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
For the fiscal year endedJune 30, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 033-01289-D
Chapeau, Inc.
(Name of small business issuer in its charter)
Utah 87-0431831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 West Broadway, Suite 501, Salt Lake City, Utah 84101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (801) 323-0329
Securities registered under section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under section 12(g) of the Act:
None
(Title of class)
Check mark 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. Yes No
Check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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.
State issuer's revenues for its most recent fiscal year:
$20,201.
State the aggregate market value of the voting and non-
voting common equity held by non-affiliates computed by reference
to the price at which the common equity was sold, or the average
bid and asked price of such common equity, as of a specified date
within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) There is currently no public trading
market for the common stock of the Company on which to base an
estimate of the market value of the common equity held by non-
affiliates.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 27, 2000, the Issuer had 8,500,000 shares of
its common stock, par value $0.001 per share, issued and
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No
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 information
statement; and (3) any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933. The listed documents
should be clearly described for identificationTransitional Small
Business Disclosure Format (Check one):
Yes No
<PAGE>
TABLE OF CONTENTS
Item Number and Caption Page
PART I
1. Description of Business 3
2. Description of Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
PART II
5. Market for Common Equity and Related Stockholder Matters 8
6. Management's Discussion and Analysis or Plan of Operation 8
7. Financial Statements 9
8. Changes in and Disagreements With Accountants on
Accounting and Financial disclosure 9
PART III
9. Directors, Executive Officers, Promoters and Control
Persons 11
10. Executive Compensation 12
11. Security Ownership of Certain Beneficial Owners
Management and 13
12. Certain Relationships and Related Transactions 14
13. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
The Company was organized under the laws of the State of
Utah on September 19, 1985. The Company completed a public
offering of its common stock in March of 1986. Initially, the
Company engaged in the operation of sport clothing stores, but
was unsuccessful and closed its final store in May 1989. The
Company did not have active operations from May 1989 until
February 3, 2000.
A new board of directors and executive management of the
Company was appointed February 3, 2000. In conjunction with the
change of management, two former principal shareholders of the
Company entered into a Stock Purchase Agreement with a group of
investors pursuant to which the following occurred:
(1) The new investors purchased 5,000,000 shares of
common stock from the two former principal shareholders;
(2) The two former principal shareholders and one of
the new investors agreed to return 7,820,049 shares of
common stock to the Company for cancellation for no
consideration; and
(3) The two former principal shareholders also agreed
to contribute notes payable and accrued interest totaling
$16,602 due to them to the capital of the Company for no
consideration.
In addition, the former board of directors resigned and a
new board of directors was appointed from the new investor group.
As a result of the stock purchase and change in management, the
Company was reactivated on February 3, 2000, representing the
inception of a new development stage for financial reporting
purposes.
The Company has no current operations or revenue, other than
interest income from its cash and cash equivalents. Through June
30, 2000, the Company had incurred only incidental expenses
primarily associated with reactivating the Company, maintaining
its corporate status, and investigating potential transactions.
The Company anticipates that these expenses may increase in the
future as the Company continues to seek to identify third parties
with which to enter into a business transaction, expends funds on
due diligence investigation of business opportunities, incurs
expenses in negotiating and obtaining professional services with
respect to potential transactions, and incurs other expenses
related to investigating and completing any transaction. It is
anticipated that such expenses will exceed the interest income
earned by the Company (which is currently the only source of
revenue available to the Company), reducing its cash and cash
equivalents and, consequently, the funds available to it to
complete any potential transaction.
<PAGE> 3
During the period ended March 31, 2000, the Company
completed a private placement of 4,000,000 shares of common stock
at a price of $0.25 per share, resulting in net proceeds to the
Company of approximately $987,000. The offering was made to
provide funding to the Company to permit it to investigate
potential business transactions, to provide the Company with
sufficient capital to potentially make acquisitions or
investments, and to enhance its viability as a merger candidate.
The board of directors has not limited the search for an
acquisition, investment, or the development of operations by the
Company to any geographic area or industry. The board will
consider potential transactions that may become available to the
Company and make decisions to pursue or not pursue such
opportunities based on its evaluation of the potential of the
transaction to provide increased value to the shareholders of the
Company as weighed against the risks and liabilities associated
with the specific transaction. In doing so, the directors will
of necessity exercise their judgment as to the probability of the
occurrence of future events, which may or may not prove to be
accurate. There can be no assurance that the Company will be
able to identify and negotiate a transaction that will ultimately
prove beneficial to the Company and its shareholders.
