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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended September 30, 2000
Commission File Number 0-31237
KEYSTONE VENTURES, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C>
NEVADA 88-0455940
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1605 MIRAGE COURT, EL CAJON, CA 92019
(Address of principal Executive Offices) (Zip Code)
</TABLE>
(619) 692-2438
(Issuer's Telephone Number)
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock - .001 Par Value
(Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Yes [X] No [ ]
The issuer had no revenues for the year ended September 30, 2000.
As of September 30, 2000, the registrant had 11,775,000 shares of common stock,
$.001 par value, issued and outstanding.
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PART 1
ITEM 1
DESCRIPTION OF THE BUSINESS
BUSINESS DEVELOPMENT
Form and Year of Organization
Keystone Ventures, Inc. was incorporated in Nevada on March 10, 1999 for the
purpose of developing a new generation Internet computer security software
system, commonly known as a software firewall system. During April 1999, the
Company received its initial funding through the sale of common stock to
investors. From inception until March 2000, Management developed the Company's
business plan and the Company had no material operating activities.
Bankruptcy or Similar Proceedings
There have been no bankruptcy, receivership or similar proceedings.
Reorganizations, Purchase or Sale of Assets
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
BUSINESS OF THE ISSUER
Principal Products or Services and Markets
The Company intends to become a primary supplier of computer software security
systems, "firewall software", in the United States. The Company's proprietary
firewall software will detect unauthorized intrusions by hackers, gather
information about hackers through backtracking commands, utilize dynamic filters
and advanced monitoring algorithms to allow legitimate communications, stop
intrusion at the front end communication port before access is allowed into
system files, protect network systems by reporting suspicious intrusions to the
network server, and feature small memory use and silent operation.
Businesses and home computer users connected via telephone, cable, DSL, or
satellite communications links are faced with continual hacker and computer
virus threats. Hackers and virus transmitters are also using new techniques to
increase attacks on individual computer systems that
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are connected only intermittently to the Internet. ISCA.net, a security
consulting firm in Virginia tested more than 2,000 sites in 1999 and found all
had a firewall system but more than 80% were inadequately protected ((C)
February 2000 Entrepreneur Magazine).
Based upon Management's experience in the computer software and hardware
business, average prices for quality firewall software protection are $50 for
stand-alone or small computer systems, $200 for network systems, and up to
$10,000 for larger application gateway systems for major Internet sites and
Internet service providers.
The Company's firewall software has the following features:
1) Detect unauthorized intrusions and viruses.
2) Utilize backtracking software to locate the originating site of the
hacker or virus.
3) Allow high speed legitimate authorized communications by using advanced
dynamic filters and monitoring techniques.
4) Block hacker and virus intrusion at the front port of the computer
system before files are opened to unauthorized communications.
5) Utilize advanced network monitoring systems to notify the server of
potential unauthorized intrusions while providing hacker and virus
containment software that allows the server time to sever unauthorized
entry and delete all "probes" or cookies.
6) Rely on subsystem silent operating techniques for undetectable
operation. Thwart users from disconnecting or disarming the firewall
security protection.
7) Able to monitor and protect Internet and Intranet network
communications. Advanced version is capable of monitoring all network
traffic.
8) Advanced software will be available to Internet Service Providers to
interface with their existing network firewall systems.
9) Prevent web server "cookies" which are small text files that can track
your movements around the web.
10) Block unwanted advertising - banner ads and pop-windows which slow down
your Internet access.
11) Block mobile code Java applets, ActiveX controls that allow intruders to
modify your data and steal passwords and files.
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12) Control both inbound and outbound Internet connections. Block incoming
and stop unauthorized access to offsite addresses.
13) Content filtering: e-mail scanning and filtering of text files and
key-word usage to guard against proprietary information transmittal.
14) Risk Management Administration functions: intrusion detection and
unauthorized information transmittal are blocked and available on
reports to IT authorized management.
15) Conserves disk space by using less than 100 mb, memory usage of less
than 1%, and bandwidth speed loss less than 2%.
The Company's firewall software product is in final simulation testing stage.
The Company intends to market its proprietary computer software firewall systems
throughout the world via the Internet and through retail stores in the United
States.
