FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 1994
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-13215
JNS MARKETING, INC.
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(Name of small business issuer in its charter)
Colorado 84-0940146
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
C/O Schlueter & Associates, P.C., 1050 17th Street,
Suite 1700, Denver, Colorado 80265
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(Address of principal executive offices)
Issuer's telephone number: (303) 292-3883
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No X
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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 issuer'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. [X]
State issuer's revenues for its most recent fiscal year: $0
As of September 30, 1997, 2,243,652 shares of the Company's Common Stock, no par
value per share, were held by non-affiliates. There is no trading market for the
Company's Common Stock.
The number of shares of Common Stock of the registrant outstanding as of
September 30, 1997, were 25,182,245.
Documents incorporated by reference
None
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TABLE OF CONTENTS
PART I PAGE
Item 1. Description of Business 1
Item 2. Description of Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 9
Item 6. Management's Discussion and Analysis or Plan
of Operation 12
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements With Accountant
on Accounting and Financial Disclosure 12
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act 12
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial
Owners and Management 16
Item 12. Certain Relationships and Related Transactions 16
Item 13. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
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PART I
Item 1 - Description of Business
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Background
JNS Marketing, Inc. (the "Company") was incorporated on July 15, 1983 under
the laws of the State of Colorado. The Company engaged from inception through
the fiscal year ended September 30, 1988 in the business of searching for and
obtaining, on a buyout basis or a right-to-market basis, products which were to
be sold to the general public primarily through the television media. Since
1989, the Company has not engaged in any business nor had any revenues. The
Company's sole business from 1989 to the present has been to seek to acquire
assets of or an interest in a company or venture actively engaged in a business
generating revenues or having immediate prospects of generating revenues.
In May 1994, the Company entered into a Plan and Agreement of
Reorganization with Cedar Pacific Golf Properties ("CPGP"), a Nevada
corporation, pursuant to which the Company issued an aggregate of 22,938,593
shares of its Common Stock in exchange for 100% of the issued and outstanding
shares of common stock of CPGP. It was intended that CPGP would exercise an
option to acquire approximately 821 acres of land near Stockton, California, and
that the Company would develop the land into a golf course and planned
residential community. However, certain conditions to which the Plan and
Agreement of Reorganization was subject were not fulfilled, and in 1997 the
Company, CPGP and CPGP's previous stockholders agreed to rescind the
transactions contemplated therein, including the issuance of the 22,938,593
shares of the Company's Common Stock and the transfer of the CPGP stock to the
Company.
In July 1997, the Company entered into a Stock Purchase Agreement with
certain individuals (collectively, the "Purchasers") pursuant to which the
Company issued 22,938,593 shares of its Common Stock to the Purchasers for a
total of $70,000.
The Company's Articles of Incorporation, as amended, entitle it to transact
any lawful business or businesses for which corporations may be incorporated
pursuant to the Colorado Corporation Code. The Company can be defined as a
"shell" company, whose sole purpose at this time is to locate and consummate a
merger or acquisition with a private entity. Any business combination or
transaction will likely result in a significant issuance of shares and
substantial dilution to present stockholders of the Company.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. In order to comply with these various limitations, management
does not intend to undertake any efforts to sell any additional securities of
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the Company, either debt or equity, or cause a market to develop in the
Company's securities until such time as the Company has successfully implemented
its business plan described herein.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of a
corporation which is registered under the Securities Exchange Act of 1934 (the
"Exchange Act"). The Company will not restrict its search to any specific
business, industry or geographical location and the Company may participate in a
business venture of virtually any kind or nature. This discussion of the
proposed business is purposefully general and is not meant to be restrictive of
the Company's virtually unlimited discretion to search for and enter into
potential business opportunities. Management anticipates that it may be able to
participate in only one potential business venture because the Company has
nominal assets and limited financial resources. See "Financial Statements." This
lack of diversification should be considered a substantial risk to shareholders
of the Company because it will not permit the Company to offset potential losses
from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all shareholders and other 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.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes that the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8-Ks, 10-Qs or 10-KSBs, agreements and related
reports and documents. The Exchange Act specifically requires that any merger or
acquisition candidate comply with all applicable reporting requirements, which
include providing audited financial statements to be included within the
numerous filings relevant to complying with the Exchange Act. Nevertheless, the
officers and directors of the Company have not conducted market research and are
not aware of statistical data which would support the perceived benefits of a
merger or acquisition transaction for the owners of a business opportunity.
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. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
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financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition or acceptance of products, services or trades;
name identification; and other relevant factors. Officers and directors of the
Company will meet personally with management and key personnel of the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained within a reasonable period of
time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated that
any outside consultants or advisors, other than the Company's legal counsel and
accountants, will be utilized by the Company to effectuate its business purposes
described herein. However, if the Company does retain such an outside consultant
or advisor, any cash fee earned by such party will need to be paid by the
prospective merger/acquisition candidate, as the Company has no cash assets with
which to pay such obligation. There have been no contracts or agreements with
any outside consultants and none are anticipated in the future.
The Company will not restrict its search to any specific kind of firms, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation or which is in essentially any stage of its corporate life.
It is impossible to predict at this time the status of any business in which the
Company may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded or may seek other
perceived advantages which the Company may offer.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has no
capital with which to pay these anticipated expenses, present management of the
Company will pay these charges with their personal funds, as interest free loans
to the Company. However, the only opportunity which management has to have these
loans repaid will be from a prospective merger or acquisition candidate.
