U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 1999
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 000-27733
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Cerritos Holdings, Inc.
(Name of small business issuer in its charter)
Nevada 77-0497976
------------------------------------ ---------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
5350 Byrne Road, Burnaby, B.C. Canada V5J 3J3
---------------------------------------------
(Address of principal executive offices) (Zip code)
Issuer's telephone number (604) 603-2542
---------------
Securities registered under Section 12(b) of the Act: NONE Securities registered
under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of class)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no 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. [ ]
State issuer's revenues for its most recent fiscal year. $ -0-
-----
As of April 5, 2000, there were 12,000,000 shares of the Registrant's
common stock, par value $0.001, issued and outstanding. The aggregate market
value of the Registrant's voting stock held by non-affiliates of the Registrant
was approximately $28,500,000 computed at the average bid and asked price as of
December 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE
Transitional Small Business Disclosure Format (check one): Yes ; NO X
----- --
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business.....................................4
Item 2. Description of Property.....................................6
Item 3. Legal Proceedings...........................................6
Item 4. Submission of Matters to a Vote of Security Holders.........6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters....7
Item 6. Management's Discussion and Analysis or Plan of Operations..8
Item 7. Financial Statements........................................9
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure....................................9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..........10
Item 10. Executive Compensation.....................................12
Item 11. Security Ownership of Certain Beneficial Owners and
Management.................................................12
Item 12. Certain Relationships and Related Transactions.............13
Item 13. Exhibits and Reports on Form 8-K...........................13
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
General
The Company intends to position itself to evolve into a vertically
integrated, diversified global media entertainment company. The Company intends
to acquire a number of diversified entertainment companies that will allow for
the pursuit of opportunities currently available in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of new and existing feature films, as well as expanding
into other areas of the entertainment industry.
The Company's common stock is traded on the National Association of
Security Dealers, Inc. (the "NASD's") OTC Bulletin Board Under the symbol
"CERH."
History
The Company has not engaged in any operations other than organizational
matters. Cerritos Holdings, Inc., a Nevada corporation (the "Company") was
incorporated on October 29, 1996, and was formed specifically to be a "clean
public shell" and for the purpose of either merging with or acquiring an
operating company with operating history and assets. The Company ceased all
operating activities during the period from October 29, 1996 to July 9, 1999 and
was considered dormant. On July 9, 1999, the Company obtained a Certificate of
renewal from the State of Nevada. Since July 9, 1999, the Company is in the
development stage, and has not commenced planned principal operations. Its
authorized capital stock is 100,000,000 shares of common stock, par value $0.001
per share.
The executive offices of the Company are located at 5350 Byrne Road,
Burnaby, B.C. Canada V5J 3J3. Its telephone number is (604) 603-2542.
OPERATING LOSSES
The Company has incurred net losses of approximately $1,500 and $100
for the fiscal years ended December 31, 1999 and December 31, 1998,
respectively. Such operating losses reflect developmental and other start-up
activities for 1999 and 1998. The Company expects to incur losses in the near
future until profitability is achieved. The Company's operations are subject to
numerous risks associated with establishing any new business, including
unforeseen expenses, delays and complications. There can be no assurance that
the Company will achieve or sustain profitable operations or that it will be
able to remain in business.
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FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company was not in full operations during 1999 and 1998 and thus,
the revenues generated are not representative of those that will be generated
once the Company becomes fully operational. Revenues are not yet sufficient to
support the Company's operating expenses and are not expected to reach such
levels until the first or second quarter of 2001. Since the Company's formation,
it has funded its operations and capital expenditures primarily through private
placements of debt and equity securities. See "Recent Sales of Unregistered
Securities." The Company expects that it will be required to seek additional
financing in the future. There can be no assurance that such financing will be
available at all or available on terms acceptable to the Company.
GOVERNMENT REGULATION
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its Province (State) or municipality. These may include
health, safety, and fire regulations. The Company's operations are also subject
to Federal and State minimum wage laws governing such matters as working
conditions and overtime.
RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act") impose sales practice and disclosure requirements
on certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and
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information with respect to the limited market in penny stocks.
