<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1998
---------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission File Number 33-1289-D
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CHAPEAU, INC.
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(Exact name of registrant as specified in charter)
Utah 87-0431831
- ------------------------------- ------------------------
(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) (Zip Code)
Issuer's telephone number, including area code: (801) 272-7131
--------------
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
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Securities registered pursuant to section 12(g) of the Act:
None
-----------------
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.(1) Yes [X]
No [ ] (2) Yes [ ] No [X]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: ($-0-)
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(Cover page continued on next page)
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State the aggregate market value of the voting stock held by
nonaffiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days: The Company does not have an active trading market
and it is, therefore, difficult, if not impossible, to determine the market
value of the stock. The Company sold shares of its common stock at $0.015 per
share, after giving effect to the fifteen to one reverse split. Accordingly,
if $0.015 per share is used, the aggregate market value of the voting stock
held by nonaffiliates would be $6,600.
As of September 25, 1998, the Registrant had 1,320,000 shares of common
stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the part of the form 10-KSB (e.g., part I, part II, etc.) into which the
document is incorporated: (1) Any annual report to security holders; (2) Any
proxy or other information statement; and (3) Any prospectus filed pursuant to
rule 424(b) or (c) under the Securities Act of 1933: None
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TABLE OF CONTENTS
PART I Page
ITEM 1. DESCRIPTION OF BUSINESS 4
ITEM 2. DESCRIPTION OF PROPERTIES 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6
ITEM 7. FINANCIAL STATEMENTS 7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 7
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT 8
ITEM 10. EXECUTIVE COMPENSATION 10
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 12
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking" statements. The Company is
including this statement for the express purpose of availing itself of
protections of the safe harbor provided by the Private Securities Litigation
Reform Act of 1995 with respect to all such forward-looking statements.
Examples of forward-looking statements include, but are not limited to: (a)
projections of revenues, capital expenditures, growth, prospects, dividends,
capital structure and other financial matters; (b) statements of plans and
objectives of the Company or its management or board of directors; (c)
statements of future economic performance; (d) statements of assumptions
underlying other statements and statements about the Company and its business
relating to the future; and (e) any statements using the words "anticipate,"
"may," "project," Intend" or similar expressions.
The Company's ability to predict projected results or the effect of
certain events on the Company's operating results is inherently uncertain.
Therefore, the Company wishes to caution each reader of this report to
carefully consider the Company wishes to caution each reader of this report to
carefully consider the following factors, any or all of which have in the past
and could in the future affect the ability of the Company to achieve its
anticipated results and could cause actual results to differ materially than
those discussed herein. Potential uncertainties include future funding
prospects for the Company, continued involvement of management and
consultants, location of potential acquisition or merger candidate, and
dilution to present stockholders if a merger candidate is located.
<PAGE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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 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's efforts to become a franchisee of Pro Image stores proved
unsuccessful and the Company ceased all activity related to the Pro Image
stores. 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.
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. (See Part III, Item 9. "Directors, Executive Officers"-Key
Consultants.")
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 selection of a business opportunity in which to participate is
complex and risky. Additionally, as the Company has only limited resources, it
may be difficult to find good opportunities. There can be no assurance that
the Company will be able to identify and acquire any business opportunity
which will ultimately prove to be beneficial to the Company and its
shareholders. The Company will select any potential business opportunity based
on management's business judgment.
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The activities of the Company are subject to several significant risks
which arise primarily as a result of the fact that the Company has no specific
business and may acquire or participate in a business opportunity based on the
decision of management which potentially could act without the consent, vote,
or approval of the Company's shareholders. The risks faced by the Company are
further increased as a result of its lack of resources and its inability to
provide a prospective business opportunity with significant capital.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's administrative offices are located at 6074 Oak Canyon
Drive, Salt lake City, Utah, which are the offices of Donald McKean, the
president of the Company. Mr. McKean has allowed the Company to use this
office without charge.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On May 20, 1998, the Company held a special meeting of shareholders to
reverse split or consolidate the issued and outstanding stock of the Company
on a fifteen (15) to one basis and to elect directors. The reverse split was
approved and effective June 12, 1998. All directors were reelected.
<PAGE>
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is not traded on any exchange or other
quotation service. The Company intends to request a symbol for its securities
when it is current in its corporate and SEC filings.
Since its inception, the Company has not paid any dividends on its Common
Stock, and the Company does not anticipate that it will pay dividends in the
foreseeable future. At September 25, 1998, the Company had approximately 63
shareholders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
Overview
Since its organization, other than completing a public offering, the
Company's only business was as a franchisee of Pro Image stores in California.
