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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the year ended March 31, 2000
Commission File Number 0-29493
TEKRON, INC.
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(Name of Small Business Issuer in Its Charter)
DELAWARE 51-0395658
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
13123 Poway Road, Poway, CA 92064
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(619)692-5868
(ISSUER'S TELEPHONE NUMBER)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - .001 Par Value
-----------------------------
(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 of 1934 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 in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10 KSB
or any amendment to this Form 10-KSB.
Yes [X] No [ ]
The issuer had no revenues for the year ended March 31, 2000.
As of March 31, 2000, the registrant had 4,104,000 shares of common stock, $.001
par value, issued and outstanding.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
Business Development
Tekron, Inc. was incorporated in Delaware on May 31, 1994 for the purpose of
developing a marine service company for boat owners that would offer on-site
preventative maintenance and repair services. From inception until December
1999, Management reviewed the marine services market while they completed
contractual obligations for other businesses, and the Company had no material
operating activities.
In late 1999, Management decided to modify its original concept to include
pick-up and delivery services tailored specifically for boat owners in order to
capitalize on the increased fragmentation of the marine service industry, and
seek necessary capital in order that they could begin developing the Company's
boat servicing business.
The Company received its initial funding through the sale of common stock to
investors from the period of approximately December 1, 1997 until January 31,
1998. The Company offered and sold 91,000 common stock shares at $0.10 per share
to non-affiliated private investors. The
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Company relied upon Section 4(2) of the Securities Act of 1993, as amended (the
"Act").
There have been no bankruptcy, receivership or similar proceedings. There have
been no material reclassifications, mergers, consolidations, or purchase or sale
of a significant amount of assets not in the ordinary course of business.
Business of the Issuer
The Company intends to become a primary provider of boat maintenance and
specialty services to two distinct target markets: the recreational boater who
"trailers" his boat, and the owner of the over 28' boat whose vessel is kept
moored and is in the water year-round. The first two markets the Company intends
to service are the high vessel capacity ports and marinas of Los Angeles and San
Diego, California.
According to the National Marine Manufacturers Association's research, most
owners don't want to be bothered with boat, engine and trailer maintenance and
repair. Over 40% of all marine maintenance is preventative ("Boating Market
Evaluation and Opportunities Study" (C) 1996 NMMA). The company will concentrate
on this preventative maintenance, while leaving the full repair services to the
traditional marine dealerships. The company will offer the boat owner the same
positive experience he's had when his car has been serviced by a typical fast
lube auto center.
The small boat owner will be offered a new concept in boat maintenance.
Utilizing marine service centers and mobile service trucks that can provide many
of the services dockside or in the owner's driveway, the company will offer the
following Marine Services Menu to the small boat owner:
Basic Engine/Drive Periodic Maintenance: Oil/Filter Change, Fuel Filter
Service, Lubrication, Hydraulic Fluid Top-Off, Multi-point Equipment Check
Supplemental Engine/Drive Service Options: Winterization/Storage Prep,
Engine Flush/Water Pump Check, Coolant Fill/Replacement, Fuel System
Treatment, Prop Shaft Lube and Prop Check/Replacement, Corrosion Protection
Treatment, Touch-Up Painting
Boat Trailer Service Options: Wheel Bearing Lubrication,
Lights/Harness/Connector Repair/Replacement, Winch/Line
Check/Lube/Replacement, Tire Check/Replacement
Boat Service Options: Pressure Spray Bottom Cleaning, Detailing, Shrink
Wrap, Battery Maintenance/Replacement, Bilge Pump Check/Replacement, Fire
Extinguisher Check/Replacement
For the 28' and larger boats which are typically left in the water for the
boating season, the Company plans to provide on-site service where the boat is
being docked (marinas, yacht clubs,
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personal docks, boat yards, etc.). The service requirements of this segment of
the boating industry are highly specialized and require a commitment to the
environment as well as the boat owner. Basic services, similar to those provided
to the small boat owner, will be offered by "a lube shop on the water". The
company will utilize marine quality high-pressure hoses to extract waste fluids
from the engine, bilges and storage tanks. Multiple adapters such as metering
guns will then be used to fill the engine or tanks with fresh oil. The
utilization of advanced systems and engineering design will provide an
environmentally safe and efficient way of handling hazardous fluids on the
water. In addition to the marine services offered to the small boat owner, the
following menu of Marine Services will be offered to the large boat owner:
Bilge Cleaning: Anti-bacterial citrus-based degreaser pre-treatment,
pressurized water cleaning, removal of bilge water and wastes, complete
