SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Eldorado Financial Group , Inc.
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(Name of Small Business Issuer in its charter)
Florida 59-2025386
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
211 West Wall, Midland, Texas 79701
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(Address of principal executive offices) (Zip code)
Issuer's telephone number (915) 682-1761
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of class)
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Eldorado Financial Group, Inc.
Table of Contents Page
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Part I
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Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis or Plan of Operations 17
Item 3. Description of Property 19
Item 4. Security Ownership of Certain Beneficial Owners and Management 19
Item 5. Directors, Executive Officers, Promoters, and Control Persons. 19
Item 6. Executive Compensation 22
Item 7. Description for Officers, Directors, Promoters, or Affiliates 22
Item 8. Description of Securities 23
Part II
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Item 1. Market Price and Dividends on the Registrant's Common 24
Equity and other Shareholder Matter
Item 2. Legal Proceedings 24
Item 3. Changes in and Disagreements with Accountants. 24
Item 4. Recent Sales of Unregistered Securities 24
Item 5. Indemnification of Directors and Officers 24
Part F/S
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Independent Auditors Report and Financial Statements F-1
Item 1. Index to Exhibits And Description of Exhibits 25
Signature Page 25
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PART 1
Item 1. Description of Business
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Eldorado Financial Group, Inc. ("Company") was incorporated under the laws of
Florida on February 26, 1980 as Eldorado Gold & Exploration, Inc. On January 13,
1987 the Company amended its Articles of Incorporation to change the corporate
name to Eldorado Financial Group, Inc.
The Company had a public offering (Form S-3, Commission file number: 2-68091) in
May 1981. The offering consisted of 400,000 units totaling 2,000,000 shares of
common stock, par value $.001 per share and 4,000,000 warrants to purchase
4,000,000 shares of common stock. The units were offered at a price of $4.50 per
unit. The net proceeds from the offering amounted to $1,483,307.
From inception through 1982, the Company conducted gold exploration efforts in
the Country of Surinam in South America through a governmentally granted
concession. During 1982, the Company ceased all operations in Surinam due to
political instability.
In 1983, the Company issued an aggregate 500,000 shares of common stock in
exchange for 100% of the issued and outstanding common stock and 50,000 shares
of preferred stock and payment of an approximate $224,000 note payable to the
controlling shareholder of Atlantic Medical Services, Inc. The Company
discontinued all operations of Atlantic Medical Services, Inc. during 1985.
In 1983, the Company issued an aggregate 120,000 shares of common stock for 100%
of the issued and outstanding shares of Datalink Systems, Inc. ("Datalink"). The
Company ceased all operations as of December 31, 1989 and has effectively had no
operations, assets or liabilities since its fiscal year ending December 31,
1989. Effective August 31, 1995, the Company distributed its holdings in
Datalink, at the then reported carrying value, to a former officer of the
Company as compensation for services performed and amounts paid for the
maintenance of the corporate entity during its dormancy.
On June 1987 a Form 15 (Certification and Notice of Termination of Registration
under Section 12(g) of the Securities Exchange Act of 1934 or Suspension of Duty
to File Reports under Section 13 and 14(d) of the Securities Exchange Act of
1934) was filed by the Company.
In December 1995, the Company issued a total of 6,602,119 shares of restricted,
unregistered common stock to a controlling shareholder for payments made on
behalf of the Company to support the corporate entity during its dormant phase,
This transaction was valued at approximately $15,000, which approximated the
fair value of the amounts paid and/or services provided.
The Company has elected to initiate the process of voluntarily becoming a
reporting Company under the Securities Exchange Act of 1934 by filing this Form
10-SB registration statement. Following the effective date of this registration
statement, the Company intends to comply with the periodical reporting
requirements of the Securities Exchange Act of 1934 and to seek to complete a
business acquisition transaction.
The Company may be referred to as a shell corporation and once trading on the
NASD Bulletin Board, a trading and reporting shell corporation. Shell
corporations have zero or nominal assets and typically no stated or contingent
liabilities. Private companies wishing to become publicly trading may wish to
merge with a shell (a reverse merger) whereby the shareholders of the private
Company become the majority of the shareholders of the combined Company. The
private Company may purchase for cash all or a portion of the common share of
the shell corporation from its major stockholders. Typically, the Board and
officers of the private Company become the new Board and officers of the
combined Company and often the name of the private Company becomes the name of
the combined Company.
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The Company has very limited capital, and it is unlikely that the Company will
be able to take advantage of more than one such business opportunity. The
Company intends to seek opportunities demonstrating the potential of long-term
growth as opposed to short-term earnings. However, at the present time, the
Company has not identified any business opportunity that it plans to pursue, nor
has the Company reached any agreement or definitive understanding with any
person concerning an acquisition.
Prior to the effective date of this registration statement, it is anticipated
that the Company's officers and directors will contact broker-dealers and other
persons with whom they are acquainted who are involved with corporate finance
matters to advise them of the Company's existence and to determine if any
companies or businesses that they represent have a general interest in
considering a merger or acquisition with a blind pool or blank check or shell
entity. No direct discussions regarding the possibility of merger are expected
to occur until after the effective date of this registration statement. No
assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given the limited funds that are
expected to be available for acquisitions. Furthermore, no assurance can be
given that any acquisition, which does occur, will be on terms that are
favorable to the Company or its current stockholders.
