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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECOND AMENDMENT
TO
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of Securities Exchange Act of 1934
SNAKE RIVER PROPERTIES, INC.
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(Name of Small Business Issuer in its Charter)
Colorado 33-0903751
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
28577 Caminito Pasadero, Suite 420
San Diego, California 92128
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(Address of principal executive offices) (Zip Code)
(619) 992-7192
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(Issuer's telephone number)
Securities to be registered pursuant to section 12(g) of the Act:
Title of each class Name of each exchange on which
To be so registered Each class is to be registered
------------------- ------------------------------
Common Shares Over-the-Counter
Bulletin Board
(OTCBB)
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business.....................................1
Item 2. Plan of Operations.........................................13
Item 3. Description of Property....................................13
Item 4. Security Ownership of Certain Beneficial Owners and
Management.................................................13
Item 5. Directors, Executive Officers, Promoters and
Control Persons............................................14
Item 6. Executive Compensation.....................................15
Item 7. Certain Relationships and Related Transactions.............15
Item 8. Description of Securities..................................15
PART II
Item 1 Market Price of and Dividends on the Registrants'
Common Equity and Other Shareholder Matters................17
Item 2. Legal Proceedings..........................................17
Item 3. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.......................17
Item 4. Recent Sales of Unregistered Securities....................17
Item 5. Indemnification of Directors and Officers..................18
PART III
Item 1. Index to Exhibits..........................................19
Item 2. Description of Exhibits....................................19
Signatures ...........................................................20
PART F/S
Contents ...........................................................21
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) Business Development
Snake River Properties, Inc. (the "Company") was incorporated in the
State of Colorado on June 6, 1989. The Company, an entity with a fiscal year
ending December 31, is a standard "C" Corporation for federal income tax
purposes. The Company, which presently does not have any subsidiaries or
affiliated entities, is a development stage enterprise. To date, the Company has
no significant operations and no revenues.
The Company has never been involved in any bankruptcy, receivership or
similar proceedings.
(b) Business of Issuer
The Company, whose web site is WWW.SNAKERIVERPROPERTIES.COM, intends to
operate as an equity real estate investment trust which will acquire, own and
operate multi-family residential and multi-tenant industrial properties (the
"Properties") located within the Snake River Territory (California, Arizona,
Colorado, Nevada, Texas or elsewhere in the Southwestern United States).
GEOGRAPHIC FOCUS
Management has focused the business plan of the Company on multifamily
and multi-tenant light industrial property operations in specific geographic
areas within the Snake River Territory. Through careful analysis of certain
major metropolitan areas that are regionally centralized within the Southwestern
United States, the Company intends to gain and retain a competitive advantage in
the acquisition of both multifamily residential and multi-tenant industrial
properties. In focusing on specific geographic areas, the executive officers
have reviewed demographic information, regional building costs and rents, and
other relevant information prior to committing to a specific market. The result
of this analysis is a narrowing of the initial focus of investment to San Diego
and Riverside Counties in California, the City of Phoenix in Arizona, and the
City of Las Vegas in Nevada. In general, management spent at least one year, and
in several cases two or more years, evaluating a specific market, gathering
relevant published statistics on the various submarkets within a given market
area, and targeting a number of submarkets for further investigation. Management
then proceeded to gather information on various selected submarkets, including
making contacts with local governmental agencies, marketing consultants and
other real estate-related entities in order to identify current economic trends
and specific market information (E.G., vacancy rates, rental rates and
capitalization rates) on multifamily residential properties within the
submarkets.
The multifamily residential Properties to be acquired by the Company
are located within the Snake River Territory. The Company believes that owning
Properties within the various regional markets of the Snake River Territory will
enable the Company to shift or reorient its acquisition strategy depending upon
which market provides the most attractive investment opportunities. In the short
term, the Company intends to concentrate its multifamily acquisition activities
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in the Southern California and Las Vegas, Nevada markets. With projected average
annual compound growth rates for employment, PER CAPITA income and population
expected to exceed the national average over the next five years in many of the
submarkets in these regions, and with growing demand for, and a limited supply
of, multifamily properties, the Company believes that it will be able to acquire
attractive investments that have a higher than average potential for income
growth and capital appreciation in these regions. The Company will expand its
acquisitions throughout the Snake River Territory as current local economic
conditions in various Southwestern metropolitan areas stabilize and improve.
Over the long term, the Company believes that multifamily Properties located in
Southern California, Arizona, Nevada and Texas will provide favorable investment
returns due to the factors described above.
The Company intends that the initial industrial Properties it will
acquire shall be located in Southern California and Las Vegas, Nevada. The
Company believes that opportunities to acquire quality industrial Properties at
attractive prices will be available in the short-term primarily because of a
combination of previously overbuilt industrial properties that have not been
fully absorbed and a high number of bank foreclosure sales that have saturated
the market over the past three years. The Company will expand its acquisition
strategy to include other Southwestern metropolitan areas at a point in time
when the economic situation in identified areas stabilizes and improves and the
Company believes it can acquire favorable income properties. Over the long-term,
the Company believes that industrial properties located in Southern California,
Nevada, Arizona, Texas and, eventually, Colorado will provide favorable returns
due to the factors described above, as well as general factors, including
excellent access to the Pacific Rim through the ports of Long Beach, Houston and
Los Angeles, increased trade flows into and from Mexico due to the NAFTA, and
large job bases in all of these regions.
FUTURE ACQUISITIONS
In making acquisitions, the Company will, in the near term, generally
seek Properties that are (i) less than 30 years of age at the time of
acquisition, (ii) available at prices at or below estimated replacement cost
after initial renovations and improvements, (iii) well-located in their markets,
(iv) capable of enhanced performance through intensive asset management and
physical improvements, and/or (v) producing an acceptable percentage of
anticipated total return in the form of current income.
The Company presently anticipates acquiring Properties from
governmental regulatory authorities, lending institutions, mortgagees in
possession and through bankruptcy reorganization proceedings. The Company also
expects to make acquisitions directly from owners of properties, as well as
through the general brokerage community.