Employees
Other than Howard S. Landa, who serves as the chief
executive officer of the Company, and Andrew C. Bebbington, who
serves as the chief financial officer of the Company, the Company
does not currently have any employees. Neither Mr. Landa nor Mr.
Bebbington currently receives compensation for the services
rendered to the Company.
FORWARD LOOKING STATEMENTS
This report and other information made publicly available by
the Company from time to time may contain certain forward looking
statements and other information relating to the Company and its
business that are based on the beliefs of management of the
Company and assumptions made concerning information then
currently available to management. Such statements reflect the
views of management of the Company at the time they are made and
are not intended to be accurate descriptions of the future. The
discussion of future events, including the business prospects of
the Company, is subject to the material risks listed below under
"Risk Factors" and assumptions made by management. These risks
include the ability of the Company to identify and negotiate a
transaction to acquire operations that provide the potential for
future shareholder value, the ability of the Company to negotiate
and complete advantageous investments, the success of the
entities in which the Company may invest (over which the Company
may have no control), the ability of the Company to attract the
necessary additional capital to permit it to take advantage of
opportunities with which it is presented, and the ability of the
Company to generate sufficient revenue such that it can support
its current cost structure. Should one or more of these or other
risks materialize or if the underlying assumptions of management
prove incorrect, actual results of the Company may vary
materially from those described in the forward looking
statements. The Company does not intend to update these forward
looking statements, except as may occur in the regular course of
its periodic reporting obligations.
<PAGE> 4
RISK FACTORS
The material risks that management believes are faced by the
Company as of the date of this report are set forth below. This
discussion of risks is not intended to be exhaustive. If any of
these risks occur, or if other risks not currently anticipated or
fully appreciated by management of the Company occur, the
business and prospects of the Company could be materially
adversely affected.
Difficulty in Identifying Businesses With Which to Enter
Into a Transaction. The Company's future success depends to a
great extent on the ability of management to identify businesses
that can potentially be acquired, or in which an investment can
be made, and to successfully negotiate the terms of a transaction
favorable to the Company. Shareholders are wholly dependent on
the ability of management to identify, evaluate, and negotiate
the terms of any transaction. The Company may not control the
other entity on completion of any transaction and, consequently,
shareholders may be dependent on the abilities and efforts of
others in managing and developing the businesses in which the
Company has invested.
Limited Amount of Funds to Invest. The Company has only a
limited amount of cash available. This amount may not meet the
total funding requirements of any entity with which the Company
completes a transaction. Consequently, the Company may be
dependent upon that entity or the Company attracting additional
capital in order for the transaction to be successful and,
ultimately, for the Company to be successful.
Unspecified Use of Cash and Cash Equivalents. Use of the
cash and cash equivalents currently available to the Company is
subject to the discretion of management. The Company generally
has unlimited discretion to search for, acquire, or participate
in a business transaction or investment. Shareholders of the
Company will not be given the opportunity to review or evaluate
the merits of a transaction before the Company enters into an
agreement involving the transaction. In addition, the
transaction may be structured in such a way so as to not require
the approval of shareholders prior to closing.
The Company Has No Operating History. The Company has no
current operations, revenues from operations, or material assets.
The Company faces all of the risks inherent in a new business and
those risks specifically inherent in the investigation and
acquisition of, or involvement in, a new business. The Company
must be regarded as a new or "start-up" venture with all of the
unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
No Assurance of Success or Profitability. There can be no
assurance that the Company will be able to negotiate and close a
favorable business transaction. In addition, even if the Company
becomes engaged in a new business, there can be no assurance that
such business will be able to generate sufficient revenues or
profits from its operations in order to make the Company
profitable.
Possible Business - Not Identified and Highly Risky. Since
the Company has not identified and has no commitments to enter
into or acquire a specific business, the Company cannot disclose
the risks or hazards of any such business or opportunity.
Generally, a shareholder can expect that a potential transaction
will present significant risks. The Company's acquisition of or
participation in a business will likely be highly illiquid and
could result in a total loss to the Company and its shareholders
if the business or opportunity is unsuccessful.