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become public corporations. In addition these enterprises
may wish to satisfy, either currently or in the reasonably near future, the
minimum tangible asset requirement in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. (See Investigation
and Selection of Business Opportunities). The Company anticipates that the
business opportunities presented to it will (i) either be in the process of
formation, or be recently organized with limited operating history or a history
of losses attributable to under-capitalization or other factors; (ii)
experiencing financial or operating difficulties; (iii) be in need of funds to
develop new products or services or to expand into a new market, or have plans
for rapid expansion through acquisition of competing businesses; (iv) or other
similar characteristics. The Company intends to concentrate its acquisition
efforts on properties or businesses that it believes to be undervalued or that
it believes may realize a substantial benefit from being publicly owned. Given
the above factors, investors should expect that any acquisition candidate may
have little or no operating history, or a history of losses or low
profitability.
The Company does not propose to restrict its search for investment opportunities
to any particular geographical area or industry, and may, therefore, engage in
essentially any business, to the extent of its limited resources. This included
industries such as service, finance, natural resources, manufacturing, high
technology, product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is unrestricted,
subject to the availability of such opportunities, economic conditions, and
other factors.
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As a consequence of this registration of its securities, any entity, which has
an interest in being acquired by, or merging into the Company, is expected to be
an entity that desires to become a public Company and establish a public trading
market for its securities. In connection with such a merger or acquisition, it
is highly likely that an amount of stock constituting control of the Company
would either be issued by the Company or be purchased from the current principal
stockholders of the Company by the acquiring entity or its affiliates. If stock
is purchased from the current principal stockholders, the transaction is very
likely to be a private transaction rather than a public distribution of
securities, but is also likely to result in substantial gains to the current
principal stockholders relative to their purchase price for such stock. In the
Company's judgment, none of the officers and directors would thereby become an
underwriter within the meaning of the Section 2(11) of the Securities Act of
1933, as amended as long as the transaction is a private transaction rather than
a public distribution of securities. The sale of a controlling interest by
certain principal shareholders of the Company would occur at a time when
minority stockholders are unable to sell their shares because of the lack of a
public market for such shares.
Depending upon the nature of the transaction, the current officers and directors
of the Company may resign their management and board positions with the Company
in connection with a change of control or acquisition of a business opportunity
(See Form of Acquisition, below, and Risk Factors The Company Lack of Continuity
of Management). In the event of such a resignation, the Company's current
management would thereafter have no control over the conduct of the Company's
business.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it will enter into a merger or acquisition
transaction with any business with which its officers or directors are currently
affiliated. Should the Company determine in the future, contrary to the forgoing
expectations, that a transaction with an affiliate would be in the best
interests of the Company and its stockholders, the Company is, in general,
permitted by Florida law to enter into a transaction if: The material facts as
to the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the Board of Directors, and the Board
in good faith authorizes, approves or ratifies the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
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The material facts as to the relationship or interest of the affiliate and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
authorized, approved or ratified in good faith by vote of the stockholders; or
the contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other Company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the business opportunity will derive from becoming a publicly held entity, and
numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of a
variety of factors, including, but not limited to, the possible need to expand
substantially, shift marketing approaches, change product emphasis, change or
substantially augment management, raise capital and the like.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to the acquisition of one business opportunity because of
the Company's limited financing. This lack of diversification will not permit
the Company to offset potential losses from one business opportunity against
profits from another, and should be considered an adverse factor affecting any
decision to purchase the Company's securities.
Certain types of business acquisition transactions may be completed without any
requirement that the Company first submit the transaction to the stockholders
for their approval. In the event the proposed transaction is structured in such
a fashion that stockholder approval is not required, holders of the Company's
securities (other than principal stockholders holding a controlling interest)
should not anticipate that they will be provided with financial statements or
any other documentation prior to the completion of the transaction. Other types
of transactions require prior approval of the stockholders.
In the event a proposed business combination or business acquisition transaction
is structured in such a fashion that prior stockholder approval is necessary,
the Company will be required to prepare a Proxy or Information Statement
describing the proposed transaction, file it with the Securities and Exchange
Commission for review and approval, and mail a copy of it to all Company
stockholders prior to holding a stockholders meeting for purposes of voting on
the proposal. Minority shareholders that do not vote in favor of a proposed
transaction will then have the right, in the event the transaction is approved
by the required number of stockholders, to exercise statutory dissenter's rights
and elect to be paid the fair value of their shares.
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The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors, none of whom are
professional business analysts (See Management). Although there are no current
plans to do so, Company management might hire an outside consultant to assist in
the investigation and selection of business opportunities, and might pay a
finder's fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or the total amount of fees
that may be paid. However, because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.
Otherwise, in analyzing potential business opportunities, Company management
anticipates that it will consider, among other things, the following factors:
Potential for growth and profitability indicated by new technology, anticipated
market expansion, or new products;
The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;
Whether, following the business combination, the financial condition of the
business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming, sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15g-9 adopted by the
Securities and Exchange Commission (See Risk Factors The Company Regulations of
Penny Stocks).
Capital requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
The extent to which the business opportunity can be advanced;
Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
Strength and diversity of existing management or management prospects that are
scheduled for recruitment;
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The cost of participation by the Company as compared to the perceived tangible
and intangible values and potential; and
The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would qualify for
listing on NASDAQ, the current standards for initial listing include, among
other requirements, that the Company (1) have net tangible assets of at least
$4.0 million, or a market capitalization of $50.0 million, or net income of not
less that $0.75 million in its latest fiscal year or in two of the last three
fiscal years; (2) have a public float (i.e., shares that are not held by any
officer, director or 10% stockholder) of at least 1.0 million shares; (3) have a
minimum bid price of at least $4.00; (4) have at least 300 round lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market capitalization of at
least $50.0 million. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection of a
business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the
business opportunity containing as much relevant information as possible.