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CREDIT FACILITY
The Company intends to eventually obtain a commitment, subject to
customary conditions, for a $5,000,000 unsecured or, alternatively, secured
credit facility from a lender that may be used to finance acquisitions of
Properties or for working capital purposes. The credit facility could enable the
Company to borrow up to 50 percent or more of the value (as determined by the
lender) of any of the otherwise unencumbered Properties of the Company. As
security for borrowings under a secured facility, the Company may grant the
lender a first mortgage lien on certain Properties designated at the time any
borrowing is made. The Company may also pay customary origination fees. There is
no guarantee that the Company may arrange a credit facility, secured or
unsecured. The Company presently has no commitment for such a credit facility,
absolute or conditional or otherwise.
PROPERTY MANAGEMENT
MULTIFAMILY RESIDENTIAL PROPERTIES
The Company will manage the multifamily Properties in each of the
targeted regions within the Snake River Territory Multifamily Properties shall
generally be in the range of 50 to 100 Units. Each Property will utilize
proactive management strategies as follows:
STAFFING. Each multifamily community will be operated by a
staff of trained employees, the number of which will be commensurate with the
size and condition of the Property. Snake River intends that typical basic staff
positions within each community would include a resident manager and maintenance
supervisor. Additional positions that may be filled, depending on the size of
the project, include assistant manager, leasing agent, bookkeeper, activities
director, maintenance person, groundskeeper, janitor or housekeeper.
MARKETING. A marketing plan will be developed for each
Property designed to maximize the leasing activity within the market area. In
general, marketing plans consist of appropriate signage programs, effective
advertising campaigns and continual training and supervision of on-site leasing
personnel to ensure maximum conversion of phone/walk-in traffic to signed
leases. Signage programs may include the use of permanent community signs,
flags, temporary banners, temporary A-frames, project amenity signs or off-site
directional signage. Snake River intends to utilize advertising to promote its
leasing activities, including newspapers, rental magazines, flyers, newspaper
news features, community centers or outreach marketing.
OPERATIONS. The Company intends that standardized operating
procedures and policies will be used to provide for daily office operations,
resident relations, conformance with local, state and federal laws, marketing
and leasing procedures, financial and accounting operations, maintenance
operations and reporting. The Company intends to utilize restrictive resident
qualification standards, as well, to ensure that each project captures a
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significant amount of the qualified residents with its market area. The Company
will rely upon standard contractual forms developed by its legal counsel,
including move-in/move-out forms, lease forms, rules and regulations, notices,
resident tracking forms, and the like. Lease agreements and rental payment
procedures will be used which are favorable to the Company as the property
owner.
The Company intends that rental payment procedures will
generally be as follows:
1. Rents shall be due by the first day of the month.
2. Rents shall be considered late and subject to a late
charge if not paid by the fifth day of the month.
3. Three-day notices for any outstanding rental balance
shall be delivered on the sixth day of the month.
4. The eviction process shall begin on the 15th day of
the month, unless the project supervisor deems it
appropriate to extend this date for extenuating
circumstances.
FINANCIAL. The Company intends that an annual operating budget
will be prepared for each project which will detail income sources (or offsets),
expense categories, debt expenditures, capital expenditures and distributions.
Integrated accounting and bookkeeping procedures will be employed through
computer technology and specialized property management software. On-site staff
will be properly-trained and diligently-supervised to ensure compliance with the
Company's financial policies and procedures.
MULTI-TENANT LIGHT INDUSTRIAL PROPERTIES
The Company intends to directly manage the Company's industrial
Properties upon acquisition of these Properties. As additional industrial
Properties are acquired in the Snake River Territory, the Company intends to
assume the direct management of these Properties in that region with staff
employed by the Company. Day-to-day operations of the industrial Properties will
be similar in nature to the multifamily Properties, with variations in
operations explained as follows:
STAFFING. The Company generally intends that each multi-tenant
industrial Property will be staffed by a part-time or full-time on-site property
manager/leasing agent. The amount of time devoted to each Property will be
dependent upon the size and rental income of the Property. Each on-site property
manager/leasing agent will be trained in the nature of the physical plant of
industrial buildings, leasing techniques for industrial properties and the
insurance and legal policies and requirements of industrial properties.
MARKETING. As with multifamily residential Properties, the
Company intends that a marketing plan will be developed for each industrial
Property that will maximize leasing activity and occupancy rates for each
project. The Company intends that primary techniques may include enhanced
signage, local broker mailings, local business mailings, direct contact with
local businesses, involvement with local chambers of commerce or limited
advertising. The Company will seek tenants primarily involved in warehouse,
distribution, assembly or light manufacturing activities.
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OPERATIONS. As with multifamily Properties, standardized
operating procedures and policies will generally be used on a Company-wide basis
for industrial Properties. Leases offered by the Company will typically be in
the one- to five-year range. Lease terms generally may include, in most cases,
annual adjustments based on changes in the consumer price index and some amount
of free rent or other rental concession, depending on local market conditions.
The standard lease will also include some provision for a refurbishing and/or
tenant improvement allowance with the amount depending upon the length of the
lease, the size of the space leased and the use. Standard lease terms will
generally include a stipulated due date for rent payment, late charges, no
offset or withholding provisions, a security deposit clause, as well as other
provisions generally considered favorable to the landlord.
FINANCIAL. As with multifamily Properties, an annual operating
budget will be prepared for each project which will detail income sources (or
offsets), expense categories, debt expenditures, capital expenditures and
distributions. Integrated accounting and bookkeeping procedures will be employed
through computer technology and specialized property management software.
On-site staff will be properly-trained and diligently-supervised to ensure
compliance with the Company's financial policies and procedures.
INSURANCE
The Company intends to carry comprehensive liability, fire (at
replacement cost), flood (where applicable), extended coverage and rental loss
insurance with respect to each of its Properties, with policy specifications,
limits, and deductibles customarily carried for similar properties. While the
Company believes that its insurance coverage will be adequate, there are certain
types of extraordinary losses which may be either uninsurable or not
economically insurable. The Company generally does not intend to carry
earthquake insurance. Should an uninsured loss occur, the Company could lose
both its investment in and anticipated profits and cash flow from a Property and
would continued to be obligated on any mortgage indebtedness on the Property.
