SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1999
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[ ] 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: 33-3378-D
COVINGHAM CAPITAL CORPORATION
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(Exact name of Registrant as specified in its charter)
UTAH 87-0430826
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
174 E. Dorchester Drive, Salt Lake City, Utah 84103
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(Address of principal executive offices) (Zip Code)
(801) 521-0880
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(Registrant's telephone number, including area code)
Securities Company pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer: (1)filed all reports required to be filed by
Section 12 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 [X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is 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]
The issuer's revenues for the year ended December 31, 1999 were $0.00
As of December 31, 1999, there are approximately 16,179,163 shares of
common voting stock of the Company held by non-affiliates. The Company's stock
is not quoted and there is no "established public market" for shares of common
voting stock of the Company, so the Company has arbitrarily valued these shares
based on $0.001 par value per share.
As of December 31, 1999 there were 36,179,163 shares of the Company's
Common Stock outstanding.
Documents Incorporated by Reference: See Exhibit List.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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COVINGHAM CAPITAL CORPORATION
FORM 10-KSB
For The Fiscal Year Ended December 31, 1999
PART I
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Page
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Item 1. Description of Business..................................... 3
Item 2. Description of Properties................................... 11
Item 3. Legal Proceedings .......................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ........ 12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.... 12
Item 6. Management Discussion and Analysis or Plan of Operation .... 13
Item 7. Financial Statements ....................................... 15
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosures ............................ 24
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ......... 24
Item 10. Executive Compensation .................................... 26
Item 11. Security Ownership of Certain Beneficial Owners and Management..27
Item 12. Certain Relationships and Related Transactions ............ 28
Item 13. Exhibits and Reports on Form 8-K .......................... 29
Signatures ......................................................... 30
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business.
Covingham Capital Corporation (the "Company") was organized under the laws
of the State of Utah on January 30, 1986, to engage in any lawful business. The
Company filed a Registration Statement of Form S-18 with the Securities and
Exchange Commission which became effective on November 10, 1986. Pursuant to
such Registration Statement and the Prospectus, the Company offered to the
public a maximum of 6,000,000 shares and a minimum of 2,000,000 shares of its
common stock at $0.05 per share. The offering closed with the minimum number of
shares having been sold.
The Company was originally formed to seek the acquisition of assets,
property or business that may benefit itself and its shareholders.
On July 31, 1987, the Company and Consumer Products Source, Inc., a
Delaware corporation ("CPS"), entered into an Agreement and Plan of
Reorganization dated July 31, 1987 (the "Reorganization Agreement") whereby CPS
was to become a wholly owned subsidiary of the Company. On September 14, 1987,
in connection therewith, the Company issued 11,163,648 restricted shares of its
common stock, $0.001 par value, to CPS's shareholders, in exchange for all of
the issued and outstanding shares of CPS. The Company also issued an additional
970,716 restricted shares for services rendered in conjunction with the CPS
acquisition and operations of the Company.
CPS which held a license agreement for the sale of various consumer
products intended on continuing to sell consumer products to bicycle dealers and
other related businesses, as it was previously operated.
Pursuant to the terms of the Reorganization Agreement, on the closing date,
Messrs. Bill Covin, Jay Bingham, Lance Bingham and Kenneth D. Murri, resigned as
officers and directors of the Company. Messrs. Thomas V. walker, Norman W. Mead,
Charles McGill, Lance Bingham and Kenneth D. Murri were subsequently elected as
directors of the Company, and the newly elected directors in turn electing Mr.
Thomas V. Walker as President and CEO, Mr. Norman W. Mead as Vice President, Mr.
Charles McGill as Secretary and Mr. Kenneth D. Murri as Treasurer.
On March 1, 1988, the Company was involuntarily dissolved by the State of
Utah, for failure to file its annual reports and maintain a registered agent in
the State.
On September 26, 1988 Thomas V. Walker resigned as an officer and director
of the Company.
In October 1988, CPS ceased operations and on November 11, 1988, CPS, the
wholly owned subsidiary of the Company was involuntarily suspended by the
California Franchise Tax board.
Between October 1988 through February 1998, the Company resumed its
original business direction of seeking a merger, reverse acquisition or other
defined change in control agreement which would be in the best interests of the
Company's shareholders. The Company entertained several proposals and entered
into a letter of intent on September 28, 1995 with American Capital Investors
Corporation ("ACIC") under which ACIC would acquire the Company.
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For various reasons, the Company and ACIC determined not to proceed to
complete the transactions contemplated in the letter of intent. As a result of
the conclusion of the relationship with ACIC, the Registration was left with
virtually no funds and no pending prospects for developing business
relationships with other companies.
The Company did not file any periodic reports with the Securities and
Exchange Commission subsequent to the Form 8-K filed November 10, 1987 and the
quarterly Report on Form 10-Q for the quarter ended March 31, 1988.
In February 1998, Lance Bingham and Kenneth D. Murri resigned as officers
and directors of the Company's leaving Norman W. Mead as the sole office and
director. Mr. Mead appointed George G. Chachas as a director and Vice President.
On February 26, 1998, Norman W. Mead resigned as an officer and director of
the Company, leaving George G. Chachas, as the sole officer and director.
On June 9, 1999, Gregory J. Chachas and James Franklin were appointed to
the Board of Directors by the Company's then sole director, George G. Chachas,
and Gregory J. Chachas was elected as Vice President of the Company.
On July 15, 1999, the Company filed an Application for Reinstatement with
the State of Utah and the Company was reinstated on August 24, 1999.
On September 21, 1999, in consideration for legal and consulting services
valued at $10,000.00 provided by Gregory J. Chachas in the reinstatement of the
Company, the Company issued 10,000,000 restricted shares of its common stock,
$0.001 par value per share to Gregory J. Chachas, Additionally, in consideration
for the capital contribution of $10,000.00 in cash and expenses paid on behalf
of the Company by Gregory J. Chachas, the Company issued an additional
10,000,000 restricted shares of its common stock to Gregory J. Chachas.
