<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter Ended: September 30, 1998
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period from _____________ to ____________
Commission File Number: 33-1289-D
---------------------
Chapeau, Inc.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 87-0429154
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
6074 Oak Canyon Drive, Salt Lake City, Utah 84117
-----------------------------------------------------
(Address of principal executive offices and Zip Code)
(801) 272-7131
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes [ ] No [X] (2) Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, Par Value $0.001 1,320,000
- ------------------------------ ----------------------------
Title of Class Number of Shares Outstanding
as of November 16, 1998
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
CHAPEAU, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, June 30,
1998 1998
(Unaudited)
------------ ------------
CURRENT ASSETS
Cash $ 2,054 $ 246
------------ ------------
Total Current Assets 2,054 246
------------ ------------
TOTAL ASSETS $ 2,054 $ 246
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ - $ 5,710
Note payable - related party (Note 5) 5,000 -
Reserve for discontinued operations 21,191 25,828
------------ ------------
Total Current Liabilities 26,191 31,538
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock $0.001 par value;
5,000,000 shares authorized; 1,000,000
shares issued and outstanding 1,000 1,000
Common stock $0.001 par value;
325,000,000 shares authorized; 1,320,049
issued and outstanding 1,320 1,320
Additional paid-in capital 240,451 240,451
Stock subscription receivable - (7,500)
Deficit accumulated during the
development stage (266,908) (266,563)
------------ ------------
Total Stockholders' Equity (Deficit) (24,137) (31,292)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,054 $ 246
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
CHAPEAU, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
September 19,
For the Three Months Ended 1985 Through
September 30, September 30,
1997 1996 1997
---------- ---------- ------------
REVENUES $ - $ - $ -
LOSS FROM DISCONTINUED
OPERATIONS (Note 4) (345) - 266,908
---------- ---------- ------------
NET LOSS $ (345) $ - $ (266,908)
========== ========== ============
LOSS PER SHARE $ (0.00) $ (0.00)
========== ==========
WEIGHTED AVERAGE
OUTSTANDING SHARES 1,320,049 1,320,044
========== =========
The accompanying notes are an integral part of these financial statements.
<PAGE> 4 CHAPEAU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-in Development
Shares Amount Shares Amount Capital Stage
----------- ---------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
At inception on September 19, 1985 - $ - - $ - $ - $ -
Common stock issued for cash to
stockholders - - 100,000 100 14,900 -
Common stock issued for cash on
March 7, 1986 - - 268,153 268 163,632 -
Issuance of warrants to purchase
402,203 shares of common stock - - - - 40 -
Common stock issued for services
at approximately $0.04 per share - - 31,847 32 14,299 -
Common stock issued in acquisition
of Robert K. McIntosh & Associates,
Inc. in July, 1987 - - 40,000 40 9,460 -
Net loss from inception
through June 30, 1994 - - - - - (222,693)
----------- ---------- ----------- ---------- ------------ ------------
Balance, June 30, 1994 - - 440,000 440 202,331 (222,693)
Net loss for the year ended
June 30, 1995 - - - - - (1,779)
----------- ---------- ----------- ---------- ------------ ------------
Balance, June 30, 1995 - - 440,000 440 202,331 (224,472)
Net loss for the year ended
June 30, 1996 - - - - - (1,961)
------------ ---------- ----------- ---------- ------------ ------------
Balance, June 30, 1996 - - 440,000 440 202,331 (226,433)
Issuance of preferred stock for
cash at $0.015 per share 1,000,000 1,000 - - 14,000 -
Issuance of common stock for
cash at $0.019 per share - - 880,000 880 24,120 -
Net loss for the year ended
June 30, 1997 - - - - - (27,166)
------------ ---------- ----------- ---------- ------------ ------------
Balance, June 30, 1997 1,000,000 $ 1,000 1,320,000 $ 1,320 $ 240,451 $ (253,599)
------------ ---------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<PAGE> 5
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-in Development
Shares Amount Shares Amount Capital Stage
----------- ---------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 1,000,000 $ 1,000 1,320,000 $ 1,320 $ 240,451 $ (253,599)
