8-K: None
2. Exhibits: None
INDEX
Form 10-K
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation *Incorporated by reference
to Registration Statement
10SB/12(g) #0-26317
3.2 Bylaws *Incorporated by reference
to Registration Statement
10SB/12(g) #0-26317
27.1 Financial Data Schedule EX-27.1
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DATED: July 7, 2000
GARNER INVESTMENTS, INC.
/s/ William A. Erickson
-------------------------------------
President
/s/ Michael R. Butler
-------------------------------------
Secretary
Directors:
/s/William A. Erickson
-------------------------------------
Director
/s/ Michael R. Butler
-------------------------------------
Director
<PAGE>
GARNER INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
AS OF DECEMBER 31, 1999 AND FOR
THE PERIOD FEBRUARY 13, 1997 (INCEPTION)
TO DECEMBER 31, 1999
INDEX TO FINANCIAL STATEMENTS
Cover Page F-1
Auditors Report for years ended December 31, 1999 and 1998 F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6
Notes to Financial Statements F-7 - F-8
F-1
<PAGE>
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson, C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
INDEPENDENT AUDITORS REPORT
Board of Directors
Garner Investments, Inc.
Casper, WY 82602
We have audited the accompanying balance sheet of Garner Investments, Inc., (A
Development Stage Company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for the period
February 13, 1997 (inception) through December 31, 1999 and the fiscal years of
December 31, 1999 and 1998 then ended. 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 audits.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is 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 audits provide 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 Garner Investments, Inc., as of
December 31, 1999 and 1998, and its results of their operations and their cash
flows for the period, February 13, 1997 (Inception) through December 31, 1999
and the fiscal years of December 31, 1999 and 1998 then ended, in conformity
with generally accepted accounting principles.
/s/Michael Johnson & Co., LLC
Denver, Colorado
January 20, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1999
With Comparative Totals for December 31, 1998
<S> <C> <C>
ASSETS: 1999 1998
------------ ------------
CURRENT ASSETS:
Cash $ 309 $ 549
------------ ------------
TOTAL CURRENT ASSET 309 549
TOTAL ASSETS $ 309 $ 549
============ ============
LIABILITIES & STOCKHOLDERS EQUITY
Stockholders' Equity (Note 3):
50,000,000 shares authorized $.001 par value,
780,000 shares issued and outstanding. 780 780
Additional paid-in capital 1,470 1,470
Deficit accumulated during the
development stage (1,941) (1,701)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 309 $ 549
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Statement of Operations
For the Period February 13, 1997 (Inception) to December 31, 1999
With Comparative Totals for December 31, 1998
<S> <C> <C> <C>
Feb. 13, 1997
Inception to
1999 1998 Dec. 31, 1999
------------- ------------ ----------------
REVENUE $ - $ - $ -
COSTS AND EXPENSES:
Office Expenses 180 32 356
Filing Fees 60 25 85
Audit Fees - 1,500 1,500
------------- ------------ ----------------
NET LOSS $ 240 $ 1,557 $ 1,797
============= ============ ================
PER SHARE INFORMATION:
Weighted average number
of common shares outstanding 780,000 780,000 780,000
------------- ------------ ----------------
Net Loss per common share $(0.0003) $(0.002) $ (0.002)
============= ============ ================
The accompanying notes are an integral part of these financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GARNER INVESTMENTS, INC.
Stockholders' Equity
December 31, 1999
<S> <C> <C> <C> <C> <C>
COMMON STOCKS Additional Retained Total
Paid-In Earnings Stockholder's
Shares Amount Capital (Deficit) Equity
----------------------------------------------------------------------------------------------------------------------------
Issuance of Stocks for Cash 480,000 $ 480 $ 1,020 $ - $ 1,500
Net Deficit 12/31/97 - - - (144) (144)
------------- ------- ------- --------- --------
Balance December 31, 1997 480,000 $ 480 $ 1,020 $ (144) $ 1,356
============= ======= ======= ========= ========
Issuance of Stocks for Cash 300,000 300 450 - 750
Net Deficit 12/31/98 - - - (1,557) (1,557)
------------- ------- ------- --------- --------
Balance December 31, 1998 780,000 $ 780 $ 1,470 $ (1,701) $ 549
============= ======= ======= ========= ========
Net Deficit 12/31/99 - - - (240) (240)
------------- ------- ------- --------- --------
Balance December 31, 1999 780,000 $ 780 $ 1,470 $ (1,941) $ 309
============= ======= ======= ========= ========
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Statement of Cash Flows
For the Period From February 13, 1997 (Inception) to December 31, 1999
With Comparative Totals for December 31, 1998
<S> <C> <C> <C>
Feb. 13, 1997
Inception to
1999 1998 Dec. 31, 1999
----------- ----------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (240) $(1,557) $ (1,941)
Decrease in Investment - 750 750
----------- ----------- ----------------
Net cash provided by operating activities (240) (807) (1,047)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance, net of
issuance costs. - 750 750
----------- ----------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 750 750
----------- ----------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENT (240) (57) (297)
BEGINNING CASH AND CASH EQUIVALENT 549 606 606
----------- ----------- ----------------
ENDING CASH AND CASH EQUIVALENT $ 309 $ 549 $ 309
=========== =========== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest
- - -
Income Taxes - - -
The accompanying notes are an integral part of these financial statements.
F-6
</TABLE>
<PAGE>
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period February 13, 1997 (Inception) to December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company was incorporated on February 13, 1997, in the State of
Wyoming. The Company is in the development stages and was organized for
the purpose of general investing. The Company's fiscal year end is
December 31. The financial statements are presented on the accrual
basis of accounting.
The accompanying financial statements have been prepared on the going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
company's continuation as a going concern is dependent on its ability
to generate sufficient cash flows to meet its obligations on a timely
basis, to raise additional cash as may be required, and ultimately to
attain successful operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
BASIS OF PRESENTATION
The company is primarily engaged in general investing. The authorized
capital stock of the corporation is 50,000,000 shares of common stock
at $0.001 par value. There are no preferred stock authorized or issued.
CASH AND CASH EQUIVALENT
The Company considers all highly-liquid debt instruments, purchased
with an original maturity of three months or less, to be cash
equivalents.
REVENUE RECOGNITION
Revenue is recognized when earned and expenses are recognized when they
occur.
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 revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
F-7
<PAGE>
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period February 13, 1997 (Inception) to December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
--------------------------------------------------
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common
shares and common shares equivalents outstanding during the period.
NOTE 2 - FEDERAL INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this approach, deferred income taxes are determined based
upon differences between the financial statement and tax bases of the
Company's assets and liabilities and operating loss carryfowards using
enacted tax rates in effect for the years in which the difference are
expected to reverse. Deferred taxes are recognized if it is more
likely than not that the future tax benefit will be realized.
As of December 31, 1999, the Company has financial reporting net
operating loss carryforwards of approximately $1,941for which the tax
effect has not been recognized for financial reporting purposes. Such
losses expire in 2013 if not utilized earlier.
NOTE 3 - STOCKHOLDERS' EQUITY
During the period, the Company issued 780,000 shares of its $0.001 par
value common stock, to various investors for cash of $2,250.
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of this company are also officers and
directors of other companies.
F-8
