<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended July 31, 2000
Transition Report under Section 13 or 15(d) of
The Exchange Act For the Transition Period from
____________________________________to ___________________________________
Commission File Number
BLUE CAPITAL ASSOCIATES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-4116850
--------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Broadway, Suite 2300, New York, N.Y. 10004
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (212) 785-6200
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the past 12
months (or 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 [ ]
At September 1, 2000, there were issued and outstanding 4,000,000
shares of Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Balance Sheets
July 31, 2000 (Unaudited) and April 30, 2000 2
Condensed Statements of Operations
Three Months Ended July 31, 2000 and Period from April 11, 2000
(Date of Inception) to July 31, 2000 (Unaudited) 3
Condensed Statements of Changes in Stockholders' Equity
Three Months Ended July 31, 2000 and Period from April 11, 2000
(Date of Inception) to July 31, 2000 (Unaudited) 4
Condensed Statements of Cash Flows
Three Months Ended July 31, 2000 and Period from April 11, 2000
(Date of Inception) to July 31, 2000 (Unaudited) 5
Notes to Condensed Financial Statements 6-9
Item 2. Management's Discussion and Analysis or Plan of Operation 10-12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
JULY 31, 2000 AND APRIL 30, 2000
<TABLE>
<CAPTION>
July 31, April 30,
ASSETS 2000 2000
------ ----------- ---------
(Unaudited) (Note 2)
<S> <C> <C>
Current assets - cash $ 400 $ 400
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ -- $ --
------- -------
Stockholders' equity:
Preferred stock, $.0001 par value; 20,000,000 shares
authorized; none issued -- --
Common stock, $.0001 par value; 100,000,000 shares
authorized; 4,000,000 issued and outstanding 400 400
Additional paid-in capital 1,940
Deficit accumulated during the development stage (1,940)
------- -------
Total stockholders' equity 400 400
------- -------
Totals $ 400 $ 400
======= =======
</TABLE>
See Notes to Condensed Financial Statements.
2
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BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 11, 2000
(DATE OF INCEPTION) TO JULY 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Three
Months
Ended
July 31,
2000 Cumulative
-------- ----------
<S> <C> <C>
Revenues $ -- $ --
General and administrative expenses 1,940 1,940
----------- -----------
Net loss $ (1,940) $ (1,940)
=========== ===========
Basic net loss per common share $ -- $ --
=========== ===========
Basic weighted average common shares outstanding 4,000,000 4,000,000
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
3
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BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 11, 2000
(DATE OF INCEPTION) TO JULY 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional During the
------------------ ------------------ Paid-in Develop-
Shares Amount Shares Amount Capital ment Stage Total
------ ------ ----------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 11, 2000 (date of
inception) -- $ -- -- $ -- $ -- $ -- $ --
Proceeds from issuance of
common stock 4,000,000 400 400
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, April 30, 2000 -- -- 4,000,000 400 -- -- 400
Capital contribution 1,940 1,940
Net loss (1,940) (1,940)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, July 31, 2000 -- $ -- 4,000,000 $ 400 $ 1,940 $ (1,940) $ 400
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Condensed Financial Statements.
4
<PAGE>
BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 11, 2000
(DATE OF INCEPTION) TO JULY 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Three
Months
Ended
July 31,
2000 Cumulative
-------- ----------
<S> <C> <C>
Operating activities:
Net loss $(1,940) $(1,940)
Expenses paid by stockholder 1,940 1,940
------- -------
Net cash provided by operating activities -- --
Financing activities - proceeds from sale of common stock 400
------- -------
Net increase in cash -- 400
Cash, beginning of period 400 --
------- -------
Cash, end of period $ 400 $ 400
======= =======
</TABLE>
See Notes to Condensed Financial Statements.
5
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BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Operations and business risk factors:
Blue Capital Associates, Inc. (the "Company") was incorporated on
April 11, 2000 to seek, investigate and, if such investigation
warrants, acquire an interest in a business entity which desires to
seek the perceived advantages of a corporation which has a class of
securities registered under the Securities Act of 1933. Generally,
an issuer who has registered securities under the Securities Act of
1933 becomes subject to the periodic and annual reporting
requirements of the Securities Act of 1934 (and is often referred to
as a "reporting company"). The Company will not restrict its search
to any specific business industry or geographical location and the
Company may participate in a business venture of virtually any kind
or nature. Management anticipates that it will be able to
participate in only one potential business venture because the
Company has nominal assets and limited financial resources. This
lack of diversification should be considered a substantial risk to
the stockholders of the Company because it will not permit the
Company to offset potential losses from one venture against gains
from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or that wish to utilize the public
marketplace in order to raise additional capital in order to expand
into new products or markets, develop a new product or service or
for other corporate purposes.
