<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
Castle Hill Associates, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-4118626
-------------------------------- ---------------------
(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]
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CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
PAGE
----
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 12, 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 12, 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 12, 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
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CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
JULY 31, 2000 AND APRIL 30, 2000
July 31, April 30,
ASSETS 2000 2000
----------- --------
(Unaudited) (Note 2)
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 2,078
Deficit accumulated during the development
stage (2,078)
------- ----
Total stockholders' equity 400 400
------ ----
Totals $ 400 $400
====== ====
See Notes to Condensed Financial Statements.
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CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 12, 2000
(DATE OF INCEPTION) TO JULY 31, 2000
(Unaudited)
Three
Months
Ended
July 31,
2000 Cumulative
--------- ----------
Revenues $ - $ -
General and administrative expenses 2,078 2,078
--------- ---------
Net loss $ (2,078) $ (2,078)
========= =========
Basic net loss per common share $ - $ -
========= =========
Basic weighted average common shares
outstanding 4,000,000 4,000,000
========= =========
See Notes to Condensed Financial Statements.
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CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 12, 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 12, 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 2,078 2,078
Net loss (2,078) (2,078)
------ ------ --------- ---- ------ ------- ------
Balance, July 31, 2000 - $ - 4,000,000 $400 $2,078 $(2,078) $ 400
====== ====== ========= ==== ====== ======= ======
</TABLE>
See Notes to Condensed Financial Statements.
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CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JULY 31, 2000 AND PERIOD FROM APRIL 12, 2000
(DATE OF INCEPTION) TO JULY 31, 2000
(Unaudited)
Three
Months
Ended
July 31,
2000 Cumulative
--------- ----------
Operating activities:
Net loss $(2,078) $(2,078)
Expenses paid by stockholder 2,078 2,078
------- -------
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
======= =======
See Notes to Condensed Financial Statements.
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<PAGE>
CASTLE HILL ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Operations and business risk factors:
Castle Hill Associates, Inc. (the "Company") was incorporated on
April 12, 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.
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<PAGE>
CASTLE HILL 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 12,
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 12, 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 12, 2000 (date of inception) through
July 31, 2000.
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CASTLE HILL 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 $2,078 (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.
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CASTLE HILL 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 $2,100 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.
* * *
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<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
Castle Hill Associates, Inc. (the "Company") was incorporated on April
12, 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
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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 $2,078. 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.
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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 $2,078.
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 April 30, 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.
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<PAGE>
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.
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<PAGE>
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.
CASTLE HILL 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
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