rinse
Maintenance Plans: Weekly/Monthly complete system check, cleaning, bilge
pump checks, safe harbor storm prep
Specialty Services: Onboard delivery of water and ice, groceries, overnight
laundry service, garbage pickup
Based upon Management's experience in the boating industry, the size and nature
of the market is diverse and continues to grow at a steady rate. According to
the National Marine Manufacturers Association, Market Statistics Department,
January 2000 ((C) 2000 NMMA), in the United States, expenditures for boating
have doubled from $11.2 million in 1993 to $22.9 million in 1999. The estimated
number of boats owned in the U.S. in 1999 was 16.8 million. Per the Market
Statistics Department analysis, the demographics of recent new boat buyers,
excluding personal water craft and small aluminum fishing boats is comprised of
the following:
<TABLE>
<CAPTION>
Total Cruiser Runabout Fiberglass
Fishing
<S> <C> <C> <C> <C>
Median Age 47 50 44 46
Median Income $71K $134K 67K 64K
Married 86% 86% 84% 89%
Managerial/Professional 58% 70% 49% 44%
Retired 11% 11% 13% 9%
Other 31% 19% 38% 47%
</TABLE>
The "Boating Market Evaluation & Opportunities Study" issued by the National
Marine Manufacturers Association ((C) 1996 NMMA) stated "The American consumer's
hunger for water-based recreation and desire to own pleasure boats may be at an
all-time high. But in order to grow, the industry providing products, sales and
service to this widespread market will need to make fundamental changes to keep
current boat owners satisfied and attract new customers."
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The report goes on to state the service segment needs a "Cultural Change". "The
treatment boat owners receive when seeking service will need to improve
dramatically. Boat owners, like most other consumer durable product owners, are
comparing service treatment to that of auto dealerships and find it hardly
measures up. Service is the number one area cited that needs improvement."
Members of the RPC (Research and Sales Promotion Committee) suggested that new
service methods need to be researched.
The Company has a current business plan which proposes to utilize its founders'
backgrounds to develop its business from the current concept stage into a unique
marine service company offering quality and convenience coupled with basic
servicing needs to a wide range of boating clientele. The business plan projects
the Company will obtain a listing on the NASD's Over the Counter Electronic
Bulletin Board during months one through three, prepare a private placement
memorandum during months one through three, and raise capital of $3,000,000
through the sale of common stock in the private placement by, selling 3,000,000
shares at $1.00 per share, to accredited or sophisticated investors during
months four through six. During month seven, after raising capital, the Company
intends to open one service site for boats in Los Angeles, and one in San Diego,
California. During months seven through twelve, in order to operate both service
sites, the Company intends to expend $60,000 for two manager-service
technicians, $120,000 for four service assistants, $25,000 for two office
clerical employees, $20,000 for inventory, $200,000 for the purchase and
outfitting of four service vehicles, $600,000 for purchase of four service
vessels, $10,000 for set-up and maintenance of the Company's web site, $125,000
for advertising, $30,000 for one marketing manager, $110,000 for purchase of
computers and fixed assets, and $62,000 for rent and other operating expenses.
The Company's current business plan provides for funding solely through private
placement investment. Through Management's experience in business and banking,
alternate sources of business funding include venture capital investment,
personal loans from Management, and institutional loans. In the event the
Company is not successful in obtaining funding through a private placement,
Management believes the best alternative to advance the Company's business plan
is for Management to loan funds to the Company sufficient to maintain the
Company at a minimum level and delay the business plan steps until such time as
private placement investment becomes available. The Company's officers and
directors have not, as of the date of this filing loaned any funds to the
Company. There are no formal commitments or arrangements to advance or loan
funds to the Company or repay any such advances or loans. At this time,
Management believes institutional loans are unavailable to the Company due to
its development stage nature, and venture capital investment is not beneficial
to the existing shareholders due to the fifty percent or greater amount of
ownership normally required for venture capital funding.
The Company intends to offer information on its services to prospective clients
on its web site, www.marineservice.net, which will feature available services,
contact information and links. It also plans to advertise its web site and
services on existing boating industry web sites, such as local yacht clubs in
the Company's service area (i.e. the San Diego Yacht Club www.sdyc.org,) and
purchase "banner ads" on the web pages of well-known regional boat supply
companies such as West Marine and Boat-US. Magazine advertising in such trade
publications as "Sail", "Sailing", "Boating", "Sea Magazine" and "Yachting" will
also be researched, as well as area
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boat show booth rentals and direct distribution of marketing flyers to local
marinas and yacht clubs.
The Company has no new product or service planned or announced to the public.
