Manually Executed
As filed with the United States Securities and Exchange
Commission
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998 Commission
File Number
0-9071
E. T. CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 74-2026624
(State of incorporation)(I.R.S. Employer Identification No.)
3525 South Tamarac Drive, Suite 120, Denver, CO80237
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(604) 925-0534
Former name, former address.
Caribou Energy, Inc.
9101 East Kenyon, Suite 2000, Denver, CO 80237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock,
$0.01 par value.
Indicate by check mark whether the registrant (1) has filed all
reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the
registrant was required to file such reports), and (2) has been
subject to
all
such filing requirements for the past 90 days.
(1) and (2)Yes
The aggregate market value for the Voting Stock held by
non-affiliates based
upon the closing price on September 30, 1998, was approximately
$5,393,608.
As of September 30, 1998, there were 58,787,216 shares of Common
Stock, $0.01
par value, outstanding.
Documents incorporated by reference: Not Applicable.
PART IPage
Item 1. Business1.
Item 2. Properties5.
Item 3. Legal Proceedings5.
Item 4. Submission of Matters to a Vote of Security Holders5.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder
Matters6.
Item 6. Selected Financial Data6.
Item 7. Management's Discussion Analysis of Financial
Condition and
Results of Operations8.
Item 8. Financial Statements and Supplementary Data9.
Item 9. Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure 9.
PART III
Item 10. Directors and Executive Officers of the
Registrant10.
Item 11. Executive Compensation10.
Item 12. Security Ownership of Certain Beneficial Owners and
Management11.
Item 13. Certain Relationships and Related Transactions12.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form
8-K13.
PART I
ITEM 1. BUSINESS
General
Origins of the Company.
The shares of the Company were registered for trading in all
50 states
and fully listed on the NASDAQ stock exchange, stock symbol CBOU
in November,
1982.
The Company is now concentrating its activities on obtaining
contracts to
raise money for charitable organizations using the proprietary 1
900
"pay-per-call" telephone numbers 1 900 "DEMOCRAT", 1 900"
REPUBLICAN", 1 900
"STOP ABUSE", 1 900 "HIV AIDS", 1 900 HIV KIDS, 1 900 "GET MADD"
and others.
The Company began its corporate existence as Caribou Energy,
Inc. (the
"Company"), and was incorporated under the laws of the State of
Colorado on
October 3, 1978. The Company's initial corporate purpose was to
engage in the
oil and gas business. Initial oil and gas industry activities of
the Company,
commencing in 1978, consisted primarily of the acquisition of
undeveloped
acreage in the Denver-Julesburg Basin in Colorado and Nebraska,
drilling 16
wells through two joint ventures and one limited partnership
organized by the
Company, and participation in 14 wells drilled in joint ventures
organized by
other industry operators. Three additional wells were drilled
during fiscal
year 1983. No further wells were drilled; no additional limited
partnerships or
joint ventures were entered into by the Company in 1984 or
thereafter.
The Company began to look seriously for an acquisition with
additional
resources. It acquired North American Equity in 1984 which
brought
approximately US$6.650,000 in oil and gas properties into the
Company. The
oil and gas industry continued its decline and after several
years and the new
properties became uneconomic. The Company continued to search
for other
acquisitions. On June 19, 1992, the Company signed an agreement
(the
"Agreement," which was set forth as Exhibit A to the Company's
1992 10-K
filing, and which is incorporated herein by this reference) which
agreement
was duly ratified by shareholders changing the direction of the
Company (see
the Company's 10-K filing for 1992 for complete details) to the
telecommunications industry,.
Although no revenues have been generated as a result of or
in direct
consequence of the new business of the Company, the Company
signed charitable
fund raising agreements with Broadway Cares, Inc. (the "Broadway
Cares
Agreement"), a group formed by the New York theatre community to
fight
A.I.D.S., in April 1993, and additional charitable fund raising
agreements
were signed between the Company and the Action For Peace
Foundation (dedicated
to helping the women and children of Bosnia in association with
United
Nations' agencies) (the "Peace Agreement") and with the National
Coalition
Against Domestic Violence (the "NCADV Agreement"), in October
1993 and
November 1993, respectively (see the Company's 1994 10-K filing
for complete
details and copies of the Peace Agreement, which was set forth as
Exhibit A
thereto, and the NCADV Agreement, which was set forth as Exhibit
B thereto).
Both of these contracts have been serviced by the E.T.
