SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 0-27759
Stearman Enterprises Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-4082816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 Broadway, Suite 1807, New York, New York 10036
(Address of principal executive offices (zip code))
212 768-2383
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the last 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
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at January 31, 2000
Common Stock, par value $0.0001 1,623,000
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
STEARMAN ENTERPRISES INC.
(A Delaware Corporation)
(A development stage company)
Balance Sheet
(U.S. DOLLARS)
6 months ended Fiscal year
January 31, ended July 31,
2000 1999
(Unaudited)
Assets
Current assets
Cash and bank $ 300 $ 300
Incorporation costs 403 403
Total Assets $ 703 $ 703
Liabilities
Current liabilities
Accounts payable $ 1,919 $ 357
Accrued interest 6 55
Convertible Debenture - 500
Total Liabilities 1,925 912
Shareholders' equity (deficit)
Share Capital
Authorized:
100,000,000 common shares
with a par value of $.0001 each
Issued and outstanding
1,623,000 common shares with a par
value of $0.0001 at January 31,
2000 and 515,000 at July 31, 1999 1,104 550
1,104 550
Accumulated Deficit (2,326) (759)
(1,222) (209)
$ 703 $ 703
CONTINUING OPERATIONS (NOTE 1)
<PAGE>
STEARMAN ENTERPRISES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Loss
(U.S. DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
3 months ended 6 months ended 3 months ended 6 months ended
October 31, January 31, October 31, January 31,
1999 2000 1998 1999
<S> <C> <C> <C> <C>
Expenses
Legal $ - $ 1,562 $ - $ -
Interest and bank charges 5 5 6 12
Filing fees - - - -
Net earnings (loss) for
the period $ (5) $ (1,567) $ (6) $ (12)
Basic and diluted loss per share $ (0.00001) $ (0.00134) $ (0.02400) $ (0.04800)
Weighted average shares Outstanding 707,696 1,165,348 250 250
</TABLE>
<PAGE>
STEARMAN ENTERPRISES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Cash Flow
(U.S. DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
3 months ended 6 months ended 3 months ended 6 months ended
October 31, January 31, October 31, January 31,
1999 2000 1998 1999
<S> <C> <C> <C> <C>
Cash provided by (used in)
Operations
Net Loss for period $ (5) $ (1,567) $ (6) $ (12)
(5) (1,567) (6) (12)
Net change in non-cash working
capital balances
Accounts payable - 1,562 - -
Accrued interest (49) (49) 6 12
Convertible Debenture (500) (500) - -
Net cash used in operating
activities (554) (554) - -
Financing
Issuance of capital stock 554 554 - -
Net cash generated
by financing activities - - - -
Change in cash for period - - - -
Cash, beginning of period 300 300 - -
Cash, end of period $ 300 $ 300 $ - $ -
</TABLE>
<PAGE>
STEARMAN ENTERPRISES INC.
(A Delaware Corporation)
(A development stage company)
Notes to Financial Statements
(U.S. DOLLARS)
1. Continuing operations
Stearman Enterprises Inc. was incorporated on March 13, 1992 in the state of
Delaware, U.S.A.
The Company has negative working capital and a deficit. The ability for
the Company to continue as a going concern is dependent upon its ability to
obtain adequate financing to reach profitable levels of operations. It is not
possible to predict whether financing efforts will be successful or if the
Company will attain profitable levels of operations.
2. Summary of significant accounting policies
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States and reflect the following
significant accounting principles:
a. Estimates and assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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 amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
b. Earnings (loss) per common share
In February, 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share (SFAS 128), which established new standards for
computing and presenting earnings per share effective for fiscal years ending
after December 15, 1997. With SFAS 128, primary earnings per share is replaced
by basic earnings per share, which is computed by dividing income available to
common shareholders by the weighted average number of shares outstanding for the
period. In addition, SFAS 128 requires the presentation of diluted earnings per
share, which includes the potential dilution that could occur if dilutive
securities were exercised or converted into common stock. The computation of
diluted EPS does not assume the conversion or exercise of securities if their
effect is anti-dilutive. Common equivalent shares consist of the common shares
issuable upon the conversion of the convertible loan notes and special warrants
(using the if-converted method) and incremental shares issuable upon the
exercise of stock options and share purchase warrants ( using the treasury stock
method).