The Company has a current business plan which proposes to utilize its founders'
backgrounds to develop its business into a primary developer and supplier of
computer firewall software systems. The business plan requires the Company
during months one through six to obtain a listing on the NASD's Over the Counter
Electronic Bulletin Board, and then raise capital of $4,000,000 through the sale
of common stock in a private placement. After raising capital, the Company
intends to incur the following expenditures for months seven through twelve:
hire two software programmers at a cost of $75,000, hire one marketing manager
at a salary of $60,000, hire two office employees at a cost of $40,000, $500,000
for advertising, and expend $100,000 for rent and other operating expenses. In
addition, during months seven through nine, the Company intends to complete all
beta testing of its software at a cost of $25,000, setup its web site at a cost
of $40,000, and purchase computers, furniture, and equipment at a cost of
$100,000. The Company plans to complete final software modifications during
months nine through twelve at a cost of $50,000, and produce the Company's
product for delivery beginning in the first quarter after month twelve.
Distribution Methods of Products or Services
The Company intends to offer information about the Company and its new
generation of computer firewall software systems to the public and Internet
service providers on its web site, superwall.net. The Company will sell its
products world-wide via the Internet and through retail stores throughout the
United States.
Status of Any Publicly Announced New Products or Services
The Company has no new product or service planned or announced to the public.
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Competition and Competitive Position
The size and financial strength of the Company's primary competitors, Network
ICE, Inc., Zone Labs, and Symantec Corporation are substantially greater than
those of the Company. In examining major competitors, Management found Network
ICE, Inc. has the largest installed base of users for both small systems and
large networks and was recommended by the technical reviewer of the Wall Street
Journal ((C) WSJ 2/24/00). Zone Labs' product was faulted for having a difficult
interface per the current Internet software review site, zdnet.com ((C) 2000).
While it was recommended on the Internet software review site, pcworld.com ((C)
2000), the technical reviewer of the Wall Street Journal called it confusing and
clumsy to use ((C) WSJ 2/24/00). Symantec Corporation, well known for its
popular Norton tools and virus trackers, offers its Norton personal Firewall
2000 with three levels of security, but its software is not available for large
networks. Its firewall software is recommended on the Internet software review
site pcworld.com ((C) 2000). The technical reviewer of the Wall Street Journal
complained it was huge, complicated, imprecise, and too overprotective ((C) WSJ
2/24/00). Any consideration of competitor's products and related product reviews
should include the facts that the Company's competitors have longer operating
histories, larger customer bases, and greater brand recognition than the
Company. Management is not aware of any significant barriers to the Company's
entry into the firewall software market, however, the Company at this time has
no market share of this market.
Suppliers and Sources of Raw Materials
The Company's product is its own firewall software. The Company intends to offer
its software through its own Internet site, requiring no outside suppliers of
materials, and on CD-ROM disks, requiring only blank CD-ROM disks that are
commercially available from a variety of manufacturers and wholesalers. The
Company intends to transfer its software to CD-ROM disks at its own facility at
a cost not to exceed $1.00 per disk. The Company will not require formal
contracts with any suppliers or manufacturers of physical products.
Dependence on One or a Few Major Customers
The Company will not depend on any one or a few major customers. The Company
intends to offer its firewall software through its own Internet site and through
major retailers such as CompUSA, Byte & Floppy, Circuit City, Office Depot,
Target, Sears, Wal-mart, and KMart.
Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor
Contracts
The Company owns its Internet domain name, has setup its first web page
"superwall.net", has filed for copyright protection of its copyrightable
computer firewall software, and will expand its web site
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after receiving funding per its business plan. The Company has no current plans
for any additional registrations such as patents, trademarks, additional
copyrights, franchises, concessions, royalty agreements or labor contracts. The
Company will assess the need for any additional copyright, trademark or patent
applications on an ongoing basis.
On March 15, 1999, the Company signed an exclusive license agreement with its
President for use of his computer firewall software in exchange for 5,000
restricted shares of the Company's common stock. The Company issued 5,000 shares
of its common stock in exchange for a ten year exclusive right to development,
manufacturing, marketing, sale, sublicensing, and any and all usages of the
computer firewall software in the United States and throughout the world. After
twenty years the license is subject to automatic renewal each year thereafter,
subject to written notification, sixty days in advance of the renewal, by both
parties of the license agreement.