Foundation, Inc. a
Washington, D.C., not-for-profit organization. The Company has
also made
proposals to represent a number of other charitable organizations
in their
fund raising activities as well. Additional agreements with
other charitable
organizations are anticipated during the next fiscal year.
It would be necessary for the Company to raise a substantial
amount of
money to obtain financial benefits from the various Agreements.
Extensive
television advertising campaigns would cost millions of dollars,
and it would
be the Company's obligation to come up with the funds necessary
to get such
campaigns going. To assist the Company in making additional
marketing
connections for its "1-900" charitable fund raising program, the
Company
opened offices in Germany
during October 1993 and in Switzerland during February 1994.
Although fund
raising efforts did not bear fruit immediately, the Company
continues its
efforts to raise money to conduct its fund raising activities.
In early 1996, the Company's original core business of oil
and gas
exploration and development appeared to be rebounding in the
United States and
throughout the Western Hemisphere. Directors and officers of the
Company were
approached by various people in the oil and gas business and
encouraged to
take part in new oil exploration ventures. The Company viewed
these overtures
seriously.
In April, 1996, the Company acquired a majority control of
Spectrum Oil
Corporation ("Spectrum") and agreed to provide $18 million in
financing for
Spectrum's hydrocarbon concessions in the Republic of Paraguay,
which totaled
approximately 15 million acres, subject to the terms of an
agreement between
Spectrum and the Company. Geologic and seismic data indicated
that there
could be tens of millions of barrels of oil in the leased area.
The Company's
Agreement to acquire Spectrum and finance its concessions was
subject to
verification of the agreements by which Spectrum acquired
development rights
to the concessions. The Company negotiated a private placement
of 8 million
share purchase warrants at a price of $2.00 per share for a
period of two
years. The financing would have guaranteed the funds necessary
to complete
the acquisition of Spectrum and to fulfill the financial
commitments of
Spectrum to the oil and gas concessions in Paraguay. However, by
July, 1996,
Spectrum was in default of its agreements with the owners of the
Paraguayan
concessions and the Company terminated all agreements between
Spectrum and the
Company. Thereafter, the Company agreed to tender back to
Spectrum the
majority control shares of Spectrum which it had given to the
Company in
connection with its agreements with the Company in exchange for
the 8 million
shares of the Company's common stock which had been given to
Spectrum pursuant
to the said agreements.
The Company thereafter negotiated an Option Agreement
directly with the
owners of the Paraguayan hydrocarbon concessions. The terms of
this Agreement
required the Company to complete a ten-year exploration and
development
program at a cost of approximately $300 million. The Company
negotiated a
$350 million financing agreement with Petek A.G., a Swiss
investment firm,
which required the Company to issue 1.5 billion shares of its
common stock for
payment against delivery. In November 1996, the shares were
electronically
delivered to Barclay's Bank in London, United Kingdom, against
payment of
US$350 million. In February, 1997, the shares were returned by
Barclays to
the Company and Barclay's withdrew from the financing.
The Company and its counsel have taken the position that the
individuals,
companies and financial institutions which either profited from
the referenced
transaction or which participated in the transaction should
compensate the
Company for the use of its securities and for breach of the
original
contractual arrangements to the Company's detriment. The
Company's lawyers
are investigating the Company's remedies as a result of these
transactions and
are confident that the Company will be successful.
The Company is continuing its efforts to finance the
Paraguayan
hydrocarbon concessions. In late 1997 and early 1998 the Asian
economic
crisis adversely affected the world price of oil, however,
activity in the oil
and gas industry has historically been cyclical and the Company
considers that
this crisis has already been discounted and should not adversely
affect
ongoing negotiations. Although it is anticipated that European
telephony and
telecommunication standards should reach North American standards
within the
next two years, the Company cannot fully utilize its systems or
services in
Europe until those standards have been met. In order to conserve
its
financial resources, the Company has decided to scale down its
European
operations until promotion of its technology is warranted by
advances in the
European telecommunications standards.
Financial Information About Industry Segments. Since inception,
Company
revenues, operating profit or loss and identifiable assets have
all been
attributable to the telecommunications industry and the oil and
gas industry.
The Company no longer has any purpose to file financial
information regarding
the amounts of revenue from sales to unaffiliated customers,
operating profit
or loss and identifiable assets attributable to this segment
inasmuch as the
Company no longer has revenue generated from its
telecommunications assets or
from active oil and gas assets. The Company has no revenue, and
no other
relevant financial information, associated with the
telecommunications
industry or with the charitable fund raising industry to date.
