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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
---------------------------------------------
AMMENDMENT NO. 1 TO FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12 (g) of the Securities Exchange Act of 1934
CATHEL PARTNERS, LTD.
(Name of Small Business Issuer in Its Charter)
Delaware 59-2571253
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
68 Schraalenburg Road, P.O. Box 233
Harrington Park, New Jersey 07640
(Address of principal executive offices, including zip code)
(201) 784-5190
(Registrant's Telephone Number, Including Area Code)
With copies to:
John J. Gitlin, Esq.
3008 Falls Church Lane
Mesquite, Texas 75149
Tel: (972) 289-0392
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
---------------------------------------------
(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
common stock, par value $.00001 per share
(Title of Class)
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ITEM 1 DESCRIPTION OF BUSINESS
Cathel Partners, Ltd. (the "Company") has not engaged in any operations
since 1993. The Company was incorporated in the state of Delaware on June 7,
1985 as BC Communications, Inc. Subsequent to its date of incorporation, the
Company filed with the Securities and Exchange Commission a Registration
Statement for the public sale of 25,000,000 units consisting of 25,000,000
shares of common stock, $0.00001 par value and 50,000,000 warrants to purchase
50,000,000 shares of the Company's common stock. The effective date of the
Prospectus and Registration Statement was September 18, 1985. Initially, the
Company intended upon completion of the offering and through the utilization of
the proceeds from the offering, to engage in the business of developing,
producing, and distributing programming of a talk and interview format for
commercial, cable and pay television markets. Following the offering the Company
exhausted its funds on the incomplete production of a show and decided to seek
other business opportunities which would offer growth and development.
On February 14, 1987, the Company acquired 73.75 percent of Kinetic
Systems, Inc. ("Kinetic Systems"), a Delaware corporation, which was in the
process of developing a closed chamber, forced hot air, liquid heating system
for use in residential and commercial buildings and in 1988 the Company
purchased the remaining 26.25 percent of Kinetic Systems. Thereafter, through
Kinetic Systems, the Company pursued development of the heating system. In 1990,
Kinetic Systems entered into a technology and patent license agreement with a
Michigan based manufacturer pursuant to which the manufacturer was granted a
limited license to develop, manufacture and market the Kinetic heating system
apparatus. The agreement subsequently expired by its own terms in 1992 due in
large part to the manufacturer's inability to complete development of the
heating system.
On January 28, 1993, the Company sold all of its shares in Kinetic
Systems to the Barrister Group, Ltd., for $100,000. The Company has been
inactive since 1993.
In November 1994, the Company, by amendment to its certificate of
incorporation, changed its name to Cathel Partners, Ltd.
In January 1995, the Company recorded a 1,000 to 1 reverse stock split
reducing the number of shares outstanding to 469,423.
In 1999, the Company decided to engage in the pursuit of seeking a
partnership with a viable business entity. The primary activity of the Company
will involve seeking business opportunity candidates which it can acquire or
with whom it can merge. The Company has not selected any company for acquisition
or merger and does not intend to limit potential acquisition candidates to any
particular field or industry, but does retain the right to limit acquisition or
merger candidates, if it so chooses, to a particular field or industry. The
Company is currently in a development stage of its business.
The proposed business activities classify the Company as a "blank
check" company. The Securities and Exchange Commission defines such companies as
"any development stage company that is issuing a penny stock (within the meaning
of section 3 (a)(51) of the Securities Exchange Act of 1934) and that has no
specific business plan or purpose, or has indicated that its business plan is to
merge with an unidentified company or companies." Many states have enacted
statutes, rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not intend to
undertake any further efforts to cause a market to develop in the Company's
securities other than, upon its becoming a reporting company, to complete the
application process with the National Association of Securities Dealers to be
listed on the NASDAQ Bulletin Board. The Company does not intend to undertake
any offering of the Company's securities, either debt or equity, until such time
as the Company has successfully implemented its business plan. On March 10, 2000
the Company completed a private
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placement with its major shareholder which resulted in the Company receiving
$15,000.00, which management feels will be sufficient to fund the Company's
efforts to become a reporting and listed company. There is, however, no
assurances that the Company will be accepted for listing on the NASDAQ Bulletin
Board. The Company intends to comply with the periodic reporting requirements of
the Securities Exchange Act of 1934 for so long as it is subject to those
requirements.
The Company is filing this Form 10SB on a voluntary basis. It has no
obligation to do so under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company believes that by filing such Form 10SB and being
obligated to file reports pursuant to Section 13 of the Exchange Act, and by
being listed on the NASDQ Bulletin Board, the Company will best position itself
as an attractive partner for potential merger or acquisition companies of
greater financial value with a history of success. While the Company believes it
will be a more attractive acquisition candidate, there is no assurance that the
foregoing assumption is correct. Further, effective January 4, 1999, in order to
become listed for trading on the Bulletin Board operated by the National
Association of Securities Dealers, Inc., the Company must be filing reports with
the Securities and Exchange Commission (the "Commission") pursuant to Section 13
of the Exchange Act.
The Company believes that there is a demand by non-public corporations
for shell corporations that have a public distribution of securities, such as
the Company. The Company believes that demand for shells has increased
dramatically since the Securities and Exchange Commission (the "Commission")
imposed additional requirements upon "blank check" companies pursuant to Reg.
419 of the Securities Act of 1933 (the "Act"). According to the Commission, Rule
419 was designed to strengthen regulation of securities offerings by blank check
companies, which Congress has found to have been a common vehicle for fraud and
manipulation in the penny stock market. See Securities Act Releases No. 6891
(April 17, 1991), 48 SEC Docket 1131 and No. 6932 (April 13, 1992) 51 Docket
0382, SEC Docket 0382. The foregoing regulation has decreased, substantially,
the number of "blank check" offerings filed with the Commission, and as a result
has stimulated an increased demand for shell corporations. While the Company has
made the foregoing assumption, there is no assurance that the same is accurate
or correct and accordingly, no assurance that the Company will be acquired by or
acquire an existing non-public entity. Furthermore, any business combination or
transaction will likely result in a significant issuance of shares and
substantial dilution to present stockholders of the Company.
Forward Looking Statements
Certain statements contained in this Registration Statement discuss
potential future events and/or transactions concerning the Company and may be
deemed to be forward looking statements. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by or on behalf of the Company. The Company
strongly urges the reader of this Registration Statement to carefully read and
consider the risk factors and other cautionary statements identified by the
Company in conjunction with the discussions by the Company of the forward
looking statements.