The size and financial strength of the Company's primary competitors,
traditional boat repair companies, Boatside Services, Inc., and Naut-A-Care
Marine Services are substantially greater than those of the Company. In
examining major competitors Management has found at traditional boat repair
companies, an average maintenance/repair takes two days and almost half of the
repairs took four. The owner is also required to trailer his boat to the
business, or for larger boats the maintenance must be done at the marina site of
the business. The other two major competitors cater to the large boat owner,
specializing in on-water service, but fail to address the needs of the small
boat owner. However, the Company's competitors have longer operating histories,
larger customer bases, and greater brand recognition than the Company.
Management is not aware of any significant barriers to the Company's entry into
the boat servicing market, however, the Company at this time has no market share
of this market.
Management will rely on their combined experience and knowledge in the auto lube
and boating industries. While the Company has no current contracts with boating
service suppliers, Management is familiar with these manufacturers and suppliers
such as Aqua Power Marine, Fram/Allied Signal, LubriMatic, Racor, Quaker State
and Shell. Management feels that availability will not be a problem at any time,
since it is aware of over two hundred suppliers of quality boating products. The
Company will enter into agreements with manufacturers and suppliers per its
business plan after raising capital during the first six months of its plan.
The Company will not depend on any one or a few major customers. The "Boating
Market Evaluation & Opportunities Study" issued by the National Marine
Manufacturers Association ((C) 1998 NMMA) reported United States Coast Guard
boat registration filings for California as 895,000. The Company's target market
for the first two years of its business plan is small and large boat owners in
the harbors of San Diego, and Los Angeles California estimated at over 40% of
the approximately 895,000 boats currently registered in the State of California.
After two years of marketing in California, the Company intends to expand into
the following boating markets identified by the NMMA 1998 study: Oregon and
Washington - 250,000 registered boats, Northeastern seaboard states - 1,132,236
registered boats, Southeastern seaboard states - 1,503,552 registered boats,
Great Lakes states - 2,834,545 registered boats.
The Company owns its Internet domain name, has setup its first web
page "marineservice.net", has applied for U.S. trademark protection, and will
expand its web site in the third quarter of 2000. The Company has no current
plans for any additional registrations such as patents, other trademarks,
copyrights, franchises, concessions, royalty agreements or labor contracts. The
Company will assess the need for any additional copyright, trademark or patent
applications on an ongoing basis.
The Company is not required to apply for or have any government approval for its
products or services.
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The Company will be subject to Federal environmental laws and regulations that
relate directly or indirectly to its operations including the National
Environmental Policy Act, the Clean Air Act, the Clean Water Act, the Safe
Drinking Water Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response, Compensation
and Liability Act, and their implementing regulations, as well as numerous state
and local environmental laws. These laws and regulations include: a) controlling
the discharge of materials into the environment, b) requiring removal and
cleanup under certain circumstances, c) requiring the proper handling and
disposal of waste materials, and, d) requirements otherwise relating to the
protection of the environment. These laws and regulations have become more
stringent in recent years and may, in certain circumstances, assess
administrative, civil and criminal penalties and impose "strict liability",
rendering a company liable for environmental damage without regard to negligence
or fault on the part of the company. Such laws and regulations may expose the
Company to liability for the conduct of or conditions caused by others or for
acts of the Company that were in compliance with all applicable laws and
regulations at the time such acts were performed. The application of these
requirements or the adoption of new requirements could have a material adverse
effect on the Company. The Company will conduct its operations in substantial
compliance with all applicable environmental laws and regulations.
The Company has not expended funds for research and development costs since
inception.
Environmental regulations have had no materially adverse effect on the Company's
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on the Company's business, financial condition or
results of operation. Public interest in the protection of the environment has
increased dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, the
business and prospects of the Company could be adversely affected.
The Company's business plan allows for maintaining insurance coverage against
certain environmental liabilities, but there can be no assurance that such
insurance will continue to be available or carried by the Company or, if
available and carried, will be adequate to cover the Company's liability in the
event of a catastrophic occurrence.
The Company's only current employees are its two officers who will devote as
much time as the board of directors determines is necessary to manage the
affairs of the Company. The officers intend to work on a full time basis when
the Company raises capital per its business plan. The Company's business plan
calls for hiring thirteen new full time employees during the next twelve months.
The Company's bylaws do not require the Company to deliver an annual report to
its shareholders and the Company has not in the past provided an annual report
to its shareholders. The Company is voluntarily filing this Form 10-KSB in order
to make its financial information equally available to any interested parties or
investors. The Company will be
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subject to the disclosure rules of Regulation S-B for a small business issuer
under the Securities Exchange Act of 1934. The Company anticipates it will
become subject to disclosure filing requirements effective sixty days after the
date the Securities and Exchange Commission accepts its original Form 10-SB
filing, and, after that date, will be required to file Form 10-KSB annually and
Form 10-QSB quarterly. In addition, the Company will be required to file Form 8
and other proxy and information statements from time to time as required. The
Company does not intend to voluntarily file the above reports in the event its
obligation to file such reports is suspended under the Exchange Act.
