U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10 - KSB
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-10999
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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 (I.R.S. Employee Identification No.)
Incorporation or Organization)
211 West Wall Street, Midland, Texas 79701
(Address of principal executive offices) (zip code)
(915) 682-1761
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(Company's telephone number, including area code)
Securities registered under Section 12 (b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock $.001 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
[ ]
The issuer's revenues for the fiscal year ended December 31, 2000, was $0.
As of December 31, 2000, the aggregate market value of the Company's common
Stock was not determinable as the stock is not trading.
As of January 4, 2001, there were 9,166,515 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes No X
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TABLE OF CONTENTS
Page Number
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Part I
Item 1 - Description of Business 3
Item 2 - Description of Property 13
Item 3 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of Security Holders 14
Part II
Item 5 - Market for Company's Common Stock and Related
Stockholders Matters 14
Item 6 - Management's Discussion and Analysis or Plan of Operation 14
Item 7 - Index to Financial Statements F-1
Item 8 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 18
Part III
Item 9 - Officers and Directors 18
Item 10 - Executive Compensation 19
Item 11 - Security Ownership of Certain Beneficial Owners And
Management 19
Item 12 - Certain Relationships and Related Transactions 19
Item 13 - Exhibits and Reports on 8-K 20
Signatures 20
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Caution Regarding Forward-Looking Information
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This annual report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate",
"believe", "estimate", "expect" and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
PART I
Item 1 - Description of Business
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.
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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.
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.
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.
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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
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;
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.
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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
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.
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.
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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.
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.
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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
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
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.
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.
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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
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.
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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.
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.
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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
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
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.
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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 - Description of Property
The Company has no property and 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 or use of office
facilities.
Item 3 - Legal Proceedings
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
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Item 4 - Submission of Matters to a Vote of Security Holders
There was no shareholder meeting and no matters were submitted to the security
holders for a vote during the fiscal year ended December 31, 2000.
PART II
Item 5 - Market for Company's Common Stock and Related Stockholder Matters
The stock does not trade on any exchange or the OTC market. There is no known
public market for this security. No dividends have been paid to date and the
Company's Board of directors does not anticipate paying dividends in the
foreseeable future.
As of December 31, 2000, there were 9,166,515 shares of $.001 par value common
stock (the "Common Stock") of the Company outstanding and owned by approximately
353 shareholders of record.
On December 26, 2000, the Company cancelled an aggregate total of 833,485 shares
of its issued and outstanding common stock. Current management, upon extensive
research into transactions approved by former officers and or controlling
shareholders, determined that all of such shares had been issued improperly,
inasmuch as no corporate authorization of the issuances existed and no
consideration was received by the Company for such shares.
Specifically, the cancellations were as follows:
400,000 shares were purchased by Glenn Little from a former officer of
the Company for a cash consideration of $15,000 and returned to the
Company's treasury with no consideration received by Glenn Little from
the Company.
403,485 shares issued to former officers, directors and individuals.
These shares were issued improperly as (A) at the time of such
issuance, the corporate charter of the Company had been revoked by the
Secretary of State of Florida for failure to make required filings and
to pay associated fees and (B) no consideration was received by the
Company for such shares. Many of the certificates representing these
shares were never delivered and were in the possession of the transfer
agent.
30,000 shares issued to a company in anticipation of fees due for
investment banking activities. These shares were issued improperly as
(A) there was no action by the Company's Board of Directors authorizing
the issuance of any of such shares, and (2) at the time of such
issuance, the corporate charter of the Company had been revoked by the
Secretary of State of Florida for failure to make required filings and
to pay associated fees.
As a result of the cancellation of these 833,485 shares of Company common stock,
the Company currently has 9,166,515 shares outstanding. The effect in the
accompanying financial statements was to restate the par value of the issued and
outstanding shares with a corresponding offset to the additional paid-in capital
account. There was no impact on the earnings of the Company as a result of this
event.
Item 6 - Management's Discussion and Analysis or Plan of Operation
The current management group intends to actively to seek, investigate and, if
warranted, acquire an interest in one or more business opportunities or
ventures. As of the date hereof, the Company has divested itself of all
operating assets and has no business opportunities or ventures under
contemplation for acquisition but proposes to investigate potential
opportunities in the form of investors or entrepreneurs with a concept which has
not yet been placed in operation, or in the form of firms which are developing
companies in need of limited additional funds for expansion into new products or
services, and which are seeking to develop a new product or service. The Company
may also seek out established businesses which may be experiencing financial or
operational difficulties and are in need of the limited additional capital the
Company could provide. The Company anticipates that it will seek to merge with
an existing business. After the merger, the surviving entity will be the
Company; however, management from the acquired entity will in all likelihood
operate the Company. There is, however, a remote possibility that the Company
may seek to acquire and operate an ongoing business, in which case the existing
management might be retained. Due to the absence of capital available for
investment by the Company, the types of businesses seeking to be acquired by the
Company will no doubt be smaller and higher risks of businesses. In all
likelihood, a business opportunity will involve the acquisition of or merger
with a corporation which does not need additional cash but which desires to
establish a public trading market for its Common Stock. Accordingly, the
Company's ability to acquire any business of substance may be extremely limited.