<PAGE> 5
Dependence on Management and Conflicts of Interest. The
Company is heavily dependent upon the skill, talents, and
abilities of its management, particularly since the Company's
management will be primarily responsible for the decisions
concerning which business to acquire or in which the Company will
participate. The Company will be dependent upon the business
acumen and expertise of such persons and the applicability of
their backgrounds to the business decisions required to be made
on behalf of the Company. The Company does not have employment
agreements with its management, and there is no assurance that
persons named herein will manage the Company in the future.
Management is Not Currently Compensated and Does Not Devote
Full Time to the Business of the Company. Management of the
Company is not currently compensated and does not devote all of
their business time to the affairs of the Company. Management
is, and will continue to be, engaged in business activities
outside the Company, some of which may be competitive with the
goals and plans of the Company. There can be no assurance as to
the amount of time that management will devote to the affairs of
the Company or any assurance that potential conflicts will be
resolved in favor of the Company.
No Existing Arrangements. The Company has no understanding
or arrangement for participation in any specific business
transaction, and there is no assurance that the Company will be
successful in negotiating or entering into a business
transaction.
Lack of Diversification. The size of the Company makes it
unlikely that the Company will be able to commit its funds to the
acquisition of or engagement in more than one specific business
transaction. The inability of the Company to diversify by
investing in more than one business transaction will increase the
risk involved. The success or failure of any business
transaction in which the Company becomes engaged will have a
substantial, if not governing, impact on the Company.
Lack of Liquidity in Certain Investments. The Company may
provide funding to start-up companies that are not publicly held.
In such event, it will need to wait until a public market
develops in the entities' securities or find another private
investor who is willing to accept the risk of lack of liquidity
in order to purchase its position in order to recognize any
increase in the value of its investment that may occur. There
can be no assurance that any entity in which the Company makes an
investment will ultimately become publicly held.
Risk of Regulation. Certain equity positions taken by the
Company in the future may be considered "investment securities"
under the Investment Company Act of 1940 (the "1940 Act").
Generally, any company that owns investment securities with a
value exceeding 40% of its total assets (excluding cash items and
government securities) is an "investment company" subject to
registration under, and compliance with, the 1940 Act unless a
particular exemption or safe harbor applies. The Company does
not currently anticipate becoming an investment company, but if
its investments in other entities have a value of in excess of
40% of its total non-cash assets, it may be required to register
under the 1940 Act. Such registration and the compliance with
the requirements of the 1940 Act would be costly and time
consuming to the Company.
<PAGE> 6
Potential for the Issuance of Additional Common Stock. The
Company has an authorized capital of 325,000,000 shares of common
stock par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.001 per share. The Company has
8,500,000 shares outstanding. The Company's board of directors
has authority, without action or vote of the shareholders, to
issue all or part of the authorized but unissued shares. Any
such issuance will dilute the percentage ownership of
shareholders and may dilute the book value of the Company's
common stock.
ITEM 2. DESCRIPTION OF PROPERTIES
The administrative offices of the Company are located at 50
West Broadway, Suite 501, Salt Lake City, Utah 84101. The
Company shares approximately 1,700 square feet of office space
with other business entities. The Company currently pays $1,163
per month for the use of these facilities. The Company does not
have a written lease agreement with respect to its offices.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings
and is not aware of any threatened proceedings. To the knowledge
of management, there are no proceedings pending or threatened
against any executive officer or director of the Company, whose
position in such proceeding would be adverse to that of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended June 30, 2000, the Company did
not hold a shareholders' meeting and did not submit any matter to
a vote of the security holders of the Company.
<PAGE> 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no public trading market for the common stock or
other securities of the Company. The Company currently has
approximately 135 shareholders of record of its common stock.
The Company has not paid dividends on its common stock in the
past and does not currently anticipate that it will do so in the
future.
In March, 2000, the Company completed the sale of 4,000,000
shares of its common stock at an offering price of $0.25 per
share, for aggregate net proceeds of approximately $987,000. The
Company did not engage an underwriter or offering agent in
connection with the issuance, and did not pay commissions to any
person. The Company relied on the exemption from registration
provided in Rule 506 of Regulation D adopted under the Securities
Act of 1933, as amended. Each of the investors in the offering
represented that he or she was an "accredited investor" as that
term is defined in Regulation D. Each of the investors
acknowledged the restricted nature of the stock acquired and
represented that they were acquiring the stock for investment
without a view to the public distribution of such stock.