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Risk Factors.
The Company's business is subject to numerous risk factors which
include the following:
1. No Operating History or Revenue and Minimal Assets. We have had no
recent operating history nor any revenues or earnings from operations since its
inception. The Company has no significant assets or financial resources. We
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 that will increase
continuously until we 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.
2. Assets of the Corporation. The Company has no substantial, material,
tangible assets as of the filling date of this registration statement. Its
present assets are extremely limited. Any business activity that the Company
eventually undertakes may require substantial capital.
3. 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 companies with which the
Company may merge or which it acquires. While management intends to seek a
merger or acquisition of privately held entities with established operating
histories, there can be no assurance that the Company will be successful in
locating an acquisition candidate meeting such criteria. In the event the
Company completes a merger or acquisition transaction, of which there can be no
assurance, the success of the Company's operations will be dependent upon
management of the successor firm and numerous other factors beyond the Company's
control.
4. Dilution in Merger or Acquisition Transaction. The Company's plan of
operation is based upon a merger with or acquisition of a private concern, which
in all likelihood would result in the Company issuing securities to shareholders
of any such target concern. The issuance of previously authorized and unissued
Common Stock of the Company would result in substantial dilution to present and
prospective shareholders of the Company, which may necessarily result in a
change in control or management of the Company.
5. Impact of Limited Time Devoted to the Company. Opportunities available
to the Company for mergers or acquisitions may be lost or delayed as a result of
the limited amount of time devoted to the Company by management. As a result, an
acquisition or merger may never take place.
6. No Business Plan. The Company has not identified the business
opportunities in which it will attempt to obtain an interest. The Company
therefore cannot describe the specific risks presented by such business. In
general, it may be expected that such business will present such a level of
risks that conventional bank financing would not be available on favorable
terms. Such business may involve an unproven product, technology or marketing
strategy, the ultimate success of which cannot be assured. The acquired business
opportunity may be in competition with larger, more established firms over which
it will have no competitive advantage. The Company's investment in a business
opportunity may be expected to be highly illiquid and could result in a total
loss to the Company if the opportunity is unsuccessful.
7. Company's Securities are Subject to Penny Stock Rules. The Company's
shares are "penny stocks" consequently they are subject to Securities and
Exchange Commission regulations which impose sales practice requirements upon
broker/dealer.
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8. Conflicts of Interest. All of the Directors are associated with other
firms or occupations involving a range of business activities. Because of these
affiliations and because these individuals will devote only a minor amount of
time to the affairs of the Company. There are potential inherent conflicts of
interest in their acting as Directors and Officers of the Company. All of the
Company's Directors and Officers are Officers and/or Directors of the majority
shareholder of the Company and are or may be Directors and/or Officers of other
entities engaged in a variety of businesses which may in the future have various
transactions with the Company. Additional conflicts of interest and non-arm's
length transactions may also arise in the future in the event the Company's
Officers or Directors are involved in the management of any firms with which the
Company transacts business. Management has adopted a policy that the Company
will not seek a merger with or an acquisition of any entity with which any of
the Officers or Directors serve as Officers, Directors or partners or in which
they or their family member own or hold an ownership interest. Business
combinations with entities owned or controlled by affiliates or associates of
the Company will not be considered, however, securities owned or controlled by
the affiliates and associates of the Company may be sold in the business
combination transaction without affording all existing shareholders a similar
opportunity. A buy-out of the Company's majority shareholder's share could occur
by an offer from a merger/acquisition candidate.
9. No Dividends Anticipated. At the present time the Company does not
anticipate paying dividends, cash or otherwise, on its Common Stock in the
foreseeable future. Future dividends will depend on earnings, if any, of the
Company, its financial requirements and other factors. Investors who anticipate
the need of an immediate income from their investment in the Company's Common
Stock should refrain from the purchase of the Company's securities.
10. Scarcity of and Competition for Merger or Acquisition Prospects. The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with and acquisitions of small private entities. A large
number of established and well financed entities, including venture capital
firms, are active in mergers and acquisitions of private 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 merger or acquisition
candidates with numerous other small public companies.
11. No Agreement for Business Combination or Other Transaction. The Company
has no arrangement, agreement or understanding with respect to engaging in a
merger with, or acquisition of, any entity private or public. There can be no
assurance the Company will be successful in identifying and evaluating suitable
merger or acquisition candidates or in concluding a merger or acquisition
transaction. Management has not identified any specific business within an
industry for evaluation by the Company. There is no assurance the Company will
be able to negotiate a merger or acquisition on favorable terms.
12. Lack of Market Research or Marketing Organization. The Company has
neither conducted nor has the Company engaged other entities to conduct market
research such that management has assurance 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 of the type contemplated by the
Company, there is no assurance the Company will be successful in completing any
such transaction.
13. Impracticability of Exhaustive Investigation. The Company's limited
funds and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Therefore, management decisions will likely be made without detailed feasibility
studies, independent
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analysis, market surveys and the like which, if the Company had more funds
available to it, would be desirable. The Company will be particularly dependent
in making decisions upon information provided by the promoter, owner, sponsor,
or others associated with the business opportunity seeking the Company's
participation. There are numerous individuals, publicly held companies, and
privately held companies seeking merger and acquisition prospects. There is
significant competition among such groups for attractive merger and acquisition
prospects. However, the number of suitable and attractive prospects is limited
and the Company may find a scarcity of suitable companies with audited financial
statements seeking merger partners of the type and size of the Company.
14. Possible Lack of Diversification. The Company may be unable to
diversify its business activities, which creates the possibility of a total loss
to the Company and its shareholders should an acquisition by the Company prove
to be unprofitable. The Company's failure or 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.
15. The Company May Pay a Finder's Fee. In connection with a
merger/acquisition, the Company may issue "restricted" shares of the Company's
Common Stock to finders. A finder's fee will not be paid, however, to any
officer, director, shareholder or other affiliated party. At the present time,
there are no plans to pay any finder's fees.