SEE "RISK FACTORS -- REAL ESTATE INVESTMENT CONSIDERATIONS: RISKS OF UNINSURED
LOSS."
EMPLOYEES
The Company initially intends to employ three persons. The Company
intends to employ approximately 20 employees in 2001 and approximately 40
employees in 2002.
COMPETITION
Management intends that all of the Properties will be located in
developed areas. There are numerous other multifamily residential and
multi-tenant industrial properties within the market area of each of the
Properties to be acquired which will compete with the Company for tenants for
its Properties. The number of competitive multifamily residential and
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multi-tenant industrial properties in the area could have a materially adverse
effect on the Company's ability to lease the multifamily residential or
multi-tenant industrial Shares at the Properties and on the amount of rents
charged. The Company will be competing for tenants and acquisitions with others
who may have greater resources or contacts than the Company and whose officers
and directors or trustees may have more experience than that of the Company's
officers and directors. The Company may compete in the acquisition of properties
with insurance companies, pension funds, private individuals, investment
companies and other REITs. SEE "RISK FACTORS -- COMPETITION."
LEGAL PROCEEDINGS
The Company is not presently involved in any litigation nor, to the
Company's knowledge, is any litigation threatened against the Company, or any
affiliate thereof.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's investment policies,
financing policies, policies with respect to certain other activities and
conflicts of interest policies. The Company's policies with respect to these
activities have been determined by the board of directors of the Company and may
be amended or revised from time to time at the discretion of the board of
directors without a vote of the stockholders of the Company.
INVESTMENT POLICIES
The Company's investment objectives will be generally to seek to
acquire well-located multifamily residential and multi-tenant industrial
Properties. Management believes that properties may be available with prices
equal to or less than replacement cost and could provide attractive initial
returns and opportunities to increase cash flow through active management. The
Company's portfolio of Properties will consist of multifamily residential and
multi-tenant industrial properties located in the Snake River Territory
(Southern California, Arizona, Nevada, Texas or the Southwestern United States).
The Company intends to focus solely on multifamily residential and multi-tenant
industrial properties in these regions. The Company believes that, in recent
years, the available financial returns have not justified the construction and
leasing risk associated with development of multifamily residential or
multi-tenant industrial Properties. Thus, the Company does not currently intend
to develop multifamily residential or multi-tenant industrial Properties;
however, it may decide to do so in the future given favorable economic
conditions.
The Company generally intends to purchase or lease income-producing
multifamily residential and multi-tenant industrial Properties for long-term
investment and to improve its Properties, or sell such Properties, in whole or
in part, when special circumstances warrant. The Company may also participate
with other entities in multifamily residential and multi-tenant industrial
Property ownership, through joint ventures or other types of co-ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness, or such financing or indebtedness may by incurred in connection
with acquiring investments. Any such financing or indebtedness will have a
priority over equity ownership interests in the Company.
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Subject to the asset and gross income tests necessary for REIT
qualification (SEE "FEDERAL INCOME TAX CONSIDERATIONS"), the Company may also
invest in securities of entities engaged in real estate activities or securities
of other issuers, including for the purpose of exercising control over such
entities. Upon closing of this Offering, the Company generally intends to invest
the net offering proceeds in liquid money market funds or short-term government
securities prior to expenditures for working capital or the acquisition of the
Properties. The Company may in the future acquire all or substantially all of
the securities or assets of other REITs or similar entities where such
investments would be consistent with the Company's investment policies. In any
event, the Company does not intend that its investments in securities will
require the Company to register as an "investment company" under the Investment
Company Act of 1940, and the Company intends to divest securities before any
such registration would be required. The Company has no other stated criteria
with respect to any such investment.
The Company's investment policies with respect to multifamily
residential and multi-tenant industrial Properties located in certain
geographical regions within the Snake River Territory are set forth below:
LAS VEGAS MULTIFAMILY RESIDENTIAL
The Company believes that a special opportunity exists for a stable
cash flow and appreciation in the multifamily property sector in Las Vegas. Las
Vegas has grown more rapidly than any of the other 'fast-growing' regions in the
Pacific southwest. Nearly one-third of the work force in Las Vegas is employed
directly in the gaming-related tourist industry. The Company believes that a
substantial portion of the remainder of the jobs in Las Vegas are presently in
other parts of the service sector of the economy.
Management believes that a direct correlation exists between the number
of hotel rooms built and the number of jobs created in Las Vegas. The Company
believes that additional population increases can be projected by taking into
account the recent expansion of existing resorts and planned construction within
the tourist industry.
Not only is the population growth affected by expansions within the
tourist industry, jobs are also created by the expansion of other industrial
operations in the area which total 2,700 new jobs per year. Nevada's employment
security research department estimates there will be a total of 240,000 jobs
created in Las Vegas between 1999 and 2002. PriceWaterhouseCoopers estimates
that there will be a doubling of the population in the next ten years if the
present population growth is maintained.
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LAS VEGAS MULTI-TENANT INDUSTRIAL
The Company also believes that the multi-tenant industrial sector of
the Las Vegas real estate market holds great promise. The vacancy rate of
industrial buildings is currently between four and five percent in the areas of
the City where the Company plans to acquire property. Las Vegas has a unique set
of circumstances giving it an advantage over other major cities in the Southwest
which are currently suffering vacancy rates in the mid-teens. Some of these
circumstances are: (i) no personal or corporate income taxes exist in Nevada
because the State's tax structure is heavily subsidized by taxes on legalized
gaming; (ii) Las Vegas is an inbound city for interstate freight services and,
therefore, freight rates are relatively low for outbound goods, making a
distribution operation less costly as compared to cities such as Salt Lake City;
and (iii) Las Vegas is on the main Union Pacific Rail line from the Eastern
United States to Los Angeles.
Las Vegas is also served by McCarran International Airport, an
international port of entry and the 18th busiest airport in the United States.