The common stock was sold to directors and individuals with
whom the directors had prior business or personal relationships.
In connection with the offering, the Company agreed to file a
registration statement with the Securities and Exchange
Commission to permit the resale of the common stock issued. The
Company has not filed this registration statement to date and
currently no public trading market exists for its securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
Plan of Operation
The Company has no current operations. Through June 30,
2000, the Company had only interest income and incidental
expenses primarily associated with reactivating the Company,
maintaining its corporate status, and investigating potential
investment and merger opportunities. For the period from
February 3, 2000 (date of inception of the development stage), to
June 30 2000, the Company's expenses were $17,451, principally
consisting of professional fees and travel expenses.
During the quarter ended March 31, 2000, the Company
completed a private placement of 4,000,000 shares of common stock
resulting in net proceeds to the Company of approximately
$987,000. The offering was made to provide funding to the
Company to permit it to identify and investigate potential
business transactions and to provide the Company with sufficient
capital to potentially make it an attractive merger candidate.
<PAGE> 8
As of June 30, 2000, the Company had current assets of
$994,481 and current liabilities of $4,446, resulting in working
capital of $990,035.
Management of the Company has reviewed a limited number of
investment or merger opportunities and continues to seek such
opportunities. Management believes that the current cash balance
is sufficient to meet its existing operating commitments and to
conduct its investigations of potential investment or merger
opportunities. The Company's need for additional capital beyond
its current cash balances will depend on the financial condition
and capital needs of the potential investment or merger
candidate.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are set forth immediately following
the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company and its current auditors have not disagreed on
any items of accounting treatment or financial disclosure.
On May 6, 2000, the board of directors of the Company
authorized a change in the independent accountants of the Company
from Jones, Jensen & Company to Hansen Barnett & Maxwell.
The report of Jones, Jensen & Company on the Company's
financial statements as of June 30, 1999, and the two years then
ended did not contain an adverse opinion, or a disclaimer of
opinion, nor was its report qualified or modified as to
uncertainty, audit scope, or accounting principles, other than a
limitation as to the presentation of the financials on a going
concern basis at a time that the Company was a development stage
company with no operating capital. During the engagement of
Jones, Jensen & Company, there were no disagreements on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreements,
if not resolved to the satisfaction of Jones, Jensen & Company,
would have caused the Company to make reference to the subject
matter of the disagreements in connection with its reports.
The Company was not advised by Jones, Jensen & Company that
internal controls necessary for the Company to develop reliable
financial statements did not exist nor that any information had
come to its attention that led it to no longer be able to rely on
management's representations or that made it unwilling to be
associated with the financial statements prepared by management.
The Company was not advised by Jones, Jensen & Company of the
need to expand significantly the scope of the Company's audit.
Jones, Jensen & Company has not advised the Company that any
information has come to its attention that Jones, Jensen &
Company concluded would materially impact the fairness or
reliability of either (i) a previously issued audit report or the
underlying financial statements; or (ii) any financial statements
issued or to be issued subsequent to the most recent audit
report. The Company provided its former auditors, Jones, Jensen
& Company with a copy of the foregoing disclosures. Jones,
Jensen & Company provided a letter to the Company confirming
their concurrence with these disclosures.
<PAGE> 9
Neither the Company nor anyone acting on its behalf
consulted Hansen Barnett & Maxwell prior to its appointment
regarding the application of accounting principles to a specific
completed or contemplated transaction, the type of audit opinion,
or other accounting advice that was considered by the Company in
reaching a decision as to an accounting, auditing, or financial
reporting issue. The Company requested that Hansen Barnett &
Maxwell review the foregoing disclosure and provided it with an
opportunity to furnish the Company with a letter containing any
new information, clarification of its views, or respects in which
it disagreed with the Company's disclosure. Hansen Barnett &
Maxwell indicated that it was unnecessary to provide such a
letter.
<PAGE> 10
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
Set forth below is the name and age of each executive
officer and director of the Company, together with all positions
and offices of the Company held by each and the term of office
and the period during which each has served:
Director
and/or
Name Age Position and Office Held Executive
Officer Since
------------------ ---- ------------------------ -------------
Howard S. Landa 52 Chairman of the Board February 3, 2000
Terrell W. Smith 52 Director February 3, 2000
Mickey Hale 52 Director February 3, 2000
Andrew C. Bebbington 40 Chief Financial Officer February 3, 2000
A director's regular term is for a period of one year or
until his or her successor is duly elected and qualified.