After this business proved unsuccessful, the Company has been seeking other
potential acquisitions, mergers or business opportunities to activate its
business operations.
Liquidity and Capital Resources
As of June 30, 1998, the Company had assets of $246 and liabilities of
$31,538. Working Capital at June 30, 1998, was a negative $31,292.
Liabilities at June 30, 1998, included $25,828 as a reserve for discontinued
operations principally related to tax and judgment liens. In July 1998, the
Company settled its tax lien with the IRS for $4,637. The funds used to pay
the tax liens were received from the collection of a subscription receivable
in the amount of $7,500 from one of the Company's shareholders.
The Company has only incidental ongoing expenses primarily associated
with maintaining its corporate status and bringing the Company current in its
reporting obligations to the Securities and Exchange Commission. For the
twelve months ended June 30, 1998, the Company had no revenues and only
expenses associated with maintaining the Company's reporting obligations to
the Securities and Exchange Commission. The Company also had $12,964 in loss
from discontinued operations. The loss from discontinued operations which was
down from the $27,166 in loss from discontinued operations in 1997.
Since inception the Company has not had profitable operations with its
only active business being discontinued in 1989. The Company is unlikely to
generate any operating revenue until the Company locates a business
opportunity with which to acquire or merge. Management of the Company will be
investigating various business opportunities. 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 has had no employees since its inception 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
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location for its offices on a "rent free basis." The Company is not paying
salaries or other form of compensation to any officers or directors of the
Company for their time and effort. The Company does intend to reimburse its
officers and directors for out of pocket cost.
At June 30, 1998, the Company had a subscription receivable for $7,500
resulting from the sale of shares of the Company's stock. The subscription
receivable was collected following the close of the June 30, 1998, fiscal
year. The Company's financial statements contain a qualification as to the
Company's ability to continue in business. Management of the Company believes
it will be able to continue in business, but until the Company finds and
acquires, or merges with an ongoing business operation, the Company will
remain unprofitable and have to rely on management and others to fund its
ongoing operations.
Results of Operations
The Company has not had any operations during the fiscal year ended
June 30, 1998. The Company's only operations, presently, have involved the
preliminary investigation of one or more potential business opportunities,
none of which have come to fruition.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth immediately
following the signature page to this form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no disagreements with its certified public
accountants with respect to accounting practices or procedures or financial
disclosure.
<PAGE>
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth as of September 24, 1998, the name, age,
and position of each executive officer and director and the term of office of
each director of the Company.
Director or
Name Age Position Officer Since
- -------------- ------- ---------- ---------------
Donald McKean 44 Director and President 1997
David A. O'Bagy 43 Director and Secretary/
Treasurer 1997
Neil Blosch 36 Director 1998
Set forth below is certain biographical information regarding each of
the Company's executive officers and directors.
Donald L. McKean was appointed the new president and a director of the
Company in June 1997. Mr. McKean is currently the vice president of sales and
marketing for Horizon Behavioral Services. From 1994 until 1997, Mr. McKean
was the vice president, national account sales for Managed Health Network
located in Los Angeles, California where he was responsible for all marketing,
sales and implementation of new national accounts. From 1993 to 1994, Mr.
McKean was the senior sales executives for First Health/Alta Health Strategies
in Salt Lake City, Utah. Mr. McKean received a Bachelor of Arts in psychology
and a master's degree in social work from the University of Utah.
David A. O'Bagy was appointed the new secretary/treasurer and a
director of the Company in June 1997. Since 1985, Mr. O'Bagy has operated
O'Bagy & Associates a real estate firm in the Salt Lake City, Utah. Mr.
O'Bagy has been involved in real estate in Salt Lake City, Utah since 1977.
Mr. O'Bagy received a Bachelor of Science in accounting from the University of
Utah in 1977.
Neil Blosch was appointed a director of the Company in April 1998. Mr.
Blosch is a general contractor in Salt Lake City, Utah owning and operating
Sheer Structure, Inc. for the past fifteen years. Mr. Blosch received a
degree from the University of Utah.
Key Consultants:
Kirk Blosch and Jeff Holmes who are major shareholders of the Company
since their purchase of shares in the Company in 1997, have indicated they
will provide management consulting to the Company. (See: "Principal
Shareholders.") The Company anticipates that Mr. Blosch and Holmes will have
a substantial voice in any future business decisions of the Company. Set
forth below is certain biographical information regarding Messrs. Blosch and
Holmes:
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Kirk Blosch, age 43, has been a general partner in the partnership of
Blosch and Holmes, a business consulting and private venture funding general
partnership since 1984. For the past fifteen years Mr. Blosch has been an
advisor for various public and private companies. During this time, Mr.