<PAGE>
c. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly
liquid investments with an original maturity of three months or less.
3. Convertible debenture
On April 17, 1997 the Company issued a 5% Convertible Debenture in the amount of
$500 U.S. due April 17, 2002 in partial settlement of outstanding legal fees.
The debenture principle bears interest at 5% per annum and the accrued interest
and the principle shall be convertible, in part or in whole on the basis of 1
share for every $1.00 U.S. ($0.0005 U.S. post forward split shares) of debt.
The debenture conversion may be exercised at the holder's option by giving the
Company 10 days notice. The Convertible debenture was converted on October 15,
1999.
4. Share Capital
a. On May 4, 1999, the Company amended its certificate of incorporation by
subdividing the authorized capital stock of the corporation so that each share
was subdivided into two thousand shares. The certificate of incorporation was
further amended by increasing the authorized capital stock of the company to
20,000,000 shares with a par value of $0.01 each.
b. On October 20, 1999, the Company amended its certificate of incorporation by
increasing its authorized capital stock to 100,000,000 shares of common stock
and changing the par value of its common shares to $.0001 par value per share.
c. On October 15, 1999, the Company issued 1,108,000 common shares on the
conversion of the debt and accrued interest of $54 at 1 share for every $0.0005
U.S. debt.
5. Related party transactions
a. At January 31, 2000, members of Maitland & Company, the Company's Canadian
legal counsel owned 125,000 shares of the Company's common stock.
b. At January 31, 2000, members of the Company's U.S. legal counsel owned
1,108,000 shares of the Company's common stock
<PAGE>
6. Income taxes
The Company has net operating losses which may give rise to future tax benefits
of approximately $229, $25 and $505 as of July 31, 1999, July 31, 1998 and July
31, 1997 respectively. To the extent not used, net operating loss carryforwards
expire in varying amounts beginning in the year 2012. Income taxes are
accounted for in accordance with Statement of Financial Accounting Standards
No.109 (SFAS 109). Under this method, deferred income taxes are determined
based on differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year end, and are measured based on enacted
tax rates and laws that will be in effect when the differences are expected to
reverse. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. No provision for
income taxes is included in the statement due to its immaterial amount.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has registered its common stock on a Form 10-SB
registration statement filed pursuant to the Securities Exchange Act of
1934 (the "Exchange Act") and Rule 12(g) thereof. The Company files with
the Securities and Exchange Commission periodic and episodic reports under
Rule 13(a) of the Exchange Act, including quarterly reports on Form 10-QSB
and annual reports Form 10-KSB. As a reporting company under the Exchange
Act, the Company may register additional securities on Form S-8 (provided
that it is then in compliance with the reporting requirements of the
Exchange Act) and on Form S-3 (provided that is has during the prior 12
month period timely filed all reports required under the Exchange Act).
The Company was formed to engage in a merger with or acquisition of an
unidentified foreign or domestic private company which desires to become a
reporting company whose securities have been registered under
the Exchange Act. The Company may be deemed to meet the definition of a
"blank check" company contained in Section (7)(b)(3) of the Securities Act
of 1933, as amended.
Management believes that there are perceived benefits to being a
reporting company which may be attractive to foreign and domestic
private companies.
These benefits are commonly thought to include
(1) the ability to use securities to make acquisition of assets or
businesses;
(2) increased visibility in the financial community;
(3) the facilitation of borrowing from financial institutions;
(4) improved trading efficiency;
(5) the potential for shareholder liquidity;
(6) greater ease in subsequently raising capital;
(7) compensation of key employees through options for stock
for which there may be a public market;
(8) enhanced corporate image; and,
(9) a presence in the United States capital market.
