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, 2000
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 Identification No.)
incorporation or organization)
7609 Ralston Road, Arvada, CO 80002
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(Address of principal executive offices)
Issuer's telephone number: (303) 422-8127
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Securities registered under Section 12(b) of the Exchange Act: None
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Securities registered under Section 12(g) of the Exchange Act: Common Stock,
no par value
(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 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 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, 2000, 406,455 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, 2000, were 3,781,455. 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 11
Item 7. Financial Statements 13
Item 8. Changes in and Disagreements With Accountants on Accounting 13
and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 13
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners and Management 15
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
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 buy out 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 229,386 (after
giving effect to the 100 to 1 reverse split effective March 9, 1999) 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 229,386 (after giving effect to the 100
to 1 reverse split effective March 9, 1999) 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 229,386 shares (after giving effect to the 100 to 1 reverse split
effective March 9, 1999) of its Common Stock to the Purchasers for a total of
$70,000.
In December 1999, the Board of Directors approved and implemented a
dividend of fourteen shares for each share issued and outstanding.
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, who's 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 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
oExchange Acto). The Company will not restrict its search to any specific
business, industry or geographical location and the Company may participate in a
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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,
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
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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
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
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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.
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.
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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
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.
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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 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 otransiento 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,
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
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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 serve 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 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.
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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
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.
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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's mailing address is 7609 Ralston Road, Arvada CO, 80002 which
is the office of M.A. Littman, the Company's attorney. This address 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 address arrangement will meet the
Company's needs for the foreseeable future. No office space is needed.
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
- -----------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) The Registrant's common stock is traded in the over-the-
counter market under the symbol JNMI (OTC Bulletin Board Symbol). The table
below sets forth the high and low bid prices of the Registrant's common stock
for the periods indicated. Such prices are inter-dealer prices, without mark-up,
mark-down or commissions and do not necessarily represent actual sales.
FY 1999 (Ended September 30, 2000):
High Bid Low Bid
-------- -------
1st quarter * *
2nd quarter * *
3rd quarter * *
4th quarter .01 .0
FY 1998 (Ended May 31, 1999):
High Bid Low Bid
-------- -------
1st quarter
2nd quarter
3rd quarter No Quotes (Not Trading)
4th quarter
* Stock was not approved for trading.
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable future.
(b) As of September 30, 2000, there were 134 holders of record of the
Registrant's common stock.
(c) The Registrant has neither declared nor paid any cash dividends on its
common stock, and it is not anticipated that any such dividend will be declared
or paid in the foreseeable future.
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.
-9-
<PAGE>
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 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 3,781,455 shares of the issued and outstanding shares of the
Company's Common Stock are "restricted" securities.
-10-
<PAGE>
Dividends
The Company has not paid any dividends to date, and has no plans to do
so in the immediate future.
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.
-11-
<PAGE>
Results of Operations for the Year Ended September 2000 Compared to Year Ended
September 30, 1999.
The Company had no revenues or operations in years ended September 30, 2000
or 1999. The Company incurred expenses in the year ended September 30, 2000 of
$6,086 compared to $9,265 in the year ended September 30, 1999. The company had
a net loss of ($6,086) in the year ended September 30, 2000 compared to a net
loss of ($9,265) in the year ended September 30, 1999. The loss per share was
($.0) in 2000 and (.04) in 1999.
The losses should be expected to continue until a profitable business can
be achieved through merger, acquisition, or development, of which there can be
no assurance.
At year end, the Company had no operating capital and is reliant upon
advances from shareholders or loans to pay any expenses incurred.
Year 2000 Issues
"Year 2000 problems" result primarily from the inability of some
computer software to properly store, recall or use data after December 31, 1999.
These problems may affect may computers and other devices that contain
oembeddedo computer chips. The Company's operations, however, do not rely
extensively on information technology ("IT") systems. The IT software and
hardware systems the Company operates are all publicly available, pre-packaged
systems that are readily replaceable with other functionally similar systems.
Accordingly, the Company does not believe that it will be materially affected by
Year 2000 problems in its IT software and hardware systems.
The Company relies on non-IT systems that may suffer from Year 2000
problems including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil field
operators and utilities. In light of the Company's substantially reduced
operations, the Company does not believe that such non-IT systems or third-party
Year 2000 problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the
Company's IT and non-IT systems or third-parties.