Narrative Description of Business. Until June 1992, the Company
was engaged
in the oil and gas exploration business and in the production and
sale to
wholesalers of crude oil and natural gas. The Company acquired
oil and gas
property interests, mainly leases through its contacts in the
petroleum
industry and then sold fractional undivided interests in a
portion of the
acreage to individual investors and industry firms in connection
with
exploratory drilling programs (limited
partnerships and joint ventures). The Company also participated
in drilling
exploratory and development wells through joint ventures
organized by other
industry operators.
As of June 1992, the Company entered into an entirely
different
business. It acquired a company with certain ownership rights
(the "Rights")
to a telecommunications system capable of answering and/or
otherwise handling
multiple telephone calls per minute (the "System"). The System
was designed
for use with voice mail, and has unique and highly useful
features. The
Company determined that such a system could most advantageously
be used for
charitable fund raising in conjunction with 1-900 numbers. As
reported above,
the Company entered into several Agreements for charitable fund
raising during
the calendar year 1993.
The Rights pertain to the "E.T. TeleManagement," "1-900,"
"1-800" and
E.T. "TeleManagement" VoiceMail systems, as reported in the
company's 1992
10-K filing.
The Company has no other patents, trademarks, licenses,
franchises or
concessions. Telecommunications services and charitable fund
raising are not
seasonal activities.
In April, 1996, the Company re-entered the oil and gas
industry by
entering into agreement with respect to Paraguayan oil and gas
concessions, as
set forth above under "Origins of the Company."
Due to the nature of the Company's business, there are no
significant
working capital items carried on its books (i.e., accounts
receivable,
inventory, etc.), although a significant amount of equipment is
carried on its
books.
Due to the nature of the Company's business, there is no
backlog of
orders. There is no portion of the Company's business which may
be subject to
renegotiation of profits or termination of contracts or
subcontracts at the
election of government.
The Company is continuing its efforts to finance the
Paraguayan
hydrocarbon concessions. In late 1997 and early 1998 the Asian
economic
crisis adversely affected the world price of oil, however,
activity in the oil
and gas industry has historically been cyclical and the Company
considers that
this crisis has already been discounted and should not adversely
affect
ongoing negotiations.
1 900 cash flow projections contained in the business plan
are
substantial, however, should be met within the first year of
signing a
contract. Even though the auditors chose to write off the
Company's
telecommunications assets over a four year period, the Company
considers its
telephone technology purchased in 1992 still has substantial
value. Although
it is anticipated that European telephony and telecommunication
standards
should reach North American standards within the next two years,
the Company
cannot fully utilize its systems or services in Europe until
those standards
have been met. In order to conserve its financial resources, the
Company has
decided to scale down its European operations until promotion of
its
technology is warranted by advances in the European
telecommunications
standards.
Financial Information About Foreign and Domestic Operations and
Export Sales.
The Company opened offices in Germany and Switzerland to assist
in financing
the various projects of the Company. It entered into an Option
Agreement with
respect to hydrocarbon concessions in the Republic of Paraguay in
1996, but
there are no foreign operations or export sales at this time.
This is
changing rapidly and it is anticipated that the Company will have
expanded its
operations in Europe and South America by fiscal 1999.
Employment. The Company has no full-time employees. The policy
of the
Company has been to utilize consultants and other professionals
on and ad hoc,
when needed, basis until the size of the Company warrants the
employment of
paid employees. The Company anticipates the need for paid
employees during
fiscal 1999. The Company considers its employee relations to be
satisfactory
under the circumstances.
Competition. The Company's activities in the oil exploration
industry as well
as in the telecommunications and fund raising industries involve
two extremely
competitive industries. The oil industry in America, after a
decade-long
decline, with a price collapse in the mid-eighties with a
corresponding
decline in demand, made a significant comeback in the mid 1990's
before
declining again in late 1997, and the fund raising industry and
the
telecommunications industry are among the most rapidly growing
industries in
the world. In both industries, the Company is one of thousands
of firms which
make money, or propose to make money, from its operations. In
the oil
industry, the Company faces competition from hundreds of
wildcatters and a
number of giant corporations like Exxon, Shell, and others. In
the
telecommunications industry, competition comes from giant
corporations like
AT&T and from thousands of small companies, offering an
ever-increasing array
of telecommunications products and services; and in the
charitable fund
raising industry, there are a number of organizations which raise
money, and a
myriad of charitable organizations formed for a myriad of
purposes.
Competition is both general and specific: there are a number of
approaches to
making money in the oil exploration industry, and there are many
other ways
to raise money for charities besides advertising 1-900 telephone
numbers.