Need for Government Approval for its Products or Services
The Company is not required to apply for or have any government approval for its
products or services.
Effect of Existing or Probable Governmental Regulations on the Company
The Company will not be subject to Federal laws and regulations that relate
directly or indirectly to its operations. The Company will be subject to common
business and tax rules and regulations pertaining to the operation of its
business in the State of California.
Research and Development Costs During the Last Two Years
The Company has not expended funds for research and development costs since
inception.
Costs and Effects of Compliance with Environmental Laws
Environmental regulations have had no materially adverse effect on the Company's
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on the Company's business, financial condition or
results of operation. Public interest in the protection of the environment has
increased dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, the
business and prospects of the Company could be adversely affected.
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Number of Total Employees and Number of Full-Time Employees
The Company's only current employees are its two Officers who will devote as
much time as the Board of Directors determines is necessary to manage the
affairs of the Company. The Officers intend to work on a full time basis when
the Company raises capital per its business plan. The Company's business plan
calls for hiring five new full-time employees during the next twelve months.
RISKS
Investors in the Company should be particularly aware of the inherent risks
associated with the Company's plans and product. These risks include but are not
limited to:
Lack of Independent Market Testing
A lack of independent market testing of the Company's product
increases the possibility that the Company's product may not
perform to reasonable commercial standards under normal use.
This could result in unexpected performance failures, a
significant product return rate, and a material reduction in
product demand.
Lack of Proven Market or Market Studies
A lack of a proven market or market studies for the Company's
product means that while Management may believe the public will
enthusiastically accept the Company's new firewall software, the
true market for this product may be minor or nonexistent. This
could result in little or no product sales.
Limited Experience of Management
The limited experience of Management in developing a new product
from inception through a fully tested, market usable status for
national and world wide consumer use may result in critical
business judgement errors as the Company grows in size and sales
volume. Management errors, not timely corrected, could result in
excessive costs and expenses, poor quality products, inability
to deliver products on time, detrimental business contract
terms, and other significant errors which could impede the
Company's business plan.
Possible Patent or Copyright Litigation
There has been no independent review or certification of
originality of the Company's software, which could lead to
patent or copyright infringement litigation. This could result
in a detrimental allocation of the Company's Management time and
financial resources which could lessen the Company's ability to
remain a viable business.
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Lack of Financial and Personnel Resources
The financial and personnel resources of the Company are
considerably less than its competitors. Therefore, the Company
will be in a competitive disadvantage as it seeks to develop its
product, hire senior programmers, and conduct marketing efforts.
This could lead to a material reduction in cash flows and
increase the risk that the Company would be unable to achieve
its business plan goals.
Dependence on current Management and availability of experienced
personnel
The Company's performance and future operating results are
substantially dependent on the continued service and performance
of its current Management. The Company intends to hire a
relatively small number of additional technical and marketing
personnel in the next year. Competition for such personnel is
intense, and there can be no assurance that the Company will be
able to retain its essential employees or that it will be able
to attract or retain highly-qualified technical and managerial
personnel in the future. The loss of the services of any of the
Company's current Management or other key employees, or the
inability to attract and retain the necessary technical and
marketing personnel could have a material adverse effect upon
the Company's business, financial condition, operating results
and cash flows.
Potential conflicts of interest
The current officers, Mr. Johnson and Ms. Myers, are the sole
officers and directors of the company and have control in
directing the activities of the company. Mr. Johnson and Ms.
Myers are involved in other business activities and may, in the
future, become involved in additional business opportunities. If
a specific business opportunity becomes available, the officers
and directors of the company may face a conflict of interest.
The Company has not formulated a plan to resolve any conflicts
that may arise. While the Company and its sole officers and
directors have not formally adopted a plan to resolve any
potential or actual conflicts of interest that exist or that may
arise, they have verbally agreed to limit their roles in all
other business activities to roles of passive investors and
devote full time services to the Company after the Company
raises capital of $4,000,000 through the sale of securities
through a private placement and is able to provide officers'
salaries per its business plan.