16. Issuance of Additional Shares. The Board of Directors has the power to
issue shares and may do so in an exchange offer or a stock for stock exchange
agreement. The Company may also issue additional shares of Common Stock pursuant
to a plan and agreement of merger with a private corporation. Although the
Company presently has no commitments, contracts or intentions to issue any
additional shares to other persons, the Company may in the future attempt to
issue shares to acquire products, properties or businesses, or for other
corporate purposes.
17. Lack of Public Market for Securities. At present, no market exists for
the Company's securities and there is no assurance that a regular trading market
will develop and if developed, that it will be sustained. A market for the
securities cannot develop until a merger or acquisition has been concluded. A
purchaser of stock may, therefore, be unable to resell the securities offered
herein should he or she desire to do so. Furthermore, it is unlikely that a
lending institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
18. Change of Control. As part of the acquisition of a business
opportunity, some or all of the current Board of Directors may resign after
appointing their successors, without shareholder approval. The acquisition of an
opportunity may also involve the issuance of a majority of the Company's stock
to promoters of the opportunity. In such event, purchasers of shares offered
hereunder would be unable to elect or remove Directors against the wishes of
such promoters.
19. Year 2000 Disclosure. Many existing computer programs use only two
digits to identify a year in the date field. These programs were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer applications could fail or create erroneous
results by or at the year 2000. As a result, many companies will be required to
undertake major projects to address the Year 2000 issue. Because the Company has
no assets, including any personal property such as computers, it is not
anticipated that we will incur any negative impact as a result of this potential
problem. However, it is possible that this issue may have an impact on us after
we successfully consummate a merger or acquisition. Management intends to
address this potential problem with any prospective merger or acquisition
candidate. There can be no assurances that new management of the Company will be
able to avoid a problem in this regard after a merger or acquisition is
consummated.
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ITEM 2. Management's Discussion and Analysis.
The Company was formed on June 7, 1985, under the laws of the State of
Delaware. The Company was formed under the name of BC Communications, Inc. In
1985, the Company conducted an offering and used the proceeds from the offering,
to engage in the business of developing, producing, and distributing programming
of a talk show and interview format for commercial, cable and pay television
markets. Following the offering the Company exhausted its funds on the
incomplete production of a show and decided to seek other business opportunities
which would offer growth and development. On February 14, 1987, the Company
acquired 73.75 percent of Kinetic Systems, Inc. ("Kinetic Systems"), a Delaware
corporation, which was in the process of developing a closed chamber, forced hot
air, liquid heating system for use in residential and commercial buildings.
Through Kinetic Systems, the Company pursued development of the heating system.
In February, 1990, Kinetic Systems entered into a technology and patent license
agreement with a Michigan based manufacturer pursuant to which the manufacturer
was granted a limited license to develop, manufacture and market the Kinetic
heating system apparatus. The agreement subsequently expired by its own terms
due in large part to the manufacturer's inability to complete development of the
heating system. On January 28, 1993, the Company sold 100 percent of the issued
and outstanding Kinetic Systems shares to the Barrister Group, Ltd., for
$100,000. The Company has been inactive since 1993.
Development stage activities.
The following discussion relates to the results of the Company's operations
to date, and the Company's financial condition:
For the next 12 months, the Company plans to devote its efforts to seeking
a viable business opportunity. The Company anticipates that its results of
operations may fluctuate for the foreseeable future due to several factors,
including whether operating results would also be adversely affected by the
Company's inability to locate a profitable business venture. Because the Company
is desiring to increase its operating expenses for personnel and other general
and administrative expenses, the Company's operating results would be adversely
affected if either a viable business opportunity could not be developed or
located. The Company's limited operating history makes accurate prediction of
future operating results difficult or impossible.
The Company has been a development stage enterprise since its date of
inception in 1985 to December 31, 1999. During this period, management had
devoted the majority of its efforts to seeking new business opportunities or to
develop a new business and finding a management team to continue the process of
completing its and obtaining sufficient working capital through loans and equity
through a private placement offering. These activities were funded by the
Company's management.
Results of operations.
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For the year months ended December 31, 1999 as compared to the year ended
December 31, 1998
The company has remained inoperative. Sales, costs of goods sold, gross
profit, operating expenses and net profit were $-0- for both the year ended
December 31, 1998 and 1999. The activities of the Company during the year ended
December 31, 1998 and 1999. consisted of preparing and filing corporate income
tax returns and filings for the Securities and Exchange Commission.
The Company's general and administrative costs aggregated approximately $12,843
for the year ended December 31, 1999 as compared to $72 for the year ended
December 31, 1998 representing an increase of $12,771. This increase represents
office expenses of $3,843 and the accruing of rent of $3,000 and officer's
salary of $6,000.
For the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999
The company has remained inactive. Sales, costs of goods sold, gross
profit, operating expenses and net profit were $-0- for both the three months
ended March 31, 1999 and 2000. The activities of the Company during the three
months ended March 31, 1999 and 2000 consisted of preparing and filing corporate
income tax returns and filings for the Securities and Exchange Commission.
The Company's general and administrative costs aggregated approximately $5,423
for the three months ended March 31, 1999 as compared to $18 for the three
months ended March 31, 1999 representing an increase of $5,405. This increase
represents professional fees of $3,000 and the accruing of rent of $750,
officer's salary of $1,500 and office expense of $173.
Liquidity And Capital Resources
As of December 31, 1999, the Company's cash balance was $273 and
working capital was negative at $19,498 consisting of cash of $273 and less
accrued liabilities of $19,771.
Net (loss) from operations amounted to $(12,843) for the year ended December 31,
1999 due to increases general and administrative expenditures related to the
accruing of $3,000 in rent, $6,000 in officer salaries and $3,843 primarily due
to the stock transfer agent.
As of March 31, 2000, the Company's cash balance was $1,323 and working
capital was negative at $8,721 consisting of cash of $1,323 and less accrued
liabilities of $10,044.
Net (loss) from operations amounted to $(5,423) for the three months
ended March 31, 2000. Cash was provided through the sale of 3,000,000 shares of
common stock to HITK Corporation for an aggregate consideration of $15,000 or
$.0005 per share. HITK Corporation is under common management control with the
principals of the Company.
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The Company's primary short-term needs are to seek sufficient capital to
continue the search for a viable business opportunity.
