SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended September 30, 2000
Commission File No. 000-28053
INVESTMENT ASSOCIATES, INC.
---------------------------
(Name of small business issuer in its charter)
Nevada 98-0204280
------ ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
104-1456 St. Paul St.
Kelowna, British Columbia, Canada V1Y 2E6
(250) 868-8177
--------------
(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
1460 Pandosy Street, Suite 106
Kelowna, British Columbia V1Y 1P3
---------------------------------
(Former Address of Registrant)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
------------
(Title of class)
Check whether the issuer (1) 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 Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
Check if disclosure of delinquent filers in response 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
(Continued on Following Page)
<PAGE>
Issuer's revenues for its most recent fiscal year: $ -0-
State the aggregate market value of the voting stock held by
non-affiliates, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: As of September 30, 2000: $0.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2000 there were
1,000,000 shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
This Form 10-KSB consists of Twenty Nine Pages.
Exhibit Index is Located at Page Twenty Eight.
2
<PAGE>
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
INVESTMENT ASSOCIATES, INC.
PAGE
----
Facing Page
Index
PART I
Item 1. Description of Business.................................. 4
Item 2. Description of Property.................................. 5
Item 3. Legal Proceedings........................................ 5
Item 4. Submission of Matters to a Vote of
Security Holders..................................... 5
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters...................... 6
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................... 6
Item 7 Financial Statements..................................... 7
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure............................. 22
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons, Compliance with
Section 16(a) of the Exchange Act.................... 22
Item 10. Executive Compensation................................... 23
Item 11. Security Ownership of Certain Beneficial
Owners and Management................................ 24
Item 12. Certain Relationships and Related
Transactions......................................... 25
PART IV
Item 13. Exhibits and Reports of Form 8-K......................... 25
SIGNATURES.......................................................... 27
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Investment Associates, Inc. (the "Company") was incorporated on July 18,
1997, under the laws of the State of Nevada to engage in any lawful corporate
undertaking, including, but not limited to, selected mergers and acquisitions.
The Company has been in the developmental stage since inception and has no
operations to date. Other than issuing shares to its original shareholders, the
Company never commenced any operational activities. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity.
Many states have enacted statutes, rules and regulations limiting the sale
of securities of "blank check" or "shell" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein. Relevant thereto,
each shareholder of the Company has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of the
Company's common stock until such time as the Company has successfully
consummated a merger or acquisition and the Company is no longer classified as a
"blank check" company. In order to provide further assurances that no trading
will occur in the Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective stock
certificate with the Company's legal counsel, who will not release these
respective certificates until such time as legal counsel has confirmed that a
merger or acquisition has been successfully consummated. However, while
management believes that the procedures established to preclude any sale of the
Company's securities prior to closing of a merger or acquisition will be
sufficient, there can be no assurances that the procedures established relevant
herein will unequivocally limit any shareholder's ability to sell their
respective securities before such closing.
During the fiscal year ended September 30, 2000, the Company filed a
registration statement with the Securities and Exchange Commission on Form 10-SB
pursuant to the rules and regulations included under the Securities Exchange Act
of 1934, as amended, wherein the Company caused to be registered its common
stock. This registration statement became effective on or about January 12,
2000. The purpose of the registration statement was management's belief that the
primary attraction of the Company as a merger partner or acquisition vehicle
will be its status as a public company. Any business combination or transaction
will likely result in a significant issuance of shares and substantial dilution
to present stockholders of the Company.
4
<PAGE>
Management has continued to review prospective merger or acquisition
candidates during the past fiscal year, but as of the date of this report, there
is no agreement between the Company and any third party providing for the
Company to merge or acquire any assets. Management of the Company is of the
opinion that the business objectives of the Company remain viable, despite the
Company's failure to merge with or acquire another business entity to date.
Management of the Company continues to review potential merger candidates and
acquisition opportunities.
Employees
During the fiscal year ended September 30, 2000, the Company had no full
time employees. The Company's President and Secretary and Treasurer have agreed
to allocate a portion of their time to the activities of the Company, without
compensation. These officers anticipate that the business plan of the Company
can be implemented by their devoting minimal time per month to the business
affairs of the Company and, consequently, conflicts of interest may arise with
respect to the limited time commitment by such officers.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities. The Company operates from its offices at 1456 St. Paul Street,
Suite 104, Kelowna, British Columbia, Canada V1Y 2E6. This space is provided to
the Company on a rent free basis by Devinder Randhawa, a shareholder of the
Company, and it is anticipated that this arrangement will remain until such time
as the Company successfully consummates a merger or acquisition. Management
believes that this space will meet the Company's needs for the foreseeable
future.