Including, but not limited to, such items as a description of products, services
and Company history; management resumes; financial information; available
projections, with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents, trademarks,
or service marks, or rights thereto; present and proposed forms of compensation
to management; a description of transactions between such Company and its
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affiliates during the relevant periods; a description of present and required
facilities;, an analysis of risks and competitive conditions; a financial plan
of operation and estimated capital requirements; audited financial statements,
or if they are not available, unaudited financial statements, together with
reasonable assurance that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 60 days following
completion of a merger or acquisition transaction; and the like.
As part of the Company's investigation, the Company's executive officers and
directors may meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be available
for consideration by the Company could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of penny stocks.
The regulations would affect, and possibly impair, any market that might develop
in the Company's securities until such time as they qualify for listing on
NASDAQ or on an exchange which would make them exempt from applicability of the
penny stock regulations. See Risk Factors Regulation of Penny Stocks.
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current stockholders,
acquisition candidates which have long-term plans for raising capital through
public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates, which have a need for an immediate cash infusion, are
not likely to find a potential business combination with the Company to be an
attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company may participate in a
business opportunity. Specific business opportunities will be reviewed as well
as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of the review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
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Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders of the
Company most likely will not have control of a majority of the voting stock of
the Company following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called tax free reorganization under the
Internal Revenue Code of 1986 as amended, depends upon the issuance to the
stockholders of the acquired Company of a controlling interest (i.e., 80% or
more) of the common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other tax free provisions provided under the Internal
Revenue Code, the Company's current stockholders would retain in the aggregate
20% or less of the total issued and outstanding shares. This could result in
substantial additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a controlling interest in the Company by the current officers, directors and
principal stockholders. See Description of Business General.
It is anticipated that any new securities issued in any reorganization would be
issued in reliance upon one or more exemptions from registration under
applicable federal and state securities laws to the extent that such exemptions
are available. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either at the
time the transaction is consummated or under certain conditions at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
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As a general matter, the Company anticipates that it, and/or its principal
stockholders will enter into a letter of intent with the management, principals
or owners of a prospective business opportunity prior to signing a binding
agreement. Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind any of the parties to consummate the transaction.
Execution of a letter of intent will by no means indicate that consummation of
an acquisition is probable. Neither the Company nor any of the other parties to
the letter of intent will be bound to consummate the acquisition unless and
until a definitive agreement is executed. Even after a definitive agreement is
executed, it is possible that the acquisition would not be consummated should
any party elect to exercise any right provided in the agreement to terminate it
on specific grounds.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs incurred in the related investigation would not be recoverable. Moreover,
because many providers of goods and services require compensation at the time or
soon after the goods and services are provided, the inability of the Company to
pay until an indeterminate future time may make it impossible to produce goods
and services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing, trading or
selling the securities of such business. The Company does not, however, intend
to engage primarily in such activities. Specifically, the Company intends to
conduct its activities so as to avoid being classified as an investment Company
under the Investment Company Act of 1940 (the Investment Act), and therefore to
avoid application of the costly and restrictive registration and other
provisions of the Investment Act, and the regulations promulgated thereunder.
The Company's plan of business may involve changes in its capital structure,
management, control and business, especially if it consummates the
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment Company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive business combination opportunities. The competition may in
part come from business development companies, venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
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these types of organizations are likely to be in a better position than the
Company to obtain access to attractive business acquisition candidates either
because they have greater experience, resources and managerial capabilities than
the Company, because they are able to offer immediate access to limited amounts
of cash, or for a variety of other reasons. The Company also will experience
competition from other public companies with similar business purposes, some of
which may also have funds available for use by an acquisition candidate.
Administrative Offices
The Company currently maintains a mailing address at 211 West Wall, Midland,
Texas 79701. The Company's telephone number there is (915) 682-1761. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address.
Employees
The Company is in the development stage and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities.
Risk Factors
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Conflicts of Interest. Certain conflicts of interest exist between the Company
and its officers and directors. They have other business interests to which they
currently devote attention, and are expected to continue to do so. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of judgement in a manner which is consistent with their fiduciary duties to the
Company. See Management, and Conflicts of Interest.
It is anticipated that the Company's principal shareholders may actively
negotiate or otherwise consent to the purchase of a portion of their common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's principal shareholders may consider
their own personal pecuniary benefit rather than the best interest of other
Company shareholders. Depending upon the nature of a proposed transaction,
Company shareholders other than the principal shareholders may not be afforded
the opportunity to approve or consent to a particular transaction. See Conflicts
of Interest.