On September 22, 1999, George G. Chachas purchased 4,283,950 shares of
common stock of the Company from Norman W. Mead, a former officer and director
of the Company.
On September 25, 1999, the Company restated its By-laws in its entirety.
On November 24, 1999, George G. Chachas and James E. Franklin, resigned as
an officers and directors of the Company and Ray Cottrell and David Nielson were
appointed to the Board of Directors by the Company's then sole director Gregory
J. Chachas.
On February 8, 2000 and February 18, 2000, respectively, Mr. Ray Cottrell
and David Nielson, resigned as directors of the Company.
On June 13, 2000, in consideration for the capital contribution of
$5,000.00 in cash by Gregory J. Chachas, the Company issued 500,000 restricted
shares of its common stock, $0.001 par value to Gregory J. Chachas. Further, in
consideration for the financial accommodations of the Company's transfer agent
in discounting the prior invoices of the Company, the Company issued 100,000
restricted shares of its common stock, $0.001 par value to Fidelity Transfer
Company.
(b) Narrative Description of Business.
The Management of the Company intends to preserve the corporate existence
of the Company while continuing to seek a business combination with another
entity seeking the advantages of an existing publicly held corporation
notwithstanding the Company's lack of capital. Management recognizes that the
Company's lack of capital is a serious disadvantage both in terms of
attractiveness to a potential acquiring entity as well as restricting
Management's ability to promote the Company and pursue negotiations.
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The Company is not currently engaging in any substantive business activity
and has no plans to engage in any such activity in the foreseeable future. In
its present form, the Company may be deemed to be a vehicle to acquire or merge
with a business or company. To the extent that it intends to continue to seek
the acquisition of assets, property or business that may benefit itself and its
shareholders, the Company is essentially a "blank check" company. Because the
Company has virtually no assets, conducts no business and has no employees,
management anticipates that any such acquisition would require it to issue
shares of its common stock as the sole consideration for the acquisition; such
an issuance would almost certainly result in a change in control of the Company.
This may also result in substantial dilution of the shares of current
shareholders. The Company's Board of Directors shall make the final
determination whether to complete any such acquisition and the approval of
shareholders will not be sought unless required by applicable laws, rules and
regulations, the Company's Articles of Incorporation or Bylaws.
The Company does not intend to restrict its search to any particular
business or industry, and the areas in which it will seek out acquisitions,
reorganizations or mergers may include, but will not be limited to, the fields
of high technology, manufacturing, natural resources, service, research and
development, communications, transportation, insurance, finance and all
medically related fields, among others. The Company recognizes that because of
its total lack of resources, the number of suitable potential business ventures
which may be available to it will be extremely limited, and may be restricted to
entities who desire to avoid what these entities may deem to be the adverse
factors related to an initial public offering ("IPO"). The most prevalent of
these factors include substantial time requirements, legal and accounting costs,
the inability to obtain an underwriter who is willing to publicly offer and sell
shares, the lack of or the inability to obtain the required financial statements
for such an undertaking, limitations on the amount of dilution public investors
will suffer to the benefit of the shareholders of any such entities, along with
other conditions or requirements imposed by various federal and state securities
laws, rules and regulations. Any of these types of entities, regardless of their
prospects, would require the Company to issue a substantial number of shares of
its common stock to complete any such acquisition, reorganization or merger,
usually amounting to between 80 and 95 percent of the outstanding shares of the
Company following the completion of any such transaction; accordingly,
investments in any such private entity, if available, would be much more
favorable than any investment in the Company.
Management intends to consider a number of factors prior to making any
decision as to whether to participate in any specific business endeavor, none of
which may be determinative or provide any assurance of success. These may
include, but will not be limited to an analysis of the quality of the entity's
management personnel; the anticipated acceptability of any new products or
marketing concepts; the merit of technological changes; its present financial
condition, projected growth potential and available technical, financial and
managerial resources; its working capital, history of operations and future
prospects; the nature of its present and expected competition; the quality and
experience of its management services and the depth of its management; its
potential for further research, development or exploration; risk factors
specifically related to its business operations; its potential for growth,
expansion and profit; the perceived public recognition or acceptance of its
products, services, trademarks and name identification; and numerous other
factors which are difficult, if not impossible, to properly analyze without
referring to any objective criteria.
Regardless, the results of operations of any specific entity may not
necessarily be indicative of what may occur in the future, by reason of changing
market strategies, plant or product expansion, changes in product emphasis,
future management personnel and changes in innumerable other factors. Further,
in the case of a new business venture or one that is in a research and
development mode, the risks will be substantial, and there will be no objective
criteria to examine the effectiveness or the abilities of its management or its
business objectives. Also, a firm market for its products or services may yet
need to be established, and with no past track record, the profitability of any
such entity will be unproven and cannot be predicted with any certainty.
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Management will attempt to obtain independent analysis or verification of
information provided and gathered, check references of management and key
personnel and conduct other reasonably prudent measures calculated to ensure a
reasonably thorough review of any particular business opportunity; however,
since the Company has extremely limited current assets and cash reserves, these
activities may be limited, and if undertaken, the cost and expense thereof will
be advanced by management, and may further dilute the interest of the
shareholders of the Company.
The Company is unable to predict the time as to when and if it may actually
participate in any specific business endeavor. The Company anticipates that
proposed business ventures will be made available to it through personal
contacts of directors, executive officers and principal shareholders,
professional advisors, broker dealers in securities, venture capital personnel,
members of the financial community and others who may present unsolicited
proposals. In certain cases, the Company may agree to pay a finder's fee or to
otherwise compensate the persons who submit a potential business endeavor in
which the Company eventually participates. Such persons may include the
Company's directors, executive officers, beneficial owners or their affiliates.
In this event, such fees may become a factor in negotiations regarding a
potential acquisition and, accordingly, may present a conflict of interest for
such individuals.
Although the Company has not identified any potential acquisition target,
the possibility exists that the Company may acquire or merge with a business or
company in which the Company's executive officers, directors, beneficial owners
or their affiliates may have an ownership interest. Current Company policy does
not prohibit such transactions. Because no such transaction is currently
contemplated, it is impossible to estimate the potential pecuniary benefits to
these persons.