-12-
<PAGE>
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
- --------------------
In January 2001, the Company engaged Michael Johnson & Co., Denver,
Colorado, as its new principal independent accountant to audit the Company's
financial statements. The prior accountant was James E. Scheifley & Associates,
P.C. There has been no disagreement between accountants regarding the
application of accounting principles to any specific completed or contemplated
transaction, or as to policies as to accounting.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
- ------------------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
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
---- --- --------
Walter Galdenzi 50 President and Director
Susan Galdenzi 48 Treasurer and Director
Wesley F. Whiting 65 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.
BIOGRAPHICAL INFORMATION
Walter Galdenzi, age 50, received a B.A. in Business from Mohawk College in
1974. He has been President and Director and a principal shareholder of Galwan
Texas, Inc. since. 1989.
Susan Galdenzi, age 48, received her B.A. from Mohawk College in 1975. She
has been Vice President and Secretary and a Director and a principal shreholder
of Galwan Texas, Inc. since 1989.
Wesley Whiting, age 65. Mr. Whiting was president, director, and secretary
of Berge Exploration, Inc. (1978-88) and was president, vice president, and
director of NELX, Inc. (1994- 1997), and was vice president and director of
Intermountain Methane Corporation (1988-91), and president of Westwind
Production, Inc. (1997-1998). He has been a director of Kimbell de Car Corp.
1998-2000. He has been President and a director of Dynadapt Systems, Inc. from
1998 to date. He is President and director of Business Exchange Holding corp.
(2000) and he is a director and Vice President of Utilitec, Inc. 1999 to date.
-13-
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that the Company's officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten percent
stockholders are required by regulation to furnish to the Company copies of all
Section 16(s) forms they file.
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
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.
-14-
<PAGE>
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.
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, 1999 (adjusted to
reflect the 1:100 reverse stock split) 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.
-15-
<PAGE>
Name and Address Shares Beneficially Owned
of Beneficial Owner Number Percent
------------------- ------ -------
Galwan Texas, Inc.
Walter Galdenzi 225,000(1) 89.3%
President & Director
Galwan Texas, Inc.
Susan Galdenzi 225,000(1) 89.3%
Secretary/Treasurer & Director
Wesley F. Whiting 0 0%
Director
Officers and Directors 225,000 89.3%
as a Group (3 persons)
- ---------------------------------
(1) Walter Galdenzi and Susan Galdenzi are married to each other and are
beneficial owners of Galwan Texas, Inc.
Change of Control
Messrs. Jerrold Burden, David Gregarek, Frederick Huttner (including Mr.
Huttner's SEP), and Henry F. Schlueter (collectively the "Sellers") each sold
56,250 shares of the Common Stock to Mr. Walter Galdenzi. The 225,000 (post
reverse stock split) shares of stock were sold to Mr. Galdenzi for $125,000, in
June 1999. Sellers paid the Company's outstanding liabilities and brought all
reports required to be filed with the Securities and Exchange Commission
current. Mr. Galdenzi acquired 89.34% of the Company's issued and outstanding
shares of common stock.
Item 12 - Certain Relationships and Related Transactions
- --------------------------------------------------------
During June 1999, the Company's major shareholders sold the Company's
common stock held by them to an unrelated group of investors for cash. In
connection therewith, the shareholders forgave an aggregate of $9,250 of
advanced made by them during the year ended September 30, 1998. The forgiveness
of indebtedness by the shareholders was accounted for as a contribution of
capital to the Company. Additionally, an aggregate of $11,105 of costs and legal
fees incurred by the Company's attorney, Henry F. Schleuter, (who was also a
significant shareholder) and included in accounts payable was converted to a
common stock subscription for 20,000 shares of the Company's common stock.
-16-
<PAGE>
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 filed a report on Form 8-K with respect to a change in
auditors on April 9, 1999.
-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: January 19,2000 By:/s/Walter Galdenzi
------------------ -------------------------
Walter Galdenzi, 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: 1/19/2000 By: /s/Walter Galdenzi
-------- ----------------------------------------
Walter Galdenzi, President and Director
Date: 1/19/2000 /s/Susan Galdenzi
-------- -----------------------------------------
Susan Galdenzi, Treasurer and Director
Date: 1/19/2000 /s/Wesley F. Whiting
-------- -----------------------------------------
Wesley F. Whiting, Secretary and Director
-18-
<PAGE>
JNS MARKETING, INC.
