<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION FROM _______________ TO __________________.
COMMISSION FILE NUMBER 000-31153
MAGNOLIA VENTURES, INC.
-----------------------------------
(Name of Small Business Issuer in its charter)
Nevada 88-0355504
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1105 Terminal Way, Suite 202 Century Park
Reno, Nevada 89502
----------------------------------------- ---------
(Address of principal executive offices) (Zip code)
N/A
-----------------------------------
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At September 30, 2000, there were outstanding 21,000,000 shares of the
Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item I. Financial Statements
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ACCOUNTANT'S LETTER 3
---------------------------------------------------------------------
BALANCE SHEET - ASSETS 4
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BALANCE SHEET - LIABILITIES AND STOCKHOLDERS' EQUITY 5
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STATEMENT OF OPERATIONS 6-7
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STATEMENT OF STOCKHOLDERS' EQUITY 8
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STATEMENT OF CASH FLOWS 9-10
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NOTES TO FINANCIAL STATEMENTS 11-15
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</TABLE>
2
<PAGE> 3
[BARRY L. FRIEDMAN, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors October 2, 2000
MAGNOLIA VENTURES, INC.
Las Vegas, Nevada
I have audited the accompanying Balance Sheets of MAGNOLIA VENTURES, INC.(A
Development Stage Company), as of September 30, 2000, and December 31, 1999, and
the related statements of stockholders' equity for September 30, 2000, and
December 31, 1999, and statements of operations and cash flows for the three
months ended September 30, 2000, and September 30, 1999, for the nine months
ended September 30, 2000, and September 30, 1999, and the two years ended
December 31, 1999, and December 31, 1998, and the period June 13, 1994,
(inception), to September 30, 2000. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MAGNOLIA VENTURES, INC.(A
Development Stage Company), as of September 30, 2000, and December 31, 1999, and
the related statements of stockholders' equity for September 30, 2000, and
December 31, 1999, and statements of operations and cash flows for the three
months ended September 30, 2000, and September 30, 1999, for the nine months
ended September 30, 2000, and September 30, 1999, and the two years ended
December 31, 1999, and December 31, 1998, and the period June 13, 1994,
(inception), to 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 #5 to the
financial statements, the Company has had no 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 #5. These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ BARRY L. FRIEDMAN
---------------------------
Barry L. Friedman
Certified Public Accountant
3
<PAGE> 4
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
9 Mos. Ended Year Ended
Sep.30, 2000 Dec.31, 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
CASH $ 0 $ 31
------------ ------------
TOTAL CURRENT ASSETS $ 0 $ 31
------------ ------------
OTHER ASSETS $ 0 $ 0
------------ ------------
TOTAL OTHER ASSETS $ 0 $ 0
------------ ------------
TOTAL ASSETS $ 0 $ 31
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
9 Mos. Ended Year Ended
Sep.30, 2000 Dec.31, 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Officers Advances (Note #8) $ 27,705 $ 155
------------ ------------
TOTAL CURRENT LIABILITIES $ 27,705 $ 155
------------ ------------
STOCKHOLDERS EQUITY (Note #4)
Serial Preferred Stock
par value $.01
Authorized 10,000,000 shares
issued and outstanding at
September 30, 2000 - None $ 0
Common stock, $.001 par value
authorized 25,000,000 shares
issued and outstanding at
December 31, 1999 - 210,000 shares $ 210
September 30, 2000 - 21,000,000 shares 21,000
Additional paid in Capital -18,900 1,890
Accumulated deficit during
the development stage -29,805 -2,234
------------ ------------
TOTAL STOCKHOLDERS' EQUITY
$ -27,705 $ -124
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 0 $ 31
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE> 6
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------
EXPENSES
General, Selling
and Administrative $ 16,006 $ 0 $ 27,581 $ 0
------------ ------------ ------------ ------------
Total Expenses $ 16,006 $ 0 $ 27,581 $ 0
------------ ------------ ------------ ------------
Net Profit/Loss (-)
from operations $ -16,006 $ 0 $ -27,581 $ 0
------------ ------------ ------------ ------------
Interest Income $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------
Net Income/Loss $ -16,006 $ 0 $ -27,581 $ 0
------------ ------------ ------------ ------------
Net Loss per share -
Basic and diluted
(Note #2) $ -.0008 $ NIL $ -.0013 $ NIL
------------ ------------ ------------ ------------
Weighted average
number of common
shares outstanding 21,000,000 21,000,000 21,000,000 21,000,000
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE> 7
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
June 13,1994
Year Ended Year Ended (Inception)
December 31, December 31, to Sep. 30,
1999 1998 2000
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0
------------ ------------ ------------
EXPENSES
General, Selling
and Administrative $ 0 $ 15 $ 30,461
------------ ------------ ------------
Total Expenses $ 0 $ 15 $ 30,461
------------ ------------ ------------
Net Profit/Loss (-)
from operations $ 0 $ -15 $ -30,461
------------ ------------ ------------
