U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 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 No. 0-26059
COMET TECHNOLOGIES, INC.
(Name of Small Business Issuer as specified in its charter)
Nevada 87-0430322
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
10 West 100 South, Suite 610, Salt Lake City, Utah 84101
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (801) 532-7851
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
Check whether the issuer (1) filed all reports required to be
filed by sections 13 or 15(d) of the Exchange Act during the past
12 months (or such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B 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 (consisting only of interest income) for
its most recent fiscal year: $8,106.
The aggregate market value of voting stock held by non-affiliates
computed on the basis of the last sale price on March 3, 2000,
was $1,752,120.
As of December 31, 1999, the Registrant had outstanding 3,598,000
shares of Common Stock, par value $0.001.
Documents incorporated by reference: None.
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TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
Part I
1. Description of Business 3
2. Description of Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security Holders 6
Part II
5. Market for Common Equity and Related Stockholder 7
Matters
6. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
7. Financial Statements 8
8. Changes in and Disagreements with Accountants 8
on Accounting and Financial Disclosure
Part III
9. Directors, Executive Officers, Promoters and Control 9
Persons; Compliance with Section 16(a) of the
Exchange Act
10. Executive Compensation 10
11. Security Ownership of Certain Beneficial Owners and 11
Management
12. Certain Relationships and Related Transactions 11
13. Exhibits and Reports on Form 8-K 11
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
The Company was organized for the purpose of creating a capital
resource fund to seek, investigate, and, if warranted, acquire or
participate in a favorable business opportunity. Since the
completion of the Company's public offering in July 1986, the
Company has reviewed and evaluated a number of business ventures
for possible acquisition or participation by the Company. The
Company has not entered into any agreement, nor does it have any
commitment or understanding to enter into or become engaged in a
transaction as of the date of this filing. The Company continues
to investigate, review, and evaluate business opportunities as
they become available and will seek to acquire or become engaged
in business opportunities at such time as specific opportunities
warrant.
To date, opportunities have been made available to the Company
through its officers and directors and through professional
advisors including securities broker-dealers and through members
of the financial community. It is anticipated that business
opportunities will continue to be available primarily from these
sources.
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis
regarding the quality of the other firm's management and
personnel, the asset base of such firm or enterprise, the
anticipated acceptability of new products or marketing concepts,
the merit of the firms business plan, and numerous other factors
which are difficult, if not impossible, to analyze through the
application of any objective criteria.
Since its inception, the Company has had no active business
operations, and has been seeking to acquire an interest in a
business with long-term growth potential. The Company currently
has no commitment or arrangement to participate in a business and
cannot now predict what type of business it may enter into or
acquire. It is emphasized that the business objectives discussed
herein are extremely general and are not intended to be
restrictive on the discretion of the Company's management.
There are no plans or arrangements proposed or under
consideration for the issuance or sale of additional securities
by the Company prior to the identification of an acquisition
candidate. Consequently, management anticipates that it may be
able to participate in only one potential business venture, due
primarily to the Company's limited capital. This lack of
diversification should be considered a substantial risk, because
it will not permit the Company to offset potential losses from
one venture against gains from another.
Selection of a Business
The Company anticipates that businesses for possible acquisition
will be referred by various sources, including its officers and
directors, professional advisors, securities broker-dealers,
venture capitalists, members of the financial community, and
others who may present unsolicited proposals. The Company will
not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its
officers and directors and their affiliates, as well as indirect
associations between them and other business and professional
people. By relying on "word of mouth", the Company may be
limited in the number of potential acquisitions it can identify.
While it is not presently anticipated that the Company will
engage unaffiliated professional firms specializing in business
acquisitions or reorganizations, such firms may be retained if
management deems it in the best interest of the Company.
Compensation to a finder or business acquisition firm may take
various forms, including one-time cash payments, payments based
on a percentage of revenues or product sales volume, payments
involving issuance of securities (including those of the
Company), or any combination of these or other compensation
arrangements. Consequently, the Company is currently unable to
predict the cost of utilizing such services.