While Management believes its estimates of projected occurrences and events are
within the timetable of its business plan, there can be no guarantees or
assurances that the results anticipated will occur. Investors in the Company
should be particularly aware of the inherent risks associated with the Company's
planned business. Although Management intends to implement its business plan
through the foreseeable future and will do its best to mitigate the risks
associated with its business plan, there can be no assurance that such efforts
will be successful. Management has no liquidation plans should the Company be
unable to receive funding. Should the Company be unable to
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implement its business plan, Management would investigate all options available
to retain value for the shareholders. Among the options that would be considered
are: acquisition of another product or technology, or a merger or acquisition of
another business entity that has revenue and/or long-term growth potential.
However, there are no pending arrangements, understandings or agreements with
outside parties for acquisitions, mergers or any other material transactions.
Year 2000 Disclosure
As Management has experienced no date recognition problems in computer systems,
equipment, or third party provided products, the Company's Year 2000 compliance
plan is to utilize software and other products which are already Year 2000
compatible and prepare no Year 2000 contingency plans.
Reports to Securities Holders
The Company's bylaws do not require the Company to deliver an annual report to
its shareholders and the Company has not in the past provided an annual report
to its shareholders. The Company is voluntarily filing this Form 10-KSB in order
to make its financial information equally available to any interested parties or
investors. The Company is subject to the disclosure rules of Regulation S-B for
a small business issuer under the Securities Exchange Act of 1934. The Company
is required to file Form 10-KSB annually and Form 10-QSB quarterly. In addition,
the Company will be required to file Form 8 and other proxy and information
statements from time to time as required.
The public may read and copy any materials the Company files with the Securities
and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 450
Fifth Street NW, Washington D. C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
ITEM 2
DESCRIPTION OF PROPERTY
The Company's principal executive office address is 1605 Mirage Court, El Cajon,
CA 92019. The principal executive office and telephone number are provided by an
officer of the corporation. The costs associated with the use of the telephone
and mailing address were deemed by Management to be immaterial as the telephone
and mailing address were almost exclusively used by the officer for other
business purposes. Management considers the Company's current principal office
space arrangement adequate until such time as the Company achieves its business
plan goal of raising capital of $4,000,000 and then begins hiring new employees
per its business plan.
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ITEM 3
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware
of any pending or potential legal actions.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended September 30, 2000, there
were no submissions of matters to a vote of security holders.
PART II
ITEM 5
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Company plans to file for trading on the OTC Electronic Bulletin Board which
is sponsored by the National Association of Securities Dealers (NASD). The OTC
Electronic Bulletin Board is a network of security dealers who buy and sell
stock. The dealers are connected by a computer network which provides
information on current "bids" and "asks" as well as volume information.
As of the date of this filing, there is no public market for the Company's
securities. As of September 30, 2000, the Company had 58 shareholders of record.
The Company has paid no cash dividends. The Company has no outstanding options.
The Company has no plans to register any of its securities under the Securities
Act for sale by security holders. There is no public offering of equity and
there is no proposed public offering of equity.
ITEM 6
PLAN OF OPERATION
The Company's current cash balance is $1,589. Management believes the current
cash balance is sufficient to fund the current minimum level of operations
through the first quarter of 2001, however, in order to advance the Company's
business plan the Company must raise capital through the sale of equity
securities. To date, the Company has sold $5,700 in equity securities. Sales of
the Company's equity securities have allowed the Company to maintain a positive
cash flow balance.
In order to implement its business plan, the Company will take the following
steps: during months one through six raise capital of $4,000,000 through the
sale of common stock in a private placement.
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After raising capital, the Company will use its cash during months seven through
twelve to hire two software programmers at a cost of $75,000, hire one marketing
manager at a salary of $60,000, hire two office employees at a cost of $40,000,
spend $500,000 for advertising, and $100,000 for rent and other operating
expenses. In addition, during months seven through nine, the Company intends to
complete all beta testing of its software at a cost of $25,000, setup its web
site at a cost of $40,000, and purchase computers, furniture, and equipment at a
cost of $100,000. The Company plans to complete final software modifications
during months nine through twelve at a cost of $50,000, and produce the
Company's product for delivery beginning in the first quarter after month
twelve.