The Company expects its capital requirements to increase over the next
several years as it expands its search for either a viable business opportunity
or to develop a profitable business strategy. The Company's future liquidity and
capital funding requirements will depend on numerous factors, including the
extent to which the Company's efforts to either find a viable business
opportunity or to develop a profitable business, the timing of regulatory
actions, if any, regarding the Company's entrance into the business, the costs
and timing of expansion of the Company's entrance into that business and the
timing of hiring additional management to operate that business.
The Company believes that it must raise additional cash and cash from
either its operations or from the personal resources of management to satisfy
its funding needs for at least the next 12 months. Thereafter, if cash generated
from operations or the personal resources of management is insufficient to
satisfy the Company's working capital and capital expenditure requirements, the
Company may be required to sell additional equity or debt securities or obtain
additional funds. There can be no assurance that such financing, if required,
will be available on satisfactory terms, if at all.
Income tax: As of March 31, 2000, the Company had a tax loss
carry-forward of $1,310,205. The Company's ability to utilize its tax credit
carry-forwards in future years will be subject to an annual limitation pursuant
to the "Change in Ownership Rules" under Section 382 of the Internal Revenue
Code of 1986, as amended. However, any annual limitation is not expected to have
a material adverse effect on the Company's ability to utilize its tax credit
carry-forwards.
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ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive offices are currently located at 68
Schraalenburg Road, Harrington Park, New Jersey, under a month to month
sub-lease with Power Tech Services, Inc. The Company pays rent of $250.00 per
month for the leased space. Mr. Robert Schuck who is President and Director of
the Company acts as a consultant to Power Tech. Mr. Schuck receives no benefit
from the sub-lease of the property by the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of common stock, the only class of securities of the
Company, by (i) each person known by the Company to beneficially own more than
five percent of the Company's common stock; (ii) each director and executive
officer of the Company; and (iii) all current directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
-------- ---------------- -------------------- ----------
<S> <C> <C> <C>
common stock, par HITK Corporation 3,250,050 87.6 %
value $.00001 68 Schraalenburg Road
per share Harrington Park, New Jersey 07640 Direct
</TABLE>
*Based on 3,709,423 shares issued and outstanding as of the filing date of
this registration statement.
The number of shares of common stock of the Company owned by the
Directors and Executive Officers of the Company as of the filing date of this
registration statement is as follows:
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
-------- ---------------- -------------------- ----------
<S> <C> <C> <C>
common stock, par Robert N. Schuck 3,370,155 shares(1)(2) 90.8%
value $.00001 85 Somerset Road
per share Norwood, New Jersey 07648 Direct
common stock, par John J. Gitlin 3,370,105 shares(1)(2)(3) 90.8%
value $.00001 3008 Falls Church Lane
per share Mesquite, Texas 75149 Direct
common stock, par Herbert Maslo 3,250,050 shares(1)(2) 87.6%
value $.00001 9 Kathy Lane
per share Warren, New Jersey 07060 Indirect
</TABLE>
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<TABLE>
<S> <C> <C>
All Officers and Directors as
a Group (3 persons) 3,490,205 shares (1)(2) 91.3 %
</TABLE>
* Based on 3,709,423 shares issued and outstanding.
(1) For purposes of this table, beneficial ownership is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, and generally includes voting or investment power with
respect to securities.
(2) Robert Schuck and John Gitlin who respectively hold the positions of
President and Vice President/Secretary-Treasurer and Directors and
Herbert Maslo who holds the position of Director of the Company hold
identical positions with HITK Corporation ("HITK") which holds a
majority shareholder interest in the Company of 87.6%, and therefore
are deemed to be beneficial owners of the shares held by HITK.
(3) Includes 50 shares held as trustee of a testamentary trust for the
benefit of Mr. Gitlin's sister. Does not include 50 shares which are
held in trust for the benefit of Mr. Gitlin as to which beneficial
ownership is disclaimed.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and Executive Officers.
Directors of the Company serve for a term of one year or until their
successors are elected. Officers are appointed by, and serve at the pleasure of,
the Board. The Directors and Executive Officers of the Company are as follows:
Robert N. Schuck, age 63. President and Director. Mr. Schuck has been President
and a Director of the Company since February 1987. Mr. Schuck has been a
Director of Power Tech Systems, Inc. since September 1988. He held the position
of Executive Vice President of eGlobe, Inc. from 1989 to 1997 and Director from
1989 to 1995. Mr. Schuck since 1986 has been the President and a Director of
HITK Corporation.
Herbert Maslo, age 62. Herbert Maslo has been a Director of the Company since
March 1994. Mr. Maslo has been, since 1990, a Director of HITK Corporation . He
has also been a Director of Power Tech Systems, Inc. since 1990 and was its
President from 1990 to 1995. Prior to that, Mr. Maslo was employed by New York
Telephone, a division of Nynex for 23 years where he held various engineering
positions including central office planning, installations and engineering as a
project manager. Mr. Maslo holds a B.A. degree in Mechanical Engineering from
the Newark College of Engineering.
John Gitlin, age 57. Mr. Gitlin has been Vice President/
Secretary-Treasurer and a Director of the Company since May 1998. From 1978 to
1982, Mr. Gitlin held the position of staff attorney with the United States
Department of Justice, Antitrust Division. From 1982 through April of 1994, he
was a partner in the law firm of Fischer, Gitlin & Sanger in Dallas, Texas. From
May 1994 to September, 1997, Mr. Gitlin held the position of Secretary with
eGlobe, Inc. Mr. Gitlin has been a Director since January 1997 and Vice
President/ Secretary-Treasurer since October 1997 of HITK Corporation.
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(b) Significant Employees.
There are no other employees of the Company other than its executive
officers, John Gitlin and Robert Schuck.
(c) Family relationships.
There are no family relationships among the present directors or officers
of the Company and there are presently no nominees or persons chosen by the
Company to become executive officers or directors of the Company.
(d) Involvement in certain legal proceedings.
During the past five years, none of the directors or officers of the
Company (i) has had any bankruptcy petitions filed by or against them, (ii) has
been convicted in a criminal proceeding or been subject to a pending criminal
proceeding, (iii) has been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; nor (iv) has been found by a court of competent jurisdiction
(in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
On March 14, 2000 the Company entered into employment agreements with
its two executive officers, Robert Schuck, President and John Gitlin, Vice
President/ Secretary-Treasurer, under the terms of which each was granted the
right to purchase 120,000 shares of the Company's stock at a purchase price of
$.005 per share. The employment agreements further provide that each officer is
to be paid a monthly salary of $250.00. The Company relied on the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended, for the
issuance of the shares of common stock to Mr. Gitlin and Mr. Schuck. All of the
shares issued were issued for investment purposes in a private transaction and
are restricted shares as defined in Rule 144 under the '33 Act, as amended.