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The Company experienced a change in control due a change in management due to
appointments to the Board of Directors and subsequent election of officers. It
is the intent of management to continue seeking a suitable situation for merger
or acquisition.
Further, the Company is dependent upon management and/or significant
shareholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. 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.
Operation of the Company
The Company intends to search throughout the United States, Canada and Europe
for a merger/acquisition candidate, however, because of lack of capital, the
Company believes that the merger/acquisition candidate will be conducting
business within a limited geographical area. In the event of a consummation of a
merger or acquisition with a suitable candidate, it is highly probable that the
Company's principal offices will be relocated to the existing office of the
merger or acquisition candidate. Further the Company may also have offices at
such other places as the Board of Directors may from time to time determine or
the future business, subsequent to the consummation of a merger or acquisition
of the Company may require.
The Officers and Directors will personally seek acquisition/merger candidates
and/or orally contact individuals or broker(s)/dealer(s) and advise them of the
availability of the Company as an acquisition candidate. The Officers will
review material furnished them by the proposed merger/acquisition candidate and
decide if a merger/acquisition is in the best interests of the Company and its
shareholders. The proposed merger/acquisition will then be submitted to all
stockholders for approval if required by Nevada statue.
The Company may also employ outside consultants, however, no such consultants
will be engaged until a merger/acquisition candidate has been targeted by the
Company. Management believes that it is impossible to consider the specific
criteria that will be used to hire consultants; however, several of the criteria
may include the consultant's relevant experience, the services to be provided,
the term of service required by the Company. Management cannot predict the
probability that management will recommend any specific consultant(s) for future
use. As of the filing of this document, the Company has not had any discussions
with or executed agreements with any outside consultants.
Other than disclosed herein, there are no other plans for accomplishing the
business purpose of the Company.
Selection of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the Officers and Directors of the Company, none of whom is a
professional business analyst and have limited training or experience in
business analysis. Inasmuch as the Company will have no funds available to it in
its search for business opportunities and ventures, the Company will not be able
to expend significant funds on a complete and exhaustive investigation of such
business opportunity. The Company will, however, investigate, to the extent
believed reasonable by Management, such potential business opportunities or
ventures.
As a part of the Company's investigation, the Officers and Directors may meet
personally with management and key personnel of the firm sponsoring the business
opportunity, may visit and inspect plants and facilities, obtain independent
analysis or verification of certain information provided, check references of
management and key personnel, and conduct other reasonable arrangements, to the
extent of the Company's limited financial resources and management and technical
expertise.
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Prior to making a decision to recommend to shareholders participation in a
business opportunity or venture, the Company will generally request that it be
provided with written materials regarding the business opportunity containing
such items as a description of products, services and company history;
management resumes; financial information; available projections with elated
assumptions upon which the projections were based; evidence of existing patents,
trademarks or service marks or rights thereto; present and proposed forms of
compensation to management; a description of transactions between the
prospective entity and its affiliates during relevant periods; a description of
resent and required facilities; an analysis of risks and competitive conditions;
and, other information deemed relevant.
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 costs for accountants, attorneys and others. If a decision is made
not to participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable. Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
to the Company of the costs incurred.
The Company will have unlimited flexibility in seeking, analyzing, and
participating in business opportunities. In its efforts, the Company will
consider the following kinds of factors:
a) Potential for growth, indicated by new technology, anticipated
market expansion or new products,
b) Competitive position as compared to other firms engaged in
similar activities;
c) Strength of the merger/acquisition candidate's management;
d) Capital requirements and anticipated availability of required
funds from future operations, through the sale of additional
securities, through joint ventures or similar arrangements or
from other sources; and
e) Other relevant factors.
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 due to
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 has not had any substantive conversations and is not currently
engaged in substantive discussions related to a proposed merger or acquisition
and, further, is unable to predict when it may identify or 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.
As of December 31, 2000, management has not identified any entity in which a
current officer, director or significant shareholder has a direct or indirect
ownership interest as a potential merger or acquisition candidate. Existing
corporate policy is silent to this situation; however, it is the intent of
management to seek candidates in which current directors, officers and/or
significant shareholders do not have direct or indirect ownership interests.