Although it currently has no plans to do so, depending on the nature and
extent of services rendered, the Company may compensate members of management in
the future for services that they may perform for the Company. Because the
Company currently has extremely limited resources, and is unlikely to have any
significant resources until it has completed a merger or acquisition, management
expects that any such compensation would take the form of an issuance of the
Company's stock to these persons; this would have the effect of further diluting
the holdings of the Company's other shareholders. However, due to the minimal
amount of time devoted to management by any person other than Mr. Chachas, there
are no preliminary agreements or understandings with respect to management
compensation.
Further, substantial fees are often paid in connection with the completion
of these types of acquisitions, reorganizations or mergers, ranging from a small
amount to as much as $250,000. These fees are usually divided among promoters or
founders, after deduction of legal, accounting and other related expenses, and
it is not unusual for a portion of these fees to be paid to members of
management or to principal shareholders as consideration for their agreement to
retire a portion of the shares of common stock owned by them. It is not
anticipated that any such opportunity will be afforded to other shareholders.
Such fees may become a factor in negotiations regarding any potential
acquisition by the Company and, accordingly, may present a conflict of interest
for such individuals.
Management expects to enter into further negotiations with target company
management following successful conclusion of financial and evaluation studies.
Negotiations with target company management will be expected to focus on the
percentage of the Company which target company shareholders would acquire in
exchange for their shareholdings in the target company. Depending upon, among
other things, the target company's assets and liabilities, the Company's
shareholders will in all likelihood hold a lesser percentage ownership interest
in the Company following any merger or acquisition. The percentage ownership may
be subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then current shareholders.
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The final stage of any merger or acquisition to be effected by the Company
will require the Company to retain the services of its counsel and a qualified
accounting firm in order to properly effect the merger or acquisition. The
Company would incur significant legal fees and accounting costs during the final
stages of a merger or acquisition. Also, if the merger or acquisition is
successfully completed, Management anticipates that certain costs will be
incurred for public relations, such as the dissemination of information to the
public, to the shareholders and to the financial community. If the Company is
unable to complete the merger or acquisition for any reason, the Company's then
supply of capital may be substantially depleted if legal fees and accounting
costs have been incurred. Management intends to retain legal and accounting
services only on an as-needed basis in the latter stages of a proposed merger or
acquisition. It is likely that the Company will seek to accomplish any business
combination in a manner which will not require shareholder approval.
The Company may be required to seek additional financing in order to
proceed with any proposed transaction with a target company, which could be
accomplished by either the sale of common stock, the issuance of debt, or both.
Competition.
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The Company will remain an insignificant participant among the firms which
engage in mergers with and acquisitions of privately-financed entities. There
are literally thousands of "blank check" companies engaged in endeavors similar
to those engaged in by the Company; many of these companies have substantial
current assets and cash reserves. Competitors also include thousands of other
publicly-held companies whose business operations have proven unsuccessful, and
whose only viable business opportunity is that of providing a publicly-held
vehicle through which a private entity may have access to the public capital
markets. There is no reasonable way to predict the competitive position of the
Company or any other entity in these endeavors; however, the Company, having
virtually no assets or cash reserves, will no doubt be at a competitive
disadvantage in competing with entities which have recently completed IPO's,
have significant cash resources and have operating histories when compared with
the complete lack of any substantive operations by the Company. In view of the
Company's limited financial resources and limited management availability, the
Company will continue to be at a significant competitive disadvantage compared
to the Company's competitors.
Principal Products or Services and their Markets.
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The extremely limited business operations of the Company, as now
contemplated, involve those of a "blank check" company. The only activity to be
conducted by the Company is to seek out and investigate the acquisition of any
viable business opportunity by purchase and exchange for securities of the
Company or pursuant to a reorganization or merger through which securities of
the Company will be issued or exchanged.
Sources and Availability of Raw Materials.
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None; not applicable.
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Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements
or Labor Contracts.
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None; not applicable.
Governmental Approval of Principal Products or Services.
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On the effectiveness of the Company's Registration Statement on Form S-8,
which occurred on November 10, 1986, the Company became subject to reporting
requirements as set forth in Sections 13 and 15(d) of the Securities Exchange
Act of 1934. Section 13 of the 1934 Act requires the company to file such
periodical and other reports which include an annual report of Form 10-KSB,
quarterly reports on Form 10-QSB and current reports on Form 8-K. Costs
associated with filings required by the Company under the 1934 Act will have to
be advanced by management, the Company's principal shareholders or any potential
business venturer, and may further dilute the interest of the public
shareholders. In the case of a merger requiring prior shareholder approval and
the submission of financial statements of the Company and other party or parties
to the merger, legal and accounting costs will be significantly higher, even
though the adoption, ratification and the approval of any such merger will be
virtually assured if recommended by Gregory J. Chachas, the principal
shareholder of the Company.
Effects of Existing or Probable Governmental Regulations.
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Since the Company was initially incorporated, federal and state securities
laws, rules and regulations have made the participation in or the conducting of
an IPO substantially easier for certain small and developmental stage companies,
reducing the time constraints previously involved, the legal and accounting
costs and the financial periods required to be included in the financial
statements. Rule 504 of Regulation D of the Securities and Exchange Commission
no longer requires the filing of a Registration Statement with any state or
territory as a condition to its use; however, this Rule is no longer available
to "blank check" companies. Accordingly, because the Company files reports
pursuant to Sections 13 and/or 15(d) of the 1934 Act, and is also presently
deemed to be a "blank check" company, this method of raising funds is foreclosed
to it. Rule 504 is also not available to "reporting issuers," which the Company
became on the effectiveness of its Registration Statement on Form 10-SB, as
amended.
The integrated disclosure system for small business issuers adopted by the
Securities and Exchange Commission in Release No. 34-30968 and effective as of
August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25 million; is a U.S. or Canadian issuer; is not an
investment company; and if a majority owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25 million or more.