These shares may not be offered for public sale except under Rule 144, or other
exemptions from registration which may be applicable pursuant to the '33 Act.
No retirement, pension, profit sharing, stock option plans or other
compensatory programs have been adopted by the Company for its officers or
directors.
Directors serve without fees or any other compensation for their
services.
No Officer and Director is entitled to any finder or other fees for any
services performed by them in finding a merger or acquisition candidate for the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 10, 2000 the Company entered into a private placement,
pursuant to Section 4(2) under the Securities Act of 1933 with HITK Corporation
("HITK") under which HITK purchased a total of 3,000,000 shares of the Company's
common stock at a purchase price of $.005 per share. Prior to the sale, HITK
held a total of 250,050 shares of the Company's common stock or 53.2 % of the
outstanding shares.
13
<PAGE> 13
Robert Schuck, President and John Gitlin Vice President/ Secretary-Treasurer and
Directors and Herbert Maslo a Director of the Company hold identical positions
with HITK and therefore would be deemed to have an indirect material interest in
the transaction. Additionally, Mr. Gitlin and Mr. Schuck hold in the aggregate
53.2% of the outstanding shares of HITK.
On March 14, 2000 the Company entered into employment agreements with its two
executive officers, Robert Schuck, President and John Gitlin, Vice President/
Secretary-Treasurer, under the terms of which each was granted the right to
purchase 120,000 shares of the Company's stock at a purchase price of $.005 per
share. The employment agreements further provide that each officer is to be paid
a salary of $250.00 per month.
(b) As of filing date of this registration statement, HITK Corporation
holds a total of 3,250,050 shares of the Company's common stock which represents
87.6 % of the issued and outstanding shares.
(c) Transactions with Promoters.
None.
ITEM 8. DESCRIPTION OF SECURITIES.
(a) common stock
The Company is authorized to issue up to 500,000,000 shares of common
stock, par value $.00001 per share ("common stock"), of which 3,709,423 shares
are issued and outstanding. Holders of common stock are entitled to one vote for
each share held of record on each matter submitted to a vote of stockholders.
There are no preemptive rights nor cumulative voting for election of directors.
Subject to the prior rights of any series of preferred stock which may from time
to time be outstanding, if any, holders of common stock are entitled to receive
ratably, dividends when, as, and if declared by the Board of Directors out of
funds legally available therefor and, upon the liquidation, dissolution, or
winding up of the Company, are entitled to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and liquidation
preferences on the preferred stock, if any. Holders of common stock have no
preemptive rights and have no rights to convert their common stock into any
other securities. The outstanding common stock is validly authorized and issued,
fully paid, and nonassessable.
(b) Preferred Stock
None
(c) Change in Control Provisions.
There are no provisions in the Company's Certificate of Incorporation
which would delay, defer or prevent a change in control of the Company. There
are provisions in the Company's By-Laws which may be deemed to delay or defer a
change in control. These include (i) that no special meeting may be called by
stockholders unless a request is made in writing by shareholders holding at
least sixty-six and two thirds of the issued and outstanding shares of the
Company's common stock and entitled to vote; (ii) nominations of persons for
election to the Board of Directors may only be made by a stockholder delivering
notice to the Company at least 60 days prior to the annual or a special meeting
called for the purpose of electing a director
14
<PAGE> 14
or not later than 10 days following the date on which the Company announces the
special or annual meeting and providing in the notice all information relating
to such person that is required to be disclosed pursuant to Regulation 14A under
the Securities Exchange Act of 1934, including such person's written consent to
be nominated and to serve if elected; (iii)any proposal by a stockholder of
business to be considered at an annual meeting must also be delivered to the
Company within the same time limitations set for nominations of persons for
election to the Board and must include a brief description of the proposed
business to be considered, the reasons for conducting such business and any
material interest in such business of such stockholder.
PART II.
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
(a) Market information.
There is presently no trading market for the Company's common stock and
there has been no trading market since at least 1994. There is no assurance that
a trading market will ever develop or, if such a market does develop, that it
will continue. The Company has caused to be filed a Form 211 with the National
Association of Securities Dealers ("NASD") to permit the Company's common stock
to be quoted on the NASDQ Bulletin Board, which is currently pending. Subject to
approval of the NASD, the Company's shares of common stock will trade on the
Bulletin Board under the symbol BCCM, if available. There are no outstanding
options or warrants to purchase or securities convertible into the Company's
common stock.
Market Price
The Company's common stock is not quoted at the present time. The
Securities and Exchange Commission has adopted a Rule 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) 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) 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 offering 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.
Effective January 4, 1999, the National Association of Securities
Dealers, Inc. (the "NASD") requires that companies listed for trading on the
Bulletin Board must file a Form 10-SB that must become effective by operation of
law and have no outstanding comments before trading may commence.
15
<PAGE> 15
Transfer Agent
American Stock Transfer & Trust Co., 40 Wall Street, New York, New York
100005, currently acts as the Company's transfer agent.
(b) Holders.
According to the Company's transfer agent, there are 831 shareholders of
record of the Company's common stock.
(b) Dividends.
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not presently a party to any pending litigation or
proceeding nor, to the knowledge of management, is any litigation or proceeding
threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On March 10, 2000 the Company entered into a private placement,
pursuant to Section 4(2) under the Securities Act of 1933 (the"33 Act") with
HITK Corporation ("HITK") under which HITK purchased a total of 3,000,000 shares
of the Company's common stock at a purchase price of $.005 per share or a total
purchase price of $15,000.00. The Company relied on exemptions provided by
Section 4(2) of the '33 Act, as amended, for the issuance of the shares of
common stock. All of the shares issued were issued for investment purposes only
in a private transaction and are restricted shares as defined in Rule 144 under
the '33 Act, as amended. These shares may not be offered for public sale except
under Rule 144, or other exemptions from registration which may be applicable
pursuant to the '33 Act.
On March 14, 2000, pursuant to rights granted to them under the terms of their
respective employment agreements with the Company, the Company's two executive
officers, Robert Schuck and John Gitlin each purchased 120,000 shares of the
Company's stock. Sale of the shares was pursuant to Section 4(2) of the '33 Act.