LACK OF TRADEMARK AND PATENT PROTECTION
The Company relies on a combination of trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the company to obtain its trade secrets and to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company.
COMPETITION
The Company faces competition from a wide variety of entertainment
distributors, many of which have substantially greater financial, marketing and
technological resources than the Company.
EMPLOYEES
As of May 5, 2000, the Company had no employees.
ITEM 2 DESCRIPTION OF PROPERTY
Since 1996 all administrative activities of the Company have been
conducted by corporate officers from either their home or business offices.
Currently, there are no outstanding debts owed by the Company for the use of
these facilities and there are no commitments for future use of the facilities.
At December 31, 1999, the company had a working agreement with the
Company president to use 600 square feet of office space, telephones and
secretarial services supplied on a gratis basis.
ITEM 3 LEGAL PROCEEDINGS
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matters were subject to a vote of security holders during the year
1999.
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PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the NASD's OTC Bulletin Board
under the symbol "CERH." The following table presents the high and low bid
quotations for the Common Stock as reported by the NASD for each quarter during
the last two years. Such prices reflect inter- dealer quotations without
adjustments for retail markup, markdown or commission, and do not necessarily
represent actual transactions.
For all of 1998 and the first three quarters of 1999 to managements knowledge
there had been no trading.
1998: High Low
First Quarter - -
Second Quarter - -
Third Quarter - -
Fourth Quarter - -
1999:
First Quarter - -
Second Quarter - -
Third Quarter - -
Fourth Quarter $ 4.75 $ 4.75
DIVIDENDS
The Company has never declared or paid any cash dividends. It is the
present policy of the Company to retain earnings to finance the growth and
development of the business and, therefore, the Company does not anticipate
paying dividends on its Common Stock in the foreseeable future.
The number of shareholders of record of the Company's Common Stock as
of May 5, 2000 was approximately 33.
RECENT SALES OF UNREGISTERED SECURITIES
There have been no sales of the Company's securities. As noted above, in
connection with organizing the Company, on November 11, 1996, persons consisting
of its officers, directors, and other individuals were issued a total of 1,000
shares of Common Stock at a value of $.001 per share.
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On May 6, 1999, those outstanding shares were forward split 1,000 to 1,
resulting in a total of 1,000,000 shares outstanding.
On November 30, 1999, Mr. Daniel L. Hodges returned 600,000 shares to the
treasury and the shares were canceled, resulting in 400,000 remaining shares
outstanding.
On December 2, 1999 the Company declared a forward split 30 to 1, resulting in a
total of 12,000,000 shares outstanding.
ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
Plan of Operations - The Company was organized for the purpose of creating a
corporate vehicle to seek, investigate and, if such investigation warrants,
acquire an interest in one or more business opportunities presented to it by
persons or firms who or which desire to seek perceived advantages of a publicly
held corporation.
The Company may incur significant post-merger or acquisition
registration costs in the event management wishes to register a portion of their
shares for subsequent sale. The Company will also incur significant legal and
accounting costs in connection with the acquisition including the costs of
preparing post- effective amendments, Forms 8-K, agreements and related reports
and documents.
The Company will not have sufficient funds (unless it is able to raise
funds in a private placement) to undertake any significant development,
marketing and manufacturing of the products acquired. Accordingly, following the
acquisition, the Company will, in all likelihood, be required to either seek
debt or equity financing or obtain funding from third parties, in exchange for
which the Company may be required to give up a substantial portion of its
interest in the acquired product. There is no assurance that the Company will be
able either to obtain additional financing or interest third parties in
providing funding for the further development, marketing and manufacturing of
any products acquired.
The entertainment industry is an intensely competitive one, where
price, service, location, and quality are critical factors. The Company has many
established competitors, ranging from similar local single unit operations to
large multi-national operations. Some of these competitors have substantially
greater financial resources and may be established or indeed become established
in areas where the Company operates. The entertainment industry may be affected
by changes in customer tastes, economic, and demographic trends. Factors such as
inflation, increased supplies costs and the availability of suitable employees
may adversely affect the entertainment industry in general and the Company in
particular. In view of the Company's limited financial resources and management
availability, the Company will continue to be at a significant competitive
disadvantage vis-a-vis the Company's competitors.