A number of state securities commissions have adopted the use of Form U-7
for SCOR, which also substantially simplifies the registration process for
IPO's; Form U-7 is primarily used in connection with offerings conducted
pursuant to Rule 504 of the Securities and Exchange Commission, but is not
limited to this use. To the extent that Rule 504 and the use of SCOR are
unavailable to the Company due to its status as a reporting company and a "blank
check" company, the use of Form U-7 will also be unavailable in this regard.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc., ("NASAA") have
expressed an interest in adopting policies that will streamline the registration
process and make it easier for a small business issuer to have access to the
public capital markets. The present laws, rules and regulations designed to
promote availability for the small business issuer to these capital markets and
similar laws, rules and regulations that may be adopted in the future will
substantially limit the demand for "blank check" companies like the Company, and
may make the use of these companies obsolete.
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Cost and Effect of Compliance with Environmental Laws.
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None; not applicable. However, environmental laws, rules and regulations
may have an adverse effect on any business venture viewed by the Company as an
attractive acquisition, reorganization or merger candidate, and these factors
may further limit the number of potential candidates available to the Company
for acquisition, reorganization or merger.
Research and Development Expenses.
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None; not applicable.
Number of Employees.
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The Company does not have any employees, and did not have any during the
fiscal year ended December 31, 1999.
RISK FACTORS
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RISK OF PENNY STOCK. The Company's common stock may, at some future time,
be deemed to be "penny stock" as that term is defined in Rule 3a51-1 of the
Exchange Act of 1934. Penny stocks are stocks (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an
issuer with net tangible assets less than US$2,000,000 (if the issuer has been
in continuous operation for at least three years) or US$5,000,000 (if in
continuous operation for less than three years), or with average annual revenues
of less than US$6,000,000 for the last three years.
A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars ($5.00) of more, excluding any broker
or dealer commissions, markups or markdowns. As of the date of this Registration
Statement the Company's common stock has a price in excess of $5.00 and would
not be deemed a penny stock.
If the Company's Common Stock were deemed a penny stock, section 15(g) and
Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in
the Company's Common Stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
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COMPETITION. There are numerous corporations, firms and individuals which
are engaged in the type of business activities in which the Company is presently
engaged. Many of those entities are more experienced and possess substantially
greater financial, technical and personnel resources than the Company or its
subsidiaries. There are literally thousands of "blank check" companies engaged
in endeavors similar to those engaged in by the Company; many of these companies
have substantial current assets and cash reserves. Competitors also include
thousands of other publicly-held companies whose business operations have proven
unsuccessful, and whose only viable business opportunity is that of providing a
publicly-held vehicle through which a private entity may have access to the
public capital markets. There is no reasonable way to predict the competitive
position of the Company or any other entity in these endeavors; however, the
Company, having virtually no assets or cash reserves, will no doubt be at a
competitive disadvantage in competing with entities which have recently
completed IPO's, have significant cash resources and have operating histories
when compared with the complete lack of any substantive operations by the
Company. The Company will remain an insignificant participant among the firms
which engage in mergers with and acquisitions of privately-financed entities. In
view of the Company's limited financial resources and limited management
availability, the Company will continue to be at a significant competitive
disadvantage compared to the Company's competitors.
NO MARKET FOR COMMON STOCK. There has never been any established "public
market" for shares of common stock of the Company. The Company intends to submit
for listing on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD"); however, management does not expect any public
market to develop unless and until the Company completes an acquisition or
merger. In any event, no assurance can be given that any market for the
Company's common stock will develop or be maintained. If a public market ever
develops in the future, the sale of "unregistered" and "restricted" shares of
common stock pursuant to Rule 144 of the Securities and Exchange Commission by
the shareholders named under the caption "Recent Sales of Unregistered
Securities," below, may have a substantial adverse impact on any such public
market.
DISCRETIONARY USE OF PROCEEDS. Because of management's broad discretion
with respect to the acquisition of assets, property or business, the Company may
be deemed to be a growth oriented company. Although management intends to apply
substantially all of the proceeds that it may receive through the issuance of
stock or debt to suitable acquisitions. such proceeds will not otherwise be
designated for any more specific purpose. The Company can provide no assurance
that any allocation of such proceeds will allow it to achieve its business
objectives.
UNASCERTAINABLE RISKS ASSOCIATED WITH POTENTIAL FUTURE ACQUIRED BUSINESSES.
To the extent that the Company may acquire a business in a highly risky
industry, the Company will become subject to those risks. Similarly, if the
Company acquires a financially unstable business or a business that is in the
early stages of development, the Company will become subject to the numerous
risks to which such businesses are subject. Although management intends to
consider the risks inherent in any industry and business in which it may become
involved, there can be no assurance that it will correctly assess such risks.
UNCERTAIN STRUCTURE OF FUTURE ACQUISITIONS. Management has had no
preliminary contact or discussions regarding, and there are no current plans,
proposals or arrangements to acquire any other specific assets, property or
business. Accordingly, it is unclear whether such any such acquisition would
take the form of an exchange of capital stock, a merger or an asset acquisition.
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CONFLICTS OF INTEREST; RELATED PARTY TRANSACTIONS. Although the Company has
not identified any new potential acquisition targets and management does not
believe there is any "present potential" for such transactions, the possibility
exists that the Company may acquire or merge with a business or company in which
the Company's executive officers, directors, beneficial owners or their
affiliates may have an ownership interest. Although there is no formal bylaw,
shareholder resolution or agreement authorizing any such transaction, corporate
policy does not forbid it and such a transaction may occur if management deems
it to be in the best interests of the Company and its shareholders, after
consideration of the above referenced factors. A transaction of this nature
would present a conflict of interest to those parties with a managerial position
and/or an ownership interest in both the Company and the acquired entity, and
may compromise management's fiduciary duties to the Company's shareholders. An
independent appraisal of the acquired company may or may not be obtained in the
event a related party transaction is contemplated. Furthermore, because
management and/or beneficial owners of the Company's common stock may be
eligible for finder's fees or other compensation related to potential
acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions. It is the Company's
intention that all future transactions be entered into on such terms as if
negotiated at arms length, unless the Company is able to received more favorable
terms from a related party.