Management has made initial progress in implementing its business plan by
setting-up its first web page "superwall.net", filing for copyright protection
of its copyrightable firewall protection software, and plans to expand its web
site in the first quarter of 2001.
The Company will only be able to continue to advance its business plan after it
receives capital funding through the sale of equity securities. After raising
capital, Management intends to hire employees, rent commercial space in El
Cajon, purchase equipment, and begin marketing its firewall protection software.
The Company intends to use its equity capital to fund the Company's business
plan during the next twelve months as cash flow from sales is not estimated to
begin until year two of its business plan. The Company will face considerable
risk in each of its business plan steps, such as difficulty of hiring competent
personnel within its budget, longer than anticipated lead time necessary to sell
and deliver its firewall protection software to customers, and a shortfall of
funding due to the Company's inability to raise capital in the equity securities
market. If no funding is received during the next twelve months, the Company
will be forced to rely on its existing cash in the bank and funds loaned by the
directors and officers. The Company's officers and directors have no formal
commitments or arrangements to advance or loan funds to the Company. In such a
restricted cash flow scenario, the Company would be unable to complete its
business plan steps, and would, instead, delay all cash intensive activities.
Without necessary cash flow, the Company may be dormant during the next twelve
months, or until such time as necessary funds could be raised in the equity
securities market.
There are no current plans for additional product research and development. The
Company plans to purchase approximately $100,000 in furniture, computers,
software during the next twelve months from proceeds of its equity security
sales. The Company's business plan provides for an increase of five employees
during the next twelve months.
ITEM 7
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements begin on page F-1 of this document.
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KEYSTONE VENTURES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
SEPTEMBER 30, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
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<S> <C>
INDEPENDENT AUDITORS REPORT F1
ASSETS F2
LIABILITIES AND STOCKHOLDERS' EQUITY F3
STATEMENT OF OPERATIONS F4
STATEMENT OF STOCKHOLDERS' EQUITY F5
STATEMENT OF CASH FLOWS F6
NOTES TO FINANCIAL STATEMENTS F7-F11
</TABLE>
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INDEPENDENT AUDITORS' REPORT
Board of Directors November 1, 2000
KEYSTONE VENTURES, INC.
San Diego, California
I have audited the accompanying Balance Sheets of KEYSTONE VENTURES,
INC. (A Development Stage Company), as of September 30, 2000, and September 30,
1999, and the related statements of operations, stockholders' equity and cash
flows for the year ended September 30, 2000, and the period March 10, 1999,
(inception), to September 30, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of KEYSTONE VENTURES,
INC. (A Development Stage Company), as of September 30, 2000, and September 30,
1999, and the related statements of operations, stockholders' equity and cash
flows for the year ended September 30, 2000, and the period March 10, 1999,
(inception), to September 30, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #5 to the
financial statements the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters is described in Note #5. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Barry L. Friedman
---------------------------
Barry L. Friedman
Certified Public Accountant
1582 Tulita Drive
Las Vegas, NV 89123
(702) 361-8414
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KEYSTONE VENTURES, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 2000 30, 1999
--------- ---------
<S> <C> <C>
CURRENT ASSETS
CASH $1,589 $5,700
------ ------
TOTAL CURRENT ASSETS $1,589 $5,700
------ ------
OTHER ASSETS $ 0 $ 0
------ ------
TOTAL OTHER ASSETS $ 0 $ 0
------ ------
TOTAL ASSETS $1,589 $5,700
------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements
- F2 -
<PAGE> 17
KEYSTONE VENTURES, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 2000 30, 1999
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES $ 0 $ 0
------- -------
TOTAL CURRENT LIABILITIES $ 0 $ 0
------- -------
STOCKHOLDERS' EQUITY (Note #4)
Common stock No par value
Authorized 25,000 shares
Issued and outstanding at
September 30, 1999-