FORM 10-K
INDEX OF FINANCIAL STATEMENTS
Pages
Auditors Report- Michael Johnson & CO F-1
Auditors Report - James E. Scheifley & Ass. F-2
Balance Sheets F-3
Statements of Operations F-4
Statements of Changes in Stockholders Deficit F-5
Statements of Cash Flows F-6 F-7
Notes to Financial Statements F-8 - F-10
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
JNS Marketing, Inc.
Wheatridge, Colorado
We have audited the accompanying balance sheet of JNS Marketing, Inc. (A
Development Stage Company) as of September 30, 2000, and the related statement
of operations, cash flows, and changes in stockholders' equity for the year then
ended September 30, 2000 and for the period from July 15, 1983 (inception) to
September 30, 2000. 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. at
September 30, 2000, and the results of their operations and their cash flows for
the year ended September 30, 2000 and for the period from July 15, 1983
(inception) to September 30, 2000 in conformity with generally accepted
accounting principles.
The financial statements for the year ended September 30, 1999 and from the
period July 15, 1983 (inception) to September 30, 1999, were audited by other
accountants, whose report dated March 29, 2000, expressed an unqualified opinion
on those statements. They have not performed any auditing procedures since that
date.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, conditions exist which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Michael Johnson & Co., LLC
Denver, Colorado
January 10, 2000
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
JNS Marketing, Inc.
We have audited the balance sheet of JNS Marketing, Inc. (a development stage
company) as of September 30, 1999, and the related statements of operations,
changes in stockholders' equity, and cash flows for each of the years in the two
year period then ended. 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 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 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 JNS Marketing, Inc. as of
September 30, 1999, and the results of its operations and cash flows for each of
the years in the two year period then ended, in conformity with generally
accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
March 29, 2000
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, 2000 and 1999
<S> <C> <C>
2000 1999
---------------- -------------
ASSETS:
Current Assets:
Cash $ - $ 871
---------------- -------------
Total Current Assets - 871
---------------- -------------
TOTAL ASSETS $ - $ 871
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 5,215 $ -
---------------- -------------
Total Current Liabilities 5,215 -
---------------- -------------
Stockholders' Equity (Deficit):
Common stock, no par value; 50,000,000
shares authorized; 3,781,455 shares issued
and outstanding at September 30, 2000 and 1999, respectively 952,727 952,727
Deficit accumulated during the development stage (957,942) (951,856)
---------------- -------------
Total Stockholders' Equity (Deficit) (5,215) 871
---------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ 871
================ =============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
JNS MARKENTING, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For the For the July 15, 1983
Year Ended Year Ended (Inception) thru
September 30 September 30, September 30,
2000 1999 2000
--------------- ----------------- --------------
REVENUES: $ - $ - $ 24,175
OPERATING EXPENSES:
Sales and marketing - - -
General and administrative 6,086 9,265 681,424
--------------- ----------------- --------------
Total Operating Expenses 6,086 9,265 681,424
--------------- ----------------- --------------
--------------- ----------------- --------------
Net Loss from Operations (6,086) (9,265) (657,249)
--------------- ----------------- --------------
Other Income and expenses:
Interest income - - 166,403
Interest expense - - (68,108)
Other - - (398,988)
--------------- ----------------- --------------
- - (300,693)
--------------- ----------------- --------------
Net Loss $ (6,086) $ (9,265) $ (957,942)
=============== ================= ==============
Weighted average number of
shares outstanding 3,781,455 251,822
=============== =================
Basic and diluted net loss per share $ (0.001) $ (0.04)
=============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
For the For the July 15, 1983
Year Ended Year Ended (Inception) to
September 30, September 30, September 30,
2000 1999 2000
----------------- -------------- ---------------
Cash Flows From Operating Activities:
Net (Loss) $ (6,086) $ (9,265) $(957,942)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - - 98,818
Stock issued for services and inventory - - 19,000
Forgiveness of indebtedness - 11,105 (99,686)
Loss on investments - - 476,583
Bad debts - - 20,000