It recently underwent a $293,000,000 expansion project. McCarran now serves
30,000,000 passengers annually.
In a study conducted by CALIFORNIA BUSINESS MAGAZINE, Nevada ranked
first among all 50 States in the categories of location, regional economy and
business climate. According to a Nevada Development Authority survey, one of the
main advantages to locating in Las Vegas is the local government's
"pro-business" attitude. Las Vegas has also created several trade zones. The
foreign trade zone designation allows that within the specified area,
international goods may be stored, manufactured and repackaged without paying
duties until they enter U.S. commerce. With these special attributes, the
Company believes that Las Vegas will continue to be an advantageous location for
owners of businesses which are of an appropriate size and nature to be renters
of the Company's multi-tenant industrial Properties.
SAN DIEGO MULTIFAMILY RESIDENTIAL
The Company believes that the real estate recession that has gripped
Southern California in the mid-90's and which came to an end in 1998 will
continue to be followed by strong demand. The recession had the effect of
drastically lowering the values of multifamily residential properties.
Unrealistic price levels at the end of the 1980s and in the early 1990s gave way
to prices that reflect the existing, not future, cash flows of properties. New
building permits for multifamily projects were virtually non-existent and many
existing multifamily properties were purchased for less than the cost of the
land, city fees and building permits that would be required to build a new
project.
The Company believes it still has a window of opportunity to buy
underperforming Properties at a discount and improve the performance and
condition of these Properties. Prior to the purchase of each Property, whether
in San Diego or elsewhere within the Snake River Territory, the Company intends
that a thorough management analysis shall be completed which will provide, in
great detail, the specific marketing, operating and maintenance policies for
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that specific Property. These analyses generally shall contain the following
sections: Executive Summary; Existing Property Improvements; Property
Operations; Market Conditions; Management Plan; Project Condition Photos; and
Contractor Bids and Cost Estimates. These analyses will allow management to make
informed, strategic decisions on how best to increase project income, lower
project expenses and provide for a cost-effective rehabilitation (where needed).
In addition to improved operations on the buildings purchased, the
projects purchased in San Diego should be positively impacted by occupancy
levels that should rise as the local economy improves and the impact of little
construction activity over the past three years is felt. Current population
predictions by the San Diego Chamber of Commerce indicate a projected increase
in population to 3,262,000 people in 2000. This represents a 23 percent increase
since 1991.
SAN DIEGO MULTI-TENANT INDUSTRIAL
As with the apartment market in San Diego, values on multi-tenant
industrial projects declined significantly in the mid-1990's, and then increased
dramatically in the late 1990's. The low prices of former bank-owned properties
sold recently reflect the preference of banks in liquidating properties owned
through foreclosure actions as quickly as possible. As with multifamily
residential properties, the future looks promising for multi-tenant industrial
projects, as the combined effects of little recent construction activity,
expanding Mexican and other foreign markets created through the NAFTA and a
general improvement in the Southern California business climate positively
impact the occupancy levels and absorption rates.
PHOENIX MULTIFAMILY RESIDENTIAL
Over the last 10 years the Phoenix apartment market has recovered from
the bust of the mid-1980s. According to CB Commercial Real Estate Group,
building permits peaked at a high 32,547 in 1984 and fell to a low of 706 in
1991, while vacancy rates reached a high of 14 percent in 1988 and are now in
the six to eight percent range. Like the San Diego market, the combination of
reduced building activity and improving market conditions indicate strong "buy"
signals for purchasers of apartment properties. This is reflected in the
dramatic increase in the number of units sold.
Net in-migration has ranged from 36,000 to 39,000 persons per year over
the last three years. This continued increase in population has also been a
major contributing factor in the improved occupancy rates and rental rates
within the area. Job growth has been averaging approximately one percent per
year over the last six years. The Company's investment policies in the Phoenix
area will consist of identifying and purchasing Properties in the more populated
suburban areas (Tempe, Scottsdale, Mesa, Chandler, Glendale, Peoria and North
Phoenix) which are near major transportation corridors and larger employment
centers.
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PHOENIX MULTI-TENANT INDUSTRIAL
Multi-tenant industrial properties in Phoenix have also shown gradual
improvement over the last few years as the business climate has continued to
improve. It is not anticipated that the NAFTA will have as big an impact on the
Phoenix market as markets in Southern California, but the proximity of Phoenix
to the large Southern California market will continue to benefit the
manufacturing and distribution segments of the Phoenix industrial sector. The
lower labor and rental costs in Phoenix have historically been attractive to
manufacturers interested in serving California cities. This trend should
continue into the future as California's economy continues to boom.
FINANCING POLICIES
The Company's debt financing policies will be determined from time to
time in light of then-current economic conditions, relative costs of debt and
equity capital, market values of its Properties, growth and acquisition
opportunities, in addition to other factors. To the extent that the board of
directors of the Company determines to obtain additional capital, the Company
may raise such capital through additional equity offerings (including offerings
of senior securities), debt financings or retention of cash flow (subject to
provisions in the Code concerning taxability of undistributed REIT income) or a
combination of these methods.
To the extent that the board of directors determines to obtain
additional debt financing, the Company intends to do so generally through
mortgages on its Properties and lines of credit. These mortgages may be
recourse, non-recourse or cross-collateralized and may contain cross-default
provisions. The Company does not have a policy limiting the number or amount of
mortgages that may be placed on any particular Property, but standard mortgage
financing instruments usually limit additional indebtedness on such Properties.
The Company may also determine to issue debt securities (which may be
convertible into shares of Common Stock or be accompanied by warrants to
purchase such shares) and to finance acquisitions through the exchange of
Properties or issuance of shares of Common Stock or other securities, including
senior securities.