All of the shares issued were issued for investment purposes only in a private
transaction and are restricted shares as defined in Rule 144 under the '33 Act,
as amended. These shares may not be offered for public sale except under Rule
144, or other exemptions from registration which may be applicable pursuant to
the '33 Act.
16
<PAGE> 16
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Both the Certificate and By-Laws provide mandatory indemnification
rights, subject to limited exceptions, to any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that such person is or was a director
or officer of the Company, or is or was serving at the request of the Company as
a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. Such indemnification rights include
reimbursement for expenses incurred by such person in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the Delaware General Corporation Law.
PART F/S
17
<PAGE> 17
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
FAX (973) 790-8845
To The Board of Directors and Shareholders
of Cathel Partners Ltd. (a development stage company)
I have audited the accompanying balance sheet of Cathel Partners Ltd. (a
development stage company) as of December 31, 1999 and the related statements of
operations, cash flows and shareholders' equity for the years ended December 31,
1998 and 1999. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cathel Partners Ltd. (a
development stage company) as of December 31, 1999 and the results of its
operations, shareholders equity and cash flows for the years ended December 31,
1998 and 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Cathel Partners Ltd. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since the date of reorganization and requires additional capital to
continue operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are described in Note 2. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of Cathel Partners Ltd. (a development
stage company) to continue as a going concern.
Thomas P. Monahan, CPA
March 5, 2000
Paterson, New Jersey
18
<PAGE> 18
CATHEL PARTNERS, LTD.
BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
March 31,
December 31, 2000
1999 Unaudited
---- ---------
<S> <C> <C>
ASSETS
Current assets
Cash $273 $1,323
---- ------
Total current assets 273 1,323
Total assets $273 $1,323
==== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $19,771 $10,044
------- -----
Total current liabilities 19,771 10,044
Stockholders' equity
Common Stock authorized 500,000,000 shares, $0.00001 par value each. At
December 31, 1999 and March 31, 2000, there are 469,427 and 3,709,427
shares outstanding respectively. 5 37
Additional paid in capital 1,285,279 1,301,447
Deficit accumulated during the development stage (1,304,782) (1,310,205)
----------- ----------
Total stockholders' equity (19,498) (8,721)
-------- -----
Total liabilities and stockholders' equity $273 $1,323
==== ======
</TABLE>
See accompanying notes to financial statements.
F1
<PAGE> 19
CATHEL PARTNERS, LTD.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period
For the three For the three from inception,
For the For the months ended months ended June 7, 1985, to
year ended year ended March 31, March 31, March 31,
December 31, December 31, 1999 2000 2000
1998 1999 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $-0- $-0- $-0- $-0- $-0-
Costs of goods sold -0- -0- -0- -0- -0-
--- --- --- --- ---
Gross profit -0- -0- -0- -0- -0-
Operations:
General and administrative 72 12,843 18 5,423 1,310,205
Depreciation and amortization -0- -0- -0- -0- -0-
--- --- --- --- ---
Total expense 72 12,843 18 5,423 1,310,205
Loss from operations (72) (12,843) (18) (5,423) (1,310,205)
Net income (loss) $(72) $(12,843) $(18) $(5,423) $(1,310,205)
===== ========= ===== ======== ============
Net income (loss) per share -basic $(0.00) $(0.03) $(0.00) $(0.01) $(1.27)
======= ======= ======= ======= =======
Number of shares outstanding- 469,427 469,427 469,203 739,427 739,427
basic ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F1
<PAGE> 20
CATHEL PARTNERS, LTD.
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Common Common Additional accumulated during
Date Stock Stock paid in capital developent stage Total
---- ------------ ------------ --------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 469,427 $5 $1,285,279 $(1,291,867) $417
Net loss (72) (72)
---- ----
Balance December 31, 1998 469,427 5 1,285,279 (1,291,939) 6,655
Net loss (12,843) (12,843)
-------- --------
Balance December 31, 1999 469,427 $5 $1,285,279 $(1,304,782) $(19,498)
Unaudited
Sale of shares 3,000,000 30 14,970 15,000
Issuance of shares for services 240,000 2 $1,198 $1,200
Net loss (5,423) (5,423)
------- -------
Balances March 31, 2000 3,709,427 $37 $1,301,447 $(1,310,205) $(8,721)
========= === ========== ============ ========
</TABLE>
See accompanying notes to financial statements.
F1
<PAGE> 21
CATHEL PARTNERS, LTD.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
For the three For the three from inception,
For the For the months ended months ended June 7, 1985, to
year ended year ended March 31, March 31, March 31,
December 31, December 31, 1999 2000 2000
1998 1999 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(72) $(12,843) $(18) $(5,423) $(1,310,205)
Adjustments to reconcile net loss to cash
used in operating activities
Shares issued for accrued salaries 1,200
Depreciation -0- -0- -0- -0-
Accounts payable and accrued expenses -0- 12,771 (8,527) 10,044
--- ------ ----- -----
TOTAL CASH FLOWS FROM OPERATIONS (72) (72) (18) (13,950) (1,298,961)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 15,000 1,300,284
------ ---------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES -0- -0- 15,000 1,300,284
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES -0- -0-
NET INCREASE (DECREASE) IN CASH (72) (72) (18) 1,050 1,323
CASH BALANCE BEGINNING OF PERIOD 417 345 345 273 -0-
--- --- --- --- ---
CASH BALANCE END OF PERIOD $345 $273 $327 $1,323 $1,323
==== ==== ==== ======
</TABLE>
See accompanying notes to financial statements.
F1
<PAGE> 22
ITEM 2. Management's Discussion and Analysis.
The Company was formed on June 7, 1985, under the laws of the State of
Delaware. The Company was formed under the name of BC Communications, Inc. In
1985, the Company conducted an offering and used the proceeds from the offering,
to engage in the business of developing, producing, and distributing programming
of a talk show and interview format for commercial, cable and pay television
markets. Following the offering the Company exhausted its funds on the
incomplete production of a show and decided to seek other business opportunities
which would offer growth and development. On February 14, 1987, the Company
acquired 73.75 percent of Kinetic Systems, Inc. ("Kinetic Systems"), a Delaware
corporation, which was in the process of developing a closed chamber, forced hot
air, liquid heating system for use in residential and commercial buildings.