Interest Income $ 0 $ 177 $ 656
------------ ------------ ------------
Net Income/Loss $ 0 $ 162 $ -29,805
------------ ------------ ------------
Net Loss per share -
Basic and diluted
(Note #2) $ NIL $ NIL $ -.0014
------------ ------------ ------------
Weighted average
number of common
shares outstanding 21,000,000 21,000,000 21,000,000
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE> 8
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance,
December 31, 1998 21,000 $ 2,100 $ 0 $ -2,224
December 3, 1999
Changed from no par
value to $0.001 -2,098 +2,098
December 3, 1999
Forward stock split
100:1 207,900 +208 -208
Net loss year ended
December 31, 1999 0
---------- -------- ---------- --------
Balance,
December 31, 1999 210,000 $ 210 $ 1,890 $ -2,224
February 8, 2000
Forward stock split
100:1 20,790,000 +20,790 -20,790
Net Loss
January 1, 2000, to
September 30, 2000 -27,581
---------- -------- ---------- --------
Balance,
September 30, 2000 21,000,000 $ 21,000 $ -18,900 $-29,805
---------- -------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE> 9
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash Flow from
Operating Activities
Net Loss $ -16,006 $ 0 $ -27,581 $ 0
Adjustment to reconcile
net loss to net cash
provided by operating
activities
Changes in Assets
and Liabilities
Increase in current
Liabilities
Officers Advances +15,975 0 +27,550 0
----------- ------------ ------------ ------------
Net cash used in
operating Activities $ -31 $ 0 $ -31 $ 0
Cash Flows from
Investing Activities 0 0 0 0
Cash Flows from
Financing Activities
Issuance of Common
Stock 0 0 0 0
------------ ------------ ------------ ------------
Net increase/decrease
in cash $ -31 $ 0 $ -31 $ 0
Cash,
beginning of period 31 0 31 0
------------ ------------ ------------ ------------
Cash,
end of period $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
9
<PAGE> 10
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
June 13,1994
Year Ended Year Ended (Inception)
December 31, December 31, to Sep. 30,
1999 1998 2000
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flow from
Operating Activities
Net Loss $ 0 $ +162 $ -29,805
Adjustment to reconcile
net loss to net cash
provided by operating
activities
Changes in Assets
and Liabilities
Increase in current
Liabilities
Officers Advances 0 -5,845 +27,705
------------ ------------ ------------
Net cash used in
operating Activities $ 0 $ -5,683 $ -2,100
Cash Flows from
Investing Activities 0 0 0
Cash Flows from
Financing Activities
Issuance of Common
Stock 0 0 +2,100
------------ ------------ ------------
Net increase/decrease
in cash $ 0 $ -5,683 $ 0
Cash,
beginning of period 31 5,714 0
------------ ------------ ------------
Cash,
end of period $ 31 $ 31 $ 0
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
10
<PAGE> 11
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000, and December 31, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized June 13,1994, under the laws of the State of
Nevada as Magnolia Ventures, Inc. The Company currently has no operations
and in accordance with SFAS #7, is considered a development stage company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and equivalents
--------------------
The Company maintains a cash balance in a non-interest-bearing bank
that currently does not exceed federally insured limits. For the
purpose of the statements of cash flows, all highly liquid investments
with the maturity of three months or less are considered to be cash
equivalents. There are no cash equivalents as of December 31, 1999, or
September 30, 2000.
11
<PAGE> 12
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
------------
Income taxes are 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 is recorded for all temporary difference between financial
and tax reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
Reporting on Costs of Start-Up Activities
-----------------------------------------
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" which provides guidance on the financial
reporting of start-up costs and organization costs. It requires most
costs of start-up activities and organization costs to be expensed as
incurred. With the adoption of SOP 98-5, there has been little or no
effect on the company's financial statements.
Loss Per Share
--------------
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share". Basic loss per share is computed by dividing losses available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects per
share amounts that would have resulted if dilative common stock
equivalents had been converted to common stock. As of September 30,
2000, the Company had no dilative common stock equivalents such as
stock options.
Year End
--------
The Company has selected December 31st as its year-end.
12
<PAGE> 13
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year 2000 Disclosure
--------------------
The Y2K issued had no effect on this Company.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended September 30,
2000. The Company's total deferred tax asset as of December 31, 1999, is as
follows:
<TABLE>
<S> <C>
Net operation loss carry forward $ 2,224
Valuation allowance $ 2,224
Net deferred tax asset $ 0
</TABLE>
The federal net operating loss carry forward will expire between 2014 and
2019.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
------------
The authorized common stock of Magnolia Ventures, Inc. consists of
25,000,000 shares with a par value of $0.001 per share.
Preferred Stock
---------------
Magnolia Ventures, Inc. has a serial preferred stock with a par value of
$0.01.