In the future, the Company may seek to extend, expand, reduce or renew
credit facilities from a lender that may be used to finance acquisitions of
Properties, or obtain new credit facilities or lines of credit. Future credit
facilities and lines of credit may be used for the purpose of making
acquisitions or capital improvements, providing working capital or meeting the
taxable income distribution requirements for REITs under the Code if the Company
has taxable income without receipt of cash sufficient to enable the Company to
meet such distribution requirements.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company may, but does not presently intend to, make investments
other than those previously described. The Company has authority to offer its
shares of Common Stock or other equity or debt securities in exchange for
Property and to repurchase or otherwise reacquire its shares of Common Stock or
any other securities and may engage in such activities in the future. The
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Company in the future may also make loans to joint ventures in which it
participates. Since the Company does not presently intend to engage in these
activities, it has not established any specific policies or criteria with
respect to such activities. The Company does not intend to engage in trading,
underwriting or the agency distribution or sale of securities of other issuers.
At all times, the Company intends to make investments in such a manner as to be
consistent with the requirements of the Code to qualify as a REIT unless,
because of circumstances or changes in the Code (or in the regulations
promulgated thereunder), the board of directors determines that it is no longer
in the best interests of the Company to qualify as a REIT. The Company's
policies with respect to such activities may be reviewed and modified from time
to time by the Company's board of directors without a vote of the stockholders.
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies designed to reduce potential
or actual conflicts of interest. In general, the Company does not intend to
engage in any transactions with any director, officer or affiliate thereof
involving the sale of disposition of an equity interest in any Property of the
Company to such person absent the approval of a disinterested majority of the
board of directors. Most other transactions between the Company and any director
or officer, or affiliate thereof, must be approved by a majority vote of the
disinterested directors as being fair, competitive and commercially reasonable
and no less favorable to the Company than similar transactions between
unaffiliated parties under the same circumstances. Such restrictions do not
apply where such director, officer or affiliate has acquired the property for
the sole purpose of facilitating its acquisition by the Company, and the total
consideration paid by the Company does not exceed the cost of the property to
such person (where the cost is increased by the person's holding costs and
decreased by any income received by the person from the property) and no special
benefit results to such person other than receipt of ordinary income related to
such property during the holding period sufficient to allow such person to bear
no loss arising from the cost of holding money.
FORWARD-LOOKING STATEMENTS
This Form 10-SB includes "forward-looking statements" within the
meaning of the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are based on managements' current
expectations and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. All statements, other than statements of historical
facts included in this Form, including without limitation, statements under
"Plan of Operation" and "Description of Business", regarding the Company's
financial position, business strategy, and plans and objectives of management of
the Company for future operations, are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations include, but
are not limited to, market conditions, competition and the ability to
successfully complete financing.
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(c) Reports to Security Holders
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, N.W., 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.
ITEM 2. PLAN OF OPERATIONS.
Business Operation (Please see Item 1. (b) Business of Issuer).
FINANCING
The Company's management is seeking funding from a variety of sources
including private placements of its stock, public offerings of its stock, as
well as debt financing. Additionally, business combinations with entities with
significant cash will be considered. However, there can be no assurance
management will be successful in these endeavors.
For the twelve month period from January 1, 2000 to December 31, 2000
it is anticipated, absent the Company's obtaining other sources of liquidity as
described above, the Company's primary funding for ongoing corporate expenses,
such as legal and accounting fees and filing fees, will be provided by the
private sale of the Company's securities.
The Company's management is commencing discussions with investment
bankers pertaining to a stair step financing plan. This will encompass initial
seed capital, a first and second level of private placements, bridge financing,
mezzanine financing and an eventual initial public offering. However, there can
be no assurance management will be successful in these endeavors.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company does not own any physical properties at this time.
The Company's corporate executive office presently is located at 18577
Caminito Pasadero, Suite 420, San Diego, California 92128.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the shares of the Common Stock (the only class of shares previously
issued by the Company) as of September 29, 2000 by (i) each person known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each director of the Company, (iii) the
executive officers of the Company, and (iv) by all directors and executive
officers of the Company as a group, prior to and upon completion of this
Offering. Each person named in the table has sole voting and investment power
with respect to all shares shown as beneficially owned by such person.
13
<PAGE>
Name and Address Shares of Percent of
Title of Class of Beneficial Owner(1) Common Stock Common Stock
-------------- ---------------------- ------------ ------------
Common Ruth Blair Ltd., IBC 416,375 8.22
c/o Callenders & Co.
One Millars Court
Nassau, N.P., Bahamas
Common InversaMex Capital, Ltd. 416,375 8.22
2726 Shelter Island Drive
Suite 370
San Diego, California 92106
Common Chase Sullivan Krueger 416,375 8.22
3566 Garrison Street
San Diego, California 92106
Common Robert Blair Krueger II 416,375 8.22
701 "B" Street, Suite 248
San Diego, California 92101
Common Kenneth M. Chatfield 416,575 8.22
1724 Caliban Drive
Encinitas, California 92024
Common Jennifer Chatfield 416,575 8.22
4206 Avacado Street
Angeles, California 90027
Common Anthony and Nicole Gangale 441,475 8.71
7067 Rock Dove Street
Carlsbad, California 92009
Common Kathleen Chatfield 416,375 8.22
1724 Caliban Drive
Encinitas, California 92024
Common Lindsay B. Walters 416,375 8.22
714 Rushville
La Jolla, CA 92037
Common Dana Walters 416,375 8.22
11286 Crystal Oaks Way
San Diego, CA 92131
Common Velma V. Walters 416,575 8.22
P.O. Box 8633
La Jolla, CA 92038
Common Thomas H. Somers 416,575 8.22
721 Avalon Court
San Diego, CA 92109
Common Mark W. Moniak (2) 0 0
Common Marisa L. Chatfield (2) 0 0
Common Directors and Officers 0 0
as a group
--------------
(1) Ruth Blair Ltd., a Bahamian international business company
("IBC"), is beneficially owned by Richard Rosburg, a Bahamian Citizen.
(2) The address of Mr. Moniak and Ms. Chatfield is the same as
the company's address.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors, executive officers and management employees of the
Company, their ages, their positions and their offices, are set forth in the
following table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark W. Moniak 36 Chairman of The Board of Directors,
President and Chief Executive Officer
Marisa L. Chatfield 36 Secretary and Treasurer
</TABLE>
The directors of the Company will serve one year terms.