15,700 shares $15,700
Common Stock
Par value $0.001
Authorized 50,000,000 shares
Issued and Outstanding at
September 30, 2000-
11,775,000 shares $11,775
Additional Paid-In Capital 3,925 0
Deficit accumulated during
The Development stage -14,111 -10,000
------- -------
TOTAL STOCKHOLDERS' EQUITY $ 1,589 $ 5,700
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,589 $ 5,700
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements
- F3 -
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KEYSTONE VENTURES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR MAR. 10, MAR. 10, 1999
ENDED 1999, TO (INCEPTION)
SEP. 30, SEPT. 30, TO SEP. 30,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0
----------- ----------- -----------
EXPENSES
General, Selling and
Administrative $ 4,111 $ 10,000 $ 14,111
----------- ----------- -----------
TOTAL EXPENSES $ 4,111 $ 10,000 $ 14,111
----------- ----------- -----------
NET PROFIT/LOSS (-) $-4,111 $-10,000 $-14,111
----------- ----------- -----------
Net Profit/Loss(-)
per weighted share
(Note #1) $-.0003 $-.0009 $-.0012
----------- ----------- -----------
Weighted average
Number of common
shares outstanding 11,775,000 11,775,000 11,775,000
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
- F4 -
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KEYSTONE VENTURES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
------ ------ ---------- --------
<S> <C> <C> <C> <C>
March 15, 1999
Issued For Services 10,000 $ 10,000 $ 0
April 30, 1999
Issued For Cash 5,700 5,700 0
Net loss year ended
March 10, 1999
(Inception) to
September 30, 1999 $ -10,000
---------- ---------- ---------- --------
Balance,
September 30, 1999 15,700 $ 15,700 $ 0 $-10,000
March 24, 2000
Changed par value from
No par value to $0.001 -15,684 +15,684
March 30, 2000
Forward Stock Split
10 for 1 141,300 +141 -141
June 15, 2000
Forward stock split
75 for 1 11,618,000 +11,618 -11,618
Net Loss Year Ended
September 30, 2000 -4,111
---------- ---------- ---------- --------
Balance,
September 30, 2000 11,775,000 $ 11,775 $ 3,925 $-14,111
---------- ---------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements
- F5 -
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KEYSTONE VENTURES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR MAR. 10, MAR. 10, 1999
ENDED 1999, TO (INCEPTION)
SEP. 30, SEPT. 30, TO SEP. 30,
2000 1999 2000
-------- -------- -----------
<S> <C> <C> <C>
Cash Flows from
Operating Activities
Net Loss $-4,111 $-10,000 $-14,111
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities
Issue Common Stock
For Services 0 +10,000 +10,000
Changes in assets and
Liabilities 0 0 0
------ ------ --------
Net cash used in
Operating activities $-4,111 $ 0 $-4,111
Cash Flows from
Investing Activities 0 0 0
Cash Flows from
Financing Activities
Issuance of Common
Stock for Cash 0 +5,700 +5,700
------ ------ --------
Net Increase (decrease) $-4,111 $+5,700 $+1,589
Cash,
Beginning of period +5,700 0 0
------ ------ --------
Cash, End of Period $1,589 $5,700 $ 1,589
------ ------ --------
</TABLE>
The accompanying notes are an integral part of these financial statements
- F6 -
<PAGE> 21
KEYSTONE VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000, and September 30, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized March 10, 1999, under the laws of the State of
Nevada as KEYSTONE VENTURES, INC. The Company currently has no
operations and in accordance with SFAS #7, is considered a development
company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and equivalents
The Company maintains a cash balance in a non-interest-bearing
bank that currently does not exceed federally insured limits.
For the purpose of the statements of cash flows, all highly
liquid investments with the maturity of three months or less are
considered to be cash equivalents.
- F7 -
<PAGE> 22
KEYSTONE VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and September 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for using the liability method of
accounting in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS #109) "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary
difference between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Reporting on Costs of Start-Up Activities
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs
of Start-Up Activities" which provides guidance on the financial
reporting of start-up costs and organization costs. It requires
most costs of start-up activities and organization costs to be
expensed as incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. With the adoption of SOP
98-5, there has been little or no effect on the company's
financial statements.