Further, the consummation of a merger or acquisition transaction may or may not
involve the sale of shares of common stock currently held by members of
management, directors or significant shareholders. The terms and conditions
related to any potential sale of these shares may or may not be made available
to other minority or non- controlling existing shareholders of the Company.
Prior to the consummation of any merger or acquisition, the Company will request
the approval of the existing shareholders if required by Nevada statue.
Accordingly, all shareholders will be provided with the pertinent information
related to the proposed merger or acquisition, including audited financial
statements, concerning the proposed target company of the merger or acquisition.
Additionally, the Company will be subject to all disclosure and reporting
requirements of The Securities and Exchange Commission, including, but not
limited to, the filing of a Form 8-K Current Report for the disclosure of any
pending merger or acquisition and the dissemination of audited financial
statements of the merger or acquisition candidate upon consummation.
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Form of Acquisition
The manner in which the Company participates in an opportunity will depend upon
the nature of the opportunity, the respective needs and desires of the Company
and the promoters of the opportunity, and the relative negotiating strength of
the Company and such promoters. The exact form or structure of the Company's
participation in a business opportunity or venture will be dependent upon the
needs of the particular situation. The Company's participation may be structured
as an asset purchase, a lease, a license, a joint venture, a partnership, a
merger or the acquisition of securities.
As set forth above, the Company may acquire its participation in a business
opportunity through the issuance of Common Stock or other securities in 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
Section 368(a)(1) of the Internal Revenue Code of 1976, as amended, may depend
upon the issuance to the shareholders of the acquired company of at least 80.0%
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, all prior shareholders may, in such circumstances, retain 20.0% or
less of the total issued and outstanding Common Stock. If such a transaction
were available to the Company, it will be necessary to obtain shareholder
approval to effectuate a reverse stock split or to authorize additional shares
of Common Stock prior to completing such acquisition. This could result in
substantial additional dilution to the equity of those who were shareholders of
the Company prior to such reorganization. Further, extreme caution should be
exercised by any investor relying upon any tax benefits in light of any existing
tax laws or any proposed changes thereto. It is possible that no tax benefits
will exist at all. Prospective investors, if any, should consult their own
legal, financial and other business advisors.
In conjunction with a merger with or acquisition of a privately-owned company,
there exists a probability that a change in control will occur upon the
consummation of the merger or acquisition. In order to make such a transaction
feasible, it is highly probable that management will offer a controlling
interest in the Company to any identified merger or acquisition candidate.
The present management and the current shareholders of the Company may not have
control of a majority of the voting shares of the Company following a
reorganization transaction. As part of such a transaction, all or a majority of
the Company's Directors may resign and new Directors may be appointed without
any vote by shareholders.
Present shareholders have not agreed to vote their respective shares of Common
Stock in accordance with the vote of the majority of all non-affiliated future
shareholders of the Company with respect to any business combination.
Not an "Investment Advisor"
The Company is not an "investment advisor" under the Federal Investment Advisers
Act of 1940, which classification would involve a number of negative
considerations. Accordingly, the Company will not furnish or distribute advise,
counsel, publications, writings, analysis or reports to anyone relating to the
purchase or sale of any securities within the language, meaning and intent of
Section 2(a)(11) of the Investment Advisers Act of 1940, 15USC 80b2(a)(11).
Not an "Investment Company"
The Company may become involved in a business opportunity through purchasing or
exchanging the securities of such business. The Company does not intend,
however, to engage primarily in such activities and is not registered as an
"investment company" under the Federal Investment Company Act of 1940. The
Company believes such registration is not required.
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The Company must conduct its activities so as to avoid becoming inadvertently
classified as a transient "investment company" under the Federal Investment
Company Act of 1940, which classification would affect the Company adversely in
a number of respects. Section 3(a) of the Investment Company Act provides the
definition of an "investment company" which excludes an entity which does not
engage primarily in the business of investing, reinvesting or trading in
securities, or which does not engage in the business of investing, owning,
holding or trading "investment securities" (defined as "all securities other
than United States government securities or securities of majority-owned
subsidiaries") the value of which exceeds forty (40.0%) of the value of its
total assets (excluding government securities, cash or cash items). The Company
intends to implement its business plan in a manner which will result in the
availability of this exemption from the definition of "investment company". The
Company proposes to engage solely in seeking an interest in one or more business
opportunities or ventures.