8
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Results of Operations - From October 29, 1996 to July 9, 1999 the Company was an
inactive corporation. From July 9, 1999 the Company was a development stage
company and had not begun principal operations. Accordingly, comparisons with
prior periods are not meaningful.
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its capital requirements through the sale of its
Common Stock.
Since the Company's re-activation in July 9, 1999, the Company's
principal capital requirements have been the funding of the development of the
Company and acquisition of motion picture and television rights.
After the completion of its expansion plans, the Company expects future
development and expansion will be financed through cash flow from operations and
other forms of financing such as the sale of additional equity and debt
securities, capital leases and other credit facilities. There are no assurances
that such financing will be available on terms acceptable or favorable to the
Company.
Government Regulations - The Company is subject to all pertinent Federal, State,
and Local laws governing its business. The Company is subject to licensing and
regulation by a number of authorities in its Province (State) or municipality.
These may include health, safety, and fire regulations. The Company's operations
are also subject to Federal and State minimum wage laws governing such matters
as working conditions and overtime.
ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices or
financial statements disclosure.
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PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
Executive Officers and Directors
The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. The following table
sets forth the name, age, and position of each executive officer and director of
the Company:
<TABLE>
<S> <C> <C> <C>
Director's Name Age Office Term Expires
Daniel Hodges 43 Sole Officer & Director resigned November 30, 1999
Ken Kantymir 54 President & Director next annual meeting
David Richard Lewis 50 Vice-President, Secretary & Director next annual meeting
Robert Kantymir 52 Director next annual meeting
</TABLE>
Daniel Hodges has been sole Director, President, Chief Financial Officer
and Secretary of the Company since his appointment on October 29, 1996. Mr.
Hodges has been president and director of Solomon Consulting Corp. which
specializes in corporate and securities consulting since 1995. He has owned and
operated an industrial manufacturing company, "APRI, Inc." since 1998. He is
currently on the board of directors of two charitable organizations as well as
over 10 for-profit corporations. Within the past year, several companies that
maintain a public trading status have had Mr. Hodges as a director including:
Avartarra.com (symbol: AVAR), Landstar, Inc. (LDSR), and Hyaton Company, Inc.
(HYTN). Mr. Hodges received his B.S. from Thomas A. Edison State College in
Trenton, New Jersey. He is also a graduate of the U.S. Air Force Undergraduate
Pilot Training program and is currently the rank of Captain as an officer in the
Air National Guard.
On November 30, 1999 Mr. Hodges resigned as the sole officer and director
of the Company. Prior to his resignation, Mr Hodges appointed Ken Kantymir,
David Richard Lewis, Doug Serada and Robert Kantymir as directors. Mr. Ken
Kantymir is the President and David Richard Lewis is the Vice-President and
Secretary.
Ken Kantymir has been active in the Vancouver film community for the
past ten years. For more than a decade he has gained extensive experience in
many aspects of British Columbia's rapidly expanding film production industry.
Mr. Kantymir has two television producer credits, two associated producer
feature film credits, and one producer credit for a feature film. He has
appeared in more than 75 television series, 25 movies of the week, and 13feature
films. He has also directed
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industrial promotional videos. Mr. Kantymir also serves s the secretary of the
Union of B.C.Performers Actors Guild and is Vice-Chairman of the UBCP Member
Benefit Trust.
David Richard Lewis has dedicated the last ten years to the film
industry and has experience in the details of the day-to-day operations of a
production company, not only behind the camera but also in front as an actor.
Me. Lewis has gained experience in almost every aspect of film production in
nearly 200 various projects in the British Columbia film industry.
Robert Kantymir has been in the film industry for the last two years.
Prior to that, he was a Botanist with a Canadian university for more than twenty
five years.
Conflicts of Interest
Certain conflicts of interest existed at December 31, 1999 and may continue to
exist between the Company and its officers and directors due to the fact that
each has other business interests to which he devotes his primary attention.