The Company will not restrict its search to any particular
business, industry, or geographical location, and management
reserves the right to evaluate and enter into any type of
business in any location. The Company may participate in a newly
organized business venture or a more established company entering
a new phase of growth or
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in need of additional capital to overcome existing financial
problems. Participation in a new business venture entails
greater risks since in many instances management of such a
venture will not have proved its ability, the eventual market of
such venture's product or services will likely not be
established, and the profitability of the venture will be
unproved and cannot be predicted accurately. If the Company
participates in a more established firm with existing financial
problems, it may be subjected to risk because the financial
resources of the Company may not be adequate to eliminate or
reverse the circumstances leading to such financial problems.
In seeking a business venture, the decision of management will
not be controlled by an attempt to take advantage of any
anticipated or perceived appeal of a specific industry,
management group, product, or industry, but will be based on the
business objective of seeking long-term capital appreciation in
the real value of the Company. The Company will not acquire or
merge with a business or corporation in which the Company's
officers, directors, or promoters, or their affiliates or
associates, have any direct or indirect ownership interest.
The analysis of new businesses will be undertaken by or under the
supervision of the officers and directors. In analyzing
prospective businesses, management will consider, to the extent
applicable, the available technical, financial, and managerial
resources; working capital and other prospects for the future;
the nature of present and expected competition; the quality and
experience of management services which may be available and the
depth of that management; the potential for further research,
development, or exploration; the potential for growth and
expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trade or
service marks; name identification; and other relevant factors.
The decision to participate in a specific business may be based
on management's analysis of the quality of the other firm's
management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological
changes, and other factors which are difficult, if not
impossible, to analyze through any objective criteria. It is
anticipated that the results of operations of a specific firm may
not necessarily be indicative of the potential for the future
because of the requirement to substantially shift marketing
approaches, expand significantly, change product emphasis, change
or substantially augment management, and other factors.
The Company will analyze all available factors and make a
determination based on a composite of available facts, without
reliance on any single factor. The period within which the
Company may participate in a business cannot be predicted and
will depend on circumstances beyond the Company's control,
including the availability of businesses, the time required for
the Company to complete its investigation and analysis of
prospective businesses, the time required to prepare appropriate
documents and agreements providing for the Company's
participation, and other circumstances.
Acquisition of a Business
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, or other reorganization with another corporation
or entity; joint venture; license; purchase and sale of assets;
or purchase and sale of stock, the exact nature of which cannot
now be predicted. Notwithstanding the above, the Company does
not intend to participate in a business through the purchase of
minority stock positions. On the consummation of a transaction,
it is likely that the present management and shareholders of the
Company will not be in control of the Company. In addition, a
majority or all of the Company's directors may, as part of the
terms of the acquisition transaction, resign and be replaced by
new directors without a vote of the Company's shareholders.
In connection with the Company's acquisition of a business, the
present shareholders of the Company, including officers and
directors, may, as a negotiated element of the acquisition, sell
a portion or all of the Company's Common Stock held by them at a
significant premium over their original investment in the
Company. As a result of such sales, affiliates of the entity
participating in the business reorganization with the Company
would acquire a higher percentage of equity ownership in the
Company. Management does not intend to actively negotiate for or
otherwise require the purchase of all or any portion of its stock
as a condition to or in connection with any proposed merger or
acquisition. Although the Company's present shareholders did not
acquire their shares of Common Stock with a view towards any
subsequent sale in connection with a business reorganization, it
is not unusual for affiliates of the entity participating in the
reorganization to negotiate to purchase shares held by the
present shareholders in order to reduce the amount of shares held
by persons no longer affiliated with the Company and thereby
reduce the
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potential adverse impact on the public market in the Company's
common stock that could result from substantial sales of such
shares after the business reorganization. Public investors will
not receive any portion of the premium that may be paid in the
foregoing circumstances. Furthermore, the Company's shareholders
may not be afforded an opportunity to approve or consent to any
particular stock buy-out transaction.