ITEM 2. PROPERTIES
The Company has its registered offices in Denver, Colorado
and has no
properties under development at this time.
ITEM 3. LEGAL PROCEEDINGS
No legal proceedings are now pending by or against the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended September 30, 1998, no significant
matters came to
a vote of security holders of the Company.
PART II
ITEM 5.MARKET PRICE FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the NASDAQ
Electronic Bulletin
Board, stock symbol ETCP. The following table sets forth the
high and low
sales price, in United States Dollars, for each quarterly period
during the
three most recent fiscal years.
1997 - 19981996 - 19971995 - 19961994 - 19951993 - 1994
Quarter EndedHigh LowHigh LowHigh LowHigh LowHigh Low
December 310.50 0.251.25 0.751.25 1.251.25 1.252.50
1.25
March 310.50 0.250.75 0.25 1.25 1.251.25 1.251.75
.40
June 300.50 0.250.75 0.251.25 1.251.25 1.25. .40
.15
September 300.50 0.010.50 0.251.25 1.251.25 1.25 .03
.01
As of September 30, 1998, there are approximately 9,396
registered
holders of record of the Company's Common Stock.
The Company has never declared or paid cash dividends to
holders of its
Common Stock. It does not anticipate paying any dividends in the
foreseeable
future.
ITEM 6.SELECTED FINANCIAL DATA
See attached page.
ITEM 6.SELECTED FINANCIAL DATA
1998* 1997* 1996* 1995*
1994*
Cash Assets $ 50,327 0 0 0
9,659
Equipment 0 0 34,270 164,772 285,193
Other Assets-
Voice-Mail 1 1 11,662,5003,325,000
Total Assets233,210243,842339,0732,193,0334,046,571
Current
Liabilities120,207107,577 81,409 65,762 32,800
Notes Payable 0 00 0 0
Debentures
Payable464,633 38,235 733,3612,058,636 3,444,089
Total
Liabilities233,210243,842 339,073 2,193,033 4,046,571
Shareholders'
Equity (351,630) 98,030(395,697) 68,635 569,682
Revenues 0 00 0 0
Expenses (449,660) (1,146,273) (4,153,668)
2,790,795
2,566,377
Net Gain
(Loss) (449,660) (1,146,273) (4,153,668)
(2,790,795)(2,566,377)
Shares Out-
standing 58,787,216 58,787,216 58,787,216
25,787,216
39,360,791
Net Gain (Loss)
Per Share (0.0076) (.0225) N/A N/A N/A
&WP6-34;Figures given are for fiscal year end, not calendar year
end. The
Company's fiscal year ends on September 30th.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Fiscal 1998 v. Fiscal 1997
Overall
The Company's entry into the area of charitable fund raising
using 1-900
"pay-per-call" telephone numbers has continued during this fiscal
year. 1 900
"DEMOCRAT" and 1 900 "REPUBLICAN" continue to have the potential
to generate
many tens of millions of dollars in revenues for the Company.
Until the
marketing plan of the Company begins to develop cash flow, the
development
stage of the program will continue to draw from the Company's
asset
resources.
During this fiscal year, the Company has attempted to
negotiate a
resolution with financial institutions which management concludes
have made a
profit from dealings involving the Company's securities but
refused to
compensate the Company as required by several contracts. The
Company expects
to ultimately obtain compensation and is negotiating with
relevant parties.
Although it is anticipated that European telephony and
telecommunication
standards should reach North American standards within the next
two years, the
Company cannot fully utilize its systems or services in Europe
until those
standards have been met. In order to conserve its financial
resources, the
Company has scaled down its European operations until promotion
of its
technology is warranted by advances in the European
telecommunications
standards.
The Company is still considering reentering the oil and gas
exploration
industry which was once its mainstay by negotiating the terms of
a financing
agreement that would allow the Company to reenter negotiations to
develop oil
and gas reserves in the Republic of Paraguay at an estimated cost
of $300
million. The Company also continued its entry into the area of
charitable
fund raising using 1-900 "pay-per-call" telephone numbers during
this fiscal
year. Cash assets at the close of fiscal 1998 were $50,327 as
compared to $0
in 1997 and $0 in 1996; fixed assets were estimated to be worth
$534,886 in
1998 but depreciated to 0 as compared to the same in 1997 and
1996; the
Rights and associated product development expenditures (subject
to the
amortization schedule set forth in the Financial Statements) were
$1 in 1998,
the same as 1997 and down from 1996 at $1,662,500. Total assets
were $233,210
compared to $243,842 in 1997, $339,073 in 1996, $2,193,033 in
1995 and
$4,046,571 in 1994.