The following is a biographical summary of the experience of the
directors and executives of the Company:
MARK W. MONIAK, 36, has served as the President, Chief Executive Officer and the
Chairman of the Board of Directors of the Company since April 2000. From 1989
until present, Mr. Moniak served as the Director of Sales for Baldwin Steel
Company in Southern California. His duties include managing a six state western
territory, developing strategies, generating sales to accounts, and customer
service. Mr. Moniak has acquired residential properties in California since
1996.
MARISA L. CHATFIELD, 36, has served as the secretary and Treasurer of the
Company since April 2000. From 1995 until present, Ms. Chatfield was the
President of a real estate consulting business, Land Ventures, Ltd., which she
founded in 1994 to consult, educate, and assist clients on land and property
opportunities in San Diego County. Ms. Chatfield received her B.A. in Psychology
from National University in San Diego.
14
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the annualized base salary that the
Company has agreed to pay for 2000 to its President and Chief Executive Officer.
None of the executive officers of the Company have received a total annual
salary and bonus in excess of $100,000.
<TABLE>
<CAPTION>
Other Registered
Name and Annual Stock Securities All other
Principal Year Compensation Award(s) Underlying LTIP Payouts Compensation
Position (Note A) Salary ($) Bonus ($) $ $ Opinions/ SARs (#) $ $
-------- ---------- ---------- ------------ ---------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark W.
Moniak,
President
and Chief
Executive
Officer 2000 $10,000 -- -- -- -- -- --
</TABLE>
Note A: Although Snake River Properties, Inc. was incorporated on June 6, 1989,
the Company has not paid salaries or other forms of compensation to employees
prior to Mr. Moniak's salary in 2000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company's authorized capital stock consists of 750,000,000 shares
of common stock, no par value, of which 5,063,000 shares were used and
outstanding as of June 30, 2000, and 10,000,000 shares of preferred stock, no
par value, none of which are outstanding.
Shareholders do not have an unqualified right to a dividend. The policy
of the Company is not to declare dividends, however dividends may be declared,
when lawful to do so, at the discretion of the Board of Directors.
A common shareholder has the right to vote his or her shares in the
affairs of the Company. Common shares have one vote each. The right to vote may
be delegated by the shareholder to another person.
In the event of a liquidation or dissolution of the Company, common
shareholders are entitled to share pro rata all assets remaining, if any, after
payment in full of liabilities.
15
<PAGE>
Shareholders do not have preemption rights. The Company's articles of
incorporation do not so provide.
In the event of a liquidation or dissolution of the Company, common
shareholders are entitled to share pro rata all assets remaining, if any, after
payment if full of all liabilities.
Shareholders do not have any other material rights. There are no
provisions in the Company's articles of incorporation or by-laws that would
delay, defer or prevent a change in control of the Company.
16
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
(a) Market Information
Currently, there is no public market for the Company's common stock. At
the appropriate time, the Company's management will complete the pertinent
procedures for listing the Company's common stock on the National Association of
Securities Dealers' Over-the-Counter Electronic Bulletin Board. There can be no
assurance, however, that management will be successful in this endeavor.
The Company has no common equity that is subject to outstanding options
or warrants to purchase, or securities convertible into, common equity of the
Company. All 5,000,000 shares of the 5,063,000 shares of common stock
outstanding at June 30, 2000 could be sold pursuant to Rule 144 under the
Securities Act.
(b) Holders
As of September 28, 2000, there were forty seven (47) common
shareholders of record.
(c) Dividends
The Company has never declared any cash dividends.
The current policy of the Company is not to pay cash dividends, but
instead to retain future earnings, if any, to support the growth of the Company.
However, there are no restrictions that limit the ability to pay dividends on
common equity when it is lawful to do so.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding. Management
is not aware of any threatened litigation, claims or assessments.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
As of May 6, 2000, the Company sold for $63,000 cash, a total of 63,000
shares of restricted common stock, as follows (all at $1.00 per share): Michael
Glade, 5,000 shares; Ed Bracken, 100 shares; William Marshall, 100 shares; Larry
Isen, 100 shares; Thomas Sommers, 100 shares, Paul Barnes, 100 shares; Herbert
E. Slezinger, 100 shares; Henry Siwecki, 5,000 shares; Anthony and Nicole
Gangale, 25,00 shares; David Roshensky, 100 shares; Martha Warner, 100 shares;
Kevin Warner, 100 shares; Rian Warner, 100 shares; Alyssa Warner,
17
<PAGE>
100 shares; Jessica Warner, 100 shares; Asley Walters, 100 shares; Cliff Smith,
100 shares; Big Rock Marketing, Inc., 10,000 shares; Bellstar Marketing, Inc.,
150.00 shares; H. Kim Gidea, 100 shares; Candace Tangye, 100 shares; Jack Legg,
100 shares; Jack McCarthy, 100 shares; M. James Herbic, 100 shares; Kim D. Rust,
100 shares; Dale A. Colosky, 100 shares; Harold J. Russell, 100 shares; Michael
Blumenthal, 150 shares; Donald Brady, 5,000 shares; Cazamar Zarimba, 10,000
shares; Daniel Condrick, 100 shares; Velma Walters, 100 shares, Kenneth M.
Chatfield, 100 shares; Jenifer Chatfield, 100 shares; and Nancy Kirhoffer, 100
shares.
The foregoing described issuances, without an underwriter, total 63,000
shares of restricted common stock. Each of these persons had access to all
material information regarding the Company prior to the offer of sale, without
an underwriter, of the Company's common stock. These offers and sales of common
stock are believed to have been exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, pursuant to section 4(2)
thereof and by available state exemptions, from registration of the offer and
sale of such common stock.