The public may read and copy any materials the Company files with the Securities
and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 450
Fifth Street NW, Washington D. C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
RISKS
Investors in the Company should be particularly aware of the inherent risks
associated with the Company's business plan. These risks include but are not
limited to:
Development Stage Status of the Company
The Company is in the developing or starting stages of its business
plan and is therefore more vulnerable to unexpected or uncontrollable
business and economic forces. It lacks any loyalty or name
recognition from potential customers. A competitor may be able to
market a similar service before the Company can complete its
development efforts. Economic conditions such as a national recession
or reduced boat sales or boat usage could lower Company revenues.
Going Concern Uncertainty
The Company may not have sufficient cash, assets, or revenues to
cover its operating costs and allow it to continue as a going
concern.
Dependence on Equity Funding
The Company's business plan requires that it successfully raise
capital to advance its business plan through a private placement
offering of its common stock in order to raise $3,000,000. If the
Company is unsuccessful in raising funds, the Company will be forced
to rely on its existing cash in the bank and funds loaned by the
directors and officers. In such a restricted cash flow scenario, the
Company would be unable to complete its business plan steps.
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Lack of Market Acceptance
The Company's long-term viability is substantially dependent upon the
widespread acceptance of the "auto-lube" concept for boats. There is
no historic evidence that this type of business will be successful
against competition from traditional boat repair and maintenance
services. Without sufficient customers or revenues, the Company would
experience a material adverse effect on the Company's business,
financial condition, operating results and cash flows.
Reliance on Current Management
The Company's performance and future operating results are
substantially dependent on the continued service and performance of
its current Management. The Company intends to hire a relatively
small number of additional technical and marketing personnel in the
next year. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to retain its essential
employees or that it will be able to attract or retain
highly-qualified technical and managerial personnel in the future.
The loss of the services of any of the Company's current Management
or other key employees or the inability to attract and retain the
necessary technical, and marketing personnel could have a material
adverse effect upon the Company's business, financial condition,
operating results and cash flows.
Management's Conflict of Interest
The current officers, Mr. Chandler and Mr. Fulton, are the sole
officers and directors of the company and have control in directing
the activities of the company. Mr. Chandler is involved in other
business activities and may, in the future, become involved in
additional business opportunities. If a specific business opportunity
becomes available, the officers and directors of the company may face
a conflict of interest. The Company has not formulated a plan to
resolve any conflicts that may arise. While the Company and its sole
officers and directors have not formally adopted a plan to resolve
any potential or actual conflicts of interest that exist or that may
arise, they have verbally agreed to limit their roles in all other
business activities to roles of passive investors and devote full
time services to the Company after the Company raises capital of
$3,000,000 through the sale of securities through a private placement
and is able to provide officers' salaries per its business plan.
While Management believes its estimates of projected occurrences and events are
within the timetable of its business plan, there can be no guarantees or
assurances that the results anticipated will occur. Although Management intends
to implement its business plan through the foreseeable future and will do its
best to mitigate the risks associated with its business plan, there can be no
assurance that such efforts will be successful. Management has no liquidation
plans should the Company be unable to receive funding. Should the Company be
unable to implement its business plan, Management would investigate all options
available to retain value for the shareholders. Among the options that would be
considered are: acquisition of another
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product or technology, or a merger or acquisition of another business entity
that has revenue and/or long-term growth potential. However, there are no
pending arrangements, understandings or agreements with outside parties for
acquisitions, mergers or any other material transactions.
Year 2000 Disclosure
For several years, users of computers in business applications were concerned
that time-sensitive software might cause their computer systems to recognize a
date using "00" as the year 1900 rather than the year 2000. This date error
problem was expected to cause computer system errors adversely affecting normal
business activities in the first weeks of 2000.
The Company's business plan provided for the purchase of computer equipment and
software during 2000. The Company's Management has hands-on familiarity with all
of the software utilized in its business plan and has experienced no Year 2000
related systems problems as of the date of this filing. Management has discussed
Year 2000 computer systems issues with proposed suppliers for the Company's
business plan and they have confirmed their computer related systems are already
Year 2000 compatible.
Management's sole Year 2000 compliance plan is to utilize only computer systems
and software which are already Year 2000 compatible. Other than the
aforementioned plan, Management has no current or contemplated Year 2000
contingency plans related to Year 2000 compliance problems.