There is no family relationship among the current directors
and executive officers. The following sets forth brief
biographical information for each director and executive officer
of the Company.
Howard S. Landa, age 52, was appointed as a director and
chairman of the board of the Company on February 3, 2000. Mr.
Landa was a founder of Kruse, Landa & Maycock, L.L.C., a legal
firm located in Salt Lake City, Utah, in 1978. Mr. Landa spent
his professional career through April 1999 specializing in
corporate acquisition, taxation, the infusion of new capital, and
management advice. Mr. Landa was appointed chairman of the board
of Sensar Corporation, a publicly-held company ("SCII") in April
1999. He is also a director of Eagle Lake Incorporated. Mr.
Landa continues to serve in those capacities, although it is
anticipated he will resign from the board of Sensar Corporation
on completion of a currently pending merger. Mr. Landa received
his juris doctorate from Hastings College of Law, University of
California, in 1973 and an L.L.M. in taxation from New York
University in 1974.
Terrell W. Smith, age 52, was appointed as a director of the
Company on February 3, 2000. Since 1990, he has been executive
vice president and general counsel for Fairbanks Corp., a
privately-held mortgage banking and servicing company located in
Salt Lake City, Utah. He holds a Bachelor of Arts in Economics
from Stanford (1971) and a juris doctorate from the University of
Utah School of Law (1974)
<PAGE> 11
Mickey Hale, age 52, was appointed as a director of the
Company on February 3, 2000. Ms. Hale has been president and
chief executive officer of Imperial Development Corporation and
related travel services and real estate entities since 1990. Ms.
Hale has been a director of Sensar Corporation, a publicly-held
company ("SCII") since May of 1999. Ms. Hale was an investment
advisor at Shearson Lehman Brothers from 1987-1990 and served in
the same capacity at Paine Webber from 1980-1987. Ms. Hale
received her Bachelor of Science in Political Science from the
University of Utah in 1970.
Andrew C. Bebbington, age 40, was appointed as chief
financial officer of the Company on February 3, 2000. Mr.
Bebbington was CEO of Sensar Corporation, a publicly-held
corporation ("SCII"), from November 1997 through April 1999 and
has served as its chief consultant thereafter. Mr. Bebbington
was formerly president of Neslab Instruments, Inc. for a period
of six years, as well as serving on the board of directors of
Life Sciences International PLC until its purchase by Thermo
Electron, Inc., in March 1997. Prior to this position, Mr.
Bebbington served as business development director of Life
Sciences for a period of four years during which time he was
responsible for coordinating Life Sciences' rapid expansion
through acquisition. Mr. Bebbington is a graduate of the London
School of Economics and is a Chartered Accountant. Mr.
Bebbington served in the KPMG consulting practice, specializing
in mergers, acquisitions, and other strategic and financial
planning activities.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation awarded to, earned by, or paid to the chief
executive officer of the Company. No other executive officer or
employee of the Company received compensation in excess of
$100,000 for the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION)
Long Term Compensation
------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Registered Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation(1) Award(s) SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------- --------- ------ ------ --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard S. Landa (1) 6/30/2000 $0 $0 $0 $0 0 $0 $0
6/30/1999 $0 $0 $0 $0 0 $0 $0
6/30/1998 $0 $0 $0 $0 0 $0 $0
Donald McKean (2) 6/30/2000 $0 $0 $0 $0 0 $0 $0
6/30/1999 $0 $0 $0 $0 0 $0 $0
6/30/1998 $0 $0 $0 $0 0 $0 $0
</TABLE>
_________________________
(1) Mr. Landa became the chief executive officer in February, 2000.
(2) Mr. McKean resigned as chief executive officr in February,
2000.
None of the executive officers of the Company have a written
employment agreement. None of the executive officers are
currently paid a salary by the Company. The outside directors
will be reimbursed for any travel and lodging occurred in
attending board meetings. In addition, the Company has agreed to
compensate the directors $1,000 for each board meeting. The
directors have agreed to waive this obligation until the
identification of an appropriate business transaction.