The Company believes that during fiscal 1999, it will both
re-establish
its presence in the petroleum industry and commence its
charitable fund
raising activities, as described in the business plan of the
Company, to raise
such funds as are necessary to possibly not only finance the
election of the
next President of the United States through the use of its
proprietary 1 900
"DEMOCRAT" AND 1 900 "REPUBLICAN" telephone numbers, but to
affect the
election campaign reform laws and forge changes to the system for
political
fund raising in the United States .
Extraordinary Items
There were no extraordinary items reported in this fiscal
year.
Liquidity and Capital Resources
At September 30, 1998, the Company had $50,327 cash assets,
but total
current assets of$ 233,210 compared to $0 cash assets and
$243,842 in fiscal
1997, $0 and $339,073 in 1996, and no cash assets and total
current assets of
$2,193,033 in 1995. The Company is not aware of any known
trends, demands,
commitments, events or uncertainties that will result in or that
are
reasonably likely to result in the Company's liquidity increasing
or
decreasing in any material way.
Capital Resources and Expenditures
There were no significant capital expenditures made by the
Company during
the fiscal year ended September 30, 1998. Further, until the
Company
concludes a financing, the Company had no known material
commitments for
additional capital expenditures as of September 30, 1998.
Management of the
Company knows of no material trends, favorable or unfavorable,
with respect to
the Company's capital resources.
Inflation
The results of the Company's operations have not been
significantly
affected by inflation during the last three fiscal years ended
September 30,
1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Such financial statements and schedules as are available are
attached
hereto.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Identification of Executive Officers and Directors
NameAgePosition with CompanyDirector Since
Sidney B. Fowlds58Chairman of the BoardOctober 31, 1986
John Johnston73Vice PresidentOctober 31, 1986
Robert M. Miller 56Secretary-TreasurerOctober 31, 1992
Mr. Fowlds and Mr. Johnston were elected to serve on October
31, 1986,
reelected at the annual meeting in 1988, reelected at the Special
Shareholders' Meeting held in mid-1992, reelected at the annual
meeting in
1994, reelected at the annual meeting in 1996, and have served
since. Mr.
Miller was elected to serve at the Special Shareholders' Meeting
held in 1992,
reelected at the annual meeting in 1994, reelected at the annual
meeting in
1996, and has served since. They were all elected to serve until
the next
annual shareholders' meeting or until their respective successors
are elected
and qualified. Officers of the Company hold office until the
meeting of the
Board of Directors after the next annual shareholders' meeting or
until
removal by the Board of Directors.
Business Experience
Sidney B. Fowlds:See the Company's 1987 Annual Report, Exhibit
C.
John Johnston: See the Company's 1987 Annual Report,
Exhibit D.
Robert M. Miller:See the Company's December 1993 Quarterly
Report, Exhibit
A.
Involvement in Certain Legal Proceedings
None.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by
the Company
during the fiscal year ended September 30, 1998, to each
executive officer who
received in excess of $60,000 (there were none) and to all
executive officers
as a group.
Cash Compensation Table
Identity of Group Capacities in which served Cash
Compensation
All executive officersExecutive Officers$0 (includes all cash
bonuses)
as a group
Employment Arrangements
Details of any Employment Contracts as exist between any
officer of the
Company set forth above and the Company itself have already been
disclosed in
previous 10-K filings for the Company. No additional contracts
were entered
into between any Directors and/or officers of the Company and the
Company
itself during the fiscal year ended September 30, 1998.
Compensation Pursuant to Plans
Once existent policies of the Company relating to
compensation pursuant
to plan(s), stock options, and the like have long been repealed
by action of
the Board of Directors until such time as the Company can produce
a regular
profit.
Other Compensation
The Company did not provide any other compensation to any of
its
executive officers which is not disclosed above.
Compensation of Directors
The Company has no standard or other arrangement pursuant to
which
directors are compensated for services as a director, including
for attendance
at meetings.
Termination of Employment and Change of Control Arrangement
None.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following tables set forth information, as of September
30, 1998,
with respect to beneficial ownership of the Company's common
stock, $0.01 par
value, of the Company's officers and directors, both individually
and as a
group, and the record and/or beneficial owners of more than five
percent of
the Company's common stock:
Security Ownership of Certain Beneficial Owners
(Name of Holder; Number of Shares; Percentage of Outstanding
Common Shares
Held)
North American Oil and Gas; 2,578,700; 4.39%
Officers and directors and beneficial owners of more than 5% of
the Company's
common stock as a group; North American Oil and Gas; 2,578,700;
4.39%
Changes in Control
The Company knows of no other arrangements the operations of
which may at
a subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Not applicable.