In the event sales of shares by present shareholders of the
Company, including officers and directors, is a negotiated
element of a future acquisition, a conflict of interest may arise
because directors will be negotiating for the acquisition on
behalf of the Company and for sale of their shares for their own
respective accounts. Where a business opportunity is well suited
for acquisition by the Company, but affiliates of the business
opportunity impose a condition that management sell their shares
at a price which is unacceptable to them, management may not
sacrifice their financial interest for the Company to complete
the transaction. Where the business opportunity is not well
suited, but the price offered management for their shares is
high, Management will be tempted to effect the acquisition to
realize a substantial gain on their shares in the Company.
Management has not adopted any policy for resolving the foregoing
potential conflicts, should they arise, and does not intend to
obtain an independent appraisal to determine whether any price
that may be offered for their shares is fair. Stockholders must
rely, instead, on the obligation of management to fulfill its
fiduciary duty under state law to act in the best interests of
the Company and its stockholders.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance on exemptions from
registration under applicable federal and state securities laws.
In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. Although the terms
of such registration rights and the number of securities, if any,
which may be registered cannot be predicted, it may be expected
that registration of securities by the Company in these
circumstances would entail substantial expense to the Company.
The issuance of substantial additional securities and their
potential sale into any trading market which may develop in the
Company's securities may have a depressive effect on such market.
While the actual terms of a transaction to which the Company may
be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to
structure the acquisition as a so-called "tax-free" event under
sections 351 or 368(a) of the Internal Revenue Code of 1986, (the
"Code"). In order to obtain tax-free treatment under section 351
of the Code, it would be necessary for the owners of the acquired
business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would
retain less than 20% of the issued and outstanding shares of the
surviving entity. Section 368(a)(1) of the Code provides for tax-
free treatment of certain business reorganizations between
corporate entities where one corporation is merged with or
acquires the securities or assets of another corporation.
Generally, the Company will be the acquiring corporation in such
a business reorganization, and the tax-free status of the
transaction will not depend on the issuance of any specific
amount of the Company's voting securities. It is not uncommon,
however, that as a negotiated element of a transaction completed
in reliance on section 368, the acquiring corporation issue
securities in such an amount that the shareholders of the
acquired corporation will hold 50% or more of the voting stock of
the surviving entity. Consequently, there is a substantial
possibility that the shareholders of the Company immediately
prior to the transaction would retain less than 50% of the issued
and outstanding shares of the surviving entity. Therefore,
regardless of the form of the business acquisition, it may be
anticipated that stockholders immediately prior to the
transaction will experience a significant reduction in their
percentage of ownership in the Company.
Notwithstanding the fact that the Company is technically the
acquiring entity in the foregoing circumstances, generally
accepted accounting principles will ordinarily require that such
transaction be accounted for as if the Company had been acquired
by the other entity owning the business and, therefore, will not
permit a write-up in the carrying value of the assets of the
other company.
The manner in which the Company participates in a business will
depend on the nature of the business, the respective needs and
desires of the Company and other parties, the management of the
business, and the relative negotiating strength of the Company
and such other management.
The Company will participate in a business only after the
negotiation and execution of appropriate written agreements.
Although the terms of such agreements cannot be predicted,
generally such agreements will require specific representations
and warranties by all of the parties thereto, will specify
certain events of default, will detail
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the terms of closing and the conditions which must be satisfied
by each of the parties prior to such closing, will outline the
manner of bearing costs if the transaction is not closed, will
set forth remedies on default, and will include miscellaneous
other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business
will be dependent on the nature of the business and the interest
acquired. The Company is unable to predict whether the Company
will be in control of the business or whether present management
will be in control of the Company following the acquisition. It
may be expected that the business will present various risks,
which cannot be predicted at the present time.