Blosch has also been involved in real estate development. During 1995 and
1996, Mr. Blosch provided bridge financing with his own funds for private
companies prior to their initial public offerings. In the first quarter of
1997, Mr. Blosch along with Mr. Holmes completed a private funding of Zevex
International, Inc., a medical product company, specializing in medical
devices and ultra sound technology and Mr. Blosch currently serves as a
director of Zevex. Zevex is traded on the American Stock Exchange. Mr.
Blosch graduated from the University of Utah in 1977 with a Bachelor of
Science in Speech Communications. Neil Blosch is the brother of Kirk Blosch.
Jeff Holmes, age 44, has been a general partner in the partnership of
Blosch and Holmes since 1984. For the past 15 years, Mr. Holmes has acted as
a business consultant to various public and private companies. Mr. Holmes is
a former director of Point of Care Technologies, Inc. a publicly held
corporation, that has two disposable screening and diagnostic testing products
for the point of care healthcare industry. Mr. Holmes was the chairman of the
board of directors of Ion Laser Technology, a medical device company listed on
the American Stock Exchange, that has developed "Bright Smile" tooth whitening
procedure. Mr. Holmes was a director of McKee and Company, the parent company
of W.B. McKee Securities, Inc., a regional broker-dealer specializing in the
financing of public and private companies. Mr. Holmes along with Mr. Blosch
completed a private funding of Zevex. Mr. Holmes graduated from the
University of Utah in 1976 with a Bachelor of Science in Marketing and
Management.
Except as indicated below, to the knowledge of management, during the
past five years, no present or former director, or executive officer of the
Company:
(1) filed a petition under the federal bankruptcy laws or any
state insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which
he was an executive officer at or within two years before the time of such
filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or otherwise
limiting, the following activities:
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, associated person of any of the foregoing, or
as an investment advisor, underwriter, broker or dealer in securities, or as
an affiliate person, director or employee of any investment company, or
engaging in or continuing any conduct or practice in connection with such
activity;
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(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or state
authority barring, suspending, or otherwise limiting for more than 60 days the
right of such person to engage in any activity described above under this
Item, or to be associated with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the Securities and Exchange Commission has not been subsequently
reversed, suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding by
the Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
The Company is not subject to the requirements of Section 16(a) of the
Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following tables set forth certain summary information concerning
the compensation paid or accrued for each of the Company's last three
completed fiscal years to the Company's or its principal subsidiaries chief
executive officer and each of its other executive officers that received
compensation in excess of $100,000 during such period (as determined at June
30, 1998, the end of the Company's last completed fiscal year):
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards and Payouts
---------------------------- ----------------------------------------
Name and Principal Other Annual Restricted Options/ LTIP All other
Position Year Salary Bonus($) Compensation Stock Awards SARs Payout Compensation
- ------------------ ---- ------ -------- ------------ ------------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald McKean 1998 $ -0- -0- -0- -0- -0- -0- -0-
President and CEO
Terrell Smith
Former President 1997 $ -0- -0- -0- -0- -0- -0- -0-
and CEO 1996 $ -0- -0- -0- -0- -0- -0- -0-
</TABLE>
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Cash Compensation
There was no cash compensation paid to any director or executive
officer of the Company during the fiscal years ended June 30, 1998, 1997, and
1996.
Bonuses and Deferred Compensation
None.
Compensation Pursuant to Plans.
None.
Pension Table
None.
Other Compensation
None
Compensation of Directors.
None.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to
be received from the Company, with respect to any person named in Cash
Compensation set out above which would in any way result in payments to any
such person because of his resignation, retirement, or other termination of
such person's employment with the Company or its subsidiaries, or any change
in control of the Company, or a change in the person's responsibilities
following a changing in control of the Company.
<PAGE>
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 25, 1997, the name and
the number of shares of the Company's Common Stock, par value $0.001 per
share, held of record or beneficially by each person who held of record, or
was known by the Company to own beneficially, more than 5% of the 1,320,000
issued and outstanding shares of the Company's Common Stock, and the name and
shareholdings of each director and of all officers and directors as a group.
<TABLE>
<CAPTION>
Title of Name of Beneficial Amount and Nature of Percent of
Class Owner Beneficial Ownership(1) Class
- --------- ------------------ ----------------------- -----------
<S> <C> <C> <C>
Common Kirk Blosch, IRA(2)
2081 South Lakeline Drive
Salt Lake City, Utah 440,000(D) 33.33%
Common Jeff Holmes(2)
600 Highway 50
Pinewild at Marla Bay, #101
Zephyr Cove, Nevada 89448 440,000(D) 33.33%
Common Cede & Co.