The Company has been informed that, as of July 1, 2000, Churchill &
Castle, Ltd. distributed a total of 5,000,000 shares of unrestricted common
stock of the Company as follows: (i) Ruth Blair Ltd., IBC, 416,375 shares; (ii)
InversaMex Capital, Ltd., 416,375 shares; (iii) Chase Sullivan Krueger, 416,375
shares; (iv) Robert Blair Krueger II, 416,375 shares; (v) Kenneth M. Chatfield,
416,375 shares; (vi) Jennifer Chatfield, 416,375 shares; (vii) Anthony and
Nicole Gangale, 416,375 shares; (viii) Kathleen Chatfield, 416,375 shares; (ix)
Lindsay B. Walters, 416,375 shares; (x) Dana Walters, 416,375 shares; (xi) Velma
V. Walters, 416,375 shares; and Thomas H. Somers, 416,375 shares. This
distribution was exempt from registration under Section 5 of the Securities Act
of 1933, as amended, pursuant to SEC Staff Legal Bulletin Number Four, Division
of Corporate Finance of the SEC (September 16, 1997).
As of July 1, 2000, Churchill & Castle gifted 100 shares of common
stock of the Company to each of Snake River's 35 shareholders who purchased
shares in the Company's May 6, 2000 private offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles and Bylaws provide that we will indemnify to the fullest
extent permitted by the general laws of the State of Colorado our officers and
directors. The scope of indemnification includes indemnifying for expenses and
liabilities directors or officers may incur in defending, settling or satisfying
any civil or criminal action brought against them on account of their being or
having been directors or officers of the Company. We may indemnify officers or
directors if such person acted in good faith and in a manner reasonable believed
to be in the best interests of Snake River and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct in question was
unlawful. In the event of a settlement, the indemnification herein shall apply
only when the Board of Directors approves such settlement and reimbursement as
being for the best interests of Snake River. Indemnification does not extend to
such action where officers or directors are adjudged to have acted with gross
negligence or to have engaged in willful misconduct. Insofar as indemnification
for liabilities arising under the Securities Action of 1933, as amended, and the
Securities Act of 1934, as amended (collectively, the "Acts"), may be permitted
to directors, officers or controlling persons pursuant to foregoing provisions,
we have been informed that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Acts and is, therefore, unenforceable.
18
<PAGE>
PART III
ITEM 1. EXHIBITS AND FINANCIAL STATEMENTS.
(a) EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation
3.2 Bylaws
11 Statement Re: Computation of Per Share Earnings
24 Power of Attorney
19
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
SNAKE RIVER PROPERTIES, INC.
Date: November 14, 2000 /s/ MARK MONIAK
----------------------------
By: Mark Moniak, President
20
<PAGE>
SNAKE RIVER PROPERTIES, INC.
FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS.
The Company's bylaws provide for indemnification against expenses
incurred, of directors or officers who are named as defendants in litigation
relating to corporate affairs, except where the director or officer is adjudged
in the action to be liable for negligence or misconduct in the performance of
duty.
The Colorado General Corporation Law authorized the Company to do the
above.
21
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent auditors' report.................................................F-2
Balance sheet, June 30, 2000.................................................F-3
Statement of operations, June 6, 1989 (inception) through
June 30, 2000............................................................F-4
Statement of shareholders' equity, June 6, 1989
Through June 30, 2000....................................................F-5
Statement of cash flows, June 6, 1989 through
June 30, 2000............................................................F-6
Summary of significant accounting policies...................................F-7
Notes to financial statements................................................F-9
F-1
<PAGE>
AMENDMENT DATED NOVEMBER 14, 2000 TO
INDEPENDENT AUDITORS' REPORT
DATED JULY 20, 2000
To the Board of Directors and Shareholders
Snake River Properties, Inc.
I have amended the audited balance sheet of Snake River Properties, Inc. (a
development stage company) as of June 30, 2000, and the related statements of
operations, shareholders' equity, and cash flows, from June 6, 1989 (inception)
through June 30, 2000. These financial statements are the responsibility of the
Company's management and are presented to comply with Item 310(b)(2)(vi) of
Regulation S-B. 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 I 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 Snake River Properties, Inc. as of
June 30, 2000, and the cumulative results of its operations and its cash flows
from June 6, 1989 (inception) through June 30, 2000, in conformity with
generally accepted accounting principles.
/s/ Craig W. Conners
--------------------
Craig W. Conners
San Diego, California
November 13, 2000
F-2
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
Balance Sheet
June 30, 2000
ASSETS
CASH..............................................................$ 38,633
EQUIPMENT, less accumulated depreciation of $15................... 530
--------------
$ 39,163
==============
SHAREHOLDERS' EQUITY
PREFERRED STOCK, no par value, 10,000,000 shares authorized;
-0- shares issued and outstanding.............................. -
COMMON STOCK, no par value; 750,000,000 shares authorized;
5,063,000 shares issued and outstanding (Note D)............... 94,000
ADDITIONAL PAID-IN CAPITAL (Note B)............................... 600
ACCUMULATED RETAINED DEFICIT ($15,437 accumulated
during the development stage).................................. (55,437)
--------------
$ 39,163
==============
See accompanying summary of significant accounting
policies and Notes to the financial statements
F-3
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
Statement of Operations
June 6, 1989 (inception) Through June 30, 2000
OPERATING EXPENSES
Professional fees........................................ 6,000
Rent (Note B)............................................ 600
Web site development costs............................... 5,000
Travel................................................... 3,744
Depreciation............................................. 15
Other.................................................... 78
--------------
TOTAL OPERATING EXPENSES 15,437
--------------
LOSS FROM OPERATIONS (15,437)
INCOME TAX EXPENSE (Note C)....................................... -
--------------
NET LOSS $ (15,437)
==============
Basic loss per common share.......................................$ *
==============
Basic weighted average common shares outstanding.................. 5,046,866
==============
* Less than $.01 per share
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-4
<PAGE>
<TABLE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
Statement of Shareholders' Equity
June 6, 1989, (Inception) through June 30, 2000
<CAPTION>
Preferred Stock Common Stock Additional
------------------------ ------------------------ Paid-in Retained
Shares Amount Shares Amount Capital Deficit Total
----------- ------------ ----------- ------------ ------------ ------------ ------------
<S> <C><C> <C> <C> <C> <C> <C>
Balance, April 10, 2000.................... - $ - 5,000,000 $ 40,000 $ - $ (40,000) $ -
May 1, 2000, shares sold in private
placement offering, net of offering
costs of $9,000 ($1.00/share)
(Note D)............................... - - 63,000 54,000 - - 54,000
Office space contributed by
Company's president (Note B)........... - - - - 600 - 600