ITEM 2 DESCRIPTION OF PROPERTY
The Company's principal executive office address is 13123 Poway Road, Poway, CA
92064. The principal executive office and telephone number are provided by Mr.
Chandler, an officer of the corporation. The costs associated with the use of
the telephone and mailing address were deemed by management to be immaterial as
the telephone and mailing address were almost exclusively used by the officer
for other business purposes. Management considers the Company's current
principal office space arrangement adequate until such time as the Company
achieves its business plan goal of raising capital of $3,000,000 and then begins
hiring new employees per its business plan.
ITEM 3 LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware
of any pending or potential legal actions.
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The Company plans to file for trading on the OTC Electronic Bulletin Board which
is sponsored by the National Association of Securities Dealers (NASD). The OTC
Electronic Bulletin Board is a network of security dealers who buy and sell
stock. The dealers are connected by a computer network which provides
information on current "bids" and "asks" as well as volume information.
As of the date of this filing, there is no public market for the Company's
securities. As of March 31, 2000, the Company had 72 shareholders of record. The
Company has paid no cash dividends. The Company has no outstanding options. The
Company has no plans to register any of its securities under the Securities Act
for sale by security holders. There is no public offering of equity and there is
no proposed public offering of equity.
ITEM 6 MANAGEMENT'S PLAN OF OPERATION
The Company's current cash balance is $4,873. Management believes the current
cash balance is sufficient to fund the current minimum level of operations
through the second quarter of 2000, however, in order to advance the Company's
business plan the Company must raise capital through the sale of equity
securities. To date, the Company has sold $9,100 in equity securities. Sales of
the Company's equity securities have allowed the Company to maintain a positive
cash flow balance.
The Company's business plan encompasses the following steps to implement its
boat servicing business plan: after raising capital of $3,000,000 during the
first six months, the Company intends to open one service site for boats in Los
Angeles, and one in San Diego, California during month seven. During months
seven through twelve, in order to operate both service sites, the Company
intends to expend $60,000 for two manager-service technicians, $120,000 for four
service assistants, $25,000 for two office clerical employees, $20,000 for
inventory, $200,000 for the purchase and outfitting of four service vehicles,
$600,000 for purchase of four service vessels, $10,000 for set-up and
maintenance of the Company's web site, $125,000 for advertising, $30,000 for one
marketing manager, $110,000 for purchase of computers and fixed assets, and
$62,000 for rent and other operating expenses.
Management has made initial progress in implementing its business plan by
registering its Internet domain name on the Internet, applying for U.S.
trademark protection, and plans to expand its web site in the third quarter of
2000. The Company will only be able to continue to
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advance its business plan after it receives capital funding through the sale of
equity securities. After raising capital, Management intends to hire employees,
rent commercial space in San Diego and Los Angeles, purchase vehicles and
equipment, and begin development of its boat service operations. The Company
intends to use its equity capital to fund the Company's business plan during the
next twelve months as cash flow from sales is not estimated to begin until year
two of its business plan. The Company will face considerable risk in each of its
business plan steps, such as difficulty of hiring competent personnel within its
budget, longer than anticipated development of its service vehicles and vessels,
and a shortfall of funding due to the Company's inability to raise capital in
the equity securities market. If no funding is received during the next twelve
months, the Company will be forced to rely on its existing cash in the bank and
funds loaned by the directors and officers. The Company's officers and directors
have not, as of the date of this filing loaned any funds to the Company. There
are no formal commitments or arrangements to advance or loan funds to the
Company or repay any such advances or loans. In such a restricted cash flow
scenario, the Company would be unable to complete its business plan steps, and
would, instead, delay all cash intensive activities. Without necessary cash
flow, the Company may be dormant during the next twelve months, or until such
time as necessary funds could be raised in the equity securities market.
There are no current plans for additional product research and development. The
Company plans to purchase approximately $110,000 in furniture, computers,
software during the next twelve months from proceeds of its equity security
sales. The Company's business plan provides for an increase of thirteen
employees during the next twelve months.
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the Company and related notes which are
included in this offering have been examined by Barry L. Friedman, P.C.,
Certified Public Accountant, and have been so included in reliance upon the
opinion of such accountant given upon his authority as an expert in auditing and
accounting.
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Tekron, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2000
March 31, 1999
March 31, 1998
<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
<S> <C>
INDEPENDENT AUDITORS REPORT 1
ASSETS 2
LIABILITIES AND STOCKHOLDERS' EQUITY 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-11
</TABLE>
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[BARRY L. FRIEDMAN, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors May 30, 2000
Tekron, Inc.