Other Property. The Company has no properties and at this time has no
agreements to acquire any properties. The Company intends to attempt to acquire
assets or a business in exchange for its securities which assets or business is
determined to be desirable for its objectives.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which management is aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
5
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information. There is presently no trading market for the common
equity of the Company.
(b) Holders. There are ten (10) holders of the Company's Common Stock.
As of the date of this report, all of the shares of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the Securities Act
of 1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose shares are aggregated), who
has satisfied a one year holding period, under certain circumstances, may sell
within any three month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
(c) Dividends.
(1) The Company has not paid any dividends on its Common Stock. The Company
does not foresee that the Company will have the ability to pay a dividend on its
Common Stock in the fiscal year ended September 30, 2000, unless the Company
successfully consummates a merger or acquisition and the relevant candidate has
sufficient assets available to undertake issuance of such a dividend and
management elects to do so, of which there can be no assurance.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
audited financial statements and notes thereto included herein. In connection
with, and because it desires to take advantage of, the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward looking statements in the following discussion
and elsewhere in this report and in any other statement made by, or on the
behalf of the Company, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking
6
<PAGE>
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. The Company
disclaims any obligation to update forward looking statements.
(a) Plan of Operation.
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the Company and
such other company as of the date of this registration statement.
The Company's Board of Directors intends to provide the Company's
shareholders with complete disclosure documentation concerning a potential
business opportunity and the structure of the proposed business combination
prior to consummation of the same, which disclosure is intended to be in the
form of a proxy statement. While such disclosure may include audited financial
statements of such a target entity, there is no assurance that such audited
financial statements will be available. The Board of Directors does intend to
obtain certain assurances of value of the target entity assets prior to
consummating such a transaction, with further assurances that an audited
statement would be provided within sixty days after closing of such a
transaction. Closing documents relative thereto will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable.
Because the Company presently has nominal overhead or other material
financial obligations, management of the Company believes that the Company's
short term cash requirements can be satisfied by management injecting whatever
nominal amounts of cash into the Company to cover these incidental expenses.
There are no assurances whatsoever that any additional cash will be made
available to the Company through any means.
ITEM 7. FINANCIAL STATEMENTS
7
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
With
INDEPENDENT AUDITORS' REPORT
September 30, 2000
Prepared By:
Cordovano and Harvey, P.C.
--------------------------
Certified Public Accountants
Denver, Colorado
8
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Index to Financial Statements
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements*
Page
----
Independent auditor's report............................................ F-2
Balance sheet at September 30, 2000..................................... F-4
Statements of operations for the years ended September 30, 2000 and 1999,
and from July 18, 1997 (inception) through September 30, 2000 ..... F-5
Statement of shareholders' equity, from July 18, 1997 (inception)
through September 30, 2000......................................... F-6
Statements of cash flows for the years ended September 30, 2000 and 1999,
and from July 18, 1997 (inception) through September 30, 2000 ..... F-7
Notes to financial statements........................................... F-8
9
<PAGE>
To the Board of Directors and Shareholders
Investment Associates, Inc.
Independent Auditors' Report
We have audited the balance sheet of Investment Associates, Inc. (a development
stage company) as of September 30, 2000 and the related statements of
operations, shareholders' equity and cash flows for the year ended September 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Investment Associates, Inc. as
of September 30, 2000 and the related statements of operations and cash flows
for the year ended September 30, 2000 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at September 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
January 12, 2001
F-2
10
<PAGE>
To the Board of Directors and Shareholders
Investment Associates, Inc.