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Possible Need for Additional Financing. The Company has very limited funds, and
such funds, may not be adequate to take advantage of any available business
opportunities. Even if the Company's currently available funds prove to be
sufficient to pay for its operations until it is able to acquire an interest in,
or complete a transaction with, a business opportunity, such funds will clearly
not be sufficient to enable it to exploit the opportunity. Thus, the ultimate
success of the Company will depend, in part, upon its availability to raise
additional capital. In the event that the Company requires modest amounts of
additional capital to fund its operations until it is able to complete a
business acquisition or transaction, such funds, are expected to be provided by
the principal shareholders. However, the Company has not investigated the
availability, source, or terms that might govern the acquisition of the
additional capital which is expected to be required in order to exploit a
business opportunity, and will not do so until it has determined the level of
need for such additional financing. There is no assurance that additional
capital will be available from any source or, if available, that it can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
Regulations of Penny Stocks. The Company's securities, when available for
trading will be subject to a Securities and Exchange Commission rule that impose
special sales practice requirements upon broker-dealers who sell such securities
to persons other than established customers or accredited investors. For purpose
of the rule, the phrase accredited investor means, in general terms,
institutions with assets in excess of $5,000,000, or individuals having a net
worth in excess of $1,000,000 or having an annual income that exceeds $200,000
(or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker dealer must make special
suitability determination for the purchaser and receive the purchasers written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers of the Company's securities and also may
affect the ability of purchasers of the Company's securities to sell such
securities in any market that might develop therefor.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate penny stocks. Such rules include Rule 3a51-1 under the
Securities Act of 1933, an Rules 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and
15g-7 under the Securities Exchange Act of 1934, as amended. Because the
securities of the Company may constitute penny stocks within the meaning of the
rules, the rules would apply to the Company and to its securities. The rules may
further affect the ability of the Company's shareholders to sell their shares in
any public market, which might develop.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years form patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) boiler room practices involving high-pressure sales tactics and
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unrealistic price projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differential and markups by selling broker-dealers; and (v)
the wholesale dumping of the same securities by promoters and broker dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns form being established with respect to the
Company's securities.
No Operating History
The Company has no operating history, revenues from operations, or assets since
December 31, 1989. The Company faces all of the risks of a new business and the
special risks inherent in the investigation, acquisition, or involvement in a
new business opportunity. The Company must be regarded as a new or start-up
venture with all of the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.
No Assurance of Success or Profitability. There is no assurance that the Company
will acquire a favorable business opportunity. Even if the Company should become
involved in a business opportunity, there is no assurance that it will generate
revenues or profits, or that the market price of the Company's outstanding
shares will be increased thereby.
Possible Business Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity. As a result, it is only able to make general disclosures concerning
the risks and hazards of acquiring a business opportunity, rather than providing
disclosure with respect to specific risks and hazards relating to a particular
business opportunity. As a general matter, prospective investors can expect any
potential business opportunity to be quite risky. See Item 1 Description of
Business.
Type of Business Acquired. The type of business to be acquired may be one that
desires to avoid effecting its own public offering an the accompanying expense,
delays, uncertainties, and federal and state requirements which purport to
protect investors. Because of the Company's limited capital, it is more likely
than not that any acquisition by the Company will involve other parties whose
primary interest is the acquisition of control of a publicly traded Company.
Moreover, any business opportunity acquired may be currently unprofitable or
present other negative factors.
14
<PAGE>
Impracticability of Exhaustive Investigation. The Company's limited funds and
lack of full-time management will make it impracticable to conduct a complete
and exhaustive investigation and analysis of a business opportunity before the
Company commits its capital or other resources thereto. Management decisions,
therefore, will likely be made without detailed feasibility studies, independent
analysis, market surveys and the like which, if the Company had more funds
available to it, would be desirable. The Company will be particularly dependent
in making decisions upon information provided by the promoter, owner, sponsor,
or others associated with the business opportunity seeking the Company's
participation. A significant portion of the Company's available funds may be
expended for investigative expenses and other expenses related to preliminary
aspects of completing an acquisition transaction, whether or not any business
opportunity investigated is eventually acquired.
Lack of Diversification. Because of the limited financial resources that the
Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
Need for Audited Financial Statements. The Company will require audited
financial statements from any business that it proposes to acquire. Since the
Company will be subject to the reporting provisions of the Securities Exchange
Act of 1934, as amended (the Exchange Act), it will be required to include
audited financial statements in its periodical reports for any existing business
it may acquire. In addition, the lack of audited financial statements would
prevent the securities of the Company from becoming eligible for listing on
NASDAQ, the automated quotation system sponsored by the Association of
Securities Dealers, Inc., or on any existing stock exchange. Moreover, the lack
of such financial statements is likely to discourage broker-dealers from
becoming or continuing to serve as market makers in the securities of the
Company. Finally, without audited financial statements, the Company would almost
certainly be unable to offer securities under a registration statement pursuant
to the Securities Act of 1933, and the ability of the Company to raise capital
would be significantly limited. Consequently, acquisitions prospects that do not
have, or are unable to provide reasonable assurances that they will be able to
obtain, the required audited statements would not be considered by the Company
to be appropriate for acquisition.
Other Regulation. An acquisition made by the Company may be of a business that
is subject to regulation or licensing by federal, state, or local authorities.
Compliance with such regulations and licensing can be expected to be a
time-consuming, expensive process and may limit other investment opportunities
of the Company.
15
<PAGE>
Dependence upon Management; Limited Participation of Management. The Company
will be entirely dependant upon the experience of its officers and directors in
seeking, investigating, and acquiring a business and in making decisions
regarding the Company's operations. It is possible that, from time to time, the
inability of such persons to devote their full time attention to the business of
the Company could result in a delay in progress toward implementing its business
plan. See Management. Because investors will not be able to evaluate the merits
of possible future business acquisitions by the Company, they should critically
assess the information concerning the Company's officers and directors.
Lack of Continuity in Management. The Company does not have an employment
agreement with any of its officers or directors, and as a result, there is no
assurance that they will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
officers and directors of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
Indemnification of Officers and Directors. The Company's By-Laws provide for the
indemnification of its, directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company, which it will be unable to recoup.
Dependence upon Outside Advisors. To supplement the business experience of its
officers and directors, the Company may be required to employ accountants,
technical experts, appraisers, attorneys, or other consultants or advisors. The
selection of any such advisors will, be made by the Company's officers, without
any input by shareholders. Furthermore, it is anticipated that such persons may
be engaged on an as needed basis without a continuing fiduciary or other
obligation to the Company. In the event the officers of the Company consider it
necessary to hire outside advisors, they may elect to hire persons who are
affiliates, if those affiliates are able to provide the required services.