Poway, California
I have audited the accompanying Balance Sheets of Tekron, Inc. (A
Development Stage Company), as of March 31, 2000, March 31, 1999, and March 31,
1998, and the related statements of operations, stockholders' equity and cash
flows for the three years ended March 31, 2000, March 31, 1999, and March 31,
1998. 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 Tekron, Inc. (A
Development Stage Company), as of March 31, 2000, March 31, 1999, and March 31,
1998, and the related statements of operations, stockholders' equity and cash
flows for the three years ended March 31, 2000, March 31, 1999, and March 31,
1998, 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 suffered recurring 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 #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
1582 Tulita Dr.
Las Vegas, NV 89123
(702)361-8414
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Tekron, Inc.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March March March
31, 2000 31, 1999 31, 1998
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS $4,873 $9,100 $9,100
------ ------ ------
TOTAL CURRENT ASSETS $4,873 $9,100 $9,100
------ ------ ------
OTHER ASSETS $ 0 $ 0 $ 0
------ ------ ------
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
------ ------ ------
TOTAL ASSETS $4,873 $9,100 $9,100
------ ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements
- 2 -
<PAGE> 17
Tekron, Inc.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March March March
31, 2000 31, 1999 31, 1998
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES $ 0 $ 0 $ 0
TOTAL CURRENT LIABILITIES $ 0 $ 0 $ 0
STOCKHOLDERS' EQUITY (Note #4)
Common stock
Par value $0.00001
Authorized 20,000,000 shares
Issued and outstanding at
March 31, 1998 -
91,200 shares
March 31, 1999 -
91,200 shares $ 1
Common stock
Par value $0.001
$ 1
Authorized 20,000,000 shares
Issued and outstanding at
March 31, 2000 -
4,104,000 shares $4,104
Additional Paid-In Capital +5,016 +9,119 +9,119
Deficit accumulated during
The Development stage -4,247 -20 -20
------ ------ ------
TOTAL STOCKHOLDERS' EQUITY $4,873 $9,100 $9,100
------ ------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $4,873 $9,100 $9,100
------ ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements
- 3 -
<PAGE> 18
Tekron, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Year Year May 31,1994
Ended Ended Ended (Inception)
Mar. 31, Mar. 31, Mar. 31, to Mar. 31,
2000 1999 1998 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ----------
EXPENSES
General, Selling and
Administrative $ 4,227 $ 0 $ 0 $ 4,247
---------- ---------- ---------- ----------
TOTAL EXPENSES $ 4,227 $ 0 $ 0 $ 4,247
---------- ---------- ---------- ----------
NET PROFIT/LOSS (-) $ -4,227 $ 0 $ 0 $ -4,247
---------- ---------- ---------- ----------
Net Loss per share -
Basic and diluted
(Note #2) $ -.0010 $ NIL $ NIL $ -.0010
---------- ---------- ---------- ----------
Weighted average
Number of common
shares outstanding 4,104,000 4,104,000 4,104,000 4,104,000
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
- 4 -
<PAGE> 19
Tekron, 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,
March 31, 1997 200 $ 1 $ 19 $ -20
January 31, 1998
Issued For Cash 91,000 0 9,100
Net loss year ended
March 31, 1998 0
--------- ------ ------ -------
Balance,
March 31, 1998 91,200 $ 1 $9,119 $ -20
Net loss year ended
March 31, 1999 0
--------- ------ ------ -------
Balance,
March 31, 1999 91,200 $ 1 $9,119 $ -20
September 16, 1999
Changed Par Value
From $0.00001
To $0.001 +90 -90
December 8, 1999
Forward Stock Split
45 for 1 4,012,800 +4,013 -4,013
Net Loss year ended
March 31, 2000 -4,227
--------- ------ ------ -------
Balance,
March 31, 2000 4,104,000 $4,104 $5,016 $-4,247
--------- ------ ------ -------
</TABLE>
The accompanying notes are an integral part of these financial statements
- 5 -
<PAGE> 20
Tekron, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Year Year May 31,1994
Ended Ended Ended (Inception)
Mar. 31, Mar. 31, Mar. 31, to Mar. 31,
2000 1999 1998 2000
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities
Net Loss $-4,227 $ 0 $ 0 $-4,247
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities
Issue Common Stock
For Services 0 0 0 +20
Changes in assets and
Liabilities 0 0 0 0
------- ------ ------ -------
Net cash used in
Operating activities $-4,227 $ 0 $ 0 $-4,227
Cash Flows from
Investing Activities 0 0 0 0
Cash Flows from
Financing Activities
Issuance of Common
Stock for Cash 0 0 +9,100 +9,100
------- ------ ------ -------
Net Increase (decrease) $-4,227 $ 0 $ 0 $+4,873
Cash,
Beginning of period 9,100 9,100 0 0
------- ------ ------ -------
Cash, End of Period $ 4,873 $9,100 $9,100 $ 4,873
------- ------ ------ -------
</TABLE>
The accompanying notes are an integral part of these financial statements
- 6 -
<PAGE> 21
Tekron, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000, March 31, 1999, and March 31, 1998
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 31, 1994, under the laws of the State of
Delaware as Tekron, Inc. The Company currently has no operations and in
accordance with SFAS #7, is considered a development 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 March 31, 2000.