------------ ---------- ----------- ---------- ------------ ------------
Shares issued in conjunction with a
15-for-1 reverse stock split - - 49 - - -
Net loss for the year ended
June 30, 1998 - - - - - (12,964)
------------ ---------- ----------- ---------- ------------ ------------
Balance, June 30, 1998 1,000,000 $ 1,000 1,320,049 $ 1,320 $ 240,451 $ (266,563)
Net loss for the three months ended
September 30, 1998 (Unaudited) - - - - - (345)
----------- ---------- ----------- ---------- ------------ ------------
Balance, September 30, 1998
(unaudited) 1,000,000 $ 1,000 1,320,049 $ 1,320 $ 240,451 $ (266,908)
=========== ========== =========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements<PAGE>
<PAGE> 6
CHAPEAU, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
September 19,
For the Three Months Ended 1985 Through
September 30, September 30,
1998 1997 1998
---------- ---------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss from operations $ (345) $ - $ (266,908)
Adjustments to reconcile net
income to net cash used by
operating activities:
Common stock issued for
services - - 14,331
Common stock issued for
exchange of assets - - 9,500
Change in assets and
liabilities:
Increase (decrease) in
accounts payable and
accrued expenses (10,347) - 21,191
---------- ---------- ------------
Net Cash (Used) by
Operating Activities (10,692) - (221,886)
---------- ---------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES - - -
---------- ---------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes
payable (related party) 5,000 - 5,000
Issuance of common stock
for cash 7,500 - 256,155
Stock offering costs - - (37,215)
---------- ---------- ------------
Net Cash Provided (Used)
by Financing Activities $ 12,500 $ - $ 223,940
---------- ---------- ------------
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
CHAPEAU, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
September 19,
For the Three Months Ended 1985 Through
September 30, September 30,
1998 1997 1998
---------- ---------- ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 1,808 $ - $ 2,054
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 246 - -
---------- ---------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,054 $ - $ 2,054
========== ========== ============
Cash Paid For:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued
for services $ - $ - $ 14,331
Common stock issued for
exchange of assets $ - $ - $ 9,500
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
CHAPEAU, INC.
(A Development State Company)
Notes to the Financial Statements
September 30, 1998 and June 30, 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Chapeau, Inc. (the "Company") was organized under the laws of the
State of Utah on September 19, 1985. On July 27, 1987, the Company
completed a plan of reorganization with Robert K. McIntosh and Associates,
Inc. (McIntosh). The Company issued 600,000 shares of its restricted common
stock to McIntosh in exchange for all of the issued and outstanding shares
of McIntosh. McIntosh held one Pro Image franchise. At the time of
acquisition, McIntosh became a wholly-owned subsidiary. Subsequent to this
event, McIntosh was dissolved in 1989 and as a result is no longer a
subsidiary of the Company.
In 1988, the Company was engaged in the operation of franchised sports
clothing stores (Pro-Image). The Company sold their final store in May,
1989 and has been inactive since that time. Presently, the Company has no
active operations and is seeking other business opportunities. The Company
has elected a June 30 year end.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a June 30 fiscal year
end.
b. Provision for Taxes
The Company has a net operating loss carryover of approximately
$260,000 as of September 30, 1998 which expires from 2000 to 2012.
The potential tax benefit has been offset by a valuation allowance for
the same amount.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities 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 Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustments are of a normal, recurring nature.
<PAGE> 8
CHAPEAU, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997 and June 30, 1997
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established revenues sufficient to cover its
operating costs and allow it to continue as a going concern. Management
intends to seek a merger with an existing, operating company, in the interim
it has committed to meeting the Company's minimal operating expenses.