Leveraged Transactions. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e. the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
16
<PAGE>
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
Competition. The search for potentially profitable business opportunities is
intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
No Foreseeable Dividends. The Company has not paid dividends on its Common Stock
and does not anticipate paying such dividends in the foreseeable future.
Loss of Control by Present Management and Stockholders. In conjunction with
completion of a business acquisition, it is anticipated that the Company will
issue an amount of the Company's authorized but unissued Common Stock that
represents the greater majority of the voting power and equity of the Company.
In conjunction with such a transaction, the Company's current Officers,
Directors, and principal shareholders could also sell all, or a portion, of
their controlling block of stock to the acquired Company's stockholders. Such a
transaction would result in a greatly reduced percentage of ownership of the
Company by its current shareholders. As a result, the acquired Company's
stockholders would control the Company, and it is likely that they would replace
the Company's management with persons who are unknown at this time.
No Public Market Exists. There is currently no public market for the Company's
common stock, and no assurance can be given that a market will develop or that a
shareholder will ever be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this Risk Factors section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchasers finds a broker
willing to effect a transaction in theses securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many leading institutions will not permit
the use of such securities as collateral for any loans.
Rule 144 Sales. Those shares held by management (8,548,899 shares) of the
outstanding shares of Common Stock that are restricted securities within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable state
securities laws. Rule 144 provides in essence that a person who has held
17
<PAGE>
restricted securities for a prescribed period, may under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1.0% of a Company's outstanding common stock or the
average weekly trading volume during the four calendar weeks prior to sale.
There is no limit on the amount of restricted securities that may be sold by a
non-affiliate after, the restricted securities have been held by the owner, for
a period of at least two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
common stock of present shareholders, may have a depressive effect upon the
price of the Common Stock in any market that may develop.
Blue Sky Consideration. Because the securities registered hereunder have not
been registered for resale under the Blue Sky laws of any state, the holders of
such shares and persons who desire to purchase them in any trading market that
might develop in the future, should be aware, that there may be significant
state Blue Sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Accordingly, investors
should consider the secondary market for the Company's securities to be a
limited one.
Item 2. Managements Discussion and Analysis or Plan of Operations
------------------------------------------------------------------
Liquidity and Capital Resource
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholders equity.
The Company intends to seek to carry out its plan of business as discussed
herein. In order to do so, it will require additional capital to pay ongoing
expenses, including particularly legal and accounting fees incurred in
conjunction with preparation and filing of this registration statement on form
10-SB, and in conjunction with future compliance with its on-going reporting
obligations.
Results of Operations
The Company has engaged in no significant operations other than organizational
activities and preparation for registration of its securities under the
Securities Exchange Act of 1934, as amended since August 31, 1989.
18
<PAGE>
For the current fiscal year, the Company anticipates incurring a loss as a
result of expenses associated with registration and compliance with reporting
obligations under the Securities Exchange Act of 1934, and expenses associated
with locating and evaluating acquisition candidates. The Company anticipates
that until a business combination is completed with an acquisition candidate, it
will not generate revenues. The Company may also continue to operate at a loss
after completing a business combination, depending upon the performance of the
acquired business.
Need for Additional Financing
It is the intent of management and significant stockholders to provide
sufficient working capital to preserve the integrity of the corporate entity,
however, there are no commitments to provide additional funds have been made by
management or other stockholders, and the Company has no plans, proposals,
arrangements or understandings with respect to the sale or issuance of
additional securities prior to the location of a merger or acquisition
candidate. Accordingly, there can be no assurance that any additional funds will
be available to the Company to allow it to cover its expenses. Notwithstanding
the forgoing, to the extent that additional funds are required, the Company
anticipates receiving such funds in the form of advancements from current
shareholders without issuance of additional shares or other securities, or
through the private placement of restricted securities rather than through a
public offering. The Company does not currently contemplate making a Regulation
S offering.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash. For information as to the
Company's policy in regard to payment for consulting services, see Certain
Relationships and Transactions.
Year 2000 Compliance Issues
---------------------------
None of the Company's information systems or non-information technology systems
were affected by the passage into the year 2000. Nevertheless, we have no
assurance that we will not experience isolated system failures as a result of
customer or third party technical problems.
Item 3. Description of Property
-------------------------------
The Company currently maintains a mailing address at 211 West Wall , Midland,
Texas 79701 and pays no rent for the use of this mailing address. The Company
19
<PAGE>
does not believe that it will need to maintain an office at any time in the
foreseeable future in order to carry out its plan of operations described
herein. The Company's telephone number is (915) 682-1761.
Item 4. Security ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
The following table sets forth, as of the date of this Registration Statement,
the number of shares of Common Stock owned of record and beneficially by
executive officers, directors and persons who hold 5% or more of the outstanding
Common Stock of the Company. Also included are the shares held by all executive
officers and directors as a group.
Name and address Number of Shares % of Class Owned
Beneficially Owned
Glenn A. Little 8,548,899 85.5%
211 West Wall
Midland, Texas 79701
Matthew Blair
200 West Wall
Suite 104
Midland, Texas 79701 0 0
All Directors and 8,548,899 85.5%
Executive Officers (2 persons)
Item 5. Directors, Executive Officers, Promoters, and Control Persons
----------------------------------------------------------------------
The directors and executive officers serving the Company are as follows:
Name Age Position Held and Tenure
---- --- ------------------------
Glenn Little 47 President, Director
Matthew Blair 43 Secretary, Treasurer Director
20
<PAGE>
The directors named above will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's affairs on an
as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely will fall within the range of five to ten hours per month. There are no
agreements or understandings for any officer or director to resign at the
request of another person, and none of the officers or directors are acting on
behalf of, or will act at the direction of, any other person.