Management has agreed among themselves that the repayment of any loans made on
behalf of the Company will not impede, or be made conditional in any manner, on
consummation of a proposed transaction.
The Articles of Incorporation of the Company provide that the Company may
indemnify officers and/or directors of the Company for liabilities, which can
include liabilities arising under the securities laws. Therefore, assets of the
Company could be used or attached to satisfy any liabilities subject to such
indemnification.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
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be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any applicable
state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has successfully consummated a merger or acquisition and the Company is no
longer considered a "shell" company. Until such time as this occurs, the Company
will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future, if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the
Company will 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. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's then-shareholders. If required to so do under relevant law, management
of the Company will seek shareholder approval of a proposed merger or
acquisition via a Proxy Statement. However, such approval would be assured where
management supports such a business transaction because management presently
controls sufficient shares of the Company to effectuate a positive vote on the
proposed transaction. Further, a prospective transaction may be structured so
that shareholder approval is not required, and such a transaction may be
effectuated by the Board of Directors without shareholder approval.
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The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants, will set forth remedies
on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the Exchange Act.
Included in these requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included in
its annual report on Form 10-KSB (or 10-K, as applicable). If such audited
financial statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the candidate to be acquired in the closing
documents, the closing documents will provide that the proposed transaction will
be voidable, at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse the Company for all costs associated with
the proposed transaction.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
Employees
The Company has no full time employees. The Company's president, treasurer
and secretary have agreed to allocate a portion of their time to the activities
of the Company, without compensation. These officers anticipate that the
business plan of the Company can be implemented by their devoting approximately
20 hours per month to the business affairs of the Company and, consequently,
conflicts of interest may arise with respect to the limited time commitment by
such officers. See Item 9, "Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act."
Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading or selling the securities of such business. However, the Company does
not 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 avoid application of the costly and restrictive
registration and other provisions of the Investment Act and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act provides the definition of an
"investment company" which includes an entity that engages or holds itself out
as being engaged primarily in the business of investing, reinvesting or trading
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in securities, or that engages or proposes to engage in the business of
investing, reinvesting, owning, holding or trading "investment securities"
(defined as all securities other than government securities, securities of
majority-owned subsidiaries and certain other securities) the value of which
exceeds 40% 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 that will result in the availability of this exception from the
definition of "investment company." Consequently, the Company's participation in
a business or opportunity through the purchase and sale of investment securities
will be limited. In order to avoid classification as an investment company, the
Company will search for, analyze and acquire or participate in a business
opportunity by use of a method that does not involve the acquisition, ownership
or holding of investment securities.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, which regulation has the purported purpose of protecting
purchasers of investment company securities. Since the Company will not register
as an investment company, its shareholders will not be afforded these purported
protections.
The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from application
of the Investment Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time-consuming and costly, or even prohibitive, given the Company's
limited resources.
Certain Risks
The Company's business is subject to numerous risk factors, including the
following:
No Operating History or Revenue and Minimal Assets. The Company has had no
operating history nor any revenues or earnings from operations. The Company has
no significant assets or financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a profitable business
opportunity. There is no assurance that the Company can identify such a business
opportunity and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance that
the Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well-financed
entities, including venture capital firms, are active in mergers and
acquisitions of companies which may be desirable target candidates for the
Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
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consequently, the Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. Moreover, the Company will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction; No Standards
for Business Combination. The Company has no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with or
acquisition of, a private or public entity. There can be no assurance that the
Company will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance that the Company will be able
to negotiate a business combination on terms favorable to the Company. The
Company has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which it will
require a target business opportunity to have achieved, and without which the
Company would not consider a business combination in any form with such business
opportunity. Accordingly, the Company may enter into a business combination with
a business opportunity having no significant operating history, losses, limited
or no potential for earnings, limited assets, negative net worth or other
negative characteristics.
Continued Management Control; Limited Time Availability. While seeking a
business combination, management anticipates devoting up to 20 hours per month
to the business of the Company. None of the Company's officers has entered into
a written employment agreement with the Company and none is expected to do so in
the foreseeable future. The Company has not obtained key man life insurance on
any of its officers or directors. Notwithstanding the combined limited
experience and time commitment of management, loss of the services of any of
these individuals would adversely affect development of the Company's business
and its likelihood of continuing operations. See Item 9, "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act."
Conflicts of Interest - General. Certain of the officers and directors of
the Company are directors and/or principal shareholders of other blank check
companies and, therefore, could face conflicts of interest with respect to
potential acquisitions. In addition, officers and directors of the Company may
in the future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serves as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other blank check
companies with which the Company's officers and directors are affiliated both
desire to take advantage of a potential business opportunity, then the Board of
Directors has agreed that said opportunity should be available to each such
company in the order in which such companies registered or became current in the
filing of annual reports under the Exchange Act subsequent to January 1, 1997.
See Item 9, "Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act - Conflicts of Interest."
Reporting Requirements May Delay or Preclude Acquisition. Sections 13 and
15(d) of the Exchange Act require companies subject thereto to provide certain
information about significant acquisitions, including certified financial
statements for the company acquired, covering one, two or three years, depending
on the relative size of the acquisition. The time and additional costs that may
be incurred by some target entities to prepare such statements may significantly
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delay or essentially preclude consummation of an otherwise desirable acquisition
by the Company. Acquisition prospects that do not have or are unable to obtain
the required audited statements may not be appropriate for acquisition so long
as the reporting requirements of the Exchange Act are applicable.