Certain Business Relationships
None.
Indebtedness of Management
None.
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1)Financial Statements
Auditors ReportF-1
Balance SheetsF-2
Statements Of OperationsF-4
Statements of Shareholders EquityF-5
Statements of Cash FlowsF-6
Notes to Financial StatementsF-7
(2) Financial Statement Schedules for the fiscal year
ended September
30, 1998
All other schedules called for under Regulation S-X are not
submitted
because they are not applicable or not required or because the
required
information is not material or is included in the financial
statements or
notes thereto.
(b) Reports on Form 8-K
No reports were made on Form 8-K during the fiscal year ended
September 30,
1998.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDIT REPORTS
AS OF
September 30, 1998 and 1997
Janet Loss, C.P.A., P.C.
3525 South Tamarac Drive, Suite 120
Denver, Colorado 80237
INDEX TO FINANCIAL STATEMENTS
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
ITEM PAGE
Report of Certified Public Accountant.................... 1
Balance Sheets,
September 30, 1998 and 1997.............................. 2-3
Statements of Operations,
For Years Ended September 30, 1998 and 1997.............. 4
Statements of Stockholders' Equity,
For Years Ended September 30, 1998 and 1997.............. 5
Statements of Cash Flows,
For Years Ended September 30, 1998 and 1997.............. 6
Notes to Financial Statements............................ 7-9
Janet Loss, C.P.A., P.C.
3525 South Tamarac Drive, Suite 120
Denver, Colorado 80237
(303) 220-0227
Board of Directors
E.T. Capital, Inc.
Suite 315 - 650 West Georgia Street
Vancouver, B.C., Canada V6BN7
I have audited the Balance Sheets of E.T. Capital, Inc. as of
September 30,
1998 and 1997, and the Statements of Operations, Stockholders'
Equity and Cash
Flows for the years ended September 30, 1998 and 1997.
I conducted my audit in accordance with generally accepted
auditing
standards. These 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 also includes assessing the
accounting principl
es used and significant estimate made by management, as well as
evaluating the
overall financial statement presentation.
In my opinion, the financial statements referred to above present
fairly, in
all material respects, the financial position of E.T. Capital,
Inc. (a
development stage company) as of September 30, 1998 and 1997, and
the results
of its operations and its cash flow for the years ended September
30, 1998 and
1997.
"Janet Loss"
Janet Loss, C.P.A., P.C.
October 9, 1998
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
September 30,September 30,
1998 1997
CURRENT ASSETS:
Cash on Hand$ 50,327$ 0
FIXED ASSETS:
Equipment (Note 2) 534,886 534,886
Less accumulated
depreciation 534,886 534,886)
Net Fixed Assets 0 0
OTHER ASSETS:
Rights' Title, net of
amortization (Note 2)$ 1 $ 1
Product Development
Expenditures, net of
amortization (Note 2) 182,882 243,841
Option (Note 8) 0
0
Total Other Assets 182,883 243,842
TOTAL ASSETS$ 233,210$ 243,842
The accompanying notes are an integral part of the financial
statements.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
September 30,September 30,
1998 1997
CURRENT LIABILITIES:
Accounts Payable $ 120,207 $ 107,577
LONG-TERM LIABILITIES: (Note 4)
Debenture Payable, Xanthos
Management Corporation 464,633
38,235
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value,
10,000,000,000 authorized,
58,787,216 shares issued
and outstanding 4,516,079 4,516,079
Paid-In-Capital in excess
of par value 20,069,869 20,069,869
(Deficit) Accumulated during
the Development Stage (24,937,587) (24,487,918)
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT)( 351,630) 98,030
SUB-TOTAL:( 351,630)( 98,030)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT):$ 233,210$ 243,842
The accompanying notes are an integral part of the financial
statements.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the YearFor the Year
Ended Ended
September 30,September
30,
1998
1997
REVENUES$ - $ -
GENERAL AND ADMINISTRATIVE EXPENSES:
Accounting$ 1,500$ 1,875