Biographical Information
Glenn A. Little, is a graduate of The University of Florida, Gainesville
(Bachelor of Science in Business Administration) and the American Graduate
School of International Management (Master International Management) and has
been the principal of Little and Company Investment Securities (LITCO), a
Securities Broker/Dealer with offices in Midland, Texas since 1979. Mr. Little
currently serves as an officer of other inactive public corporations having the
same business purpose as the Company.
Before founding LITCO Mr. Little was a stockbroker with Howard, Weil, Labouisse
Friedrich in New Orleans and Midland and worked for the First National Bank of
Commerce in New Orleans, Louisiana.
Matthew Blair was formerly a solo practitioner of law in Midland, Texas and is
presently a Title IV-D Master in Midland County Texas. Before opening his
practice he served in the Legal Department of the Federal Deposit Insurance
Corporation (FDIC), Midland, Texas where he gained exposure to corporate
structures and debt workouts. His employment before the FDIC appointment was
with Texas American Energy and Exxon Corporation. Mr. Blair received a Bachelor
of Arts in Government from The University of Texas at Austin (1975) and Juris
Doctor from Texas Tech University School of Law (1979). He is licensed in every
state court in Texas, United States District Court (Texas) and in The United
States Supreme Court.
21
<PAGE>
Indemnification of Officers and Directors.
1) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit and proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as director r, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys'; fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2) A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action claim,
suit or proceeding referred to above, the corporation shall indemnify him
against expenses, including attorneys fees, actually and reasonably incurred by
him in connection with the defense.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
Conflicts of Interest
None of the officers of the Company will devote more than a portion of his time
to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of the officers
other business and investment activities. Such conflicts may require that the
Company attempt to employ additional personnel. There is no assurance that the
services of such persons will be available or that they can be obtained upon
terms favorable to the Company.
22
<PAGE>
The officers, directors and principal shareholders of the Company may actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium may be paid by the purchaser in
conjunction with any sale of shares by the Company's officers, directors and
principal shareholders made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
paid to members of Company management to acquire their shares creates a conflict
of interest for them and may compromise their state law fiduciary duties to the
Company's other shareholders. In making any such sale, members of Company
management may consider their own personal pecuniary benefit rather than the
best interests of the Company and the Company's other shareholders, and the
other shareholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by members
of Company management.
Item 6. Executive Compensation
-------------------------------
No officer or director has received any compensation from the Company. Until the
Company acquires additional capital, it is not anticipated that any officer or
director will receive compensation from the Company other than reimbursement for
out-of-pocket expenses incurred on behalf of the Company. See Certain
Relationships and Related Transactions. The Company has no stock option,
retirement, pension, or profit-sharing programs for the benefit of directors,
officers or other employees, but the Board of Directors may recommend adoption
of one or more such programs in the future.
Item 7. Description of Officers, Directors, Promoters, and Affiliates
----------------------------------------------------------------------
No officer, director, promoter, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's fee that
may be paid to a third party for consulting services to assist management in
evaluating a prospective business opportunity would be paid in stock rather than
in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether, or in what amount, such
stock issuance might be made.
It is not currently anticipated that any salary, consulting fee, or finder's fee
shall be paid to any of the Company's directors or executive officers, or to any
other affiliate of the Company except as described under Executive Compensation
above.
The Company does not maintain an office, but it does maintain a mailing address
at 211 West Wall, Midland, Texas 79701, for which it pays no rent, and for which
it does not anticipate paying rent in the future. It is likely that the Company
will not establish an office until it has completed a business acquisition
transaction, but it is not possible to predict what arrangements will actually
be made with respect to future office facilities.
23
<PAGE>
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Item 8. Description of Securities
----------------------------------
Common Stock
The Company's Articles of incorporation authorize the issuance of 100,000,000
shares of Common Stock. Each record holder of Common Stock is entitled to one
vote for each share held on all matters properly submitted to the stockholders
for their vote. The Articles of Incorporation do not permit cumulative voting
for the election of directors.
Holders of outstanding shares of Common Stock are entitled to such dividends as
may be declared from time to time by the Board of Directors out of legally
available funds; and, in the event of liquidation, dissolution or winding up of
the affairs of the Company, holders are entitled to receive, ratably, the net
assets of the Company available to stockholders after distribution is made to
the preferred stockholders, if any, who are given preferred rights upon
liquidation. Holders of outstanding shares of Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding shares of
Common Stock are, and all unissued shares when offered and sold will be, duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
additional shares of the Company's Common Stock are issued, the relative
interests of then existing stockholders may be diluted.
Transfer Agent
The transfer agent is General Securities Transfer Agency located at 3614 Calle
del Sol NE, Albuquerqe, New Mexico 87110. The telephone number is (505)
265-6658.
Reports to Stockholders
The Company plans to furnish it's stockholders with an annual report for each
fiscal year ending December 31 containing financial statements audited by its
independent certified public accountants. In the event the Company enters into a
business combination with another Company, it is the present intention of
management to continue furnishing annual reports to stockholders. Additionally,
the Company may, in its sole discretion, issue unaudited quarterly or other
interim reports to its stockholders when it deems appropriate. The Company
intends to comply with the periodic reporting requirements of the Securities
Exchange Act of 1934.