Independent Auditors' Report
We have audited the balance sheet of Investment Associates, Inc. (a development
stage company) as of September 30, 1999 (not separately included herein) and the
related statements of operations, shareholders' equity and cash flows for the
year ended September 30, 1999 and period July 18, 1997 (inception) through
September 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Investment Associates, Inc. as
of September 30, 1999 and the related statements of operations and cash flows
for the year ended September 30, 1999, and for the period from July 18, 1997
(inception) through September 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 (not separately
included herein) to the financial statements, the Company is in the development
stage and has no operations as of September 30, 1999. The deficiency in working
capital as of September 30, 1999 raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 5 (not separately included herein). The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
October 18, 1999
F-3
11
<PAGE>
<TABLE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Balance Sheet
September 30, 2000
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash .................................................. $ -
------------------
TOTAL CURRENT ASSETS -
------------------
TOTAL ASSETS -
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued liabilities .................................. $ 1,500
------------------
TOTAL CURRENT LIABILITIES 1,500
------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value,
25,000,000 shares authorized,
-0- shares issued and
outstanding (See Note D) ........................... -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,000,000 shares issued and
outstanding (See Note D) ........................... 1,000
Additional paid-in capital .......................... 14,205
Deficit accumulated during the
development stage .................................. (16,705)
------------------
TOTAL SHAREHOLDERS' EQUITY (1,500)
------------------
$ -
==================
See accompanying notes to financial statements
</TABLE>
F-4
12
<PAGE>
<TABLE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Statements of Operations
<CAPTION>
July 18, 1997
Year Ended (inception)
---------------------------- Through
September 30, September 30, September 30,
2000 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
Revenue ........................ $ - $ - $ -
COSTS AND EXPENSES
Legal fees ..................... $ 11,190 $ - $ 11,190
Accounting fees ................ 3,980 - 3,980
Licenses and fees .............. 200 335 535
Organizational Costs ........... - - 1,000
Printing - - -
------------- ------------- -------------
LOSS FROM OPERATIONS (15,370) (335) (16,705)
------------- ------------- -------------
INCOME TAX BENEFIT (EXPENSE) (NOTE C)
Current tax benefit ............ 2,926 64 3,180
Deferred tax expense ........... (2,926) (64) (3,180)
------------- ------------- -------------
NET LOSS $ (15,370) $ (335) $ (16,705)
============= ============= =============
BASIC LOSS PER COMMON SHARE .... $ * $ * $ *
============= ============= =============
BASIC WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........... 1,000,000 1,000,000 1,000,000
============= ============= =============
* Less than .01 per share
See accompanying notes to financial statements
</TABLE>
F-5
13
<PAGE>
<TABLE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Statement of Shareholders' Equity
July 18, 1997 (inception) through September 30, 2000
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Capital Paid During
--------------- ----------------- In Excess Development
Shares Amount Shares Amount of Par Value Stage Total
------ ------- --------- ------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance,
July 18, 1997 ..... - $ - - $ - $ - $ - $ -
Common stock issued
in exchange for
services .......... 1,000,000 1,000 - - 1,000
Net loss for the
period ended
September 30, 1997 - - - - - (1,000) (1,000)
------ ------- --------- ------ ------------ ----------- ---------
BALANCE,
SEPTEMBER 30, 1997 - - 1,000,000 1,000 - (1,000) -
Net loss for year
ended September 30,
1998 .............. - - - - - - -
------ ------- --------- ------ ------------ ----------- ---------
BALANCE,
SEPTEMBER 30, 1998 - - 1,000,000 1,000 - (1,000) -
Expenses paid by
third party on
behalf of the
Company ........... - - - - 335 - 335
Net loss for year
ended September 30,
1999 .............. - - - - - (335) (335)
------ ------- --------- ------ ------------ ----------- ---------
BALANCE,
SEPTEMBER 30,
1999 .............. - - 1,000,000 1,000 335 (1,335) -
Expenses paid by
third party on
behalf of the
Company ........... - - - - 13,870 - 13,870
Net loss for year
ended September 30,
2000 .............. - - - - - (15,370) (15,370)
------ ------- --------- ------ ------------ ----------- ---------
BALANCE,
SEPTEMBER 30,
2000 .............. - - 1,000,000 1,000 14,205 (16,705) (1,500)
====== ======= ========= ====== ============ =========== =========
See accompanying notes to financial statements
</TABLE>
F-6
14
<PAGE>
<TABLE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Statements of Cash Flows
<CAPTION>
July 18, 1997
Year Ended (inception)
---------------------------- Through
September 30, September 30, September 30,
2000 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
CASH (USED IN)
OPERATING ACTIVITIES
Net Loss ..................... $ (15,370) $ (335) $ (16,705)
Non-cash transactions:
Common stock issued
for services ............... - - 1,000
Changes in operating assets and
liabilities:
Accounts payable and
accrued liabilities .... 1,500 - 1,500
Third party expenses paid by
affiliate on behalf of the
company, recorded as
additional paid-in capital . 13,870 335 14,205
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES - - -
------------- ------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - -
------------- ------------- -------------
NET INCREASE IN CASH - - -
Cash, beginning of period .... - - -
------------- ------------- -------------
CASH, END OF PERIOD $ - $ - $ -
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest ....................... $ - $ - $ -
============= ============ =============
Income taxes ................... $ - $ - $ -
============= ============ =============
Non-cash financing activities:
1,000,000 shares common stock
issued for services .......... $ - $ - $ 1,000
============= ============ ============
See accompanying notes to financial statements
</TABLE>
F-7
15
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
------------
Investment Associates, Inc. (the "Company") was incorporated under the laws of
Nevada on July 18, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company is
a development stage enterprise in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7.