The Company anticipates that the selection of a business opportunity
in which to participate will be complex and extremely risky.
Management believes (but has not conducted any research to confirm)
that there are business entities seeking the perceived benefits of a
company having a class of securities registered under the Securities
Act of 1933. Such perceived benefits may include facilitating or
improving the terms on which additional equity financing may be
sought, providing liquidity for incentive stock options or similar
benefits to key employees, increasing the opportunity to use
securities for acquisitions, providing liquidity for stockholders
and other factors. Business opportunities may be available in many
different industries and at various stages of development, all of
which will make the task of comparative investigation and analysis
of such business opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other
assets. However, management believes the Company will be able to
offer owners of acquisition candidates the opportunity to acquire a
controlling ownership interest in a reporting company without
incurring the cost and time required to conduct an initial public
offering. Management has not conducted market research and is not
aware of statistical data to support the perceived benefits of a
business combination for the owners of a target company.
6
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BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Unaudited interim financial statements:
The Company had not conducted any commercial operations through July
31, 2000 and, accordingly, it was in the development stage as of
that date. Management does not expect the Company to generate any
revenues until such time as an acquisition of an operating company
is consummated.
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial
position of the Company as of July 31, 2000, and its results of
operations, changes in stockholders' equity and cash flows for the
three months ended July 31, 2000 and the related cumulative amounts
for period from April 11, 2000 (date of inception) to July 31, 2000.
Information included in the condensed balance sheet as of April 30,
2000 has been derived from, and certain terms used herein are
defined in, the audited financial statements of the Company as of
April 30, 2000 and for the period from April 11, 2000 (date of
inception) to April 30, 2000, (the "Audited Financial Statements")
included in the Company's Registration on Form 10-SB (the "Form
10-SB") for the period ended April 30, 2000 that was previously
filed with the United States Securities and Exchange Commission (the
"SEC"). Pursuant to the rules and regulations of the SEC, certain
information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these condensed
financial statements unless significant changes have taken place
since the end of the most recent fiscal year. Accordingly, these
unaudited condensed financial statements should be read in
conjunction with the Audited Financial Statements and the other
information also included in the Form 10-SB.
Note 3 - Net earnings (loss) per share:
The Company presents basic earnings (loss) per share and, if
appropriate, diluted earnings per share in accordance with the
provisions of Statement of Financial Accounting Standards No. 128,
"Earnings per Share." Basic earnings (loss) per common share is
calculated by dividing net income or loss by the weighted average
number of common shares outstanding during the period. The
calculation of diluted earnings per common share is similar to that
of basic earnings per common share, except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if all potentially dilutive common
shares, such as those issuable upon the exercise of stock options,
were issued during the period. Diluted per share amounts have not
been presented in the accompanying unaudited condensed statements of
operations because the Company did not have any potentially dilutive
common shares outstanding during the three months ended July 31,
2000 and the period from April 11, 2000 (date of inception) through
July 31, 2000.
7
<PAGE>
BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Related party transactions:
The Company has entered into an agreement with Capital Advisory
Partners, LLC ("CAP") pursuant to which CAP will supervise the
search for potential target companies for a business combination.
CAP owns 800,000 shares of the Company's common stock. The agreement
will continue until such time as the Company has consummated a
business combination. CAP has agreed to pay all expenses of the
Company without repayment until such time as a business combination
is consummated. In the three months ended July 31, 2000, CAP
incurred expenses on behalf of the Company totaling $1,940 (it did
not incur any such expenses prior to that period) and, accordingly,
the Company recorded a charge to operations and a contribution to
capital in that amount.
CAP has entered into agreements, and anticipates that it will enter
into other agreements, with other consultants to assist it in
locating a potential target company and CAP may share its stock in
the Company with, or grant options on such stock to, such referring
consultants and may make payment to such consultants from its own
resources. There is no minimum or maximum amount of stock, options
or cash that CAP may grant or pay to such consultants. CAP is solely
responsible for the costs and expenses of its activities in seeking
a potential target company, including any agreements with
consultants, and the Company has no obligation to pay any costs
incurred or negotiated by CAP.
CAP anticipates that it may seek to locate a target company through
solicitation. Such solicitation may include newspaper or magazine
advertisements, mailings and other distributions to law firms,
accounting firms, investment bankers, financial advisors and similar
persons, the use of one or more World Wide Web sites and similar
methods. No estimate can be made as to the number of persons who may
be contacted or solicited. As of July 31, 2000, CAP had not made any
solicitations and did not anticipate that it would do so. CAP
expects to rely on consultants in the business and financial
communities for referrals of potential target companies.