Impact of Year 2000.
-------------------
During 1999 we completed our remediation and testing of our platform
systems, management support, systems, and our internal information technology
and non-information technology systems. Because of those planning and
implementation efforts, we experienced no disruptions in our information
technology and non-information technology systems and those systems have
successfully responded to the Year 2000 date change. We did not incur any
significant expenses during 1999 in conjunction with remediating our systems. We
are not aware of any material problems resulting from Year 2000 issues, either
with our products, internal systems, or the products and services of third
parties. We will continue to monitor our mission critical computer applications
and those of our suppliers and vendors throughout the Year 2000 to ensure any
latent Year 2000 matters arising are addressed promptly.
ITEM 2. DESCRIPTION OF PROPERTIES
Other than cash in the amount of approximately $691.00, as of the date of
this report, the Company has no appreciable assets, property or business. Its
principal executive office address and telephone number are the business office
address and telephone number of its President, Gregory J. Chachas, and are
provided at no cost. Because the Company has no business, its activities have
been limited to keeping itself in good standing in the State of Utah, and with
preparing and maintaining and the Company's required periodic reports under the
1934 Act. These activities have consumed an insignificant amount of management's
time; therefore, the costs to Mr. Chachas of providing the use of his office and
telephone have been minimal. Accordingly, there is no written lease between the
Company and Mr. Chachas and there are no preliminary agreements or
understandings with respect to the use of the office facility, either now or in
the future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. No federal,
state or local governmental agency is presently contemplating any proceeding
against the Company. No director, executive officer or affiliate of the Company
or owner of record or beneficially of more than five percent of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
Page 11
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during this fiscal year covered by this report to a
vote of security holders, through the solicitation of proxies, or otherwise.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Market Information
------------------
There has never been any established "public market" for shares of common
stock of the Company. The Company intends to submit for listing on the OTC
Bulletin Board of the National Association of Securities Dealers, Inc. (the
"NASD"); however, management does not expect any public market to develop unless
and until the Company completes an acquisition or merger. In any event, no
assurance can be given that any market for the Company's common stock will
develop or be maintained. If a public market ever develops in the future, the
sale of "unregistered" and "restricted" shares of common stock pursuant to Rule
144 of the Securities and Exchange Commission by the shareholders named under
the caption "Recent Sales of Unregistered Securities," below, may have a
substantial adverse impact on any such public market.
There are no outstanding options, warrants or calls to purchase any of the
authorized securities of the Company.
The sales of an aggregate of 20,600,000 "unregistered" and "restricted"
shares of common stock to the persons named under the caption "Recent Sales of
Unregistered Securities," below, were the only sales of any securities of the
Company during the past three years. Future sales of any of these securities or
any securities of the Company issued in any acquisition, reorganization or
merger may have a future adverse effect on any "public market" that may develop
in the common stock of the Company. See the caption "Recent Sales of
Unregistered Securities" of this Report.
Holders
-------
As of December 31, 1999, there were approximately 140 shareholders of
record of the Company's Common Stock.
Dividends
---------
The Company has not declared any cash dividends with respect to its common
stock and does not intend to declare dividends in the foreseeable future. The
future dividend policy of the Company cannot be ascertained with any certainty,
and if and until the Company completes any acquisition, reorganization or
merger, no such policy will be formulated. There are no material restrictions
limiting, or that are likely to limit, the Company's ability to pay dividends on
its securities.
Recent Sales of Unregistered Securities.
---------------------------------------
On September 21, 1999, in consideration for legal and consulting services
valued at $10,000.00 provided by Gregory J. Chachas, an officer and director of
the Company, the Company issued 10,000,000 "unregistered" and "restricted"
shares of common stock, $0.001 par value per share to Gregory J. Chachas.
Additionally, in consideration for the capital contribution of $10,000.00 in
cash and expenses paid on behalf of the Company by Gregory J. Chachas, the
Company issued an additional 10,000,000 "unregistered" and "restricted" shares
of common stock to Gregory J. Chachas.
Page 12
<PAGE>
Subsequent Events.
-----------------
On June 13, 2000, in consideration for the capital contribution of
$5,000.00 in cash by Gregory J. Chachas, the Company issued 500,000
"unregistered" and "restricted" shares of common stock to, $0.001 par value to
Gregory J. Chachas, and in consideration for the financial accommodations in
discounting the prior invoices of the Company, the Company issued 100,000
"unregistered" and "restricted" shares of common stock, $0.001 par value to
Fidelity Transfer Company.
Each of these individuals or entities, is a current or former director and
executive officer of the Company or had access to all material information
regarding the Company prior to the offer or sale of these securities. The offers
and sales of these securities are believed to have been exempt from the
registration requirements of Section 5 of the Securities Act of 1933 pursuant to
Section 4(2) thereof, and from similar states' securities laws, rules and
regulations requiring the offer and sale of securities by available state
exemptions from such registration.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
CAUTIONARY FORWARD - LOOKING STATEMENT
--------------------------------------
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) the extremely competitive conditions that
currently exist in the market for "blank check" companies similar to the Company
and (ii) lack or resources to maintain the Company's good standing status and
requisite filings with the Securities and Exchange Commission. The foregoing
list should not be construed as exhaustive and the Company disclaims any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
Plan of Operation.
------------------
The Company has not engaged in any material operations or had any revenues
from operations during the last three fiscal years. The Company's plan of
operation for the next 12 months is to continue to seek the acquisition of
assets, property or business that may benefit the Company and its shareholders.
Because the Company has virtually no resources, management anticipates that to
achieve any such acquisition, the Company will be required to issue shares of
its common stock as the sole consideration for such acquisition.