The Company has been in the development stage since inception and has no
operations to date.
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company is a development stage company
with no revenue as of September 30, 2000 and has incurred losses of $(15,370),
$(335) and $(16,705) for the years ended September 30, 2000 and 1999 and for the
period July 18, 1997 (inception) through September 30, 2000, respectively. The
Company has no operating history or revenue, no assets, and continuing losses
which the Company expects will continue for the foreseeable future. These
factors among others may indicate that the Company will be unable to continue as
a going concern for a reasonable period of time. An affiliate of the Company
plans to continue advancing funds on an as needed basis and in the longer term,
revenues from the operations of a merger candidate, if found. The Company's
continuation as a going concern is dependent upon continuing capital advances
from an affiliate and commencing operations or locating and consummating a
business combination with an operating company. There is no assurance that the
affiliate will continue to provide capital to the Company or that the Company
can commence operations or identify such a target company and consummate such a
business combination. These factors, among others, raise substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Summary of significant accounting policies
------------------------------------------
Cash equivalents
----------------
The Company's financial instruments consist of accounts payable and accrued
liabilities. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
F-8
16
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Use of estimates
----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
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. Accordingly, actual results could differ from those estimates.
Income Taxes
------------
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
---------------------
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") which requires the disclosure of basic and diluted earnings per
share. Basic earnings per share is calculated using income available to common
shareowners divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares, such as options, had been issued. The
Company has a simple capital structure and no outstanding options at September
30, 2000. Therefore, dilutive earnings per share are not applicable and
accordingly have not been presented
Fiscal year
-----------
The Company operates on a fiscal year ending on September 30.
F-9
17
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Stock based compensation
------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair value of financial instruments
-----------------------------------
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based in available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
Recently issued accounting pronouncements
-----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended September 30, 2000. There was no effect on the financial statements
presented from the adoption of the new pronouncements.
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
F-10
18
<PAGE>
INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, concluded
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires an entity to recognize all derivatives on a balance sheet, measured at
fair value.
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities." Sop 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. This address
is Suite 104, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
The Company does not maintain a checking account and all expenses incurred by
the Company are paid by an affiliate. For the fiscal year ended September 2000
the Company incurred $11,190 in legal expense, $3,980 in accounting expense, $85
in filing fees, and $115 in resident agent fees. The affiliate does not expect
to be repaid for the expenses it pays on behalf of the Company. Accordingly, as
the expenses are paid, they are classified as additional-paid-in capital.
F-11
19
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INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note C: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
for the years ended September 30, 2000 and September 30, 1999 is as follows:
Year Ended Year Ended
September 30, September 30,
2000 1999
------------- -------------
U.S. statutory federal rate...................... 15.00% 15.00%
State income tax rate, net of federal benefits... 4.04% 4.04%
Offering costs, permanent difference ............ 0.00% 0.00%
Net operating loss (NOL) for which no tax
benefit is currently available................. -19.04% -19.04%
------------- -------------
0.00% 0.00%
============= =============
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance the years ended
September 30, 2000 and September 30, 1999 was $2,862. NOL carryforwards at
September 30, 2000 will begin to expire in 2013. The valuation allowance will be
evaluated at the end of each year, considering positive and negative evidence
about whether the asset will be realized. At that time, the allowance will
either be increased or reduced; reduction could result in the complete
elimination of the allowance if positive evidence indicates that the value of
the deferred tax asset is no longer impaired and the allowance is no longer
required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' equity
Common Stock
------------
The Company initially authorized 25,000 shares of no par value common stock. On
July 23, 1999 the Board of Directors approved an increase in authorized shares
to 50,000,000 and changed the par value to $.001. On July 20, 1997 the Company
issued 1,000 shares of common stock for services valued at $1.00 per share, or
$1000.
F-12
20
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INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note D: Shareholders' equity, concluded
On October 5, 1999 the Company filed amended articles with the state of Nevada
to change the authorized shares of common stock originally approved by the Board
of Directors to 50,000,000, $.001 par and 25,000,000 shares of preferred stock
$.001 par.
On October 6, 1999 the Board of Directors approved a 1,000 to 1 forward split.
This increases outstanding common shares from 1,000 to 1,000,000. The financial
statements take into account this split.
F-13
21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Officers continue in office at the pleasure of the Board of Directors.