- 7 -
<PAGE> 22
Tekron, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000, March 31, 1999, and March 31, 1998
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. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. 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 March 31, 2000, the Company had no dilative common
stock equivalents such as stock options.
- 8 -
<PAGE> 23
Tekron, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000, March 31, 1999, and March 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year End
The Company has selected March 31st as its fiscal year-end.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended March 31,
2000, due to the net loss and no state income tax in Delaware, the state
of the Company's domicile and operations. The Company's total deferred
tax asset as of March 31, 2000 is as follows:
<TABLE>
<S> <C>
Net operation loss carry forward $ 4,247
Valuation allowance $ 4,247
Net deferred tax asset $ 0
</TABLE>
The federal net operating loss carry forward will expire between 2015
and 2020.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
- 9 -
<PAGE> 24
Tekron, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000, March 31, 1999, and March 31, 1998
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the corporation consists of 20,000,000
shares with a par value $0.001 per share.
Preferred Stock
Tekron, Inc. has no preferred stock.
On September 15, 1994, the Company issued 200 shares of its $0.00001 par
value common stock in consideration of $0.10 per-share ($20.00) to its
directors.
On January 31, 1998, the Company issued 91,000 shares of its $0.00001
par value common stock for cash of $9,100.
On September 16, 1999, the State of Delaware approved the Company's
restated Articles of Incorporation, which changed the par value from
$0.00001 to $0.001.
On December 8, 1999, the Company approved a forward stock split on the
basis of 45 for 1, thus increasing the common stock from 91,200 shares
4,104,000 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. The stockholders/officers and/or directors
have informally committed to advancing the operating costs of the
Company interest free.
- 10 -
<PAGE> 25
Tekron, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
March 31, 2000, March 31, 1999, and March 31, 1998
NOTE 6 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
NOTE 7 - 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.
- 11 -
<PAGE> 26
[BARRY L. FRIEDMAN, P.C. LETTERHEAD]
To Whom It May Concern: May 30, 2000
The firm of Barry L. Friedman, P.C., Certified Public Accountant consents
to the inclusion of their report of May 30, 2000, on the Financial Statements of
Tekron, Inc., as of March 31, 2000, in any filings that are necessary now or in
the near future with the U.S. Securities and Exchange Commission.
Very truly yours,
/s/ Barry L. Friedman
---------------------------
Barry L. Friedman
Certified Public Accountant
1582 Tulita Dr.
Las Vegas, NV 89123
(702)361-8414
<PAGE> 27
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Officers of the Company, all of those whose one year terms
will expire 3/31/01, or at such a time as their successors shall be elected and
qualified are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected Term Expires
<S> <C> <C> <C> <C>
Andrew Chandler 40 President, 9/15/94 3/31/01
13123 Poway Road Secretary,
Poway, CA 92064 Director
Don Fulton 60 Treasurer, 9/15/94 3/31/01
13123 Poway Road Director
Poway, CA 92064
</TABLE>
Each of the foregoing persons, Mr. Chandler and Mr. Fulton, may be deemed a
"promoter" of the Company, as that term is defined in the rules and regulations
promulgated under the securities and Exchange Act of 1933. Mr. Chandler and Mr.
Fulton are the only promoters of the Company.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring suspending or
otherwise limiting him from acting as an investment advisor, underwriter, broker
or dealer in the securities industry, or as an affiliated person, director or
employee of an investment company, bank, savings and loan association, or
insurance company or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the purchase or sale of
any securities.
No Executive Officer or Director of the Corporation has been convicted in any
criminal
13
<PAGE> 28
proceeding (excluding traffic violations) or is the subject of a criminal
proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of any
pending legal proceedings.
RESUMES
Andrew Chandler, President, Secretary & Director
1994 - Current President and owner of Quik Lube, Inc. in Poway, California.
Quik Lube provides a full line of automobile services from
basic lubrication and oil changes to extensive automobile
repairs such as radiators, brakes, air conditioning,
electrical systems, suspension parts, engine rebuilding, and
transmission repair.