Governmental Regulation
It is impossible to predict the government regulation, if any, to
which the Company may be subject until it has acquired an
interest in a business. The use of assets and/or conduct of
businesses which the Company may acquire could subject it to
environmental, public health and safety, land use, trade, or
other governmental regulations and state or local taxation. In
selecting a business in which to acquire an interest, management
will endeavor to ascertain, to the extent of the limited
resources of the Company, the effects of such government
regulation on the prospective business of the Company. In
certain circumstances, however, such as the acquisition of an
interest in a new or start-up business activity, it may not be
possible to predict with any degree of accuracy the impact of
government regulation. The inability to ascertain the effect of
government regulation on a prospective business activity will
make the acquisition of an interest in such business a higher
risk.
Competition
The Company will be involved in intense competition with other
business entities, many of which will have a competitive edge
over the Company by virtue of their stronger financial resources
and prior experience in business. There is no assurance that the
Company will be successful in obtaining suitable investments.
Employees
The Company is a development stage company and currently has no
employees. Executive officers, who are not compensated for their
time contributed to the Company, will devote only such time to
the affairs of the Company as they deem appropriate, which is
estimated to be approximately 20 hours per month per person.
Management of the Company expects to use consultants, attorneys,
and accountants as necessary, and does not anticipate a need to
engage any full-time employees so long as it is seeking and
evaluating businesses. The need for employees and their
availability will be addressed in connection with a decision
whether or not to acquire or participate in a specific business
industry.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company uses offices and related clerical services at 10 West
100 South, Suite 610, Salt Lake City, Utah 84101, provided by an
officer and director of the Company at a monthly rental rate of
$200.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such
proceedings by or against the Company have been threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the
fourth quarter of 1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Although quotations for the Company's common stock appear on the
OTC Bulletin Board, there is no established trading market for
the common stock. For the past two calendar years, and from
December 31, 1998, to the present, transactions in the common
stock can only be described as sporadic. Consequently, the
Company is of the opinion that any published prices cannot be
attributed to a liquid and active trading market and, therefore,
are not indicative of any meaningful market value.
The following table sets forth for the respective periods
indicated the prices of the Company's Common Stock in the over-
the-counter market, as reported and summarized by the OTC
Bulletin Board. Such prices are based on inter-dealer bid and
asked prices, without markup, markdown, commissions, or
adjustments and may not represent actual transactions.
Calendar Quarter Ended High Bid ($) Low Bid ($)
March 31, 1998 0.1875 0.125
June 30, 1998 0.125 0.125
September 30, 1998 0.125 0.125
December 31, 1998 0.125 0.125
March 31, 1999 0.125 0.125
June 30, 1999 0.125 0.125
September 30, 1999 0.125 0.0938
December 31, 1999 0.125 0.125
There are outstanding options to purchase 600,000 shares of
common stock at an exercise price of $0.1875, which expire in
March 2009. There is an outstanding warrant to purchase 50,000
shares of the Company's common stock at an exercise price of
$0.1875, which expire in March 2009. All shares of common stock
outstanding may be sold without restriction under Rule 144(k)
promulgated under the Securities Act of 1933, except 483,120
shares which are held by officers and directors ("Control
Shares"). Control Shares may be sold subject to complying with
all of the terms and conditions of Rule 144, except the one-year
holding period which has been satisfied.
Since its inception, no dividends have been paid on the Company's
common stock. The Company intends to retain any earnings for use
in its business activities, so it is not expected that any
dividends on the common stock will be declared and paid in the
foreseeable future.
At March 22, 2000, there were approximately 100 holders of record
of the Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Years Ended December 31, 1999 and 1998
The Company had no revenue from continuing operations for the
periods ended December 31, 1999 and 1998.
General and administrative expenses for the periods ended
December 31, 1999 and 1998, consisted of general corporate
administration, legal and professional expenses, and accounting
and auditing costs. These expenses were $7,961 and $9,224 for
the periods ended December 31, 1999 and 1998, respectively.
General and administrative expenses in the period ended December
31, 1999 were less than in the period ended December 31, 1998
primarily due to the number of business opportunities reviewed
during the year in which professional services were required.