Abandonment of partnership interest - - 18,600
Changes in assets and liabilities:
Increase in accounts payables and accrued expenses 5,215 (4,215) 5,215
----------------- -------------- ---------------
5,215 6,890 538,530
----------------- -------------- ---------------
Net Cash Used in Operating Activities (871) (2,375) (419,412)
----------------- -------------- ---------------
Cash Flow From Financing Activities:
Proceeds from notes payable - - 146,290
Advances from shareholders - - 9,250
Repayment of notes payable - - (12,000)
Proceeds from the issuance of common shares - - 325,737
Payment for cancellation of stock - - (49,865)
----------------- -------------- ---------------
Net Cash Provided By Financing Activites - - 419,412
----------------- -------------- ---------------
Increase (Decrease) in Cash (871) (2,375) -
Cash and Cash Equivalents - Beginning of period 871 3,246 -
----------------- -------------- ---------------
Cash and Cash Equivalents - End of period $ - $ 871 $ -
================= ============== ===============
Supplemental Cash Flow Information:
Cash paid during period for:
Interest paid $ - $ - $ 68,108
================= ============== ===============
================= ===============
Taxes paid $ - $ - $ -
================= ============== ===============
Non-cash
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Deficit
Accumulated
During the
Common Stock Development
Shares Amount Stage Totals
------ ------ ----- ------
Balance - July 15, 1983 - $ - $ - $ -
Stock issuance for cash at $.6.67 per share 210,000 10,000 - 10,000
Net loss for period - - (96,110) (96,110)
------- ------- ------- -------
Balance - September 30, 1984 210,000 10,000 (96,110) (86,110)
------- ------- ------- -------
Stock issuance for cash at $100 per share 39,665 283,320 - 283,320
Expenses of offering - (72,133) - (72,133)
Stock issuance for partnership share at $291.60
per share 840 17,500 - 17,500
Stock issuance for Tri-Party agreement at $300
per share 28,000 600,000 - 600,000
Stock issuance for principal reduction of note
payable at $120 per share 2,333 20,000 - 20,000
Net loss for year - - (238,550) (238,550)
------- ------- ------- -------
Balance - September 30, 1985 280,838 858,687 (334,660) 524,027
------- ------- ------- -------
Stock issuance for services at $36 per share 3,500 9,000 - 9,000
Stock issuance for purchase of inventory at
$300 per share 3,500 75,000 - 75,000
Net loss for year - - (71,792) (71,792)
------- ------- ------- -------
Balance - September 30, 1986 287,838 942,687 (406,452) 536,235
------- ------- ------- -------
Cancellation of common stock issuance at $300
per share (3,500) (75,000) - (75,000)
Net loss for year - - (90,820) (90,820)
------- ------- ------- -------
Balance - September 30, 1987 284,338 867,687 (497,272) 370,415
------- ------- ------- -------
Stock issuance for services at $25 per share 5,600 10,000 - 10,000
Stock issuance of additional common stock
pursuant to prior agreements in 1998 24,173 - - -
Net loss for year - - (391,533) (391,533)
-------- ------- ------- -------
Balance - September 30, 1988 314,111 877,687 (888,805) (11,118)
------- ------- ------- -------
Net loss for year - - (28,287) (28,287)
------- ------- ------- -------
Balance - September 30, 1989 314,111 877,687 (917,092) (39,405)
------- ------- ------- -------
Net loss for year - - (865) (865)
------- ------- ------- -------
Balance - September 30, 1990 314,111 877,687 (917,957) (40,270)
------- ------- ------- -------
Net loss for year - - (779) (779)
------- ------- ------- -------
Balance - September 30, 1991 314,111 877,687 (918,736) (41,049)
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
JNS MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
Deficit
Accumulated
During the
Common Stock Development
Shares Amount Stage Totals
------ ------ ----- ------
<S> <C> <C> <C> <C>
Balance - September 30, 1991 314,111 877,687 (918,736) (41,049)
------- ------- -------- -------
Net loss for year - - (675) (675)
------- ------- -------- -------
Balance - September 30, 1992 314,111 877,687 (919,411) (41,724)
------- ------- -------- -------
Net loss for year - - 15,551 15,551
------- ------- -------- --------
Balance - September 30, 1993 314,111 877,687 (903,860) (26,173)
------- ------- -------- --------
Stock issuance for cash at $.15 per share 3,211,397 34,550 - 34,550
Net income for year - - (15,734) (15,734)
------- -------- -------- --------
Balance - September 30, 1994 3,525,508 912,237 (919,594) (7,357)
------- -------- -------- --------
Net loss for year - - (6,774) (6,774)
------- -------- -------- --------
Balance - September 30, 1995 3,525,508 912,237 (926,368) (14,131)
------- -------- -------- --------
Net loss for year - - (1,774) (1,774)
------- -------- -------- --------
Balance - September 30, 1996 3,525,508 912,237 (928,142) (15,905)