Lack of Market Research or Marketing Organization. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, the Company's activities
may be limited to those engaged in by the business opportunity or opportunities
which the Company merges with or acquires. The Company's inability to diversify
its activities into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
Regulation. Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940, insofar as the Company will not be
engaged in the business of investing or trading in securities. In the event the
Company engages in business combinations which result in the Company holding
passive investment interests in a number of entities, the Company could be
subject to regulation under the Investment Company Act of 1940. In such event,
the Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The Company has
obtained no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company to material
adverse consequences.
Probable Change in Control and Management. A business combination involving
the issuance of the Company's Common Stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's Common Stock held by them, or
resign as members of the Board of Directors of the Company. The resulting change
in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. The issuance of
previously authorized and unissued shares of Common Stock of the Company would
result in a reduction in the percentage of shares owned by present and
prospective shareholders of the Company and may result in a change in control or
management of the Company.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public trading
market for its shares. A business opportunity may attempt to avoid what it deems
to be adverse consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
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be incurred in such an offering, loss of voting control to public shareholders
and the inability or unwillingness to comply with various federal and state laws
enacted for the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax- free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential business
opportunity must provide audited financial statements for review, for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses associated with
preparing audited financial statements.
Item 2 - Description of Property
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The Company has no properties and at this time has no agreements to acquire
any properties. The Company intends to attempt to acquire assets or a business
in exchange for its securities which assets or business is determined to be
desirable for its objectives.
The Company operates from its offices at 1050 17th Street, Suite 1700,
Denver, Colorado 80265, which is the office of Henry F. Schlueter, an officer
and director of the Company. This space is provided to the Company on a rent
free basis and it is anticipated that this arrangement will remain until such
time as the Company successfully consummates a merger or acquisition. Management
believes that this space will meet the Company's needs for the foreseeable
future.
Item 3 - Legal Proceedings
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The Company is not a party to any legal proceedings, nor does management
believe that any such proceedings are contemplated.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted by the Company to a vote of the Company's
shareholders through the solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5 - Market for Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities and management does not intend to initiate any such
discussions until such time as the Company has consummated a merger or
acquisition. There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
-9-
<PAGE>
Market Price
The Company's Common Stock is not quoted at the present time.
Effective August 11, 1993, the Securities and Exchange Commission (the
"Commission") adopted Rule 15g-9, which established the definition of a "penny
stock," for purposes relevant to the Company, as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and (ii) that the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The NASDAQ Stock Market, which administers NASDAQ, has recently made
changes in the criteria for NASDAQ eligibility. In order to be included in
NASDAQ's SmallCap Market, a company must satisfy the requirements described
below. A company must meet one or more of the following three requirements: (i)
net tangible assets of $4 million ($2 million for continued inclusion); (ii)
have a market capitalization of $50 million ($35 million for continued
inclusion); or (iii) have net income (in the latest fiscal year or two of the
last three fiscal years) of $750,000 ($500,000 for continued inclusion). In
addition, a company must also satisfy the following requirements: (i) 1 million
shares in the public float (500,000 for continued inclusion); (ii) $5 million of
market value of the public float ($1 million for continued inclusion); (iii) a
minimum bid price of $4 ($1 for continued inclusion); (iv) three market makers
(two for continued inclusion); (v) 300 (round lot) shareholders; (vi) an
operating history of one year or market capitalization of $50 million; and (vii)
certain corporate governance standards.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities to be
traded without the aforesaid limitations. However, there can be no assurance
that, upon a successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Company's securities on a national
exchange. In such event, trading, if any, in the Company's securities may then
-10-
<PAGE>
continue in the non-NASDAQ over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.
Holders
There are approximately 134 record holders of the Company's Common Stock.
An aggregate of 24,778,925 shares of the issued and outstanding shares of the
Company's Common Stock were issued in accordance with the exemption from
registration afforded by Section 4(2) of the Securities Act.
As of the date of filing this report, 1,840,332 of the issued and
outstanding shares of the Company's Common Stock were eligible for sale under
Rule 144 promulgated under the Securities Act of 1933 (the "Securities Act"),
subject to certain limitations included in said Rule. However, the holder of
400,000 of those shares has executed a "lock-up" letter agreement, affirming
that he will not sell those 400,000 shares prior to October 1998. In general,
under Rule 144, a person (or persons whose shares are aggregated), who has
satisfied a one year holding period, under certain circumstances, may sell
within any three month period a number of shares which does not exceed the
greater of one percent of the then outstanding shares of Common Stock or the
average weekly trading volume during the four calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who has satisfied a two year holding period
and who is not, and has not been for the preceding three months, an affiliate of
the Company.
Dividends
The Company has not paid any dividends to date, and has no plans to do so
in the immediate future.
Recent Sales of Unregistered Securities
In May 1994, the Company entered into a Plan and Agreement of
Reorganization (the "Plan") with Cedar Pacific Golf Properties ("CPGP"), a
Nevada corporation. Pursuant to the Plan, the Company issued an aggregate of
22,938,593 shares of its Common Stock to the six stockholders of CPGP in
exchange for 100% of the issued and outstanding shares of common stock of CPGP.