Patricia A. Meding, who is the sole officer and director of the
Company, is the sole officer, director and controlling stockholder
of CAP.
Note 5 - Income taxes:
The Company accounts for income taxes pursuant to the asset and
liability method which requires deferred income tax assets and
liabilities to be computed annually for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The
income tax provision or credit is the tax payable or refundable for
the period plus or minus the change during the period in deferred
tax assets and liabilities.
8
<PAGE>
BLUE CAPITAL ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Income taxes (concluded):
As of July 31, 2000, the Company had net operating loss
carryforwards of approximately $1,900 available to reduce future
Federal taxable income which, if not used, will expire in 2020. The
Company had no other material temporary differences as of that date.
Due to the uncertainties related to, among other things, the changes
in the ownership of the Company, which could subject those loss
carryforwards to substantial annual limitations, and the extent and
timing of its future taxable income, the Company offset the deferred
tax assets attributable to the potential benefits of approximately
$800 from the utilization of those net operating loss carryforwards
by an equivalent valuation allowance as of July 31, 2000.
As a result of the increase in the valuation allowance of $800
during the three months ended July 31, 2000, no credits for income
taxes are included in the accompanying condensed statements of
operations.
* * *
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the condensed
financial statements and notes thereto appearing elsewhere in this report.
OVERVIEW
Blue Capital Associates, Inc. (the "Company") was incorporated on
April 11, 2000 under the laws of the State of Delaware to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date other than issuing shares to its original
shareholders.
The Company will attempt to locate and negotiate with a business
entity for the combination of that target company with the Company. The
combination will normally take the form of a merger, stock-for-stock exchange or
stock-for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended.
The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company with a class
of registered securities. The proposed business activities described herein
classify the Company as a "blank check" company.
PLAN OF OPERATION
The Company is a blank check company whose plan of operation over
the next twelve months is to seek and, if possible, acquire an operating
business or valuable assets by entering into a business combination. The Company
will not be restricted in its search for business combination candidates to any
particular geographical area, industry or industry segment, and may enter into a
combination with a private business engaged in any line of business, including
service, finance, mining, manufacturing, real estate, oil and gas, distribution,
transportation, medical, communications, high technology, biotechnology or any
other. Management's discretion is, as a practical matter, unlimited in the
selection of a combination candidate. Management of the Company will seek
combination candidates in the United States and other countries, as available
time and resources permit, through existing associations and by word of mouth.
This plan of operation has been adopted in order to attempt to create value for
the Company's shareholders. For further information on the Company's plan of
operation and business, please consult the Company's registration statement on
Form 10SB-12G available on the EDGAR system of the U.S. Securities and Exchange
Commission.
The Company does not intend to do any product research or
development. The Company does not expect to buy or sell any real estate, plant
or equipment except as such a purchase might occur by way of a business
combination that is structured as an asset purchase, and no such asset purchase
currently is anticipated. Similarly, the Company does not expect to add
additional
10
<PAGE>
employees or any full-time employees except as a result of completing a business
combination, and any such employees likely will be persons already then employed
by the company acquired.
The Company has not engaged in any negotiations with any specific
entity regarding the possibility of a business combination with the Company. The
Company has entered into an agreement with Capital Advisory Partners, LLC, a
shareholder of the Company, to supervise the search for target companies as
potential candidates for a business combination. The agreement will continue
until such time as the Company has effected a business combination. Capital
Advisory Partners, LLC has agreed to pay all expenses of the Company without
repayment until such time as a business combination is effected. Patricia A.
Meding, who is the sole officer and director of the Company, is the sole officer
and director and controlling shareholder of Capital Advisory Partners, LLC.
Capital Advisory Partners, LLC may only locate potential target
companies for the Company and is not authorized to enter into any agreement with
a potential target company binding the Company. The Company's agreement with
Capital Advisory Partners, LLC is not exclusive and Capital Advisory Partners,
LLC has entered into agreements with other companies similar to the Company on
similar terms. Capital Advisory Partners, LLC may provide assistance to target
companies incident to and following a business combination, and receive payment
for such assistance from target companies.
Capital Advisory Partners, LLC anticipates that it may seek to
locate a target company through solicitation. Such solicitation may include
newspaper or magazine advertisements, mailings and other distributions to law
firms, accounting firms, investment bankers, financial advisors and similar
persons, the use of one or more World Wide Web sites and similar methods. No
estimate can be made as to the number of persons who may be contacted or
solicited. To date Capital Advisory Partners, LLC has not made any
solicitations, does not anticipate that it will do so, and expects to rely on
referrals from consultants in the business and financial communities for
referrals of potential target companies.