Each officer and director may continue to do so notwithstanding the fact that
management time should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its management,
and conflicts may develop in the future. The Company has not established
policies or procedures for the resolution of current or potential conflicts of
interests between the Company, its officers and directors or affiliated
entities. There can be no assurance that management will resolve all conflicts
of interest in favor of the Company, and failure by management to conduct the
Company's business in the Company's best interest may result in liability to the
management. The officers and directors are accountable to the Company as
fiduciaries, which means that they are required to exercise good faith and
integrity in handling the Company's affairs. Shareholders who believe that the
Company has been harmed by failure of an officer or director to appropriately
resolve any conflict of interest may, subject to applicable rule of civil
procedure, be able to bring a class action or derivative suit to enforce their
rights and the Company's rights.
Board Meetings and Committees
The Directors and Officers will not receive remuneration from the
Company until a subsequent offering has been successfully completed, or cash
flow from operating permits, all in the discretion of the Board of Directors.
Directors may be paid their expenses, if any, of attendance at such meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor. No compensation has been paid to
the Directors. The Board of Directors may designate from among its members an
executive committee and one or more other committees. No such committees have
been appointed.
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Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
ITEM 10 EXECUTIVE COMPENSATION
None of the executive officer's salary and bonus exceeded $100,000
during any of the Company's last two fiscal years.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of
record or who was known by the Company to own beneficially more than 5% of the
12,000,000 shares of issued and outstanding Common Stock of the Company as of
December 31, 1999 and information as to the ownership of the Company's Stock by
each of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
Name and Address
of Beneficial Owners / Nature of Shares
Directors Ownership Owned Percent
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ken Kantymir common stock 2,400,000 20%
David Richard Lewis common stock 600,000 5%
Doug Serada common stock 2,400,000 20%
Robert Kantymir common stock 600,000 5%
All Executive Officers
and Directors as a Group
(3 persons) common stock 3,600,000 30%
</TABLE>
The address of all four stockholders is care of the Company.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with organizing the Company, on November 11, 1996,
persons consisting of its officers, directors, and other individuals were issued
a total of 1,000 shares of Common Stock at a value of $.001 per share. On May 6,
1999, the outstanding shares were forward split 1,000 to 1, resulting in a total
of 1,000,000 shares outstanding. On October 25, 1999, Mr. Daniel L. Hodges
returned 600,000 shares to the treasury and the shares were canceled, resulting
in 400,000 remaining shares outstanding. On December 2, 1999 the outstanding
shares were forward split 30 to 1 resulting in a total of 12,000,000 shares
outstanding. Under Rule 405 promulgated under the Securities Act of 1933, Mr.
Hodges may be deemed to be a promoter of the Company. No other persons are known
to Management that would be deemed to be promoters.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Balance Sheets as of December 31, 1999, and 1998.............................F-2
Statements of Operations for the years ended
December 31, 1999, and 1998.............................................F-4
Statement of Stockholders' Equity for the years ended
December 31, 1999, and 1998.............................................F-5
Statements of Cash Flows for the years ended
December 31, 1999, and 1998.............................................F-9
Notes to Financial Statements...............................................F-11
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2. Financial Statement Schedules
The following financial statement schedules required by Regulation S-X
are included herein.
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Title of Document
3.1 Articles of Incorporation (1)
3.2 Amended Articles of Incorporation (1)
3.3 Bylaws (1)
27.1 Financial Data Schedule
(1) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on October 20, 1999.
(b) Reports on Form 8-K filed.
On January 24, 2000 the company filed an 8-K reporting a change in
control and resignation of officer.
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
CERRITOS HOLDINGS, INC.
Dated: May 5, 2000 By /S/ Ken Kantymir
------------------------
Ken Kantymir,
C.E.O., Chairman, President, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 5h day of May 2000.