The Plan was subject to the fulfillment of certain conditions which were not
met. As a result, in July 1997, the Plan was rescinded, all shares of the
Company's Common Stock previously issued to the stockholders of CPGP were
returned to the Company and canceled and all shares of CPGP previously
transferred to the Company were returned to the original holders thereof.
In July 1997, the Company entered into a Stock Purchase Agreement (the
"Agreement") pursuant to which it issued and sold an aggregate of 22,938,593
shares of its Common Stock to five persons for a total of $70,000.
No underwriter, broker or dealer, in its capacity as such, was involved in
any of the above sales of the Company's unregistered securities, and no
underwriting discounts, commissions or brokerage fees were paid with respect to
such transactions.
The Company considers that the above transactions are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, (the "Securities Act") pursuant to the exemptions under Sections 4(2)
and 3(b) of the Securities Act as sales of securities not involving a public
offering. Management of the Company has represented that the persons who paid
cash for their securities in the foregoing transactions possessed material
information concerning the Company and were in a position to obtain from the
Company information necessary to verify such information. All such persons were
-11-
<PAGE>
offered the opportunity to obtain information from the Company in order to
evaluate the merits and risks of the proposed investment. In addition, all such
persons were informed that they were obtaining "restricted securities" as
defined in Rule 144 under the Securities Act, that such shares cannot be
transferred without appropriate registration or exemption therefrom, that they
must bear the economic risk of the investment for an indefinite period of time
and that the Company would restrict the transfer of the securities in accordance
with such restrictions. In addition, each certificate representing shares
purchased in the above transactions bears the standard restrictive legend.
Item 6 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
Plan of Operation
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. As of the date of
this report, the Company has no plans, arrangements, understandings or
commitments with respect to any potential merger or acquisition, nor is the
Company engaged in negotiations with respect to such matter. For a complete
description of the Company's plan of operation, see Item 1, "Description of
Business."
If required to so do under relevant law, management of the Company will
seek shareholder approval of a proposed merger or acquisition via a Proxy
Statement. However, such approval would be assured where management supports
such a business transaction because management presently controls sufficient
shares of the Company to effectuate a positive vote on the proposed transaction.
Further, a prospective transaction may be structured so that shareholder
approval is not required, and such a transaction may be effectuated by the Board
of Directors without shareholder approval. While any disclosure which may be
provided to shareholders may include audited financial statements of such a
target entity, there is no assurance that such audited financial statements will
be available. The Board of Directors does intend to obtain certain assurances of
value of the target entity assets prior to consummating such a transaction, with
further assurances that an audited statement would be provided within 60 days
after closing of such a transaction. Closing documents relative thereto will
include representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
Item 7 - Financial Statements
- -----------------------------
The response to this item is submitted as a separate section of this report
beginning on page F-1.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
The Company has not had any reported or material disagreement with its
accountants on any matter of accounting principles, practices or financial
statement disclosure.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
- --------------------------------------------------------------------------------
-12-
<PAGE>
Set forth below is certain information concerning the directors and
executive officers of the Company as of the date of filing this report.
Name Age Position
---- --- --------
David Gregarek 43 President and Director
Frederick A. Huttner 52 Treasurer and Director
Henry F. Schlueter 46 Secretary and Director
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified. Each of
the Company's officers and directors devotes only such time as is available to
the business of the Company. There are no family relationships between any
directors or executive officers of the Company.
David J. Gregarek has served as President and director of the Company since
January 6, 1996. Mr. Gregarek only devotes such time as is available to the
business of the Company. Mr. Gregarek also has served on the Boards of Directors
of the following blank check companies:
Bellview Capital Corporation ("Bellview") conducted its initial public
offering in August 1986 and raised gross proceeds of $150,000 through the sale
of 15,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and one warrant to purchase common stock. On February 27, 1987,
Bellview acquired the assets of Associated Ancillary Service, Inc., and changed
its name to Medical Ancillary Services, Inc. Mr. Gregarek served as a director
of Medical Ancillary Services, Inc. until his resignation in August 1987.
Medical Ancillary Services, Inc. is not an Exchange Act reporting company.
Clearview Capital Corporation ("Clearview") conducted its initial public
offering in June 1987 and raised gross proceeds of $200,000 through the sale of
20,000,000 units at $0.01 per unit, with each unit consisting of one share of
common stock and two warrants to purchase common stock. Effective January 19,
1988, Clearview merged with Arriba Fajita, Inc., the operator of four
restaurants in Austin, Texas, and changed its name to Arriba Fajita Holdings,
Inc. Mr. Gregarek resigned from the Board of Directors of Arriba Fajita
Holdings, Inc. in June 1988. Arriba Fajita Holdings, Inc. is not an Exchange Act
reporting company.
Ferrari Capital, Ltd. ("Ferrari") conducted its initial public offering in
1987 or early 1988 and raised gross proceeds of $125,000 through the sale of
12,500,000 units at $0.01 per unit, each unit consisting of one share of common
stock and one warrant to purchase common stock. Mr. Gregarek resigned from the
Board of Directors of Ferrari in 1989. Ferrari was administratively dissolved by
the Colorado Secretary of State in January 1993.