COMPETITION. The Company will be in direct competition with many
entities in its efforts to locate suitable business opportunities. Included in
the competition will be business development companies, venture capital
partnerships and corporations, small business investment companies, venture
capital affiliates of industrial and financial companies, broker-dealers and
investment bankers, management and management consultant firms and private
individual investors. Most of these entities will possess greater financial
resources and will be able to assume greater risks than those which the Company,
with its limited capital, could consider. Many of these competing entities will
also possess significantly greater experience and contacts than the Company's
Management. Moreover, the Company also will be competing with numerous other
blank check companies for such opportunities.
EMPLOYEES. The Company has no employees nor are there any other
persons other than Ms. Meding who devote any time to its affairs. It is not
expected that the Company will have employees except as a result of completing a
combination.
RESULTS OF OPERATIONS
FIRST QUARTER 1999 - During the first fiscal quarter ended July
31, 2000, the Company incurred a net loss of $1,940. This was due to general and
administrative expenses incurred by the Company in connection with its formation
and the filing of a registration statement on Form 10-SB. The Company paid no
rent or salaries and had no operations during the quarter.
11
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LIQUIDITY and CAPITAL RESOURCES
The Company had $400 cash on hand at the end of the quarter and
had no other assets to meet ongoing expenses or debts that may accumulate. Since
inception, the Company has accumulated a deficit (net loss) of $1,940.
The Company has no commitment for any capital expenditure and
foresees none. However, the Company will incur routine fees and expenses
incident to its reporting duties as a public company, and it will incur expenses
in finding and investigating possible acquisitions and other fees and expenses
in the event it makes an acquisition or attempts but is unable to complete an
acquisition. The Company's cash requirements for the next twelve months are
relatively modest, principally accounting expenses and other expenses relating
to making filings required under the Securities Exchange Act of 1934 (the
"Exchange Act"), which should not exceed $10,000 in the fiscal year ending March
31, 2001. Any travel, lodging or other expenses which may arise related to
finding, investigating and attempting to complete a combination with one or more
potential acquisitions could also amount to thousands of dollars.
The Company will only be able to pay its future debts and meet
operating expenses by raising additional funds, acquiring a profitable company
or otherwise generating positive cash flow. As a practical matter, the Company
is unlikely to generate positive cash flow by any means other than acquiring a
company with such cash flow. Capital Advisory Partners, LLC has agreed to pay
all expenses of the Company without repayment until such times as a business
combination is effected. However, it is not certain that Capital Advisory
Partners, LLC will be financially able to do so. The Company has no intention of
borrowing money to reimburse or pay salaries to any officer, director or
shareholder of the Company or their affiliates. There currently are no plans to
sell additional securities of the Company to raise capital, although sales of
securities may be necessary to obtain needed funds. The Securities and Exchange
Commission and certain states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. The Company does not
plan to issue or sell any shares or take any efforts to cause a market to
develop in the Company's securities until such time as the Company has
successfully implemented its business plan and it is no longer classified as a
blank check company.
Should Capital Advisory Partners, LLC or other shareholders
refuse to advance needed funds, however, the Company would be forced to turn to
outside parties to either loan money to the Company or buy the Company's
securities. There is no assurance that the Company will be able to raise
necessary funds from outside sources. Such a lack of funds could result in
severe consequences to the Company, including among others:
(1) failure to make timely filings with the SEC as required by
the Exchange Act;
(2) curtailing or eliminating the Company's ability to locate and
perform suitable investigations of potential acquisitions; or
(3) inability to complete a desirable acquisition due to lack of
funds to pay legal and accounting fees and
acquisition-related expenses.
The Company hopes to require potential candidate companies to
deposit funds with the Company that it can use to defray professional fees and
travel, lodging and other due diligence expenses incurred by the Company's
management related to finding and investigating a candidate company and
negotiating and consummating a business combination. There is no assurance that
any potential candidate will agree to make such a deposit.
12
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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Default in Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed
by the registrant during the quarter ended
July 31, 2000.
13
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Company duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BLUE CAPITAL ASSOCIATES, INC.
By: /s/ Patricia Meding
-----------------------
Patricia Meding
President
Date: September 14, 2000
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Company in the capacities set forth and on
the dates indicated.
Signature Position Date
By: /s/Patricia Meding President and Director September 14, 2000
-------------------
Patricia Meding
14