Loss Per Share
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share". Basic loss per share is computed by dividing losses
available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted loss per
share reflects per share amounts that would have resulted if
dilative common stock equivalents had been converted to common
stock. As of September 30, 2000, the Company had no dilative
common stock equivalents such as stock options.
- F8 -
<PAGE> 23
KEYSTONE VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and September 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year End
The Company has selected September 30th as its fiscal year-end.
Year 2000 Disclosure
The Y2K issue had no effect on this Company.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended September
30, 2000. The Company's total deferred tax asset as of September 30,
2000, is as follows:
<TABLE>
<S> <C>
Net operation loss carry forward $14,111
Valuation allowance $14,111
Net deferred tax asset $ 0
</TABLE>
The federal net operating loss carry forward will expire by 2019.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the corporation consists of 50,000,000
shares with a par value $0.001 per share.
- F9 -
<PAGE> 24
KEYSTONE VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and September 30, 1999
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock
The Company has no preferred stock.
On March 24, 1999, the Company issued 10,000 shares of its no-par-value
common stock for services of $10,000 to its directors.
On April 30, 1999, the company issued 5,700 shares of its no-par-value
common stock for cash of $5,700.
On March 24, 2000, the State of Nevada approved the Company's restated
Articles of Incorporation, which changed the par value from no par to
$0.001. Also, the Company's authorized common stock was increased from
25,000 shares to 50,000,000 shares.
On March 30, 2000, the Company approved a forward stock split on the
basis of 10 for 1, thus increasing the common stock from 15,700 shares
to 157,000 shares.
On June 15, 2000, the Company approved a forward stock split on the
basis of 75 for 1, thus increasing the common stock from 157,000 shares
to 11,775,000.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. However, the Company does not have significant cash
or other material assets, nor does it have an established source of
revenues sufficient to cover its operating costs and to allow it to
continue as a going concern. The stockholders/officers and/or directors
have informally committed to advancing the operating costs of the
Company interest free, if necessary.
- F10 -
<PAGE> 25
KEYSTONE VENTURES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 2000, and September 30, 1999
NOTE 6 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides office services without charge. Such
costs are immaterial to the financial statements and accordingly, have
not been reflected therein. The officers and directors of the Company
are involved in other business activities and may in the future, become
involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The
Company has not formulated a policy for the resolution of such
conflicts.
- F11 -
<PAGE> 26
ITEM 8
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
CONTROL AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The Directors and Officers of the Company, all of those whose one year terms
will expire 3/31/01, or at such a time as their successors shall be elected and
qualified are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected Term Expires
<S> <C> <C> <C> <C>
Bruce Johnson 49 President, 3/15/99 3/31/01
7582 Skyline Drive Treasurer,
San Diego, Ca 92114 Director
Ann Myers 73 Secretary, 3/15/99 3/31/01
1605 Mirage Court Director
El Cajon, CA 92019
</TABLE>
Each of the foregoing persons may be deemed a "promoter" of the Company, as that
term is defined in the rules and regulations promulgated under the Securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring, suspending or
otherwise limiting him or her from acting as an investment advisor, underwriter,
broker or dealer in the securities industry, or as an affiliated person,
director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities.
13
<PAGE> 27
No Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of any
pending legal proceedings.
Resumes
Bruce Johnson, President, Treasurer & Director
1990 - Current President, Seaside Computers, Inc. Specializing in
hardware sales, custom software design, and information system
security for a variety of commercial customers in Southern
California. Responsible for design and installation of software
security systems comprised of risk analysis, encryption,
intrusion detection and blocking, network adapters, security
testing, monitor alerts, and security system administration.
Customers include engineering, financial, accounting and law
offices, manufacturing, wholesaling, retailing, financial
services, health care services, transportation firms, and
warehousing businesses.
Ann Myers, Secretary & Director
1985-Current Independent contractor providing accounting and management
information services for manufacturing and service businesses.
Responsibilities include financial statement reporting,
inventory control, data processing, billings, and selection of
applications software.
ITEM 6
EXECUTIVE COMPENSATION
The company's current officers receive no compensation.