13
<PAGE> 14
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000, and December 31, 1999
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
On June 30, 1994, the company issued 2,100 shares of its no par value
common stock in consideration of $2,100 in cash.
On December 3, 1999, the State of Nevada approved the Company's restated
Articles of Incorporation, which increased its capitalization from 2,500
common shares to 25,000,000 common shares. The no par value was changed to
$0.001.
On December 3, 1999, the Company forward split its common stock 100:1, thus
increasing the number of outstanding common stock shares from 2,100 shares
to 210,000.
On February 8, 2000, the State of Nevada approved the Company's Articles of
Incorporation, which created a new class of serial preferred stock, with a
par value of $0.01.
On February 8, 2000, the Company forward its common stock 100 to 1, thus
increasing the number of outstanding common stock shares from 210,000
shares to 21,000,000 shares.
NOTE 5 - 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 significant cash or other
material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a
going concern. It is the intent of the Company to seek a merger with an
existing, operating company.
14
<PAGE> 15
MAGNOLIA VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and December 31, 1999
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides office services without charge. Such
costs are immaterial to the financial statements and accordingly, have not
been reflected therein. The officers and directors of the Company are
involved in other business activities and may, in the future, become
involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The
Company has not formulated a policy for the resolution of such conflicts.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock or serial preferred stock.
NOTE 8 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing company, an officer of the Company has advanced funds on behalf of
the Company to pay for any costs incurred by it. These funds are interest
free.
15
<PAGE> 16
Item II. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company has not commenced business activities and has no assets or
operations. The Company has had no preliminary negotiations to effectuate a
business combination.
The Company is dependent upon its officers to meet any de minimis
costs which may occur. Peggy Melilli, an officer and director of the Company,
has agreed to provide the necessary funds, without interest, for the Company to
comply with the Securities Exchange Act of 1934, as amended; provided that she
is an officer and director of the Company when the obligation is incurred. All
advances are interest-free.
In addition, since the Company has had no operating history nor any
revenues or earnings from operations, with no significant assets or financial
resources, the Company will in all likelihood sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in the Company incurring a net operating loss which
will increase continuously until the Company can consummate a business
combination with a profitable business opportunity and consummate such a
business combination.
This discussion may contain certain forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those forward-looking statements. The
factors that may cause actual results to differ materially is that the Company
has no arrangement, agreement or understanding with respect to engaging in a
merger with, joint venture with or acquisition of, a private or public company
and that there can be no assurance that the Company will be successful in
identifying and evaluating suitable business opportunities or including a
business combination.
Item III. Qualitative and Quantitative Disclosures About Market Risk.
The Company has neither considered or conducted any research
concerning qualitative and quantitative market risk.
16
<PAGE> 17
PART II
OTHER INFORMATION
<TABLE>
<S> <C>
Item 1 - Legal Proceedings ...........................................................................None
Item 2 - Changes in the Rights of the Company's
Security Holders ............................................................................None
Item 3 - Defaults by the Company on its
Senior Securities ...........................................................................None
Item 4 - Submission of Matter to Vote of Security
Holders .....................................................................................None
</TABLE>
Item 5 - Other Information
(a) Board Meeting
The board held one meeting during the current quarter, which was a
special meeting.
(b) Committees
The board of directors has not established any audit committee. In
addition, the Company does not have any other compensation or executive or
similar committees. The Company will not, in all likelihood, establish any audit
committee until such time as the Company completes a business combination, of
which there can be no assurance. The Company recognizes that an audit committee,
when established, will play a critical role in the financial reporting system of
the Company by overseeing and monitoring management's and the independent
auditors' participation in the financial reporting process. At such time as the
Company establishes an audit committee, its additional disclosures with the
Company's auditors and management may promote investor confidence in the
integrity of the financial reporting process.
Until such time as an audit committee has been established, the full
board of directors will undertake those tasks normally associated with an audit
committee to include, but not by way of limitation, the (i) review and
discussion of the audited financial statements with management, (ii) discussions
with the independent auditors the matters required to be discussed by the
Statement On Auditing Standards No. 61, as may be modified or supplemented, and
(iii) received from the auditors disclosures regarding the auditors'
Independents Standards Board Standard No. 1, as may be modified or supplemented.
The board of directors of the Company, consistent with its intent to
enhance the reliability and credibility of its financial statements, has
submitted the financial statements included in this Form 10-QSB to its
independent auditors prior to
17
<PAGE> 18
the filing of this report. An audit was completed for the period
then ended.
Item 6 - Exhibits and Reports on Form 8-K
The following exhibits are filed with this report:
(a) No reports on Form 8-K were filed during the quarter for
which the report is filed.
(b) Financial Data Schedule 27.1.
SIGNATURE
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: November 10, 2000 MAGNOLIA VENTURES, INC.
By: /s/ Peggy Melilli
------------------------
Peggy Melilli
President