Signatures Title
/S/ Ken Kantymir
Ken Kantymir C.E.O., Chairman, President, Director
(Principal Executive Officer)
/S/ David Richard Lewis
David Richard Lewis Vice-President, Secretary, Director
(Principal Financial and Accounting
Officer)
/S/ Robert Kantymir
Robert Kantymir Director
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
-:-
INDEPENDENT AUDITOR'S REPORT
DECEMBER 31, 1999 AND 1998
<PAGE>
CONTENTS
Page
Independent Auditor's Report..............................................F - 1
Balance Sheets
December 31, 1999 and 1998..............................................F - 2
Statements of Operations for the
Years Ended December 31, 1999 and 1998..................................F - 3
Statement of Stockholders' Equity
Since October 29, 1996 (inception) to December 31, 1999..................F - 4
Statements of Cash Flows for the
Years Ended December 31, 1999 and 1998..................................F - 5
Notes to Financial Statements.............................................F - 6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Cerritos Holdings Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Cerritos Holdings
Inc. (a development stage company) as of December 31,1999 and 1998, and the
related statements of operations and cash flows for the two years ended December
31, 1999 and the statement of stockholders' equity from October 29, 1996
(inception) to December 31, 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 audits.
We conducted our audits 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 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 Cerritos Holdings
Inc. (a development stage company) as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the two years ended December
31, 1999 in conformity with generally accepted accounting principles.
Respectfully submitted
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
April 20, 2000
F - 1
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Assets:
Intangible and Other Assets
Motion Picture and Television Rights $ 13,717 $ -
================= =================
Liabilities:
Accounts Payable $ 181 $ 200
Accrued Liabilities 2,717 -
----------------- -----------------
2,898 200
----------------- -----------------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 12,000,000 shares at December 31,
1999 and 1998 12,000 12,000
Paid-In Capital 1,485 -
Retained Deficit (1,200) (12,200)
Deficit Accumulated During the
Development Stage (1,466)
Currency Translation Adjustment - -
----------------- -----------------
Total Stockholders' Equity 10,819 (200)
----------------- -----------------
Total Liabilities and
Stockholders' Equity $ 13,717 $ -
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 2
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
since July 9,
1999
inception
For the year ended of
December 31, development
-------------------------------------
1999 1998 stage
------------------ ----------------- -----------------
<S> <C> <C> <C>
Revenues: $ - $ - $ -
Expenses: 1,466 100 1,466
------------------ ----------------- -----------------
Net Loss $ (1,466) $ (100) $ (1,466)
================== ================= =================
Basic & Diluted loss per share $ - $ -
================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
SINCE OCTOBER 29, 1996 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Since July 9,
1999
Inception of
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
<S> <C> <C> <C> <C> <C>
---------------- ------------- ------------ ------------- ----------------
Balance at October 29, 1996
(inception) - $ - $ - $ - $ -
November 11, 1996 Issuance of
Stock for Services and payment
of Accounts payable 1,000 1,000 - - -
Net Loss - - - (1,000) -
---------------- ------------- ------------ ------------- ----------------
Balance at December 31, 1996
As originally reported 1,000 1,000 - (1,000) -
Retroactive adjustment for 1,000
to 1 stock split May 6, 1999 999,000 - - - -
Retroactive adjustment for shares
returned for cancellation
November 30, 1999 (600,000) (600) 600 - -
Retroactive adjustment for 30 to 1
stock split December 2, 1999 11,600,000 11,600 (600) (11,000) -
---------------- ------------- ------------ ------------- ----------------
Restated balance January 1, 1997 12,000,000 12,000 - (12,000) -
Net Loss - - - (100) -
---------------- ------------- ------------ ------------- ----------------
Balance at December 31, 1997 12,000,000 12,000 - (12,100) -
Net Loss - - - (100) -
---------------- ------------- ------------ ------------- ----------------
Balance at December 31, 1998 12,000,000 12,000 - (12,200) -
Capital contributed by shareholders - - 1,485 11,000 -
Net Loss - - - - (1,466)
---------------- ------------- ------------ ------------- ----------------
Balance at December 31, 1999 12,000,000 $ 12,000 $ 674 $ (1,200) $ (1,466)
================ ============= ============ ============= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Since July 9,
1999
For the years ended Inception of
December 31, Development
----------------------------
1999 1998 Stage
------------- ------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net Loss $ (1,466) $ (100) $ (1,285)
Increase (Decrease) in Accounts Payable (19) 100 (19)
Increase (Decrease) in Accrued Liabilities 2,717 - 2,717
------------- ------------- -----------------
Net Cash Used in operating activities 1,232 - 1,232
------------- ------------- -----------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in Motion Picture and
Television rights (13,717) - (13,717)
------------- ------------- -----------------
Net cash provided by investing activities (13,717) - (13,717)
------------- ------------- -----------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital contributed by shareholder 12,485 - 12,485
------------- ------------- -----------------
Net Cash Provided by
Financing Activities 12,485 - 12,485
------------- ------------- -----------------
Net (Decrease) Increase in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
at Beginning of Period - - -
------------- ------------- -----------------
Cash and Cash Equivalents
at End of Period $ - $ - $ -
============= ============= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ 250 $ - $ 250
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Cerritos Holdings Inc. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
October 29, 1996. The Company ceased all operating activities during the period
from October 29, 1996 to July 9, 1999 and was considered dormant. On July 9,
1999, the Company obtained a Certificate of renewal from the State of Nevada.
