SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 21, 2000
POPstar Communications, Inc.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada
------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-27213 88-0385920
------------------ ------------------------------
(Commission File Number) (IRS Employer Identification No.)
107 East 3rd Avenue
Vancouver, British Columbia V5T 1C7
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 872-6608
N/A
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
At the request of the Commission, the Registrant is hereby filing a copy
of its audited financial statements as of and for the period from December
17, 1998 (inception date) to December 31, 1998. These financial statements
give effect to the reverse acquisition by the Company of Cherokee Leather, Inc.
as previously described in the Registrant's Form 10-SB, as amended, originally
filed on September 1, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Financial Statements of
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
<PAGE>
AUDITORS' REPORT
To the Board of Directors
POPstar Global Communications Inc.
We have audited the balance sheet of POPstar Global Communications Inc. (A
Development Stage Company) as at December 31, 1998 and the statements of
operations and shareholder's equity and cash flows for the period from
incorporation on December 17, 1998 to December 31, 1998. 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
in the United States. Those standards require that we plan and perform an 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, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and the
results of its operations and its cash flows for the period then ended in
accordance with generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in note 1 to the financial
statements, the Company has suffered losses from operations and has no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters is
described in note 1. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Chartered Accountants
Vancouver, Canada
July 28, 1999
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Balance Sheet
(Expressed in U.S. Dollars)
December 31, 1998
- --------------------------------------------------------------------------------
Assets
Total assets $ -
=======
Liabilities and Shareholders' Equity
Liabilities $ -
Shareholders' equity:
Capital stock (note 3) -
Retained earnings -
-------
Total shareholders' equity -
Going concern (note 1)
Commitment (note 6)
Contingency (note 7)
Subsequent event (note 8)
Total liabilities and shareholders' equity $ -
=======
See accompanying notes to financial statements.
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Statement of Operations and Retained Earnings
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998
to December 31, 1998
- --------------------------------------------------------------------------------
Revenues $ -
Expenses -
-------
Net income -
Retained earnings, beginning of period -
=======
Retained earnings, end of period $ -
=======
Basic earnings per weighted share (note 2(d)) $ -
=======
Weighted average number of common shares outstanding -
See accompanying notes to financial statements.
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Statement of Cash Flows
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998
to December 31, 1998
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ -
Changes in non-cash operating working capital -
-------
Total cash flows from operating activities -
-------
Increase in cash -
Cash, beginning of period -
-------
Cash, end of period $ -
=======
Interest paid $ -
Income taxes paid -
=======
See accompanying notes to financial statements.
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
The Company was incorporated in the British Virgin Islands as an International
Business Company on December 17, 1998. The Company is a provider of Internet
based facsimile transmission technology and is currently in the process of field
testing its services, as such, it is considered a development stage company.
1. GOING CONCERN:
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However the Company does not have an established source of revenue
sufficient to cover its operating costs and to allow it to continue as a going
concern. Subsequent to year end, the Company issued shares for cash (note 3)
and commenced development of certain licensed software (note 4). In addition,
the Company's shares were acquired by POPstar Communications, Inc. (note 8) in a
transaction that will be accounted for as a recapitalization of the Company.
Management anticipates that funds will be available from its shareholders, the
common controlled company (note 4) or additional security issuances to fund
operating requirements for the next fiscal year. There is no guarantee that the
licensed software will generate revenues sufficient to cover its operating costs
or that proceeds received from the issuance of shares or other sources will
maintain the Company until that time.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Software development:
Software development costs are expensed as incurred unless they meet generally
accepted accounting criteria for deferral and amortization. The Company
assesses whether it has met the relevant criteria for deferral and amortization
at each reporting date. No such expenditures met these criteria during the
current period.
(b) Income taxes:
Income taxes will be provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109)
"Accounting for Income Taxes". A deferred tax asset or liability will be
recorded for all temporary differences between financial and tax reporting based
on the enacted tax rates in the expected period of reversal of the difference.
A valuation allowance is provided to the extent that it is not considered more
likely than not that deferred tax assets arising due to loss carry forwards or
temporary differences will be realized.
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Financial Statements, page 2
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Use of estimates:
The preparation of the consolidated financial statement, 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 contingencies at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
Assumptions underlying these estimates are limited by the availability of
reliable data and the uncertainty of predictions concerning future events.
Consequently, the estimates and assumptions made do not necessarily result in a
precise determination of reported amounts. Actual results could differ from
those estimates.