------- -------- -------- --------
Stock issuance for $.30 per share 3,211,403 70,000 - 70,000
Redemption and cancellation of common stock -
pursuant to recission agreement (3,211,403) (49,865) - (49,865)
Net income for year - - (2,092) (2,092)
------- -------- -------- --------
Balance - September 30, 1997 3,525,508 932,372 (930,234) 2,138
------- -------- -------- --------
Net loss for year - - (12,357) (12,357)
------- -------- -------- --------
Balance - September 30, 1998 3,525,508 932,372 (942,591) (10,219)
------- -------- -------- --------
Reverse stock split - 1 to 100 (3,273,686) - - -
Forgiveness of indebtedness by shareholders - 20,355 - 20,355
Net loss for year - - (9,265) (9,265)
------- -------- -------- --------
Stock split - 14 shares to 1 share stock dividend 3,525,508 - - -
Rounding adjustment due to stock split dividend 4,125 - - -
Balance - September 30, 1999 3,781,455 952,727 (951,856) 871
------- -------- -------- --------
Net loss for year - - (6,086) (6,086)
------- -------- -------- --------
Balance - September 30, 2000 3,781,455 $952,727 $ (957,942) $ (5,215)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
JNS MARKETING, INC.
(A Development Stage Company)
Notes To Financial Statements
September 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
---------------------------------------------------------------------
Nature of Operations
--------------------
JNS Marketing, Inc. (the "Company") was incorporated in 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 that 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.
The Company's fiscal year end is September 30.
Basis of Presentation - Development Stage Company
-------------------------------------------------
The Company has not earned any significant revenue from limited
principal operations. Accordingly, the Company's activities have been
accounted for as those of a "Development Stage Enterprise" as set forth
in Financial Accounting Standards Board Statement No. 7 ("SFAS 7").
Among the disclosures required by SFAS 7 are that the Company's
financial statements be identified as those of a development stage
company, and that the statements of operations, stockholders' equity
(deficit) and cash flows disclose activity since the date of the
Company's inception.
Basis of Accounting
-------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considered all
cash and other highly liquid investments with initial maturities of
three months or less to be cash equivalents.
Net earning (loss) per share
----------------------------
Basic and diluted net loss per share information is presented under the
requirements of SFAS No. 128, Earnings per Share. Basic net loss per
share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding for the period; less shares
subject to repurchase. Diluted net loss per share reflects the
potential dilution of securities by adding other common stock
equivalents, including stock options, shares subject to repurchase,
warrants and convertible preferred stock, in the weighted-average
number of common shares outstanding for a period, if dilutive. All
potentially dilutive securities have been excluded from the
computation, as their effect is anti-dilutive.
F-7
<PAGE>
JNS MARKETING, INC.
(A Development Stage Company)
Notes To Financial Statements
September 30, 2000
Fair Value of Financial Instruments
-----------------------------------
The carrying amount of accounts payable is considered to be
representative of its respective fair value because of the short-term
nature of this financial instrument.
Income Taxes
------------
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this method, deferred tax assets and liabilities are
measured based on differences between financial reporting and tax bases
of assets and liabilities measured using enacted tax rates and laws
that are expected to be in effect when differences are expected to
reverse.
NOTE 2 - CAPITAL STOCK TRANSACTIONS:
------------------------------------
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
3,211,403 shares of the Company's no par value common stock. This
Agreement was subsequently rescinded July 2, 1997 (See "rescission
agreement").
Rescission agreement
--------------------
On July 2, 1997, the Company entered into a rescission agreement with
CPGP Group in which CPGP relinquished control of the Company by
returning 3,211,403 shares of the Company stock acquired pursuant to
the Plan of Reorganization discussed in Note 3. CPGP received $49,865
for the redemption and cancellation of the shares.
Stock purchase agreement
------------------------
On July 2, 1997, the Company entered into stock purchase agreement in
which several individuals purchased 3,211,403 newly issued shares of
the Company's no par value common stock for $70,000. Control of the
Company changed as a result of this transaction.