24
<PAGE>
Part II
Item 1. Market Price and Dividends on the Registrant's Common equity and other
Shareholder Matters
--------------------------------------------------------------------------------
The stock does not trade on any exchange or the OTC market. There is no known
public market for this security. As of May 15, 2000 the Company had 353
shareholders of record. No dividends have been paid to date and the Company's
Board of directors does not anticipate paying dividends in the foreseeable
future.
Item 2. Legal Proceedings
--------------------------
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
Item 3. Changes in and Disagreements with Accountants
------------------------------------------------------
The Company has had no changes in or disagreements with accountants on
accounting or financial disclosures.
Item 4. Recent sales of Unregistered Securities
------------------------------------------------
There have been no sales of unregistered securities in the past three years.
Item 5. Indemnification of Directors and Officers
--------------------------------------------------
The Bylaws of the Company, provide that the Company will indemnify its officers
and directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings where the officer or director acted in good faith
and in a manner he reasonably believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, absent a finding
of negligence or misconduct in the performance of duty.
Part F/S
The Financial Statements of the Company required by regulation S-B commence on
page F-1 hereof and are incorporated herein by reference.
<PAGE>
Eldorado Financial Group, Inc.
Contents
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets
as of September 30, 1999, December 31, 1998 and 1997 F-4
Statements of Operations
for the nine months ended September 30, 1999 and
the years ended December 31, 1998 and 1997 F-5
Statement of Changes in Shareholders' Equity
for the nine months ended September 30, 1999 and
for the years ended December 31, 1998 and 1997 F-6
Statements of Cash Flows
for the nine months ended September 30, 1999 and
for the years ended December 31, 1998 and 1997 F-7
Notes to Financial Statements F-8
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Eldorado Financial Group, Inc.
We have audited the accompanying balance sheets of Eldorado Financial Group,
Inc. (a Florida corporation) as of September 30, 1999, December 31, 1998 and
1997 and the related statements of operations and comprehensive income, changes
in shareholders' equity and cash flows for the nine months and each of the two
years then ended, respectively. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eldorado Financial Group, Inc.
as of September 30, 1999, December 31, 1998 and 1997 and the related statements
of operations and comprehensive income, changes in shareholders' equity and cash
flows for the nine months and each of the two years then ended, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note A. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
/s/ S. W. HATFIELD, CPA
-------------------
S. W. HATFIELD, CPA
Dallas, Texas
October 27, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
Eldorado Financial Group, Inc.
Balance Sheets
September 30, 1999, December 31, 1998 and 1997
September 30, December 31, December 31,
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash on hand and in bank $ -- $ -- $ --
----------- ----------- -----------
Total Assets $ -- $ -- $ --
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Current liabilities
Accounts payable - trade $ 2,475 $ 1,602 $ 967
----------- ----------- -----------
Total Liabilities 2,475 1,602 967
----------- ----------- -----------
Commitments and contingencies
Shareholders' equity (deficit)
Common stock - $0.001 par value
100,000,000 shares authorized
10,000,000 shares issued and
outstanding, respectively 10,000 10,000 10,000
Additional paid-in capital 1,996,483 1,996,483 1,996,483
Accumulated deficit (2,008,958) (2,008,085) (2,007,450)
----------- ----------- -----------
Total Shareholders' Equity (Deficit) (2,475) (1,602) (967)
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements. F-4
<PAGE>
<TABLE>
<CAPTION>
Eldorado Financial Group, Inc.
Statements of Operations and Comprehensive Income
Nine months ended September 30, 1999 and
Years ended December 31, 1998 and 1997
Nine months Year Year
ended ended ended
September 30, December 31 December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
------------ ------------ ------------
Expenses
General and administrative expenses 873 635 707
------------ ------------ ------------
Total operating expenses 873 635 707
------------ ------------ ------------
Loss from Operations (873) (635) (707)
Provision for Income Taxes -- -- --
------------ ------------ ------------
Net Loss (873) (635) (707)
Other Comprehensive Income -- -- --
------------ ------------ ------------
Comprehensive Income $ (873) $ (635) $ (707)
============ ============ ============
Earnings per share of common stock
outstanding computed on net income
- basic and fully diluted nil nil nil
=== === ===
Weighted-average number of shares
outstanding - basic and fully diluted 10,000,000 10,000,000 10,000,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements. F-5
<PAGE>
<TABLE>
<CAPTION>
Eldorado Financial Group, Inc.
Statement of Changes in Shareholders' Equity
Nine months ended September 30, 1999 and
Years ended December 31, 1998 and 1997
Additional
Common Stock paid-in Accumulated
Shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1997 10,000,000 $ 10,000 $ 1,996,483 $(2,006,743) $ (260)
Net loss for the year -- -- -- (707) (707)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1997 10,000,000 10,000 1,996,483 (2,007,450) (967)
Net loss for the year -- -- -- (635) (635)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1998 10,000,000 10,000 1,996,483 (2,008,085) (1,602)
Net loss for the nine months -- -- -- (873) (873)
----------- ----------- ----------- ----------- -----------
Balances at
September 30, 1999 10,000,000 $ 10,000 $ 1,996,483 $(2,008,958) $ (2,475)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements. F-6
<PAGE>
<TABLE>
<CAPTION>
Eldorado Financial Group, Inc.