Don Fulton, Treasurer & Director
Current Retired
1987 - 1999 Union Bank of California. Manager of corporate commercial
lending. Flag Member in good standing with San Diego and
Southwestern Yacht Clubs. Member of PHRF Racing Association,
a handicapping association of buoy and off-shore race teams,
since 1976. Member of the San Diego Racing Fleet. Has
participated in annual yacht races from California to Mexico
in the San Diego/Ensenada races and Newport Beach/Ensenada
races for over thirty years. Also has participated in
California yacht races such as the Coronado Islands
Regattas. Owner and captain of three sailboats ranging in
size from twenty eight feet to thirty five feet.
1969 B.A. Political Science, San Diego State University
ITEM 10 EXECUTIVE COMPENSATION
The company's current officers receive no compensation.
14
<PAGE> 29
Summary Compensation Table
<TABLE>
<CAPTION>
Name & Year Salary Bonus Other Restricted Options LTIP All other
principle ($) ($) annual stock SARs Payouts compen-
position compen- awards($) ($) sation($)
sation($)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Chandler 1996 -0- -0- -0- -0- -0- -0- -0-
President 1997 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
D Fulton 1996 -0- -0- -0- -0- -0- -0- -0-
Director 1997 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
There are no current employment agreements between the Company and its executive
officers.
The Board agreed to pay Mr. Chandler for administrative services and services
related to the Company's business plan 100 shares of the Company's common stock
on September 15, 1994. The stock was valued at the price unaffiliated investors
paid for stock sold by the Company, $.10 per share. On December 8, 1999, 4,400
shares of the Company's common stock were issued to him per a 45 for 1 stock
split.
The Board agreed to pay Mr. Fulton for administrative services and services
related to the Company's business plan 100 shares of the Company's common stock
on September 15, 1994. The stock was valued at the price unaffiliated investors
paid for stock sold by the Company, $.10 per share. On December 8, 1999, 4,400
shares of the Company's common stock were issued to him per a 45 for 1 stock
split.
The terms of these stock issuances were as fair to the Company, in the Board's
opinion, as could have been made with an unaffiliated third party.
The officers currently devote an immaterial amount of time to manage the affairs
of the Company. The Directors and Principal Officers have agreed to work with no
remuneration until such time as the Company receives sufficient revenues
necessary to provide proper salaries to all Officers and compensation for
Directors' participation. The Officers and the Board of Directors have the
responsibility to determine the timing of remuneration for key personnel based
upon such factors as positive cash flow to include stock sales, product sales,
estimated cash expenditures, accounts receivable, accounts payable, notes
payable, and a cash balance of not less than $15,000 at each month end. When
positive cash flow reaches $15,000 at each month end and appears sustainable the
board of directors will readdress compensation for key personnel and enact a
plan at that time which will benefit the Company as a whole. At this time,
management cannot accurately estimate when sufficient revenues will occur to
implement this
15
<PAGE> 30
compensation, or the exact amount of compensation.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock
through the most current date - March 31, 2000:
<TABLE>
<CAPTION>
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
<S> <C> <C> <C>
Common Andrew Chandler 4,500 (a) 1%
13123 Poway Road
Poway, CA 92064
Common Don Fulton 4,500 (b) 1%
13123 Poway Road
Poway, CA 92064
Total Shares Owned by Officers & Directors
As a Group 9,000 2%
</TABLE>
(a) Mr. Chandler received 100 shares of the Company's common stock on September
15, 1994 for administrative services and services related to the Company's
business plan. 4,400 shares of the Company's common stock were issued to him per
a 45 for 1 stock split on December 8, 1999.
(b) Mr. Fulton received 100 shares of the Company's common stock on September
15, 1994 for administrative services and services related to the Company's
business plan. 4,400 shares of the Company's common stock were issued to him per
a 45 for 1 stock split on December 8, 1999.
16
<PAGE> 31
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The principal executive office and telephone number are provided by Mr.
Chandler, an officer of the corporation. The costs associated with the use of
the telephone and mailing address were deemed by management to be immaterial as
the telephone and mailing address were almost exclusively used by the officer
for other business purposes.
ITEM 13 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
Reports filed on Form 8-K: None
Reports required to be filed by Regulation S-X: None
SIGNATURES
----------
Pursuant to the requirements of Section 13 and 15 (d) 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.
Tekron, Inc.
Date 6/12/2000 By /s/ Andrew Chandler
-------------------------------
Andrew Chandler, President & Director
Date 6/12/2000 By /s/ Don Fulton
---------------------------------
Don Fulton, Treasurer & Director
17