Net loss from April 10, 2000 through
June 30, 2000.......................... - - - - - (15,437) (15,437)
----------- ------------ ----------- ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 2000 - $ - 5,063,000 $ 94,000 $ 600 $ (55,437) $ 39,163
=========== ============ =========== ============ ============ ============ ============
* Restated for 8 to 1 reverse stock split (see Note D)
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-5
</TABLE>
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
Statement of Cash Flows
June 6, 1989 (Inception) Through June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss..................................................................$ (15,437)
Transactions not requiring cash:
Depreciation......................................................... 15
Office space contributed by the Company's president (Note B)......... 600
--------------
NET CASH (USED IN)
OPERATING ACTIVITIES (14,822)
--------------
INVESTING ACTIVITIES
Equipment purchases....................................................... (545)
--------------
NET CASH (USED IN)
INVESTING ACTIVITIES (545)
--------------
FINANCING ACTIVITIES
Proceeds from the sale of common stock (Note D)........................... 63,000
Payments for offering costs............................................... (9,000)
--------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 54,000
--------------
CHANGE IN CASH AND CASH EQUIVALENTS 38,633
Cash and cash equivalents, beginning of period.................................. -
--------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 38,633
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest..................................................................$ -
==============
Income taxes..............................................................$ -
==============
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-6
</TABLE>
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE COMPANY
Snake River Properties, Inc. (the "Company") entered the development stage as a
residential real estate company in accordance with Financial Accounting
Standards Board Statements of Financial Accounting Standards (SFAS) No. 7
"Accounting and Reporting by Development Stage Enterprises" on the date of its
incorporation, June 6, 1989. the Company entered into a new development stage on
April 10, 2000 as a company intending to qualify as a real estate investment
trust. At present, the Company intends to qualify as an equity real estate
investment trust that will acquire, own and operate multi-family residential and
multi-tenant light industrial properties located in the Snake River Territory.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
EQUIPMENT AND DEPRECIATION
Equipment is stated at cost. Equipment is depreciated over its estimated useful
life using the straight-line method.
Upon retirement or disposition of the furniture and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations. Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.
WEB SITE DEVELOPMENT
The Company expenses all internal and external costs incurred to develop
internal-use computer software. As a development stage company, management has
determined there is no assurance that the web site will provide substantive
service potential to the Company.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
F-7
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
EARNINGS/(LOSS) PER SHARE
The Company reports loss per share using a dual presentation of basic and
diluted loss per share. Basic loss per share excludes the impact of common stock
equivalents. Diluted loss per share utilizes the average market price per share
when applying the treasury stock method in determining common stock equivalents.
However, the Company has a simple capital structure for the period presented
and, therefore, there is no variance between the basic and diluted loss per
share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company's only financial instrument at June 30, 2000 was cash.
F-8
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A: NATURE OF ORGANIZATION
BACKGROUND
The Company was incorporated under the laws of Colorado on June 6, 1989. From
its inception, the Company has been a development stage company under SFAS No. 7
with the specific business plan upon incorporation until April 9, 2000 of
acquiring and developing residential real estate in the State of Colorado.
Following incorporation, the Company remained a shell company in its initial
development stage which identified certain real estate in Colorado for
acquisition and development. Effective April 10, 2000, the Company entered its
development stage as a real estate company which intends to seek qualification
as a real estate investment trust. The Company is currently a "shell
corporation" and its principal activities since April 10, 2000 have consisted of
organizational matters for its new development plan and the sale of its no par
value common stock.
RE-INCORPORATION
On April 10, 2000, the Company filed amended articles of incorporation with the
State of Colorado, at which time the Company revised Article XI, Board of
Directors. The Board consists of one director who is also the President of the
Company.
NOTE B: RELATED PARTY TRANSACTION
The President provided office space to the Company at no charge for the period
presented. The office space was valued at $200 per month and is included in the
accompanying financial statements as rent expense with a corresponding credit to
additional paid-in capital.
NOTE C: INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the effective
rate is as follows:
June 30,
2000
--------------
U.S. federal statutory graduated rate.................... 15.00%
State income tax rate, net of federal benefit............ 7.51%
Offering costs........................................... 13.13%
Net operating loss for which no tax benefit
is currently available................................ -35.64%
--------------
0.00%
==============
At June 30, 2000, deferred taxes consisted of a net tax asset of $5,502, due to
operating loss carryforwards of $15,437, which was fully allowed for in the
valuation allowance of $5,502. The valuation allowance from June 6, 1989
(inception) through June 30, 2000 was $5,502. Net operating loss carryforwards
will expire through 2020.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
F-9
<PAGE>
SNAKE RIVER PROPERTIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE D: SHAREHOLDERS' EQUITY
COMMON STOCK
In April and May of 2000, the Company conducted a private placement offering
whereby it sold 63,000 shares of its no par value common stock for $1.00 per
share pursuant to an exemption from registration claimed under Sections 4(2) and
4(6) of the Securities Act of 1933, as amended, and Regulation D promulgated
thereunder. The Company received net proceeds of $54,000 after deducting
offering costs totaling $9,000.
Following its original incorporation in June of 1989, the Company issued
40,000,000 of its no par value common stock to an officer as payment for
services related to the organization and start-up of the Company. The value of
the transaction could not be objectively measured as the services were rendered
by a related party. The transaction was recorded at a nominal value of $40,000
($.001 per share) as there was no market price for the Company's common stock on
the date of issuance.
REVERSE STOCK SPLIT
On April 7, 2000, the Board of Directors authorized an 8 to 1 reverse split of
the Company's no par value common stock, effective on that date. As a result of
the split, the Company's outstanding common shares were reduced from 40,000,000
to 5,000,000. All per share and shares outstanding data in the accompanying
financial statements have been restated to reflect the reverse split.
F-10