Statements of Cash Flows
Nine months ended September 30, 1999 and
Years ended December 31, 1998 and 1997
Nine months Year Year
ended ended ended
September 30, December 31, December 31,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ (873) $ (635) $ (707)
Adjustments to reconcile net loss
to net cash provided by operating activities
Increase (Decrease) in
Accounts payable - trade 873 635 707
------- ------- -------
Net cash used in operating activities -- -- --
------- ------- -------
Cash Flows from Investing Activities -- -- --
------- ------- -------
Cash Flows from Financing Activities
Proceeds from private placement
of common stock -- -- --
------- ------- -------
Net cash provided by financing activities -- -- --
------- ------- -------
Increase (Decrease) in Cash -- -- --
Cash at beginning of period -- -- --
------- ------- -------
Cash at end of period $ -- $ -- $ --
======= ======= =======
Supplemental Disclosure of Interest and Income Taxes Paid
Interest paid for the year $ -- $ -- $ --
======= ======= =======
Income taxes paid for the year $ -- $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements. F-7
<PAGE>
Eldorado Financial Group, Inc.
Notes to Financial Statements
Note A - Organization and Description of Business
Eldorado Financial Group, Inc. (Company) was incorporated under the laws of the
State of Florida on February 26, 1980 as Eldorado Gold & Exploration, Inc. On
January 13, 1987, the Company amended its Articles of Incorporation to change
the corporate name to Eldorado Financial Group, Inc. and modified the Company's
capital structure to allow for the issuance of up to 100,000,000 shares of
common stock at $0.001 par value per share.
>From inception through 1982, the Company conducted gold exploration efforts in
the Country of Surinam in South America through a Governmentally granted
concession. During 1982, the Company ceased all operations in Surinam due to
political instability.
In 1983, the Company issued an aggregate 500,000 shares of common stock in
exchange for 100.0% of the issued and outstanding common stock and 50,000 shares
of preferred stock and payment of an approximate $224,000 note payable to the
controlling shareholder of Atlantic Medical Services, Inc. The Company
discontinued all operations of Atlantic Medical Services, Inc. during 1985.
In 1983, the Company issued an aggregate 120,000 shares of common stock for
100.0% of the issued and outstanding common stock of Datalink Systems, Inc.
(Datalink). Subsequent public offerings and exercise of outstanding warrants of
Datalink during 1985 and 1986 reduced the Company's holdings in Datalink from
100.0% to approximately 65.0%. Datalink ceased all operations as of December 31,
1989 and the Company distributed its 100.0% of its holdings in Datalink, at the
then recorded carrying value, to a former officer of the Company, effective
August 31, 1995, as compensation for services performed and amounts paid for the
maintenance of the corporate entity during its dormancy.
In December 1995, the Company issued a total of 6,602,119 shares of restricted,
unregistered common stock to a controlling shareholder for payments made on
behalf of the Company to support the corporate entity during its dormant phase.
This transaction was valued at approximately $15,000, which approximates the
fair value of the amounts paid and/or services provided.
The Company has effectively had no operations, assets or liabilities since its
fiscal year ended December 31, 1989. Accordingly, the Company is dependent upon
management and/or significant shareholders to provide sufficient working capital
to preserve the integrity of the corporate entity at this time. It is the intent
of management and significant shareholders to provide sufficient working capital
necessary to support and preserve the integrity of the corporate entity.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
Eldorado Financial Group, Inc.
Notes to Financial Statements - Continued
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
2. Loss per share
--------------
Loss per share of common stock is computed using the weighted-average
number of shares outstanding during each respective period presented. As of
September 30, 1999, December 31, 1998 and 1997, respectively, the Company
has no outstanding stock warrants, options or convertible securities which
could be considered as dilutive for purposes of the loss per share
calculation.
F-9
<PAGE>
<TABLE>
<CAPTION>
Eldorado Financial Group, Inc.
Unaudited Balance Sheets
December 31, 1999 and March 31, 2000
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
------
Current assets
Cash on hand and in bank $ -- $ --
----------- -----------
Total Assets $ -- $ --
=========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
-----------------------------------
Liabilities
Current liabilities
Accounts payable - trade $ 2,475 $ 2,475
----------- -----------
Total Liabilities 2,475 2,475
----------- -----------
Commitments and contingencies
Shareholders equity (deficit)
Common stock - $0.001 par value
100,000,000 shares authorized
10,000,000 shares issued and
outstanding 10,000 10,000
Additional paid-in capital 1,996,483 1,996,483
Accumulated deficit (2,008,958) (2,008,958)
----------- -----------
Total Shareholders Equity (Deficit) (2,475) (2,475)
----------- -----------
Total Liabilities and Shareholders Equity $ -- $ --
----------- -----------
</TABLE>
F-1
<PAGE>
Eldorado Financial Group, Inc.
Statements of Operations and Comprehensive Income
Six months ended March 31, 2000 and Three months ended December 31, 1999
Six months Three months
March 31, 2000 December 31, 1999
Revenues $ -- $ --
----------- -----------
Expenses
General and administrative expenses 0 0
----------- -----------
Total operating expenses 0 0
----------- -----------
Loss from Operations 0 0
Provision for Income Taxes 0 0
Net Loss 0 0
----------- -----------
Other Comprehensive Income 0 0
Comprehensive Income $ 0 $ 0
Earnings per share of common stock
outstanding computed on net income
- basic and fully diluted nil nil
=== ===
Weighted-average number of shares
outstanding - basic and fully diluted 10,000,000 10,000,000
=========== ===========
F-2
<PAGE>
Part III
--------
Item 1&2 Index to Exhibits and Description of Exhibits
Exhibit No. Description
3.1 Articles of Incorporation
3.2 By-Laws
Item 2(a) Articles of Incorporation.
Item 2(b) By-laws
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.
Eldorado Financial Group, Inc.
Date: May 15, 2000
/s/ Glenn Little
------------------
Glenn Little