Amortization (Note 2) 60,959 60,960
Auto Expenses, gas and repairs 12,000
12,000
Consulting Fees 72,890 623,750
Depreciation Expenses (Note 2) 0
34,270
Filing and Transfer Fees11,13024,293
Rent Expense50,40050,400
Telephone Expense36,00036,000
Travel and Promotions 180,000 180,000
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 424,879$ 1,023,548
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES)( 424,879)( 1,023,548)
OTHER INCOME AND (EXPENSES):
Interest Expense( 24,781)( 122,724)
Loss on expired options( 0)(
1)
TOTAL OTHER INCOME AND
(EXPENSES)( 24,781) ( 122,725)
NET (LOSS)$( 294,332)$( 1,146,273)
NET (LOSS) PER SHARE$( .0088)$( .0225)
The accompanying notes are an integral part of the financial
statements.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
CommonTotal
Class A StockAdditionalDevelopment
Stockholders'
$.0001Par Value Paid-In StageEquity
Shares Amount Capital (Deficit)
(Deficit)
Balances,
October1, 199658,757,216$4,516,869$18,429,869 $(23,341,645) $
(
395,697)
Issue 1,500,000,000
shares at $.234 per
share, Oct. 1, 1996 1,500,000,000 15,000,000 335,000,000
0
350,000,000
Cancellation of
1,500,000,000 share
issued @ .234 per
share, Feb.15, 1997 (1,500,000,000) (15,000,000)
(335,000,000) 0 (350,000,000)
Sale of 8,000,000
shares of treasury
stock @ $.215
September 21, 1997 0 0
1,640,000 0 1,640,000
Net (Loss) for the
Year Ended
September 30, 1997 0 0 0 (1,146,273)
(1,146,273)
Balances,
September 30, 199758,787,216$ 4,516,079$ 20,069,869$
(24,487,918
$ 98,030
Net (Loss) for the
Year Ended
September 30, 1998 0 0 0 ( 449,660)
( 449,660)
Balances,
September 30, 199858,787,216$ 4,516,079$ 20,069,869$
(24,937,578)
$ ( 351,630)
The accompanying notes are an integral part of the financial
statements.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the YearFor the Year
Ended Ended
September 30,September
30,
1998
1997
Net Cash Flows From Operating Activities:
Net (loss)$( 449,660)$( 1,146,273)
Adjustments to Reconcile
Net (Loss) to Cash (Loss)
From Operating Activities:
Amortization 60,959 60,960
Depreciation 0 34,270
Sub-total( 388,701) ( 1,051,043)
Increase in Accounts Payable 12,630
26,168
(Decrease) Increase in
Debenture Payable, Xanthos
Management Corp. 426,398 ( 695,126)
Increase (Decrease) due to sale
And purchase of 8,000,000
Shares of treasury stock 0 (
1)
Option 0 1
INCREASE (DECREASE) IN CASH 50,327
0
CASH, BEGINNING OF PERIOD 0
0
CASH, END OF THE PERIOD$ 50,327$ 0
The accompanying notes are an integral part of the financial
statements.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Note 1 - HISTORY
E.T. Capital, Inc. (formerly Caribou Energy Inc.)was incorporated
in Colorado
in 1978. The Company was originally engaged in oil and gas
exploration from
its inception until 1988. In 1988, the Company abandoned all of
its oil and
gas properties and all accounts associated with oil and gas have
been written
off.
In 1992, E.T. Capital, Inc. (the Colorado Corporation) secured
all the rights,
title and interest to the E.T. "TeleManagement" VoiceMail System
and 1-800 and
1-900 "pay-per-call" telephone numbers and information center
from a Nevada
corporation, E.T. Network, Inc., for $6,650,000.00. This
purchase was
financed by the sale of 20,000,000 Regulation "S" restricted
shares of the
Company.
As of October 1, 1994, the Colorado Corporation changed its name
to E.T.
Capital, Inc.
E.T. Network, Inc. was a Nevada corporation which owned the
world-wide rights
to the E.T. "TeleManagement" VoiceMail System and the 1-800 and
1-900 "pay
- -per-call" telephone numbers and information center. Its
wholly-owned
subsidiary was Encryption Technology Canada, Inc. (E.T.). This
subsidiary
owned the rights for the VoiceMail system in Canada.
The assets of E.T. network, Inc. (the Nevada Corporation) and
Encryption
Technology Canada, Inc. were then transferred to the Colorado
Corporation.
Encryption Technology Canada, Inc. has been de-registered and is
no longer in
existence.
Note 2 - SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The company is on the accrual basis of accounting for financial
statements and
income tax purposes.