NOTE 4 - DISCONTINUED OPERATIONS
In 1989, the Company discontinued operations and was reclassified as a
development stage company. All revenues generated by the Company have been
netted against the expenses and are grouped into the discontinued operations
line on the statements of operations.
NOTE 5 - NOTES PAYABLE - RELATED PARTY
During the three months ended September 30, 1998, a shareholder loaned the
Company $5,000 to pay ongoing operating expenses. The note is non-interest
bearing and due on demand.
<PAGE>
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
Chapeau, Inc., a Utah corporation, (the "Company") was organized under
the laws of the State of Utah on September 19, 1985, to provide a capital
resource fund to be used to participate in business opportunities. The
Company completed a public offering of its common stock in March of 1986.
The Company received net proceeds from the public offering of approximately
$163,900, after deducting underwriters' compensation and other costs of the
offering totaling approximately $37,215.
On May 13, 1987, the Company entered into an agreement with Pro Image,
Inc. for the purchase of licenses to open up to eighteen (18) Pro Image
stores. In 1987, the Company acquired Robert K. McIntosh, Inc., a closely
held corporation which owned a Pro Image franchise. In exchange for all of
the stock of Robert K. McIntosh, Inc., the Company issued 600,000 shares of
its common stock and the shareholders of Robert K. McIntosh, Inc., Robert K.
McIntosh and Robert McDonald, became members of the Company's board of
directors. In December 1987, the Company also entered an agreement with
Dave Carver to purchase a Pro Image store in Long Beach, California.
The Company used the proceeds of its public offering and all additional
funds it borrowed or raised to fund the Company's efforts in starting and
purchasing Pro Image stores. The Company's efforts to become a franchisee
of Pro Image stores; however, proved unsuccessful and the Company ceased all
activity related to the Pro Image stores.
After the Company ceased its Pro Image franchises, the Company
investigated several other business opportunities none of which proved
successful. The Company presently has no operations other then minimal
operations necessary to maintain its corporate status.
In 1997, the Company changed management and sold shares of its Common
and Preferred Stock in an effort to raise enough capital to cover past
obligations and provide capital for corporate cleanup. Through the sale of
13,200,000 shares of its Common Stock the Company raised $25,000. The
Company raised an additional $15,000 by the sale of 1,000,000 shares of its
preferred stock (the "1997 Series A Convertible Preferred Stock".) All
shares were sold to two individuals. The preferred stock is convertible
into shares of the Company's common stock on an eleven to one basis, after
giving effect to the Company's fifteen to one reverse stock split.
Accordingly, the holders of preferred stock will be able to convert their
1,000,000 shares of preferred stock into eleven million shares of the
Company's common stock. On May 20, 1998, the shareholders of the Company
approved a fifteen to one reverse split of the Company's issued and
outstanding shares of Common Stock reducing the shares of outstanding Common
Stock to 1,320,000.
The Company is currently seeking potential business acquisition or
opportunities to enter in an effort to commence business operations. The
Company does not propose to restrict its search for a business opportunity
to any particular industry or geographical area and may, therefore, engage
in essentially any business in any industry. The Company has unrestricted
discretion in seeking and participating in a business opportunity, subject
to availability of such opportunities, economic conditions, and other
factors.
The Company intends to take advantage of any reasonable business
proposal presented which management believes will provide the Company and
its stockholders with a viable business opportunity. The board of directors
will make the final approval in determining whether to complete any
acquisition,and unless required by applicable law, the articles of
incorporation, bylaws or by contract, stockholders' approval may not be
sought.
The investigation of specific business opportunities and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require management time and attention
and will require the Company to incur costs for payment of accountants,
attorneys, and others. If a decision is made not to participate in or
complete the acquisition of a specific business opportunity, the costs
incurred in a related investigation will not be recoverable. Further, even
if agreement is reached for the participation in a specific business
opportunity by way of investment or otherwise, the failure to consummate the
particular transaction may result in the loss to the Company of all related
costs incurred.