<PAGE>
A private company which may be interested in a business combination
with the Company may include
(1) a company for which a primary purpose of becoming a reporting
company is the use of its securities for the acquisition of
assets or businesses;
(2) a company which is unable to find an underwriter of its securities
or is unable to find an underwriter of securities on terms
acceptable to it;
(3) a company which wishes to become a reporting company with less
dilution of its common stock than would occur normally upon an
underwriting;
(4) a company which believes that it will be able obtain
investment capital on more favorable terms after it has become
a reporting company;
(5) a foreign company which may wish an initial entry into the
United States securities market;
(6) a special situation company, such as a company seeking to satisfy
redemption requirements under a qualified Employee Stock Option
Plan; and,
(7) a company seeking one or more of the other benefits believed to
attach to a reporting company.
Management is actively engaged in seeking a qualified private company
as a candidate for a business combination. The Company is authorized to enter
into a definitive agreement with a wide variety of private businesses without
limitation as to their industry or revenues. It is not possible at this time to
predict with which private company, if any, the Company will enter into a
definitive agreement or what will be the industry, operating history, revenues,
future prospects or other characteristics of that company.
As of the date hereof, management has not made any final decision
concerning or entered into any agreements for a business combination. When
any such agreement is reached or other material fact occurs, the Company
will file notice of such agreement or fact with the Securities and Exchange
Commission on Form 8-K. Persons reading this Form 10-QSB are advised to
see if the Company has subsequently filed a Form 8-K.
The Company does not intend to trade its securities in the secondary
market until completion of a business combination. It is anticipated that
following such occurrence the Company will take the steps required
to cause its common stock to be admitted to quotation on the
NASD OTC Bulletin Board or, if it then meets the financial and other
requirements thereof, on the Nasdaq SmallCap Market, National Market System
or regional or national exchange.
COMPUTER SYSTEMS REDESIGNED FOR YEAR 2000
Many existing computer programs use only two digits to identify a year
in such program's date field. These programs were designed and developed
without consideration of the impact of the change in the century for
which four digits will be required to accurately report the date. If not
corrected, many computer applications could fail or create erroneous results
<PAGE>
by or following the year 2000 ("Year 2000 Problem"). Many of the computer
programs containing such date language problems have not been corrected by
the companies or governments operating such programs. The Company does not
have operations and does not maintain computer systems. However, it is
impossible to predict what computer programs will be effected, the impact
any such computer disruption will have on other industries or commerce or the
severity or duration of a computer disruption.
Before the company enters into any business combination, it will inquire
as to the status of any target company's Year 2000 Problem, the steps such
target company has taken to correct any such problem and the probable impact
on such target company of any computer disruption. However, there can be
no assurance that the Company will not combine with a target company that
has an uncorrected Year 2000 Problem or that any such Year 2000 Problem
corrections are sufficient. The extent of the Year 2000 Problem of a
target company may be impossible to ascertain and its impact on the
Company is impossible to predict.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is
unaware of such proceedings contemplated against it.
ITEM 2. CHANGES IN SECURITIES
On October 15, 1999, the Company issued 1,108,000 common shares on the
conversion of the 5% Convertible Debenture in the amount of $500 and accrued
interest of $54 at the rate of 1 share for every $0.0005 of debt. The debenture
was in settlement of outstanding legal fees.
On October 20, 1999, the company amended it certificate of incorporation by
increasing its authorized capital stock to 100,000,000 shares of common stock
and changing its authorized capital to $0.0001 par value per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Not applicable.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the
quarter.
<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.
STEARMAN ENTERPRISES INC.
By: /s/ Herbert Maxwell
Herbert Maxwell, President
Dated May 17, 2000
<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-2000
<CASH> 300
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 703
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,623,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (703)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,567)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,567)
<EPS-BASIC> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