Summary Compensation Table
<TABLE>
<CAPTION>
Other
Name & annual Restricted Options All other
principle Salary Bonus compen- stock SARs LTIP compen-
position Year ($) ($) sation ($) awards ($) ($) Payouts sation ($)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B Johnson 1999 -0- -0- -0- 5,000 -0- -0- -0-
President 2000 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
14
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Myers 1999 -0- -0- -0- 5,000 -0- -0- -0-
Director 2000 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
There are no current employment agreements between the Company and its executive
officers.
The Board agreed to pay Mr. Johnson 5,000 shares of the Company's common stock
for an exclusive license agreement on March 15, 1999. The stock was valued at
the price unaffiliated investors paid for stock sold by the Company, $1.00 per
share. 45,000 shares of the Company's common stock were issued to him per a 10
for 1 stock split on March 30, 2000. 3,700,000 shares of the Company's common
stock were issued to him per a 75 for 1 stock split on June 15, 2000.
The Board agreed to pay Ms. Myers for administrative services and services
related to the Company's business plan 5,000 shares of the Company's common
stock on March 15, 1999. The stock was valued at the price unaffiliated
investors paid for stock sold by the Company, $1.00 per share. 45,000 shares of
the Company's common stock were issued to her per a 10 for 1 stock split on
March 30, 2000. 3,700,000 shares of the Company's common stock were issued to
her per a 75 for 1 stock split on June 15, 2000.
The terms of these stock issuances were as fair to the Company, in the Board's
opinion, as could have been made with an unaffiliated third party.
The Officers currently devote an immaterial amount of time to manage the affairs
of the Company. The Directors and Principal Officers have agreed to work with no
remuneration until such time as the Company receives sufficient revenues
necessary to provide proper salaries to all Officers and compensation for
Directors' participation. The Officers and the Board of Directors have the
responsibility to determine the timing of remuneration for key personnel based
upon such factors as positive cash flow to include stock sales, product sales,
estimated cash expenditures, accounts receivable, accounts payable, notes
payable, and a cash balance of not less than $100,000 at each month end. When
positive cash flow reaches $100,000 at each month end and appears sustainable
the board of directors will readdress compensation for key personnel and enact a
plan at that time which will benefit the Company as a whole. At this time,
management cannot accurately estimate when sufficient revenues will occur to
implement this compensation, or the exact amount of compensation.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
ITEM 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
15
<PAGE> 29
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock
through the most current date - September 30, 2000:
<TABLE>
<CAPTION>
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
<S> <C> <C> <C>
Common Bruce Johnson 3,750,000(a) 32%
7582 Skyline Drive
San Diego, CA 92114
Common Ann Myers 3,750,000(b) 32%
1605 Mirage Court
El Cajon, CA 92019
Total Shares Owned by Officers & Directors
As a Group 7,500,000 64%
</TABLE>
(a) Mr. Johnson received 5,000 shares of the Company's common stock on March 15,
1999 for a license agreement related to the Company's business plan. 45,000
shares of the Company's common stock were issued to him per a 10 for 1 stock
split on March 30, 2000. 3,700,000 shares of the Company's common stock were
issued to him per a 75 for 1 stock split on June 15, 2000.
(b) Ms. Myers received 5,000 shares of the Company's common stock on March 15,
1999 for administrative services and services related to the Company's business
plan. 45,000 shares of the Company's common stock were issued to her per a 10
for 1 stock split on March 30, 2000. 3,700,000 shares of the Company's common
stock were issued to her per a 75 for 1 stock split on June 15, 2000.
ITEM 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The principal executive office and telephone number are provided by Ms. Myers,
an officer of the corporation. The costs associated with the use of the
telephone and mailing address were deemed by management to be immaterial as the
telephone and mailing address were almost exclusively used by the officer for
other business purposes.
16
<PAGE> 30
ITEM 13
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibit 23 Consent of Experts and counsel
Exhibit 27 Financial Data Schedule
Reports filed on Form 8-K: None
Reports required to be filed by Regulation S-X: None
SIGNATURES
---------------------------
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Keystone Ventures, Inc.
Date November 4, 2000 By /s/ Bruce Johnson
------------------------------------
Bruce Johnson, President & Director
Date November 4, 2000 By /s/ Ann Myers
-------------------------------------
Ann Myers, Secretary, Treas. & Director