(d) Earnings per share:
Earnings per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Basic earnings per share is
computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share reflects per share amount that would have resulted if dilutive
securities, such as the preferred shares, had been converted to common stock at
the later of the beginning of the period or their date of issuance.
3. CAPITAL STOCK:
Authorized:
100,000,000 common voting shares with no par value
10,000,000 preferred voting shares with no par value
Shares Amount
Issued and outstanding:
Common share issued for cash - $ -
-------
Balance, December 31, 1998 $ -
=======
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Financial Statements, page 3
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
3. CAPITAL STOCK (CONTINUED):
(a) The Company was incorporated in December 1998 with an authorized share
capital of 5,000,000 common voting shares with no par value. No shares were
issued prior to December 31, 1998.
(b) On January 21, 1999, the Company increased its authorized share capital
to 100,000,000 common voting shares without par value and 10,000,000 preferred
voting shares without par value. At the option of the shareholder, each
preferred share may be converted into one common share.
(c) On January 1, 1999 and February 17, 1999, the Company issued a total of
10,500,000 common shares for total proceeds of $9,565.
(d) On March 29, 1999 and June 30, 1999, the Company issued a total of
2,375,000 preferred shares for total proceeds of $1,979,167.
(e) On January 12, 1999, the Company committed an additional 625,000 and
3,000,000 preferred shares to be issued not later than October 31, 1999 and
March 31, 2000, respectively, for total cash proceeds of $3,020,833.
(f) On January 12, 1999, the Company granted an option to a shareholder to
acquire up to 1,000,000 preferred shares at an amount equal to $0.833333 per
preferred share. The payment for the acquisition would be an exchange of the
preferred shares for an assignment of debt due to the shareholder from a company
under common control.
4. RELATED PARTY TRANSACTIONS:
(a) On January 11, 1999, the Company entered into a Licensing Agreement with
TGI Technologies Ltd. ("TGI"), a company under common control, whereby the
Company has been granted the exclusive commercial exploitation rights to certain
Internet fax server software (the "Software"). Under this license, the Company
has agreed to pay a percentage of the net sales resulting from the commercial
activities of the Software, subject to a specified annually minimum, as follows:
Calendar Percentage Annual
year of net sales minimum
- --------------------------------------------------------------------------------
1999 8% $ 400,000
2000 6% 600,000
2001 4% 500,000
2002 2% 500,000
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Financial Statements, page 4
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS (CONTINUED):
(b) In addition, the Company has entered into an agreement with TGI, a
company under common control, whereby TGI will provide technical assistance,
software development, marketing, management and other services, as required.
The charge is based on TGI's direct and indirect costs of the services provided
plus 15%.
5. INCOME TAXES:
There is no provision for income taxes for the period ended December 31, 1998.
6. COMMITMENT:
On August 10, 1999, the Company entered into a non-exclusive, royalty free
Service Agreement with TransNexus, LLC, a company incorporated under the laws of
the State of Georgia. Under the terms of the Agreement, TransNexus, LLC will
provide financial transaction settlement services and billing information to
Internet Service Providers ('ISP') using the Company's technology in exchange
for a percentage of the billings. The charging rates are currently under
negotiation and have not yet been finalized.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could affect an entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Financial Statements, page 5
(Expressed in U.S. Dollars)
Period from incorporation on December 17, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
8. SUBSEQUENT EVENT:
On July 20, 1999, POPstar Communications, Inc. ("POPS") (formerly named Cherokee
Leather, Inc.), a public company acquired all the issued and outstanding common
and preferred shares of the Company in exchange for 12,875,000 common shares of
POPS with the management of the Company continuing to manage operations for the
combined entity. The common shares of POPS cannot be sold until July 20, 2000
except pursuant to an effective registration statement under the United States
Securities Act of 1933 and any applicable State laws or upon the express written
agreement of the Company. As POPS has no significant operations to the date of
the acquisition, the transaction will be accounted for as a capital transaction
whereby the Company is considered to have issued a capital transaction for
consideration equal to the net assets of POPS. Under this accounting method,
the comparative financial statements of POPS will be those of the Company.
A condensed unaudited pro forma balance sheet of the Company giving effect to
the capital transaction as if it had occurred on December 31, 1998 is as
follows:
Assets $ -
=======
Current liabilities $ 2,517
Shareholders' equity:
Share capital (2,517)
Deficit -
-------
(2,517)
-------
$ -
=======
<PAGE>
SIGNATURES
Pursuant to the requirements 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: January 28, 2000 POPSTAR COMMUNICATIONS, INC.
By:/s/ John McDermott
-------------------------
John McDermott
Chief Executive Officer