P.O. Box 222
Bowling Green Station
New York, New York 10274 81,193(I) 6.15%
Officers, Directors and Nominees:
Common Donald L. McKean -0- -0-
Common David O'Bagy -0- -0-
Common Neil Blosch -0- -0-
All Officers and Directors
as a Group (3 persons) -0- -0-
_____________________________
(1) Indirect and Direct ownership are referenced by an "I" or "D," respectively. All shares
owned directly are owned beneficially and of record and such shareholder has sole voting,
investment, and dispositive power, unless otherwise noted.
(2) Kirk Blosch and Jeff Holmes also purchased 500,000 shares each of the Company's 1997 Series A
Convertible Preferred Stock which converts into shares of Common Stock on a one (1) for eleven
(11) basis.
</TABLE>
<PAGE>
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.
During the fiscal year ended June 30, 1998, the Company paid former
officers and directors $25,000 to cover past obligations owed to them by the
Company. Other than specified above, there were no material transactions, or
series of similar transactions, since the beginning of the Company's last
fiscal year, or any currently proposed transactions, or series of similar
transactions, to which the Company was or is to be party, in which the amount
involved exceeds $60,000, and in which any director or executive officer, or
any security holder who is known by the Company to own of record or
beneficially more than 5% of any class of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, has an
interest.
Certain Business Relationships
Jeff Holmes and Kirk Blosch purchased 500,000 shares each of the
Company's 1997 Series A Convertible Preferred Stock which converts into shares
of Common Stock on a one (1) for eleven (11) basis. The purchase price for
the shares of preferred stock was an aggregate of $15,000. This purchase of
preferred stock was after Messrs. Holmes and Blosch had already acquired
voting control of the Company. If Messrs. Holmes and Blosch were to convert
the preferred stock they would have another 11,000,000 shares of Common Stock
of the Company which would substantially dilute the ownership percentage of
current shareholders.
Indebtedness of Management
There were no material transactions, or series of similar transactions,
since the beginning of the Company's last fiscal year, or any currently
proposed transactions, or series of similar transactions, to which the Company
was or is to be a party, in which the amount involved exceeds $60,000 and in
which any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than 5% of any class of
the Company's common stock, or any member of the immediate family of any of
the foregoing persons, has an interest.
Transactions with Promoters
The Company was organized more than five years ago; hence transactions
between the Company and its promoters or founders are not deemed to be
material.
<PAGE>
<PAGE> 14
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The following financial statements are
included in this report:
Title of Document Page
- ----------------- ----
Report of Jones, Jenson & Co., Certified Public Accountants 16
Balance Sheets as of June 30, 1998, and 1997 17
Statements of Operations for the fiscal years ended June 30, 1998,
and 1997 18
Statements of Stockholders' Equity for the years ended June 30, 1998,
and 1997, and from inception 19
Statements of Cash Flows for the fiscal years
ended June 30, 1998, and 1997 20
Notes to Financial Statements 22
(a)(2) Financial Statement Schedules. The following financial statement
schedules are included as part of this report:
None.
(a)(3) Exhibits. The following exhibits are included as part of this
report:
SEC
Exhibit Reference
Number Number Title of Document Location
- ------ --------- ----------------- --------
Item 3 Articles of Incorporation and Bylaws
- ------------------------------------------------------------
3.01 3 Articles of Incorporation Incorporated
by reference*
3.02 3 Bylaws Incorporated
by reference*
3.03 3 Designations of Rights, Privileges and
Preferences of the 1997 Series A
Convertible Preferred Stock Incorporated
By reference**
Item 4 Instruments Defining the Rights of Security Holders
- ---------------------------------------------------------------------------
4.01 4 Specimen Stock Certificate Incorporated
by reference*
* Incorporated by reference from the Company's registration statement on form
S-18 filed with the Commission, SEC file no. 33-1289-D.
** Incorporated by reference from the Company's annual report on form 10-KSB
for the year ended June 30, 1997.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
Chapeau, Inc.