Since July 9, 1999, the Company is in the development stage, and has not
commenced planned principal operations.
Nature of Business
The Company intends to position itself to evolve into a vertically
integrated, diversified global media entertainment company. The Company intends
to acquire a number of diversified entertainment companies that will allow for
the pursuit of opportunities currently available in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of new and existing feature films, as well as expanding
into other areas of the entertainment industry.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F - 6
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic
loss per share computations are as follows:
<TABLE>
<CAPTION>
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the year ended December 31, 1999
<S> <C> <C> <C>
Basic Loss per Share
Loss to common shareholders $ (1,466) 12,000,000 $ -
================== =================== ==================
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1998
<S> <C> <C> <C>
Basic Loss per Share
Loss to common shareholders $ (100) 12,000,000 $ -
================== =================== ==================
</TABLE>
The effect of outstanding common stock equivalents would be
anti-dilutive for December 31, 1999 and 1998 and are thus not considered.
Intangible Assets
Intangible assets are valued at cost and will be amortized on the
income forecast method. The initial valuation of the motion picture option
agreements were derived from what Management believes to be arms length
negotiation.
There have been no production costs as of December 31, 1999. It is
anticipated that when production costs are incurred the income forecast method
will be used to amortize the cost of production for films, manuscripts,
recordings and similar property.
The Company identifies and records impairment losses on intangible
assets when events and circumstances indicate that such assets might be
impaired. The Company considers factors such as significant changes in the
regulatory or business climate and projected future cash flows from the
respective asset. Impairment losses are measures as the amount by which the
carrying amount of intangible asset exceeds its fair value.
F - 7
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Foreign Currency Translation
The functional currency of the Company is Canadian dollars. Balance
sheet accounts are translated to U.S. dollars at the current exchange rate as of
the balance sheet date. Income statement items are translated at average
exchange rates during the period. The resulting trnaslation adjustment is
recorded as a separate component of stockholders' equity.
Reclassification
Certain reclassifications have been made in the 1999 and 1998 financial
statements to conform with the December 31, 1999 presentation.
NOTE 2 - INCOME TAXES
As of December 31, 1999, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $2,000 that may
be offset against future taxable income through 2011. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
NOTE 4 - COMMITMENTS
As of December 31, 1999 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
F - 8
<PAGE>
CERRITOS HOLDINGS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1999 AND
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 5 - STOCK SPLIT
On May 6, 1999 the Board of Directors authorized 1,000 to 1 stock
split, changed the authorized number of shares to 100,000,000 shares and the par
value to $.001 for the Company's common stock. As a result of the split, 999,000
shares were issued.
On December 2, 1999 the Board of Directors authorized a 30 to 1 stock
split. As a result of this split the Company issued 11,600,000 shares of common
stock. All references in the accompanying financial statements to the number of
common shares and per-share amounts for 1999 and 1998 have been restated to
reflect the stock split.
F - 9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF CERRITOS HOLDINGS INC. AS OF DECEMBER 31, 1999 AND THE
RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13
<CURRENT-LIABILITIES> 2
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> (1)
<TOTAL-LIABILITY-AND-EQUITY> 13
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>