Through Kinetic Systems, the Company pursued development of the heating system.
In February, 1990, Kinetic Systems entered into a technology and patent license
agreement with a Michigan based manufacturer pursuant to which the manufacturer
was granted a limited license to develop, manufacture and market the Kinetic
heating system apparatus. The agreement subsequently expired by its own terms
due in large part to the manufacturer's inability to complete development of the
heating system. On January 28, 1993, the Company sold 100 percent of the issued
and outstanding Kinetic Systems shares to the Barrister Group, Ltd., for
$100,000. The Company has been inactive since 1993.
Development stage activities.
The following discussion relates to the results of the Company's operations
to date, and the Company's financial condition:
For the next 12 months, the Company plans to devote its efforts to seeking
a viable business opportunity. The Company anticipates that its results of
operations may fluctuate for the foreseeable future due to several factors,
including whether operating results would also be adversely affected by the
Company's inability to locate a profitable business venture. Because the Company
is desiring to increase its operating expenses for personnel and other general
and administrative expenses, the Company's operating results would be adversely
affected if either a viable business opportunity could not be developed or
located. The Company's limited operating history makes accurate prediction of
future operating results difficult or impossible.
The Company has been a development stage enterprise since its date of
inception in 1985 to December 31, 1999. During this period, management had
devoted the majority of its efforts to seeking new business opportunities or to
develop a new business and finding a management team to continue the process of
completing its and obtaining sufficient working capital through loans and equity
through a private placement offering. These activities were funded by the
Company's management.
<PAGE> 23
Results of operations.
For the year months ended December 31, 1999 as compared to the year ended
December 31, 1998.
The company has remained inoperative. Sales, costs of goods sold, gross
profit, operating expenses and net profit were $-0- for both the year ended
December 31, 1998 and 1999. The activities of the Company during the year ended
December 31, 1998 and 1999. consisted of preparing and filing corporate income
tax returns and filings for the Securities and Exchange Commission.
The Company's general and administrative costs aggregated approximately
$12,843 for the year ended December 31, 1999 as compared to $72 for the year
ended December 31, 1998 representing an increase of $12,771. This increase
represents office expenses of $3,843 and the accruing of rent of $3,000 and
officer's salary of $6,000.
For the three months ended March 31, 2000 as compared to the three months
ended March 31, 1999
The company has remained inactive. Sales, costs of goods sold, gross
profit, operating expenses and net profit were $-0- for both the three months
ended March 31, 1999 and 2000. The activities of the Company during the three
months ended March 31, 1999 and 2000 consisted of preparing and filing corporate
income tax returns and filings for the Securities and Exchange Commission.
The Company's general and administrative costs aggregated approximately
$5,423 for the three months ended March 31, 1999 as compared to $18 for the
three months ended March 31, 1999 representing an increase of $5,405. This
increase represents professional fees of $3,000 and the accruing of rent of
$750, officer's salary of $1,500 and office expense of $173.
Liquidity And Capital Resources
As of December 31, 1999, the Company's cash balance was $273 and working
capital was negative at $19,498 consisting of cash of $273 and less accrued
liabilities of $19,771.
Net (loss) from operations amounted to $(12,843) for the year ended
December 31, 1999 due to increases general and administrative expenditures
related to the accruing of $3,000 in rent, $6,000 in officer salaries and $3,843
primarily due to the stock transfer agent.
As of March 31, 2000, the Company's cash balance was $1,323 and working
capital was negative at $8,721 consisting of cash of $1,323 and less accrued
liabilities of $10,044.
Net (loss) from operations amounted to $(5,423) for the three months ended
March 31, 2000. Cash was provided through the sale of 3,000,000 shares of common
stock to HITK Corporation for an aggregate consideration of $15,000 or $.0005
per share. HITK Corporation is under common management control with the
principals of the Company.
<PAGE> 24
The Company's primary short-term needs are to seek sufficient capital to
continue the search for a viable business opportunity.
The Company expects its capital requirements to increase over the next
several years as it expands its search for either a viable business opportunity
or to develop a profitable business strategy. The Company's future liquidity and
capital funding requirements will depend on numerous factors, including the
extent to which the Company's efforts to either find a viable business
opportunity or to develop a profitable business, the timing of regulatory
actions, if any, regarding the Company's entrance into the business, the costs
and timing of expansion of the Company's entrance into that business and the
timing of hiring additional management to operate that business.
The Company believes that it must raise additional cash and cash from
either its operations or from the personal resources of management to satisfy
its funding needs for at least the next 12 months. Thereafter, if cash generated
from operations or the personal resources of management is insufficient to
satisfy the Company's working capital and capital expenditure requirements, the
Company may be required to sell additional equity or debt securities or obtain
additional funds. There can be no assurance that such financing, if required,
will be available on satisfactory terms, if at all.
Income tax: As of March 31, 2000, the Company had a tax loss carry-forward
of $1,310,205. The Company's ability to utilize its tax credit carry-forwards in
future years will be subject to an annual limitation pursuant to the "Change in
Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as
amended. However, any annual limitation is not expected to have a material
adverse effect on the Company's ability to utilize its tax credit
carry-forwards.
<PAGE> 25
CATHEL PARTNERS, LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - FORMATION OF COMPANY AND ISSUANCE OF COMMON STOCK
a. Formation and Description of the Company
Cathel Partners, Ltd. (the "Company"), was formed under the laws of the
State of Delaware on June 7, 1985 with the name B C Communications, Inc. and was
authorized to issue up to 10,000,000 shares of common stock, $0.001 par value.
On September 4, 1985, the certificate of incorporation was amended to change the
number of shares authorized to issue up to 200,000,000 shares of common stock,
$0.00001 par value each share. On April 16, 1987, the Company amended its
certificate of incorporation to change the number of shares authorized to issue
up to 500,000,000 shares of common stock, $0.00001 par value each share. On
November 13, 1994, the Company amended its certificate of incorporation to
change the name of the corporation to Cathel Partners, Ltd.
b. Description of Company
The Company is a development stage company that is without a business
purpose since 1993 and is in the process of seeking a viable business
opportunity.
c. Issuance of shares
On March 10, 2000, the Company sold an aggregate of 3,000,000 shares of
common stock to HITK Corporation for an aggregate consideration of $15,000 or
$.0005 per share.