<PAGE> 12
ITEM 11. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information as to each person
owning of record or who was known by the Company to own
beneficially more than 5% of the 8,500,000 shares of common stock
outstanding as of September 27, 2000, and information as to the
ownership of the Company's common stock by each of its directors
and by the directors and executive officers as a group. Except
as otherwise indicated, all shares are owned directly, and the
persons named in the table have sole voting and investment power
with respect to shares shown as beneficially owned by them.
Number of Percent
Name Shares of of Ownership
Common Stock
Held
---------------------- ------------- -------------
Principal Shareholders
Joe Buzas 1,000,000 11.8%
P.O. Box 40178
Salt Lake City, Utah
84110-4108
Howard S. Landa(1) 1,386,184 16.3%
50 West Broadway,
Suite 501
Salt Lake City, Utah
84101
Officers and Directors
Howard S. Landa -----------------------See Above----------------------
Mickey Hale 580,000 6.8%
50 West Broadway,
Suite 501
Salt Lake City, Utah
84101
Terrell W. Smith 355,000 4.2%
50 West Broadway,
Suite 501
Salt Lake City, Utah
84101
Andrew C. Bebbington 180,000 2.1%
50 West Broadway,
Suite 501
Salt Lake City, Utah
84101
All Officers and
Directors as 2,501,184 29.4%
a Group (4)
_________________________
(1) Mr. Landa has direct beneficial ownership of 95,868
shares. The balance of 1,290,316 shares is owned both
directly and indirectly by his spouse and children. Mr. Landa
disclaims any direct beneficial interest in those shares.
<PAGE> 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 2000, principal shareholders
of the Company agreed to cancel 7,820,049 shares of previously
outstanding stock. Contemporaneously, two former principal
shareholders of the Company agreed to waive the Company's
obligation with respect to funds previously advanced to it in the
amount of $16,602 and contributed this amount is the capital of
the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The financial statements, including the index to the
financial statements, are included immediately following the
signature page to this report.
EXHIBITS
Exhibit
Number Number Title of Document Location
------ ------ ------------------------- ---------------------------
1 (3) Articles of Incorporation Incorporated by reference(1)
2 (3) Bylaws Incorporated by reference(1)
3 (3) Designation of Rights, Incorporated by reference(2)
Privileges and Preferences
of 1997 Series A Convertible
Preferred Stock
4 (4) Specimen Stock Certificate Incorporated by reference(1)
5 (16) Letter from Jones Jensen & Incorporated by reference(3)
Company
6 (27) Financial Data Schedule This Filing
_________________________
(1) Incorporated by reference from the Company's registration
statement on Form S-18 filed with the Commission, SEC File No.
33-1289-D.
(2) Incorporated by reference from the Company's annual
report on Form 10-KSB for the year ended June 30, 1997.
(3) Incorporated by reference from the Company's quarterly
report on Form 10-QSB for the quarter ended March 31, 2000.
REPORTS ON FORM 8-K
During the last quarter of the fiscal year ended June 30,
2000, the Company did not file a report on Form 8-K.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company has
caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
CHAPEAU, INC.
Dated: September 27, 2000 By:/s/ Howard S. Landa
--------------------------------
Howard S. Landa, President
(Chief Executive Officer)
By:/s/ Andrew C. Bebbington
---------------------------------
Andrew C. Bebbington
(Chief Financial Officer)
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 Company and in the capacities
and on the dates indicated:
Dated: September 27, 2000 By:/s/ Howard S. Landa
---------------------------------
Howard S. Landa, Director
Dated: September 27, 2000 By:/s/ Terrell W. Smith
---------------------------------
Terrell W. Smith, Director
Dated: September 27, 2000 By:/s/ Mickey Hale
---------------------------------
Mickey Hale, Director
Dated: September 27, 2000 By:/s/ Andrew C. Bebbington
------------------------------------
Andrew C. Bebbington, Director
<PAGE> 15
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Balance Sheet - June 30, 2000 F-3
Statement of Income for the Period from February 3, 2000
(Date of Inception of the Development Stage) to June 30, 2000 F-4
Statement of Stockholders' Equity (Deficit) for the Period
from February 3, 2000 (Date of Inception of the Development
Stage) to June 30, 2000 F-5
Statement of Cash Flows for the Period from February 3, 2000
(Date of Inception of the Development Stage) to June 30, 2000 F-6
Notes to the Financial Statements F-7
<PAGE> F-1
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
MEMBER OF AICPA DIVISION OF FIRMS Fax (801) 532-7944
MEMBER OF SECPS 345 East 300outh, Suite 200
MEMBER OF SUMMIT INTERNATIONAL ASSOCIATES Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders
Chapeau, Inc.