The Directors and Officers of the Company as of the date of this report are
as follows:
Name Age Position
---------------- --- -------------------------
David Ward 41 President and Director
Robert Hemmerling 41 Secretary, Treasurer
and Director
All Directors of the Company will hold office until the next annual meeting
of the shareholders and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors and hold office
until their death or until they resign or are removed from office.
There are no family relationships among the officers and directors. There
is no arrangement or understanding between the Company (or any of its directors
or officers) and any other person pursuant to which such person was or is to be
selected as a director or officer.
(b) Resumes:
David Ward, President and a director of the Company, was appointed to his
positions with the Company in July 1997. In addition to his positions with the
Company, since July 1992 Mr. Ward has been self-employed as a business
consultant, providing management consulting services for various private
companies in the construction and service industries. Mr. Ward received a
Bachelors Degree in Commerce from the University of British Columbia in 1984 and
a Professional Teaching Certificate from the University of British Columbia in
1987. He devotes only such time as necessary to the business of the Company,
which time is expected to be nominal.
22
<PAGE>
Robert Hemmerling, Secretary, Treasurer and a director, was appointed to
his positions with the Company in July 1997. In addition to his positions with
the Company, since September 1996, Mr. Hemmerling has been employed with
Strathmore Resources, Ltd., Kelowna, British Columbia, in the investor relations
department. Strathmore Resources is engaged in the business of acquiring and
developing uranium properties. Prior, from January 1996 through August 1996, Mr.
Hemmerling was unemployed. From January 1992 through December 1995, Mr.
Hemmerling was an electrician with Concord Electric, Kelowna, British Columbia.
He devotes only such time as necessary to the business of the Company, which
time is expected to be nominal.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and person who own more than 10% of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission, provided that there were any changes to such persons
respective stock holdings in the Company during the previous fiscal year. Based
upon information provided to the Company, there have been no changes in the
securities holdings of any person during the past fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
None of the Company's officers and/or directors receive any compensation
for their respective services rendered unto 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 this Registration Statement, the
Company has no funds available to pay directors. Further, none of the directors
are accruing any compensation pursuant to any agreement with the Company.
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 is offered
compensation in any form from any prospective merger or acquisition candidate,
the
23
<PAGE>
proposed transaction will 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.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of this Registration Statement, but is expected to
be comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
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.
The Company maintains a policy whereby the directors of the Company may be
compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company did not reimburse any director
for such expenses during the fiscal year ended September 30, 2000.
There are no bonus or incentive plans in effect, nor are there any
understandings in place concerning additional compensation to the Company's
officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as by all directors and officers of the
issuer. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
24
<PAGE>
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent of
Title of Class Owner Owner Class
-------------- ----- ----- -----
Common David Ward(1) 304,000 30.4%
4531 Granville Avenue
Richmond, British Columbia
Canada V7C 1E3
Common Robert Hemmerling(1) 304,000 30.4%
1908 Horizon Drive
Kelowna, British Columbia
Canada V1Z 3L3
Common All Officers and 608,000 60.8%
Directors as a
Group (2 persons)
------------------------------
(1) Officer and Director.
The balance of the Company's outstanding Common Shares are held by 8
persons.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company maintains a mailing address at an affiliate's address. This
address is Suite 104, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At
this time the Company has no need for an office.
The Company does not maintain a checking account and all expenses incurred
by the Company are paid by an affiliate. For the fiscal year ended September
2000, the Company incurred $11,190 in legal expense, $3,980 in accounting
expense, $85 in filing fees, and $115 in resident agent fees. The affiliate does
not expect to be repaid for the expenses it pays on behalf of the Company.
There are no other related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1* Certificate and Articles of Incorporation
3.2* Bylaws
25
<PAGE>
4.1* Form of Lock-up Agreements Executed by the Company's
Shareholders
EX-27 Financial Data Schedule
* Filed with the Securities and Exchange Commission in the Exhibits to Form
10-SB, filed on November 12, 1999, and are incorporated by reference herein.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended September 30, 2000.
26
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on January 11, 2001.
INVESTMENT ASSOCIATES, INC.
(Registrant)
By:s/ David Ward
--------------------------------
David Ward, President
By:s/ Robert Hemmerling
--------------------------------
Robert Hemmerling, Treasurer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on January 11, 2001.
s/ David Ward
------------------------------
David Ward, Director
s/ Robert Hemmerling
------------------------------
Robert Hemmerling, Director
27
<PAGE>
INVESTMENT ASSOCIATES, INC.
Exhibit Index to Annual Report on Form 10-KSB
For the Fiscal Year Ended September 30, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule..............................................29
28