Effective January 14, 1981, the U. S. Securities and Exchange Commission adopted
Rule 3a-2 which deems that an issuer is not engaged in the business of
investing, reinvesting, owning, holding or trading in securities for purposes of
Section 3(a)(1), cited above, if, during a period of time not exceeding one
year, the issuer has a bona fide intent to be engaged primarily, or as soon as
reasonably possible (in any event by the termination of a one year period of
time), in a business other that of investing, reinvesting, owning, holding or
trading in securities and such intent is evidenced by the Company's business
activities and appropriate resolution of the Company's Board of Directors duly
adopted and duly recorded in the minute book of the Company. The Rule 3a-2 "safe
harbor" may not be relied on more than a single time. The Company expects to
have invested or committed all, or substantially all, of the proceeds of this
public offering in the investigation and/or acquisition of a business
opportunity acquisition within a year after completion of the offering and
thereafter to not encounter the possibility of being classified as a transient
investment company.
Item 7 - Index to Financial Statements
The required accompanying financial statements begin on page F-1 of this
document.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
PART III
Item 9 - Officers and Directors
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
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.
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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.
Item 10 - Executive Compensation
There was no compensation paid during the Fiscal year ended December 31, 2000.
None of the Company's current officers or directors receives or has received any
salary from Company during the preceding five years. The Company does not
anticipate entering into employment agreements with any of its officers or
directors in the near future. Directors do not receive compensation for their
services as directors and are not reimbursed for expenses incurred in attending
board meeting.
Item 11 - 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.
% of Class
Name and address Number of Shares Beneficially Owned
---------------- ---------------- ------------------
Glenn A. Little 8,548,899 93.26%
211 West Wall
Midland, Texas 79701
Matthew Blair 0 0.00%
200 West Wall
Suite 104
Midland, Texas 79701
All Directors and 8,548,899 93.26%
Executive Officers (2 persons)
Item 12 - Certain Relationships and Related Transactions
On December 26, 2000, the Company cancelled an aggregate total of 833,485 shares
of its issued and outstanding common stock. Current management, upon extensive
research into transactions approved by former officers and or controlling
shareholders, determined that all of such shares had been issued improperly,
inasmuch as no corporate authorization of the issuances existed and no
consideration was received by the Company for such shares.
19
<PAGE>
Specifically, the cancellations were as follows:
400,000 shares were purchased by Glenn Little from a former officer of the
Company for a cash consideration of $15,000 and returned to the Company's
treasury with no consideration received by Glenn Little from the Company.
403,485 shares issued to former officers, directors and individuals. These
shares were issued improperly as (A) at the time of such issuance, the
corporate charter of the Company had been revoked by the Secretary of State
of Florida for failure to make required filings and to pay associated fees
and (B) no consideration was received by the Company for such shares. Many of
the certificates representing these shares were never delivered and were in
the possession of the transfer agent.
30,000 shares issued to a company in anticipation of fees due for investment
banking activities. These shares were issued improperly as (A) there was no
action by the Company's Board of Directors authorizing the issuance of any of
such shares, and (2) at the time of such issuance, the corporate charter of
the Company had been revoked by the Secretary of State of Florida for failure
to make required filings and to pay associated fees.
As a result of the cancellation of these 833,485 shares of Company common stock,
the Company currently has 9,166,515 shares outstanding.
Item 13 - Exhibits and Reports on Form 8-K
Exhibit 27.1 - Financial Data Schedule
Reports on Form 8-K
December 26,2000 - Reporting the cancellation of 833,485 shares of common
stock outstanding.
--------------------------------------------------------------------------------
SIGNATURES
In accord with Section 13 or 15(d) of the Securities Act of 1993, as amended,
the Company caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Eldorado Financial Group, Inc.
Dated: January 4, 2001 By: /s/ Glenn A. Little
--------------- -----------------------
Glenn A. Little
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date as indicated.
Dated: January 4, 2001 By: /s/ Glenn A. Little
--------------- ---------------------------
Glenn A. Little
President, Director and
Chief Executive Officer
20
<PAGE>
ELDORADO FINANCIAL
GROUP, INC.
Financial Statements
and
Auditor's Report
December 31, 2000 and 1999
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
Eldorado Financial Group, Inc.