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The Company had no interest expense in the periods ending
December 31, 1999 or 1998. Interest income in the periods ended
December 31, 1999 and 1998, respectively, resulted from the
investment of funds in short-term, liquid cash equivalents.
Interest income was $8,106 and $7,463 in the periods ended
December 31, 1999 and 1998, respectively. Interest income has
increased from period to period primarily because of the
additional interest earned on interest accumulated in prior
periods.
As a result of the foregoing factors, the Company realized a net
gain of $145 for the period ended December 31, 1998, as compared
to a net loss of $1,761 for the same period in 1998.
Liquidity and Capital Resources
At December 31, 1999, the Company had working capital of
approximately $198,975 as compared to $201,075 at December 31,
1998. Working capital as of both dates consisted substantially
of short-term investments, and cash and cash equivalents.
Although the Company's most significant assets consist largely of
cash and cash equivalents, the Company has no intent to become,
or hold itself out to be, engaged primarily in the business of
investing, reinvesting, or trading in securities. Accordingly,
the Company does not anticipate being required to register
pursuant to the Investment Company Act of 1940 and expects to be
limited in its ability to invest in securities, other than cash
equivalents and government securities, in the aggregate amount of
over 40% of its assets. There can be no assurances that any
investment made by the Company will not result in losses.
Management believes that the Company has sufficient cash and
short-term investments to meet the anticipated needs of the
Company's operations through at least the next 12 months.
However, there can be no assurances to that effect, as the
Company has no significant revenues and the Company's need for
capital may change dramatically if it acquires an interest in a
business opportunity during that period. The Company's current
operating plan is to (i) handle the administrative and reporting
requirements of a public company; and (ii) search for potential
businesses, products, technologies and companies for acquisition.
At present, the Company has no understandings, commitments or
agreements with respect to the acquisition of any business,
product, technology or company and there can be no assurance that
the Company will identify any such business, product, technology
or company suitable for acquisition in the future. Further,
there can be no assurance that the Company would be successful in
consummating any acquisition on favorable terms or that it will
be able to profitably manage the business, product, technology or
company it acquires.
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed under the headings "Item 1. Description of Business,"
and "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations," and also include general
economic factors and conditions that may directly or indirectly
impact the Company's financial condition or results of
operations.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company appear at the end of this
report beginning with the Index to Financial Statements on page F-
1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants
in the past four years.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Officers
The following table sets forth the names, ages, and positions
with the Company for each of the directors and officers of the
Company.
Name Age Positions (1) Since
Richard B. Stuart 61 President and Director 1986
Philip C. Gugel 57 Vice President and Director 1986
Jack M. Gertino 60 Secretary, Treasurer and 1986
Director
All executive officers are elected by the Board and hold office
until the next Annual Meeting of stockholders and until their
successors are elected and qualify.
The following is information on the business experience of each
director and officer.
Richard Stuart is President and a director of Compuscore, a
privately-held company providing computer scoring of clinical
protocols. From 1972 to 1983, Dr. Stuart was affiliated with
Weight Watchers International, holding such titles as
Psychological Director and Executive Director of One to One
Weight management System, a subsidiary of Weight Watchers. Dr.
Stuart has been employed part time with the University of Utah
since 1977 and is presently Professor of Family and Community
Medicine and Professor of Social Work. Dr. Stuart is also a
director of Domino Investments, Inc., a Utah publicly-held
corporation organized for the same general purpose as the
Company, until 1985, when it merged with General Automotive Corp.
He continues to serve as a director of such company. Dr. Stuart
completed his undergraduate training at New York University in
1955 and received his masters and doctoral degrees from Columbia
University in 1960 and 1965 respectively.
Philip C. Gugel has been a private investor and businessman for
the past five years. Since 1986 he has been the Chief Executive
Officer of Hawthorne Capital Corporation, a private company which
owns and operates a Molly Maid franchise in Modesto, CA.