Upon the effectiveness of its Registration Statement on Form S-18, as
amended, on November 10, 1986, the Company became subject to the periodic
reporting obligations of Section 13 and 15(d) of the 1934 Act. These Section
requires the Company to file (i) an annual report on Form 10-KSB with the
Securities and Exchange Commission within 90 days of the close of each fiscal
year (Reg. Sections 240.13a-1 and 249.310b); (ii) a quarterly report on Form
10-QSB within 45 days of the end of each of the first three quarters of its
fiscal year (Reg. Sections 240.13a-13 and 249.308b); and (iii) a current report
on Form 8-K within 15 days of the occurrence of certain material events (e.g.,
changes in accountants, acquisitions or dispositions of a substantial amount of
assets not in the ordinary course of business) (Reg. Sections 240.13a-11 and
249.308). In addition, annual reports on Form 10-KSB must be accompanied by
audited financial statements as of the end of the issuer's most recent fiscal
year. These reporting requirements may deter potential reorganization candidates
that are not willing to undergo the public and agency scrutiny resulting there
from.
Page 13
<PAGE>
In the event that the Company contacts or is contacted by a private company
or other entity which may be considering a merger with or into the Company, it
is possible that the Company would be required to raise additional funds in
order to accomplish the transaction. Otherwise, and even though the Company only
possesses nominal funds, as the Company does not engage in any ongoing business
which requires the routine expenditure of funds, the Company would not be
required to raise additional funds during the next twelve months. The Company
does not routinely expend any funds for the ownership or lease of property, as
any routine activities are being conducted out of an office made available by
the Company's President.
During the next 12 months, the Company's only foreseeable cash requirements
will relate to maintaining the Company in good standing and making the requisite
filings with the Securities and Exchange Commission and the payment of expenses
associated with reviewing or investigating any potential business venture, which
may be advanced by management or principal shareholders as loans to the Company.
Because the Company has not identified any such venture as of the date of this
Report, it is impossible to predict the amount of any such loan. However, any
such loan will not exceed $25,000 and will be on terms no less favorable to the
Company than would be available from a commercial lender in an arm's length
transaction. Management does not intend to raise any required funds through any
private placement of "unregistered" and "restricted" securities or any public
offering of its common stock. Nor does the Company intend to undertake any
offering of its securities under Regulation S of the Securities and Exchange
Commission. As of the date of this Report, the Company has not begun seeking any
acquisition and there are no plans, proposals, arrangements or understandings
with respect to the sale or issuance of additional securities by the Company
prior to the location of any acquisition or merger candidate.
Because the Company is not currently making any offering of its securities,
and does not anticipate making any such offering in the foreseeable future,
management does not believe that Rule 419 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, concerning
offerings by blank check companies, will have any effect on the Company or any
activities in which it may engage in the foreseeable future.
Results of Operations.
---------------------
Revenues for the fiscal years ended December 31, 1999 and 1998, were zero.
The Company had a net loss of $17,711 during the fiscal year ended December
1999, and a net loss of $700, for the year ended December 31, 1998.
Liquidity.
---------
During the fiscal year ended December 31, 1999, the Company incurred
expenses of $17,711, while receiving $0 in revenues; the Company received $0 in
revenues, with total expenses of $700 during the fiscal year ended December 31,
1998.
Page 14
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
COVINGHAM CAPITAL CORPORATION
AND SUBSIDIARIES
Audited Financial Statements
December 31, 1999
Page
----
Independent Auditors' Report ........................................... 16
Consolidated Balance Sheet ............................................. 17
Consolidated Statements of Operations .................................. 18
Consolidated Statements of Stockholders' Equity ........................ 19
Consolidated Statements of Cash Flows .................................. 21
Notes to the Financial Statement ....................................... 22
Page 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders of
Covingham Capital Corporation
(A Development Stage Company)
LaJolla, CA
We have audited the accompanying balance sheet of Covingham Capital Corporation
(a development stage company) as of December 31, 1999 and the related statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1999 and 1998 and from January 1, 1987 through December 31, 1999. 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. The financial statements for the period from inception on January
30, 1986 through December 31, 1986 were audited by other auditors whose report
dated May 13, 1987 expressed an unqualified opinion on these statements. The
financial statements for the period January 30, 1986 (inception) through
December 31, 1999 includes stockholders equity and deficit accumulated during
the development stage of $1,589 and $742,371, respectively. Our opinion on the
statements of operations, stockholders equity and cash flows for the period
January 30, 1986 (inception) through December 31, 1999, insofar as it relates to
amounts for prior periods through December 31, 1986, is based solely on the
report of other auditors.
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 Covingham Capital Corporation
(a development stage company) as of December 31, 1999 and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998 and
from January 1, 1987 through December 31, 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
June 7, 2000
Page 16
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage company)
Balance Sheet
ASSETS
------
<TABLE>
<CAPTION>
December 31,
1999
------------------
<S> <C>
CURRENT ASSETS
Cash $ 1,589
-----------------
Total Current Assets 1,589
-----------------
TOTAL ASSETS $ 1,589
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
-----------------
Total Current Liabilities -
-----------------
TOTAL LIABILITIES -
-----------------
STOCKHOLDERS' EQUITY
Common stock: 100,000,000 shares authorized of $0.001
par value, 36,179,163 shares issued and outstanding 36,180
Additional paid-in capital 707,780
Deficit accumulated during the development stage (742,371)
-----------------
Total Stockholders' Equity 1,589
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,589
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 17
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION> From
Inception on
January 30,
For the Years Ended 1986 Through
December 31, December 31,
---------------------------
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
General and administrative 17,711 700 18,411
------------ ------------ ------------
Total Expenses 17,711 700 18,411
------------ ------------ ------------
Operating loss before loss from
discontinued operations (17,711) (700) (18,411)
------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS (Note 3) - - (723,960)
------------ ------------ ------------
NET LOSS $ (17,711) $ (700) $ (742,371)
============ ============ ============
BASIC LOSS PER SHARE $ (0.00) $ (0.00)
============ ============
BASIC WEIGHTED AVERAGE SHARES 35,979,163 30,477,793
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 18
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------- Paid-In Subscription Development