Parkway Capital Corporation ("Parkway") conducted its initial public
offering in February 1988 and raised gross proceeds of $200,000 through the sale
of 20,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and two warrants to purchase common stock. In March 1994, Mr.
Gregarek sold 19,160,000 shares of Parkway for a price of $0.001 per share, or
$19,491, thereby effecting a change in control of Parkway, and resigned from its
Board of Directors. In October 1994, Parkway was merged into QCS Corporation,
which currently trades on the Nasdaq Bulletin Board under the symbol QCSC.
Maui Capital Corporation ("Maui") conducted its initial public offering in
May 1989 and raised gross proceeds of $250,000 through the sale of 50,000,000
units at $0.005 per unit, with each unit consisting of one share of common stock
and one warrant to purchase common stock. In September 1995, Maui, through a
wholly owned subsidiary, merged with Charter Communications International, Inc.
-13-
<PAGE>
and Mr. Gregarek resigned from its Board of Directors. In January 1996, Maui
acquired 90% of the stock of Phoenix DataNet, Inc. ("PDN"). In March 1996, Maui
merged with Phoenix Data Systems, Inc. ("Phoenix"), the former parent of PDN,
and in conjunction with that merger, Maui acquired the remaining 10% of the
stock of PDN. In May 1996, Maui changed its name to Charter Communications
International, Inc. ("Charter") which currently trades on the Nasdaq Bulletin
Board under the symbol CHTD.
Aurora Acquisitions, Inc. ("Aurora") filed a registration statement under
the Securities Act of 1933, as amended, in 1992 in order to register units of
its securities for issuance and sale; however, the registration statement was
abandoned in 1993 and none of the units were issued or sold. Mr. Gregarek was
one of the initial shareholders and investors in Aurora. Mr. Gregarek offered to
attempt to register Aurora under the Securities Exchange Act of 1934, to find an
appropriate candidate for a reverse acquisition, to obtain counsel for the
company and to assemble a new management team for the company. Mr. Gregarek was
appointed to the board of directors of Aurora in January 1996. As of the date of
filing this Annual Report, no acquisition candidate has been identified. Aurora
has been an Exchange Act reporting company since 1996.
Frederick R. Huttner has served as Treasurer and a director of the Company
since August 6, 1997. From February 1987 until his resignation in October 1992,
Mr. Huttner was a director of Parkway Capital Corporation, another blank check
company. Since 1981, Mr. Huttner has been the President and sole shareholder of
Huttner and Company, which provides consulting services to emerging businesses.
From 1992 to 1994, he also served as the controller for Orange Broussards
School. Mr. Huttner received his Bachelor of Arts degree in accounting from New
York University and is a member of the American Institute of Certified Public
Accountants. Mr. Huttner is a director of Applied Voice Recognition, Inc., an
Exchange Act reporting company.
Henry F. Schlueter has served as Secretary and a director of the Company
since August 6, 1997. Since 1992, Mr. Schlueter has been the managing director
of Schlueter & Associates, P.C., a law firm, practicing in the areas of
securities, mergers and acquisitions, finance and corporate law. From 1989 to
1991, prior to establishing Schlueter & Associates, P.C., Mr. Schlueter was a
partner in the Denver, Colorado office of Kutak Rock (formerly Kutak, Rock &
Campbell), and from 1984 to 1989, he was a partner in the Denver office of
Nelson & Harding. Mr. Schlueter is a member of the American Institute of
Certified Public Accountants, the Colorado Society of CPA's, the Colorado and
Denver Bar Associations and the Wyoming State Bar. Mr. Schlueter received his
law degree from the University of Wyoming College of Law in 1978.
Compliance with Section 16(a) of the Exchange Act
Based upon the rescission of the sale in 1994 of shares of the Company's
Common Stock and other investigation, management of the Company is not aware of
any failure to timely file reports required by section 16(a) of the Exchange Act
during the fiscal year ended September 30, 1994 or fiscal years prior thereto.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
Certain of the officers and directors of the Company are directors and
principal shareholders in other blank check companies, and officers and
directors of the Company may in the future become shareholders, officers or
directors of other companies which may be formed for the purpose of engaging in
-14-
<PAGE>
business activities similar to those conducted by the Company. Accordingly,
direct conflicts of interest may arise in the future with respect to such
individuals acting on behalf of the Company or other entities. Conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities contemplated
by the Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company and
the companies with which the officers and directors are affiliated both desire
to take advantage of an opportunity, then the Board of Directors has agreed that
said opportunity should be available to each such company in the order in which
such companies registered or became current in the filing of annual reports
under the Exchange Act subsequent to January 1, 1997. All directors may still
individually take advantage of opportunities if the Company should decline to do
so. Except as set forth above, the Company has not adopted any other conflict of
interest policy with respect to such transactions.
The Company's Board of Directors has adopted a policy that the Company will
not seek a merger with, or acquisition of, any entity in which any officer or
director serves as an officer or director or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
Item 10 - Executive Compensation
- --------------------------------
None of the Company's officers and/or directors receives any compensation
for their respective services rendered to the Company, nor have they received
such compensation in the past. They all have agreed to act without compensation
until authorized by the Board of Directors, which is not expected to occur until
the Company has generated revenues from operations after consummation of a
merger or acquisition. As of the date of filing this report, the Company has no
funds available to pay officers or directors. Further, none of the officers or
directors is accruing any compensation pursuant to any agreement with the
Company.