Date: September 30, 1998 By: /S/ Donald McKean
-----------------------------------------
Donald McKean, President and Director
(Principal Executive Officer)
<PAGE>
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Chapeau, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Chapeau, Inc. (a
development stage company) as of June 30, 1998 and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the years ended June 30, 1998 and 1997 and from inception on September
19, 1985 through June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chapeau, Inc. (a
development stage company) as of June 30, 1998 and the results of
its operations and its cash flows for the years ended June 30, 1998 and 1997
and from inception on September 19, 1985 through June 30, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is a development stage company with no
operating capital which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
August 27, 1998
50 Main Street, Suite 1450
Salt Lake City, UT 84144
<PAGE> 17
CHAPEAU, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
June 30,
1998
------------
CURRENT ASSETS
Cash $ 246
------------
Total Current Assets 246
------------
TOTAL ASSETS $ 246
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 5,710
Reserve for discontinued operations 25,828
------------
Total Current Liabilities 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
Common stock $0.001 par value; 325,000,000 shares
authorized; 1,320,049 shares issued and outstanding 1,320
Additional paid-in capital 240,451
Stock subscription receivable (Note 6) (7,500)
Deficit accumulated during the development stage (266,563)
------------
Total Stockholders' Equity (Deficit) (31,292)
------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 246
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 18
CHAPEAU, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
For the September 19,
Years Ended 1985 Through
June 30, June 30,
1998 1997 1998
------------ ------------ ------------
REVENUES $ - $ - $ -
LOSS FROM DISCONTINUED
OPERATIONS (Note 4) 12,964 27,166 266,563
------------ ------------ ------------
NET LOSS $ (12,964) $ (27,166) $ (266,563)
============ ============ ============
BASIC LOSS PER SHARE $ (0.00) $ (0.00)
============ ===========
BASIC WEIGHTED AVERAGE
OUTSTANDING SHARES 1,320,049 560,548
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 19
CHAPEAU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
[CAPTION]
<TABLE>
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
subscription receivable at $0.015
per share 1,000,000 1,000 - - 14,000 -
Issuance of common stock for
subscription receivable 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>
<PAGE>
<PAGE> 20
CHAPEAU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
[CAPTION]
<TABLE> 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)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 21
CHAPEAU, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the September 19,
Years Ended 1985 Through
June 30, June 30,
1998 1997 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Income (loss) from operations $ (12,964) $ (27,166) $ (266,563)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Common stock issued for services - - 14,331
Common stock issued for exchange
of assets - - 9,500
Changes in assets and liabilities:
Increase (decrease) in accounts
payable and accrued expenses 5,710 2,166 31,538
(Increase) in interest receivable 279 (279) -
Increase (decrease) in notes payable
and accrued interest (25,279) 25,279 -
------------ ------------ ------------
Net Cash Provided (Used) by
Operating Activities (32,254) - (211,194)
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net Cash Provided (Used) by
Investing Activities - - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock
for cash 32,500 - 248,655
Stock offering costs - - (37,215)
------------ ------------ ------------
Net Cash Provided (Used) by
Financing Activities $ 32,500 $ - $ 211,440
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 22
CHAPEAU, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the September 19,
Years Ended 1985 Through
June 30, June 30,
1998 1997 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Income (loss) from operations $ (12,964) $ (27,166) $ (266,563)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Common stock issued for services - - 14,331
Common stock issued for exchange
of assets - - 9,500
Changes in assets and liabilities:
Increase (decrease) in accounts
payable and accrued expenses 5,710 2,166 31,538
(Increase) in interest receivable 279 (279) -
Increase (decrease) in notes payable
and accrued interest (25,279) 25,279 -
------------ ------------ -----------
Net Cash Provided (Used) by
Operating Activities (32,254) - (211,194)
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net Cash Provided (Used) by
Investing Activities - - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock for
cash 32,500 - 248,655
Stock offering costs - - (37,215)
------------ ------------ ------------
Net Cash Provided (Used) by
Financing Activities $ 32,500 $ - $ 211,440
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 23
CHAPEAU, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1998 and 1997
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 40,000 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.
b. Provision for Taxes
The Company has a net operating loss carryover of approximately $266,000 as of
June 30, 1998 which expires from 2000 to 2013. 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.
<PAGE>
<PAGE> 24
CHAPEAU, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1998 and 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 to 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 - RESERVE FOR DISCONTINUED OPERATIONS
There are several tax and judgment liens against the Company. The tax and
judgment liens along with interest, total approximately $25,000.
NOTE 6 - STOCK SUBSCRIPTION RECEIVABLE
The Company has a receivable from related parties for $7,500. The amount was
paid in full subsequent to this audit.
NOTE 7 - SUBSEQUENT EVENT
In July of 1998, the Company settled its tax lien with the IRS for $4,637.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783211
<NAME> CHAPEAU, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 246
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 246
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 246
<CURRENT-LIABILITIES> 31,538
<BONDS> 0
0
1,000
<COMMON> 234,271
<OTHER-SE> (266,563)
<TOTAL-LIABILITY-AND-EQUITY> 246
<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> (12,964)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,964)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