We have audited the accompanying balance sheet of Chapeau, Inc. (a
development stage company) as of June 30, 2000 and the related statements of
income, stockholders' equity (deficit) and cash flows for the period from
February 3, 2000 (date of inception of the development stage) through June
30, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chapeau, Inc. as of June
30, 2000, and the results of its operations and its cash flows for the
period from February 3, 2000 (date of inception of the development stage)
through June 30, 2000 in conformity with accounting principles generally
accepted in the United States.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
July 13, 2000
<PAGE> F-2
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 989,555
Accrued interest receivable 4,926
-----------
TOTAL CURRENT ASSETS 994,481
------------
TOTAL ASSETS $ 994,481
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 4,446
------------
TOTAL CURRENT LIABILITIES 4,446
------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares
authorized; none issued and outstanding -
Common stock, $0.001 par value; 325,000,000 shares
authorized; 8,500,000 issued and outstanding 8,500
Additional paid-in capital 1,238,158
Deficit accumulated prior to date of inception
of the development stage (259,373)
Retained earnings from date of inception of the
development stage (February 3, 2000) 2,750
------------
TOTAL STOCKHOLDERS' EQUITY 990,035
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 994,481
============
The accompanying notes are an integral part of these financial
statements.
<PAGE> F-3
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME
FOR THE PERIOD FROM FEBRUARY 3, 2000
(DATE OF INCEPTION OF THE DEVELOPMENT STAGE)
TO JUNE 30, 2000
INTEREST INCOME $ 20,201
GENERAL AND ADMINISTRATIVE EXPENSE 17,451
----------
NET INCOME $ 2,750
==========
BASIC INCOME PER SHARE $ -
==========
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 7,786,743
==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> F-4
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM FEBRUARY 3, 2000
(DATE OF INCEPTION OF THE DEVELOPMENT STAGE)
TO JUNE 30, 2000
<TABLE>
<CAPTION>
Retained
Earnings
Accumulated From Date
Prior to of the
Inception Develoment Total
Common Stock Additional of the Stage Stockholders'
----------------------- Paid-In Development (February 3, Equity
Shares Amount Capital Stage 2000) (Deficit)
---------- -------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - FEBRUARY 3, 2000
(DATE OF INCEPTION OF THE
DEVELOPMENT STAGE) 12,320,049 $ 12,320 $ 230,451 $(259,373) $ - $ (16,602)
Conversion of related party note
payable and accrued interest
into additional paid-in capital - - 16,602 - - 16,602
Cancellation of stock (7,820,049) (7,820) 7,820 - - -
Common stock issued from February
28, to March 13, 2000 at $0.25 per
share, less offering costs 4,000,000 4,000 983,285 - - 987,285
Net income - - - - 2,750 2,750
---------- -------- ----------- --------- ----------- ------------
BALANCE - JUNE 30, 2000 8,500,000 $ 8,500 $ 1,238,158 $(259,373) $ 2,750 $ 990,035
========== ======== =========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> F-5
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 3, 2000
(DATE OF INCEPTION OF THE DEVELOPMENT STAGE)
TO JUNE 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,750
Adjustments to reconcile net income to net cash
from operating activities:
Changes in assets and liabilities:
Accrued interest receivable (4,926)
Accounts payable and accrued liabilities 4,446
-----------
NET CASH AND CASH EQUIVALENTS PROVIDED BY
OPERATING ACTIVITIES 2,270
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,000,000
Stock offering costs (12,715)
-----------
NET CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 987,285
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 989,555
CASH AND CASH EQUIVALENTS AT FEBRUARY 3, 2000
(DATE OF INCEPTION OF THE DEVELOPMENT STAGE) -
-----------
CASH AND CASH EQUIVALENTS AT JUNE 30, 2000 $ 989,555
===========
SUPPLEMENTAL CASH FLOW INFORMATION
Noncash Financing Activities
Conversion of related party note payable and accrued
interest into additional paid-in capital $ 16,602
The accompanying notes are an integral part of these financial
statements.