It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
-15-
<PAGE>
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted Common Stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
Item 11 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1997 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's executive
officers and directors; and (iii) all executive officers and directors as a
group. Except as noted, each person or entity has sole voting and sole
investment power with respect to the shares shown.
Name and Address Shares Beneficially Owned
of Beneficial Owner Number Percent
- ------------------- ------ -------
Henry F. Schlueter 5,734,649 22.7%
1050 17th Street, Suite 1700
Denver, Colorado 80265
David Gregarek 5,734,648 22.7%
P. O. Box 518
Littleton, Colorado 80160
Frederick R. Huttner(1) 5,734,648 22.7%
13634 Taylor Crest Road
Houston, Texas 77079
Jerrold D. Burden 5,734,648 22.7%
Strategic Alliance Co.
680 Franklin Street
Denver, Colorado 80218
Officers and Directors 17,203,945 68.2%
as a Group (3 persons)
- -------------
(1) Includes 3,932,330 shares which are held of record by the Frederick R.
Huttner-SEP.
Item 12 - Certain Relationships and Related Transactions
- --------------------------------------------------------
-16-
<PAGE>
Effective July 2, 1997, the Company entered into a Stock Purchase Agreement
with David Gregarek, the President of the Company, Frederick R. Huttner, the
Treasurer of the Company, Henry F. Schlueter, the Secretary of the Company, and
one other individual (collectively, the "Purchasers") pursuant to which the
Company issued 22,938,593 shares of its Common Stock to the Purchasers. In
consideration for the shares, the Purchasers paid the Company the amount of
$65,000 in cash and assumed certain liabilities of the Company to the extent of
$5,000. As a result of this transaction, the Purchasers acquired 91% of the
issued and outstanding shares of Common Stock of the Company, thereby effecting
a change in control of the Company.
Schlueter & Associates, P.C., the law firm of which Henry F. Schlueter, the
Company's Secretary and director, is managing director, is currently providing
legal services to the Company.
That firm may provide such services in the future and may receive compensation
therefor from the Company.
Item 13 - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) No Exhibits are filed with this Annual Report:
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended September 30, 1994.
-17-
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JNS MARKETING, INC.
Date: By: /s/ David Gregarek
------------------------------
David Gregarek, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: /s/ Frederick R. Huttner
----------------------------------
Frederick R. Huttner, Treasurer
Date: /s/ Henry F. Schlueter
----------------------------------
Henry F. Schlueter, Secretary
-18-
<PAGE>
JNS MARKETING, INC.
(A Development Stage Enterprise)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1994, 1993 AND 1992
<PAGE>
I N D E X
PAGE
----
ACCOUNTANTS' AUDIT REPORT F-1
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS F-3
STATEMENTS OF CASH FLOWS F-4
STATEMENT OF STOCKHOLDERS' EQUITY F-5 - F-6
NOTES TO FINANCIAL STATEMENTS F-7 - F-8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of JNS Marketing, Inc.
We have audited the accompanying balance sheet of JNS Marketing, Inc. (a
development stage company) as of September 30, 1994 and 1993 and the related
statements of operations and stockholders' equity for the years ended September
30, 1994, 1993 and 1992 and for the period from July 15, 1983 (inception) to
September 30, 1994. We have also audited the accompanying statement of cash
flows for the years ended September 30, 1994, 1993 and 1992. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 JNS Marketing, Inc. as of
September 30, 1994 and 1993 and the results of its operations and its cash flows
for the years ended September 30, 1994, 1993 and 1992 and the results of its
operations from July 15, 1983 (inception) to September 30, 1994 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 shown in the financial statements,
the Company has incurred net losses since its inception and has experienced
severe liquidity problems. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
LEVINE, HUGHES & MITHUEN, INC.
Englewood, Colorado
October 7, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1993
ASSETS
------
1994 1993
------------- ----------
<S> <C> <C>
Current assets: $ - $ -
----------- -----------
Total current assets - -
----------- -----------
Total assets $ - $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable, current portion (Note 4) $ - $ 12,000
Accounts payable 7,357 11,173
Accrued liabilities - 3,000
----------- -----------
Total current liabilities 7,357 26,173
----------- -----------
Stockholders' equity:
Common stock, no par value, 50,000,000 shares authorized,
25,182,245 and 2,243,652 shares issued and outstanding at
September 30, 1994 and 1993. 912,237 877,687
Accumulated deficit during the development stage (919,594) (903,860)
----------- -----------
Total stockholders' (deficit) (7,357) (26,173)
----------- -----------
$ - $ -
=========== ===========
The accompanying notes are an integral part of the
financial statements. See accountants' audit report.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Inception
(July 15, 1983)
September to September September September
30, 1994 30, 1994 30, 1993 30, 1992
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating revenue $ - $ 24,175 $ - $ -
----------- ------------ ----------- -----------
Costs and expenses:
Sales and marketing - 60,432 - -
General and administrative 15,634 483,826 403 468
Depreciation and amortization - 98,818 - -
----------- ------------ ----------- -----------
15,634 643,076 403 468
----------- ------------ ----------- -----------
Loss from operations (15,634) (618,901) (403) (468)
----------- ------------ ----------- -----------