Change in control
-----------------
During June 1999, the Company's major shareholders sold the Company's
common stock held by them to an unrelated group of investors for cash.
In connection therewith, the shareholders forgave an aggregate of
$9,250 of advances made by them during the year ended September 30,
1998. The forgiveness of indebtedness by the shareholders was accounted
for a contribution of capital to the Company. Additionally, an
aggregate of $11,105 of costs and legal fees incurred by the Company's
attorney who was also a shareholder and included in the accounts
payable was converted to a common stock subscription for 20,000 share
of the Company's common stock.
F-8
<PAGE>
JNS MARKETING, INC.
(A Development Stage Company)
Notes To Financial Statements
September 30, 2000
Stock split and dividend distribution
-------------------------------------
During March 1999, the Company affected a 1 share for 100 shares
reverse stock split, which had been approved by the shareholders in
1998. During December 1999, the Company effected a 14 share for 1 share
stock dividend. All share and per share amounts in the foregoing
financial statements and the accompanying notes have been restated to
give effect to the reverse stock split and subsequent dividend
distribution.
NOTE 3 - INCOME TAXES
---------------------
There has been no provision for U.S. federal, state, or foreign income
taxes for any period because the Company has incurred losses in all
periods and for all jurisdictions.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax assets are as follows:
Deferred tax assets
Net operating loss carryforwards $957,942
Valuation allowance for deferred tax assets (957,942)
--------
Net deferred tax assets $ -
==============
Realization of deferred tax assets is dependent upon future earnings, if
any, the timing and amount of which are uncertain. Accordingly, the net
deferred tax assets have been fully offset by a valuation allowance. As
of September 30, 2000, the Company had net operating loss carryforwards
of approximately $957,942 for federal and state income tax purposes.
These carryforwards, if not utilized to offset taxable income begin to
expire in 2007. Utilization of the net operating loss may be subject to
substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code and similar state provisions. The
annual limitation could result in the expiration of the net operating
loss before utilization.
NOTE 4 - GOING CONCERN:
-----------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. The Company has no
assets and its operations are in the development stage.
The future success of the Company is likely dependent on its ability to
attain additional capital to develop its proposed products and
ultimately, upon its ability to attain future profitable operations.
There can be no assurance that the Company will be successful in
obtaining such financing, or that it will attain positive cash flow
from operations.
F-9
<PAGE>
JNS MARKETING, INC.
(A Development Stage Company)
Notes To Financial Statements
September 30, 2000
Note 5 - OTHER ACCOUNTING POLICIES:
-----------------------------------
Stock-based Compensation
------------------------
The Company adopted Statement of Financial Accounting Standard No. 123
(FAS 123), Accounting for Stock-Based Compensation beginning with the
Company's first quarter of 1996. Upon adoption of FAS 123, the Company
continued to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB
No. 25, Accounting for Stock Issued to Employees. The Company paid no
stock-based compensation during the year ended September 30, 2000.
Pensions and other Post-retirement Benefits
-------------------------------------------
Effective, December 31, 1998, the Company adopted the provisions of
SFGAS No. 132, Employers Disclosures about Pensions and Other
Post-retirement Benefits ("SFAS 132"). SFAS supersedes the disclosure
requirements in SFAS No. 87, Employers' Accounting for Pensions, and
SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other
Than Pensions. The overall objective of SFAS 132 is to improve and
standardize disclosures about pensions and other post-retirement
benefits and to make the required information more understandable. The
adoption of SFAS 132 did not affect results of operations or financial
positions. The Company has not initiated benefit plans to date that
would require disclosure under the statement.
Reporting Comprehensive Income
------------------------------
SFAS No. 130. "Reporting Comprehensive Income", establishes guidelines
for all items that are to recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1997 and reclassification financial statements for earlier
periods will be required for comparative purposes. To date, the Company
has not engaged in transactions that would result in any significant
difference between its reported net loss and comprehensive net loss as
defined in the statements.
Financial Reporting for Segments of a Business Enterprise
---------------------------------------------------------
Effective December 31, 1998, the Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards for
the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. SFAS 131 also established standards for
related disclosures about products and services, geographic areas and
major customers. The adoption of SFAS 131 did not affect results of
operations or financial position. To date, the Company has not operated
in its one planned business activity.
F-10