On March 14, 2000, the Company issued an aggregate of 120,000 shares of
common stock each to Robert N. Schuck and John Gitlin in consideration of
services valued at $1,200 or $.0005 per share.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Financial Statement Presentation
The accompanying unaudited financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
had no business activities and has incurred net losses of $1,310,205 from
inception to March 31, 2000. These factors indicate that the Company's
continuation, as a going concern is dependent upon its ability to obtain
adequate financing. The Company will be relying upon the resources of management
to provide the necessary working capital to sustain the Company's existence
until a viable business opportunity can be located. The Company will require
substantial additional funds to finance its business activities on an ongoing
basis and will have a continuing long-term need to obtain additional financing
once a viable business opportunity is found.
<PAGE> 26
CATHEL PARTNERS, LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
The financial statements presented at December 31, 1999 consist of the
balance sheet as at December 31, 1999 and the statements of operations, cash
flows and stockholders equity for the years ended December 31, 1998 and 1999.
The unaudited financial statements presented at March 31, 2000 consist
of the balance sheet as at March 31, 2000 and the statements of operations, cash
flows and stockholders equity for the three months ended March 31, 1999 and
2000.
b. Cash and Cash Equivalents
Cash and Cash Equivalents - Temporary investments with a maturity of less
than three months when purchased are treated as cash
c. Loss Per Share:
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the period from reorganization through December 31, 1999 and March 31, 2000,
there were no dilutive securities outstanding.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
e. Unaudited financial information
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring items) necessary to present fairly the consolidated financial position
of the Company and its subsidiary as of March 31, 2000 and the consolidated
results of its operations and its cash flows for the three months ended March
31, 1999 and 2000. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the SEC's rules
and regulations of the Securities and Exchange Commission. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
<PAGE> 27
CATHEL PARTNERS, LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 3 - RELATED PARTY TRANSACTIONS
a. Office Space
The Company occupies office space at 68 Schraalenburg Road, Harrington
Park, New Jersey for a monthly rental of $250. The Company has accrued rent
expense for the years ended December 31, 1999 and March 31, 2000 of $3,000 and
$750 respectively.
b. Officer Salaries
No officer has received a salary in excess of $100,000.
For the years ended December 31, 1999 and for the three months ended
March 31, 2000, the Company has accrued a minimal compensation of $250 per month
respectively each as compensation to the President and the Vice
President/Secretary/Treasurer as consideration for services while the Company is
in the development stage of development of and aggregate of $6,996 and $1,500
respectively.
c. Common Management
Robert N. Schuck is both the President of the Company and for HITK
Corporation which holds 3,250,050 shares or 87.6% of the Company's issued and
outstanding shares of stock at March 31, 2000.
John J. Gitlin is both the Vice President/Secretary/Treasurer of the
Company and for HITK Corporation.
On March 10, 2000, the Company sold an aggregate of 3,000,000 shares of
common stock to HITK Corporation for an aggregate consideration of $15,000.
NOTE 6 - INCOME TAXES
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999 and March 31,
2000, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carry forward and was
fully offset by a valuation allowance.
At March 31, 2000, the Company has net operating loss carry forwards for
income tax purposes of $1,310,205. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010. The Company's
utilization of this carry forward
<PAGE> 28
CATHEL PARTNERS, LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
against future taxable income may become subject to an annual limitation due to
a cumulative change in ownership of the Company of more than 50 percent.
The components of the net deferred tax asset as of March 31, 2000 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax asset:
Net operating loss carry forward $ 445,470
Valuation allowance $(445,470)
----------
Net deferred tax asset $ -0-
</TABLE>
The Company recognized no income tax benefit from the loss generated for
the period from the date of inception to March 31, 2000. SFAS No. 109 requires
that a valuation allowance be provided if it is more likely than not that some
portion or all of a deferred tax asset will not be realized. The Company's
ability to realize benefit of its deferred tax asset will depend on the
generation of future taxable income. Because the Company has yet to recognize
significant revenue from the sale of its products, the Company believes that a
full valuation allowance should be provided.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a. Employment Agreement with John J. Gitlin
In March, 2000, the Company entered into an employment agreement with
John J. Gitlin as Vice President. The agreement may be terminated at will by Mr.
Gitlin upon 30 days notice or election by a majority vote of the board of
directors or at the written request of the majority of shareholders.
Compensation is $3,000 payable in monthly increments of $250 per month plus
reimbursement for out of pocket expenses. Mr. Gitlin was also granted an option
to purchase 120,000 of common stock during the term of this agreement.
During March, 2,000, Mr. Gitlin exercised this option and received
120,000 shares of common stock in consideration for $600 in accrued wages that
were due him as of December 31, 1999.
b. Employment Agreement with Robert N. Schuck
In March 2000, the Company entered into an employment agreement with
Robert N. Schuck as President. The agreement may be terminated at will by Mr.
Schuck upon 30 days notice or election by a majority vote of the board of
directors or at the written request of the majority of shareholders.
Compensation is $3,000 payable in monthly increments of $250 per month plus
reimbursement for out of pocket expenses. Mr. Schuck was also granted an option
to purchase 120,000 of common stock during the term of this agreement.
<PAGE> 29
CATHEL PARTNERS, LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
During March, 2000, Mr. Schuck exercised this option and received
120,000 shares of common stock in consideration for $600 in accrued wages that
were due him as of December 31, 1999.
NOTE 8 - BUSINESS AND CREDIT CONCENTRATIONS
The amount reported in the financial statements for cash approximates
fair market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
NOTE 9 - DEVELOPMENT STAGE COMPANY
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of any private placement for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete is search for a new viable business
opportunity, management talent, and working capital to engage in any profitable
business activity. Since its reorganization, the Company's activities have been
limited to the search for a new viable business opportunity and office space.
<PAGE> 30
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Certificate of Incorporation of Registrant
3.2 Certificates of Amendment to Certificate of
Incorporation of Registrant
3.3 By-laws of Registrant
10.1 Stock Purchase Agreement with HITK Corporation
10.2 Employment and Stock Purchase Agreement
10.3 Employment and Stock Purchase Agreement with John J. Gitlin
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
CATHEL PARTNERS LTD.
Date: June 21, 2000 By: /s/Robert N. Schuck
------------------------------
Robert N. Schuck
President
27