Other income (expense):
Debt forgiveness - 110,791 16,132 -
Other income - 9,211 - -
Interest income - 166,403 - -
Interest expense (100) (68,108) (178) (207)
Other expense - (1,807) - -
Abandonment of interest in
limited partnership - (18,600) - -
Refunds - (2,000) - -
Bad debts - (20,000) - -
Loss on Tri-Party purchase
and sale - (50,000) - -
Loss due to decline in value of
investments - (426,583) - -
---------- ------------ ----------- -----------
(100) (300,693) 15,954 (207)
----------- ------------ ----------- -----------
Income (loss) before provision
for income tax benefit (15,734) (919,594) 15,551 (675)
Provision for income tax - - (2,333) -
Income tax benefit (Note 2) - - 2,333 -
----------- ------------ ----------- -----------
Net income (loss) $ (15,734) $ (919,594) $ 15,551 $ (675)
=========== ============ =========== ===========
Net income (loss) per
common share (note 3) $ * $ (0. 32) $ * $ *
=========== ============ =========== ===========
Weighted average
number of shares
outstanding (Note 3) 9,671,151 2,839,815 2,243,652 2,243,652
=========== ============ ========= ===========
* Less than $.01 per share
The accompanying notes are an integral part of the
financial statements. See accountants' audit report.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1994 AND 1993
1994 1993 1992
----------- ----------- -----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ (15,734) $ 15,551 $ (675)
----------- ----------- -----------
Change in assets and liabilities:
Increase (decrease) in accounts payable (3,816) (15,551) 675
Increase (decrease) in accrued liabilities (3,000) - -
----------- ----------- -----------
Total adjustments (6,816) (15,551) 675
----------- ----------- -----------
Net cash used by operating activities (22,550) - -
----------- ----------- -----------
Cash flows from financing activities:
Proceeds received from issuance of stock 34,550 - -
Payments on notes payable (12,000) - -
----------- ----------- -----------
Net cash used by financing activities 22,550 - -
----------- ----------- -----------
Net decrease in cash - - -
Cash, beginning of year - - -
----------- ----------- -----------
Cash, end of year $ - $ - $ -
============ =========== ===========
The accompanying notes are an integral part of the
financialstatements. See accountants' audit report.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
During the
No Par Development
Shares Value Stage Total
----------- ---------- ----------- ----------
Issuance of common stock for cash at $.007
<S> <C> <C> <C> <C>
per share 1,500,000 $ 10,000 $ -- $ 10,000
Net loss for the period ended
September 30, 1984 -- -- (96,110) (96,110)
---------- ---------- ---------- ----------
Balance at September 30, 1984 1,500,000 10,000 (96,110) (86,110)
Issuance of common stock for cash from
Public Offering at $1.00 per share 283,320 283,320 -- 283,320
Deferred offering costs -- (72,133) -- (72,133)
Issuance of common stock for purchase
of partnership interest at $2.916
per share 6,000 17,500 -- 17,500
Issuance of common stock pursuant to
Tri-Party agreement at $3.00 per share 200,000 600,000 -- 600,000
Issuance of common stock in principal
reduction of note payable at $1.20
per share 16,666 20,000 -- 20,000
Net loss for the period ended
September 30, 1985 -- -- (238,550) (238,550)
---------- ---------- ---------- ----------
Balance at September 30, 1985 2,005,986 858,687 (334,660) 524,027
Issuance of common stock for services
at $.36 per share 25,000 9,000 -- 9,000
Issuance of common stock for purchase
of inventory at $3.00 per share 25,000 75,000 -- 75,000
Net loss for the period ended
September 30, 1986 -- -- (71,792) (71,792)
---------- ---------- ---------- ----------
Balance at September 30, 1986 2,055,986 942,687 (406,452) 536,235
Cancellation of common stock (25,000) (75,000) -- (75,000)
Net loss for the period ended
September 30, 1987 -- -- (90,820) (90,820)
---------- ---------- ---------- ----------
Balance at September 30, 1987 2,030,986 867,687 (497,272) 370,415
The accompanying notes are an integral part of the
financial statements. See accountants' audit report.
F-5
<PAGE>
JNS MARKETING, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Deficit
Accumulated
During the
Development
Shares Value Stage Total
---------- ---------- ---------- ----------
Issuance of additional common stock
pursuant to prior agreements 172,666 $ -- $ -- $ --
Issuance of common stock for services
at $.25 per share 40,000 10,000 -- 10,000
Net loss for the year ended
September 30, 1988 -- -- (391,533) (391,533)
---------- ---------- ---------- ----------
Balance at September 30, 1988 2,243,652 877,687 (888,805) (11,118)
Net loss for the year ended
September 30, 1989 -- -- (28,287) (28,287)
---------- ---------- ---------- ----------
Balance at September 30, 1989 2,243,652 877,687 (917,092) (39,405)
Net loss for the year ended
September 30, 1990 -- -- (865) (865)
---------- ---------- ---------- ----------
Balance at September 30, 1990 2,243,652 877,687 (917,957) (40,270)
Net loss for the year ended
September 30, 1991 -- -- (779) (779)
---------- ---------- ---------- ----------
Balance at September 30, 1991 2,243,652 877,687 (918,736) (41,049)
Net loss for the year ended
September 30, 1992 -- -- (675) (675)
---------- ---------- ---------- ----------
Balance at September 30, 1992 2,243,652 877,687 (919,411) (41,724)
Net income for the year ended
September 30, 1993 -- -- 15,551 15,551
---------- ---------- ---------- ----------
Balance at September 30, 1993 2,243,652 877,687 (903,860) (26,173)
Issuance of common stock 22,938,593 34,550 -- 34,550
Net income for the year ended
September 30, 1994 -- -- (15,734) (15,734)
---------- ---------- ---------- ----------
Balance at September 30, 1994 25,182,245 $ 912,237 $ (919,594) $ (7,357)
========== ========== ========== ==========
The accompanying notes are an integral part of the
financial statements. See accountants' audit report.