Shares Amount Capital Receivable Stage
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at inception on
January 30, 1986 - $ - $ - $ - $ -
Issuance of common stock for
cash at $0.0075 per share 2,000,000 2,000 13,000 - -
Net loss from inception on
January 30, 1986 through
December 31, 1986 - - - - (15,000)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1986 2,000,000 2,000 13,000 - (15,000)
Issuance of common stock
for cash at $0.05 per share 2,044,800 2,045 100,195 - -
Issuance of common stock
for purchase of subsidiary
at $0.05 per share 11,163,611 11,164 547,019 - -
Issuance of common stock
for services at $0.05 970,752 971 47,566 - -
Net loss for the year ended
December 31, 1987 - - - - (708,960)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1987 16,179,163 16,180 707,780 - (723,960)
Net loss for the years ended
December 31, 1988 to 1997 - - - - -
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 16,179,163 $ 16,180 $ 707,780 $ - $ (723,960)
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 19
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------- Paid-In Subscription Development
Shares Amount Capital Receivable Stage
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 16,179,163 $ 16,180 $ 707,780 $ - $ (723,960)
Issuance of common stock
for subscription receivable
at $0.001 per share 17,000,000 17,000 - (17,000) -
Net loss for the year ended
December 31, 1998 - - - - (700)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 33,179,163 33,180 707,780 (17,000) (724,660)
Issuance of common stock
for services and expenses
paid by officer at $0.001 10,000,000 10,000 - - -
Issuance of common stock for
conversion of debt at $0.001 700,000 700 - - -
Issuance of common stock for
cash at $0.001 per share 9,300,000 9,300 - - -
Shares returned to treasury (17,000,000) (17,000) - 17,000 -
Net loss for the year ended
December 31, 1999 - - - - (17,711)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 36,179,163 $ 36,180 $ 707,780 $ - $ (742,371)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 20
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
January 30,
For the Years Ended 1986 Through
December 31, December 31,
---------------------------
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (17,711) $ (700) $ (742,371)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Loss on discontinued operations - - 558,182
Common stock issued for services 10,000 - 58,538
Change in operating assets and liabilities:
Increase (decrease) in accounts payable - 700 -
------------ ------------ ------------
Net Cash (Used) by Operating Activities (7,711) - (125,651)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 9,300 - 127,240
------------ ------------ ------------
Net Cash Provided by Financing Activities 9,300 - 127,240
------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,589 - 1,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD - - -
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,589 $ - $ 1,589
============ ============ ============
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Common stock issued for payment of debt $ 700 $ - $ 700
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 21
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Covingham
Capital Corporation (a development stage company) is presented to
assist in understanding the Company's financial statements. The
financial statements and notes are representations of the
Company's management, which is responsible for their integrity and
objectivity. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
a. Organization and Business Activities
The financial statements presented are those of Covingham Capital
Corporation (the Company). The Company was incorporated in the
State of Utah on January 30, 1986 to engage in any lawful
activity, but more particularly to assist companies in marketing
their goods and services. The Company is considered a development
stage company per SFAS No. 7.
b. Accounting Method
The financial statements are prepared using the accrued method of
accounting. The Company has elected a December 31, year end.
c. Revenue Recognition
The Company currently has no source of revenues. Revenue
recognition policies will be determined when principal operations
begin.
d. 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 and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
e. Income Taxes
No provision for income taxes has been accrued because the Company
has net operating losses from inception. The net operating loss
carryforwards of approximately $740,000 at December 31, 1999 will
expire by 2019. No tax benefit has been reported in the financial
statements because the Company is uncertain if the carryforwards
will expire unused. Accordingly, the potential tax benefits are
offset by a valuation account of the same amount.
Page 22
<PAGE>
COVINGHAM CAPITAL CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
g. Basic Loss Per Share
The computations of basic loss per share of common stock are based
on the weighted average number of common shares outstanding during
the period of the consolidated financial statements.
NOTE 2 - 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. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern.
The Company is seeking additional financing from a private
placement of common stock. In the interim, a shareholder has
committed to meeting the Company's cash needs for a term of at
least twelve (12) months from the date of these financial
statements or until the Company establishes an active business
operation.
NOTE 3 - DISCONTINUED OPERATIONS
In July of 1987, the Company purchased 100% of the common stock of
Consumer Products Source, Inc. for 11,163,611 shares of the
Company's common stock valued at $558,183. Subsequently, Consumer
Products Source, Inc. was suspended and is no longer an active
subsidiary of the Company. The loss from discontinued operations
includes the purchase price of the subsidiary plus any losses
prior to the purchase of the subsidiary.
Page 23
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 27, 2000, the Company engaged HJ & Associates, LLC, Certified
Public Accountants (formerly Jones, Jensen & Company), as independent
accountants to the Company. There were no disagreements with former accountants
on accounting principles or on any other matter.
PART III.
---------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (a) OF THE EXCHANGE ACT
See Item 11 for information on the beneficial ownership of the Company's
securities.
(a) Identity of Directors and Executive Officers.
The directors and executive officers of the Company are as follows:
Name and Address Age Position Term Served Since
--------------------------------------------------------------------------------
Gregory J. Chachas 68 President, 1 year November 24, 1999
Treasurer, November 24, 1999
Secretary, November 24, 1999
Director June 9, 1999
Each of the persons listed in the above table possesses sole investment
power and sole voting power over the shares set forth in the table included in
Item 11.
There are no arrangements or understandings between any of the directors or
executive officers, or any other person or person pursuant to which they were
selected as directors and/or officers.
Gregory J. Chachas, age 68, was appointed as a director of the Company on
June 9, 1999. On November 24, 1999, Mr. Chachas was appointed as President,
Treasurer, and Secretary of the Company and is currently the sole officer and
director.
Beginning in 1958, Mr. Chachas, along with his father and a brother, owned
and operated several businesses, including the Junction Motor Service Company, a
Cadillac-Pontiac/GMC truck dealership, Ely, Nevada; the Hilltop Motel and
Hilltop Drug in Ely and the Cleveland Ranch, a cattle ranch in Spring Valley,
Nevada. After the sale of the ranch in 1975, he continued in family enterprises
in Ely and was instrumental in developing a shopping center, featuring a Safeway
market and a Sprouse Reitz variety store.