Fixed Assets and Depreciation
Fixed assets are made up of computer equipment, cellular phones
and
furniture. The furniture was put into use October, 1991, and
equipment was
put into use October 1, 1992. Both furniture and equipment are
being
depreciated over their estimated life.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Note 2 - CONTINUED
Amortization
The purchased rights for the TeleManagement VoiceMail system and
the 1-800 and
1-900 "pay-per-call" telephone numbers are being amortized over
the estimated
useful life of four (4) years.
Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly
liquid debt instruments purchased with a maturity of three months
or less to
be cash equivalents.
Note 3 - RELATED PARTIES
As the corporation was unable to meet its financial obligations
as they became
due, one of the major shareholders of the Company, Xanthos
Management
Corporation, offered to pay the obligations on behalf of the
Company and
agreed to make payments as required, such payments secured by and
subject to
the terms of a debenture duly filed and registered with the
Secretary of State
for the State of Colorado.
The Board of Directors of E.T. Capital, Inc. authorized
management fees of
$25,000.00 per month for office, telephone, automobile and
travel, and
promotion be paid to Xanthos Management Corporation.
Note 4 - DEBENTURE PAYABLE, BEARER
This debenture is dated October 31, 1992 and is secured by the
company assets
of E.T. "TeleManagement" System, 1-900 services, 1-800 services,
VoiceMail
services and Computer Centers. The total aggregate principal
amount of the
debenture shall be $5,000,000.00 may be outstanding at any time
and interest
shall be payable at ten (10) percent per annum.
Note 5 - FISCAL YEAR
The Company adopted a fiscal year end of September 30th.
Note 6 - CURRENCY EXCHANGE
The financial statements are presented in dollar amounts based on
the United
States Currency Exchange.
E.T. CAPITAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Note 7 - ACQUISITIONS AND FINANCING
In April, 1996 the Company acquired a majority control of
Spectrum Oil
Corporation and agreed to finance Spectrum's hydrocarbon
concessions in
Paraguay totaling approximately 15 million acres subject to the
terms of an
agreement between Spectrum and the Company. Geologic and seismic
data
indicate that there could be tens of millions of barrels of oil
in the leased
area. The Company agreed to acquire majority control of Spectrum
and to
finance Spectrum Oil's hydrocarbon concessions in the Republic of
Paraguay
subject to verification of the Spectrum's agreements under which
they held the
development rights to the concessions. Financing to make this
acquisition and
to proceed with the work program of approximately US$18 million
was subject to
the terms of an agreement between Spectrum and the Company. The
Company
negotiated a Private Placement of 8 million common shares of the
Company at a
price of US$1.25 carrying 8 million share purchase warrants at a
price of
US$2.00 per share for a period of two years. This financing
would guarantee
the funds necessary to complete the acquisition of Spectrum and
fulfill the
financial commitments of Spectrum to the oil and gas concessions
in Paraguay.
In July of 1996, Spectrum was in default of its agreements with
the owners of
the Paraguayan concessions and the Company terminated all
Agreements between
Spectrum and the Company. The 8 million share financing was
reversed, the
shares of the Company were returned to the Company and the
majority control
shares of Spectrum were returned.
Note 8 - OPTION
The Company negotiated an Option Agreement directly with the
owners of the
Hydrocarbon concessions in the Republic of Paraguay. The terms
of the
Agreement require the Company to complete a ten year exploration
and
development program of approximately US$300 million. The Company
negotiated
a
US$350 million financing with Petek AG, a Swiss Investment firm
which require
the Company to issue 1.5 billion shares for payment against
delivery. In
November 1996, the shares were electronically delivered to
Barclay's Bank in
London, England against payment of US$350 million. In February
1997, the
shares were returned by Barclay's to the Company Barclay's
withdrew from the
financing. The Company's lawyers are investigating the Company's
remedies as
a result of this transaction and are confident that the Company
will be
successful.
SIGNATURES
Pursuant to the requirements of Section 13 or 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, duly authorized.
Dated: October 10, 1998
E.T. CAPITAL, INC. (the "Company")
By: /s/ Sidney B. Fowlds
Chairman of Board of Directors
Pursuant to the requirements of the Securities Exchange Act of
1934, this
report has been signed below by the following persons on behalf
of the Company
and in the capacities and on the dates indicated.
Dated: October 10, 1998/s/ Sidney B. Fowlds
Director: Sidney B. Fowlds
Dated: October 10, 1998/s/ John Johnston
Director: John Johnston
Dated: October 10, 1998/s/ Robert M. Miller
Director: Robert M. Miller