Contents
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets
as of December 31, 2000 and 1999 F-4
Statements of Operations and Comprehensive Income
for the years ended December 31, 2000 and 1999 F-5
Statement of Changes in Shareholders' Equity
for the years ended December 31, 2000 and 1999 F-6
Statements of Cash Flows
for the years ended December 31, 2000 and 1999 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 December 31, 2000 and 1999 and the related
statements of operations and comprehensive income, changes in shareholders'
equity and cash flows for 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 December 31, 2000 and 1999 and the related statements of operations and
comprehensive income, changes in shareholders' equity and cash flows for 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. W. HATFIELD, CPA
Dallas, Texas
January 4, 2001
Use our past to assist your future sm
(secure mailing address) (overnight delivery/shipping address)
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
December 31, 2000 and 1999
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 $ -- $ --
----------- -----------
Total Liabilities -- --
----------- -----------
Commitments and contingencies
Shareholders' equity (deficit)
Common stock - $0.001 par value
100,000,000 shares authorized
9,166,515 and 10,000,000 shares
issued and outstanding, respectively 9,167 10,000
Additional paid-in capital 2,001,570 2,000,101
Accumulated deficit (2,010,737) (2,010,101)
----------- -----------
Total Shareholders' Equity (Deficit) -- --
----------- -----------
Total Liabilities and Shareholders' Equity $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Eldorado Financial Group, Inc.
Statements of Operations and Comprehensive Income
Years ended December 31, 2000 and 1999
2000 1999
------------ ------------
Revenues $ -- $ --
------------ ------------
Expenses
General and administrative expenses 636 2,016
------------ ------------
Total operating expenses 636 2,016
------------ ------------
Loss from Operations (636) (2,016)
Provision for Income Taxes -- --
------------ ------------
Net Loss (636) (2,016)
Other Comprehensive Income -- --
------------ ------------
Comprehensive Income $ (636) $ (2,016)
============ ============
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 9,986,336 10,000,000
============ ============
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
Years ended December 31, 2000 and 1999
Common Stock Additional
------------ paid-in Accumulated
Shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1999 10,000,000 $ 10,000 $ 1,996,483 $(2,008,085) $ (1,602)
Capital contributed to
support operations -- -- 3,618 -- 3,618
Net loss for the year -- -- -- (2,016) (2,016)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1999 10,000,000 10,000 2,000,101 (2,010,101) --
Stock cancelled on
December 26, 2000 (833,485) (833) 833 -- --
Capital contributed to
support operations -- -- 636 -- 636
Net loss for the year -- -- -- (636) (636)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 2000 9,166,515 $ 9,167 $ 2,001,570 $(2,010,737) $ --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Eldorado Financial Group, Inc.
Statements of Cash Flows
Years ended December 31, 2000 and 1999
2000 1999
------- -------
Cash Flows from Operating Activities
Net loss for the year $ (636) $(2,016)
Adjustments to reconcile net loss
to net cash provided by operating activities
Increase (Decrease) in
Accounts payable - trade -- (1,602)
------- -------
Net cash used in operating activities (636) (3,618)
------- -------
Cash Flows from Investing Activities -- --
------- -------
Cash Flows from Financing Activities
Cash contributed to support operations 636 3,618
------- -------
Net cash provided by financing activities 636 3,618
------- -------
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 $ -- $ --
======= =======
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.
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.
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. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 2000 and 1999, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
As of December 31, 2000 and 1999, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
3. Income (Loss) per share
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 2000 and 1999,
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-8
<PAGE>
Eldorado Financial Group, Inc.
Notes to Financial Statements - Continued
Note C - Common Stock Transactions
On December 26, 2000, the Company cancelled an aggregate total of 833,485 shares
of its issued and outstanding common stock. Current management, upon extensive
research into transactions approved by former officers and or controlling
shareholders, determined that all of such shares had been issued improperly,
inasmuch as no corporate authorization of the issuances existed and no
consideration was received by the Company for such shares.
Specifically, the cancellations were as follows:
400,000 shares were purchased by the current majority stockholder from a
former officer of the Company for a cash consideration of $15,000 and
returned to the Company's treasury with no consideration received by the
majority stockholder.
403,485 shares issued to former officers, directors and individuals. These
shares were issued improperly as (A) at the time of such issuance, the
corporate charter of the Company had been revoked by the Secretary of State
of Florida for failure to make required filings and to pay associated fees
and (B) no consideration was received by the Company for such shares. Many
of the certificates representing these shares were never delivered and were
in the possession of the transfer agent.
30,000 shares issued to a company in anticipation of fees due for
investment banking activities. These shares were issued improperly as (A)
there was no action by the Company's Board of Directors authorizing the
issuance of any of such shares, and (2) at the time of such issuance, the
corporate charter of the Company had been revoked by the Secretary of State
of Florida for failure to make required filings and to pay associated fees.
As a result of the cancellation of these 833,485 shares of Company common stock,
the Company currently has 9,166,515 shares outstanding. The effect in the
accompanying financial statements was to restate the par value of the issued and
outstanding shares with a corresponding offset to the additional paid-in capital
account. There was no impact on the earnings of the Company as a result of this
event.
F-9