<PAGE> F-6
CHAPEAU, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
HISTORY AND NATURE OF BUSINESS - Chapeau, Inc. (the
"Company") was organized under the laws of the State of
Utah on September 19, 1985. The Company was engaged in the
operation of sports clothing stores but was unsuccessful
and closed its final store in May 1989. The Company was
dormant from May 1989 until February 3, 2000.
RECAPITALIZATION - On February 3, 2000, two principal
shareholders of the Company (the "Selling Shareholders")
and the Company entered into a Stock Purchase Agreement
with a group of investors (the "Purchasers"). Under the
terms of the Stock Purchase Agreement, the Selling
Shareholders contributed notes payable and accrued
interest to the Selling Shareholders totaling $16,602 as
capital of the Company with no additional shares being
issued, the Purchasers acquired 5,000,000 shares of common
stock from the Selling Shareholders by a cash payment of
$300,000, or $0.06 per share, and the Selling Shareholders
and one of the Purchasers returned 7,820,049 shares of
common stock to the Company for cancellation for no
consideration. No stated or unstated rights were given in
exchange for the cancellation of the common stock. No gain
or loss was recognized in connection with the contribution
of the notes payable and accrued interest to capital.
INCEPTION OF THE DEVELOPMENT STAGE - In connection with
the recapitalization of the Company, the former board of
directors resigned and a new board of directors was
appointed from the Purchasers. Howard S. Landa was also
appointed as the chief executive officer and Andrew C.
Bebbington was appointed as the chief financial officer of
the Company. As a result of the Stock Purchase Agreement
and the changes in management, the Company was reactivated
on February 3, 2000. The development stage activities of
the Company include raising capital and seeking investment
or merger opportunities.
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.
CASH AND CASH EQUIVALENTS - The Company considers all
highly liquid investments purchased with maturity of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reflected in the balance sheet for cash and accounts
payable approximate their respective fair values due to
the short maturities of these instruments.
INCOME TAXES - The Company utilizes the liability method
of accounting for income taxes. Under the liability
method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the
differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely
than not that such tax benefits will not be realized.
BASIC INCOME PER SHARE - Basic income per share is
calculated by dividing net income by the weighted average
number of common shares outstanding during the period.
<PAGE> F-7
CONCENTRATION OF CREDIT RISK - The Company's financial
instruments that are exposed to concentration of credit
risk consist primarily of cash equivalents. The Company
maintains its cash and cash equivalents at one major
financial institution. Cash equivalents are invested
through a daily repurchase agreement with the financial
institution. The agreement provides for the balance of
available funds to be invested in an undivided interest in
one or more direct obligations of, or obligations that are
fully guaranteed as to principal and interest by, the
United States Government, or an agency thereof. These
securities are not a deposit and are not insured by the
Federal Deposit Insurance Corporation.
NOTE 2 - RELATED PARTY TRANSACTIONS
Prior to the change in executive management in February
2000, the Company borrowed money from directors or
shareholders in order to fund its continued existence.
These notes were unsecured, were due on demand and bore
interest at a rate of 8% per annum. On February 3, 2000,
notes in the amount of $16,602, including accrued
interest, were contributed to additional paid-in capital.
Commencing May 1, 2000, the Company has rented office
space in a leasehold held by the chief executive officer
on a month-to-month basis. The monthly rental is $1,163
per month. Rent expense for the period from February 3,
2000 (date of inception of the development stage) through
June 30, 2000 was $2,326.
NOTE 3 - INCOME TAXES
As of June 30, 2000, the Company has net operating loss
carryforwards for tax reporting purposes of approximately
$255,000 expiring in various years through 2019. There
were no deferred tax assets recorded in the financial
statements for net operating loss carryforwards because
the likelihood or realization of the related tax benefits
cannot be established. Accordingly, a valuation allowance
of approximately $87,000 has been recorded to reduce the
net deferred tax asset to zero.
A reconciliation of the amount of tax expense for the
period from February 3, 2000 (date of inception of the
development stage) to June 30, 2000 that would result from
applying the federal statutory rate to pre tax income to
the provision for income taxes is as follows:
Income tax at 34%
$ 969
Benefit from operating loss
carryforwards (969)
-----
$ -
=====
NOTE 4 - STOCKHOLDERS'- EQUITY
In March 2000, the Company completed a private placement
of 4,000,000 shares of common stock at $0.25 per share.
The net proceeds to the Company, after deducting
associated offering costs, were approximately $987,000.
<PAGE> F-8