F-6
</TABLE>
<PAGE>
JNS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
------------
JNS Marketing, Inc. (the Company) was incorporated in the State of
Colorado on July 15, 1983. The Company was organized to search for and
obtain, on a buyout basis or a right-to-market basis, products which
will be sold to the general public primarily through the television
media; and to engage in any activity or business not in conflict with
the laws of the State of Colorado or of the United States of America.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Income Taxes
The Company has adopted the flow-through method of accounting for tax
credits. Under this method, the current provision for income taxes is
reduced by the amount of the credits applied against tax otherwise
payable. No provision for income taxes was required at September 30,
1994 and 1992. The Company has recognized net losses of $15,734 and
$675 for fiscal years 1994 and 1992 respectively, and accumulated net
losses from inception (July 15, 1983) to date of $919,594, which
expire at varying dates between the years 2001 and 2008. There were no
previous earnings to which losses may be carried back and there are no
recorded income tax deferrals to be eliminated. The Company had
taxable income of $15,551 at September 30, 1993 which resulted in
income tax recognition of $2,333. The income tax was eliminated in
full by recognition of the tax benefit of the Company's prior years
accumulated net operating loss.
NOTE 3 PER SHARE DATA
--------------
Net loss per share is based on the weighted average common shares
outstanding. There were no common stock equivalents for each of the
years in the three year period then ended.
NOTE 4 NOTES PAYABLE AND LONG-TERM DEBT
--------------------------------
Notes payable at September 30, 1994 and 1993 consist of the following:
1994 1993
---- ----
Note payable, Dean and Eleonore Voos,
guaranteed personally by J.R.
Nelson, the Company's president,
with interest at 15% per annum.
Principal and accrued interest were
payable in full on March 28, 1987.
Subsequently, by mutual consent of
the parties, the note was verbally
extended on a month-to-month basis
at 21% per annum. $ - $ 12,000
-------- --------
12,000
Less Current Maturities - 12,000
-------- --------
$ - $ 12,000
======== ========
Dean and Eleanore Voos obtained a default judgement against the
Company in the amount of $32,912.47, in a suit brought in Sedgwick
County, Kansas. The judgement was obtained on a promissory note
executed by the Company in 1987 and guaranteed by its former
president, Jerry Nelson. Effective April 29, 1994, the Company entered
into an agreement whereby it agreed to settle the judgement and debt
for the sum of $15,000. The Company has paid the settlement amount.
NOTE 5 CANCELLATION OF AGREEMENT AND RETURN OF COMMON STOCK
----------------------------------------------------
Pursuant to an asset purchase agreement entered into April 5, 1986,
the Company purchased certain assets for inventory (the "Assets") from
Carl G. Waldenstrom ("Seller"), and individual dealing with his sole
and separate property. In consideration of the asset purchase, the
Company agreed to deliver to Seller 25,000 shares of its no par value,
common stock. Subsequent to the closing of this asset purchase
transaction, the Company sold the Assets to Hoseco, Inc. a privately
held Colorado corporation engaged in the design, development,
manufacture, marketing and distribution of hoses, clamps, connectors
and related fluid transport and hydraulic system products designed and
marketed for commercial and industrial use. As consideration for the
sale, the Company received 2,500 shares of Hoseco, Inc. common stock.
Subsequently, on August 1, 1987, in conjunction with the termination
of the Plan and Agreement of Reorganization, 25,000 shares of JNS
Marketing, Inc. common stock, previously issued to Carl G. Waldenstrom
as consideration for certain assets delivered to Hoseco, Inc., was
returned to the Company.
F-7
<PAGE>
JNS MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
On or about May 22, 1994 the Company entered into a plan of
reorganization (the "Agreement") with Cedar Pacific Golf Properties
("CPGP"), a Nevada corporation whereby the Company acquired 100% of
the issued and outstanding stock of CPGP and $34,550 in exchange for
22,938,593 shares of the Company's no par value common stock. This
Agreement was subsequently rescinded July 2, 1997 (See Note 7).
NOTE 7 SUBSEQUENT EVENTS
-----------------
Recission Agreement
On July 2, 1997, the Company entered into a recission agreement with
CPGP Group in which CPGP Group relinquished control of the Company by
returning 22,938,593 shares of the Company stock acquired pursuant to
the Plan of reorganization discussed in Note 6.
Stock Purchase Agreement
On July 2, 1997, the Company entered into stock purchase agreement in
which several individuals purchased 22,938,593 newly-issued shares of
the Company's no par common stock for $70,000. Control of the Company
changed as a result of this transaction.
F-8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements of JNS Marketing, Inc. as of September 30, 1994 and 1993 and for the
years ended September 30, 1994, 1993 and 1992 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 7,357
<BONDS> 0
0
0
<COMMON> 912,237
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 15,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> (15,734)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,734)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.002)
</TABLE>