Currently, management is not able to determine the time or resources
that will be necessary to complete the participation in or acquisition of
any future business prospect. There is no assurance that the Company will
be able to acquire an interest in any such prospects, products or
opportunities that may exist or that any activity of the Company, regardless
of the completion of any participation in or the acquisition of any business
prospect, will be profitable.
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1998, the Company had assets of $2,054 and
liabilities of $26,191 resulting in a negative working capital position of
($24,137). The Company has only incidental ongoing expenses primarily
associated with maintaining its corporate status and professional fees
associated with accounting costs. For the three months ended September 30,
1998, the Company had no revenue and expenses of $345.
The liabilities of $24,137 includes $5,000 loaned to the Company from a
major shareholder of the Company to pay ongoing expenses. The Company is
attempting to negotiate the remaining liabilities of the Company down and
will try and raise further capital either through loans or the sale of its
securities to pay of the remainder of its debts. There can be no assurance
of success in raising further capital.
The Company had no revenue for the corresponding quarter ended
September 30, 1997. The Company does not anticipate any revenue, other than
nominal interest income, until it is able to establish operation through a
merger or acquisition, which may not occur.
Although the Company has had only limited expenses, it may have to incur
substantial legal and accounting cost to locate and complete a merger or
acquisition. At the present time the Company is relying on the financial
support of its principal shareholders Kirk Blosch and Jeff Holmes to provide
further funding to meet ongoing financial requirements. Neither Mr. Blosch
nor Holmes have any obligation to continue to fund the Company and have not
indicated if they will provide any future funding to cover further expenses.
Since inception the Company has not generated sufficient revenue to
cover operating cost and since the termination of its business operations in
1989 has not generated any revenues. It is unlikely that any revenue will
be generated until the Company locates a business opportunity with which to
acquire or merge. Management of the Company will be investigating various
business opportunities with which to acquire or merge. These efforts may
cost the Company not only out of pocket expenses for its management but also
expenses associated with legal and accounting cost. There can be no
guarantee that the Company will receive any benefits from the efforts of
management to locate business opportunities. The Company may have trouble
attracting potential acquisitions or mergers as it does not have substantial
assets to entice potential business opportunities to enter into transactions
with the Company.
If and when the Company locates a business opportunity, management of
the Company will give consideration to the dollar amount of that entity's
profitable operations and the adequacy of its working capital in determining
the terms and conditions under which the Company would consummate such an
acquisition. Potential business opportunities, no matter which form they
may take, will most likely result in substantial dilution for the Company's
shareholders as it has only limited capital and no operations.
The Company has no employees and does not intend to employ anyone in
the future, unless its present business operations were to change. The
president of the Company is providing the Company with a location for its
offices on a "rent free basis." No salaries or other form of compensation
are being paid by the Company for the time and effort required by management
to run the Company. The Company does intend to reimburse its officers and
directors for out of pocket cost.
Results of Operations
- ---------------------
The Company's has no operations except preliminary investigation of one
or more potential business opportunities, none of which have come to
fruition.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
Pursuant to a vote of shareholders on May 20, 1998, the Company
reversed split or consolidated its common stock on a fifteen (15) to one (1)
basis. As a result of the reverse split or consolidation, the Company
reduced its issued and outstanding common stock from 19,800,000 to 1,320,000
which management felt made the Company a more attractive merger candidate.
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
No. 27 Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
None
SIGNATURES
Pursuant to the requirements 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.
Chapeau, Inc.
[Registrant]
Dated: November 17, 1998 By:/s/ Donald McKean, President and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783211
<NAME> CHAPEAU INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 2,054
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,054
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,054
<CURRENT-LIABILITIES> 26,191
<BONDS> 0
0
1,000
<COMMON> 241,771
<OTHER-SE> (266,908)
<TOTAL-LIABILITY-AND-EQUITY> 2,054
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (345)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (345)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