During this time, he also practiced law in Ely, Nevada, served as city
attorney for the city of Ely, and later, as district attorney for Eureka County,
Nevada, and as district attorney for White Pine County, Nevada. Mr. Chachas has
a degree in economics from Harvard College and a juris doctor degree from the
University of Utah College of Law. He has been admitted to practice law in Utah,
Nevada and Colorado and admitted to practice before the Federal Courts as well
as before the United States Supreme Court.
Since 1990, he has concentrated on his investments in water and mining
properties and on several Ely properties. He is presently President of
Intermountain Water Co. Inc., which holds water rights in southwestern Nevada,
and President of Great Basin Exploration Co. Inc., which is in the business of
gold and silver exploration and holds mining properties in Nevada and Idaho.
Page 24
<PAGE>
Directorships
-------------
No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any other company registered as an
investment company under the Investment Company Act of 1940.
Significant Employees.
---------------------
The Company has no employees who are not executive officers, but who are
expected to make a significant contribution to the Company's business. It is
expected that current members of management and the Board of Directors will be
the only persons whose activities will be material to the Company's operations.
Members of management are the only persons who may be deemed to be promoters of
the Company.
Family Relationships.
--------------------
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
Involvement in Certain Legal Proceedings.
----------------------------------------
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or
vacated.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed.
Page 25
<PAGE>
At the present time the Company is not subject to Section 16, and
therefore, the directors and officers and shareholders who own ten percent (10%)
of the common stock of the Company are not required to file any reports under
Section 16.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Securities All
Other Underlying Other
Annual Restricted Options/ LTIP Compen-
Name and Year or Compen- Stock SAR's Payouts sation
Principal Period Salary Bonus sation) Awards (#) ($) ($)
Position Ended ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gregory J. Chachas(1) 1999 $0 0 0 (1) 0 0 0
President and Director 1998 $0 0 0 0 0 0 0
1997 $0 0 0 0 0 0 0
---------------------
</TABLE>
(1) In 1999, 10,000,000 "unregistered" and "restricted" shares of the
Company's common stock were issued to Gregory J. Chachas in consideration
of services rendered. See the caption "Business Development," Part I, Item
1 of this Report.
No cash compensation, deferred compensation or long-term incentive plan
awards were issued or granted to the Company's management during the fiscal
years ended December 31, 1999. Further, no member of the Company's management
has been granted any option or stock appreciation right; accordingly, no tables
relating to such items have been included within this Item.
Compensation of Directors.
-------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's directors
was compensated during the Company's last completed fiscal year for any service
provided as director.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
--------------------------------------------------------------------------------
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any director
or executive officer of the Company which would in any way result in payments to
any such person because of his or her resignation, retirement or other
termination of employment with the Company or its subsidiaries, any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
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<PAGE>
Nor are there any agreements or understandings for any director or
executive officer to resign at the request of another person; none of the
Company's directors or executive officers is acting on behalf of or will act at
the direction of any other person.
Bonuses and Deferred Compensation
---------------------------------
None.
Compensation Pursuant to Plans
------------------------------
None.
Pension Table
-------------
None; not applicable.
Other Compensation
------------------
None.
Termination of Employment and Change of Control Arrangements
------------------------------------------------------------
None.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth the share holdings of those persons who own
more than five (5%) percent of the Company's common stock as of September 26,
2000. Each of these persons has sole investment and sole voting power over the
shares indicated.
Name And
Title of Address Of Amount of Percent of
Class Beneficial Owner Ownership Class
--------------------------------------------------------------------------------
Common Stock Gregory J. Chachas 20,500,000 56.66%
174 E. Dorchester Drive
Salt Lake City, UT 84103
All Directors and Officers 20,500,000 56.66%
as a Group (1 person)
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<PAGE>
(b) Security Ownership of Management
--------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of September 26, 2000. Each of these persons
has sole investment and sole voting power over the shares indicated.
Name And
Title of Address Of Amount of Percent of
Class Beneficial Owner Ownership Class
--------------------------------------------------------------------------------
Common Stock Gregory J. Chachas 20,500,000 56.66%
174 E. Dorchester Drive
Salt Lake City, UT 84103
All Directors and Officers 20,500,000 56.66%
as a Group (1 person)
(c) Changes in Control.
-------------------
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.
---------------------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $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 five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
However, each of the current directors and executive officers and certain of the
Company's former directors and executive officers has received "unregistered"
and "restricted" shares of the Company's common stock in consideration of
services rendered and cash contributed to the Company. Gregory J. Chachas,
currently the sole officer and director, who is deemed to be an affiliate of the
Company, has received an aggregate of 20,500,000 "unregistered" and "restricted"
shares in consideration of services rendered and the sum of $15,000 in cash. See
the captions "Recent Sales of Unregistered Securities" and "Executive
Compensation" of this Report.
Certain Business Relationships.
------------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $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 five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
However, see the caption "Transactions with Management and Others" of this
Report.
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<PAGE>
Indebtedness of Management.
--------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $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 five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
However, see the caption "Transactions with Management and Others" of this
Report.
Transactions with Promoters.
---------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any promoter or founder, or any member of
the immediate family of any of the foregoing persons, had a material interest.
However, see the caption "Transactions with Management and Others" of this
Report.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits attached or incorporated by reference pursuant to Item
601 of Regulation S-B.
Exhibit Description
------- -----------
3.1 Articles of Incorporation of
Covingham Capital Corp., a Utah corporation;
3.2 Restated By-laws of
Covingham Capital Corp., a Utah corporation;
27 Financial Data Schedule
submitted electronically for SEC information only).
(b) There were no other reports on Form 8-K filed during the period covered
by this report.
EXHIBIT INDEX
-------------
The following Exhibit Index sets forth the Exhibit attached hereto
Exhibit Description
------- -----------
3.1 Articles of Incorporation of
Covingham Capital Corp., a Utah corporation;
3.2 Restated By-laws of
Covingham Capital Corp., a Utah corporation;
Page 29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
COVINGHAM CAPITAL CORP.
A Utah Corporation
Dated: October 16, 2000 /s/ Gregory J. Chachas
--------------------------
By: Gregory J. Chachas
Its: President and CEO
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