Jack M Gertino, has been a private investor and business
consultant in Salt Lake City, Utah, for the past five years.
From June 1995 through October 1996, Mr. Gertino was an owner of
a Tunex Service Center franchise in Layton, Utah, which offers
automotive Tune-up services. He is currently pursuing a number
of real estate projects, including the recent purchase and
operation of a commercial office building in Salt Lake City.
From February 1992 to the present, he has served as a director of
Red Horse Entertainment Corporation, a publicly held shell
corporation seeking a business acquisition. Since February 1997,
he has also served as an officer and director of Lazarus
Industries, Inc., a publicly held shell corporation seeking a
business acquisition.
Other Shell Company Activities
Mr. Gertino is currently a director of Red Horse Entertainment
Corporation and Lazarus Industries, Inc., both publicly held
shell corporations seeking a business acquisition. The
possibility exists that one or more of the officers and directors
of the Company could become officers and/or directors of other
shell companies in the future, although they have no intention of
doing so at the present time. Certain conflicts of interest are
inherent in the participation of the Company's officers and
directors as management in other shell companies, which may be
difficult, if not impossible, to resolve in all cases in the best
interests of the Company. Failure by management to conduct the
Company's business in its best interests may result in liability
of management of the Company to the shareholders.
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ITEM 10. EXECUTIVE COMPENSATION
The Company has no agreement or understanding, express or
implied, with any officer, director, or principal stockholder, or
their affiliates or associates, regarding employment with the
Company or compensation for services. The Company has no plan,
agreement, or understanding, express or implied, with any
officer, director, or principal stockholder, or their affiliates
or associates, regarding the issuance to such persons of any
shares of the Company's authorized and unissued common stock.
There is no understanding between the Company and any of its
present stockholders regarding the sale of a portion or all of
the common stock currently held by them in connection with any
future participation by the Company in a business. There are no
other plans, understandings, or arrangements whereby any of the
Company's officers, directors, or principal stockholders, or any
of their affiliates or associates, would receive funds, stock, or
other assets in connection with the Company's participation in a
business. No advances have been made or contemplated by the
Company to any of its officers, directors, or principal
stockholders, or any of their affiliates or associates.
There is no policy that prevents management from adopting a plan
or agreement in the future that would provide for cash or stock
based compensation for services rendered to the Company.
On acquisition of a business, it is possible that current
management will resign and be replaced by persons associated with
the business acquired, particularly if the Company participates
in a business by effecting a stock exchange, merger, or
consolidation as discussed under "BUSINESS." In the event that
any member of current management remains after effecting a
business acquisition, that member's time commitment and
compensation will likely be adjusted based on the nature and
location of such business and the services required, which cannot
now be foreseen.
On March 11, 1999, the Company granted to Richard B. Stuart,
Phillip C. Gugel and Jack M. Gertino options to purchase 200,000
shares of common stock each at an exercise price of $0.1875,
which was the average of the bid and asked prices for the common
stock on that date. The options are vested and expire in March
2009. The options were issued to compensate these persons for
their services to the Company over the past 13 years, for which
they have received no other compensation.
The following table sets forth certain information with respect
to unexercised options held by the executive officers as of
December 31, 1999.
Name and Principal Number of Securities Value of Unexercised
Position Underlying Unexercised In-the-Money Options
Options at December 31, 1999 ($)(1)
December 31, 1999 (#)
Exerciseable/Unexerciseable Exerciseable/Unexerciseable
Richard G. Stuart 200,000/-0- -0-/-0-
President
Philip C. Gugel 200,000/-0- -0-/-0-
Vice President
Jack M. Gertino 200,000/-0- -0-/-0-
Secretary and Treasurer
(1) This value is determined on the basis of the difference
between the average of the high bid and asked prices on December
31, 1999, of the securities underlying the options, which was
$0.1719, and the exercise price.
10
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of March 1, 2000, the number
and percentage of the outstanding shares of common stock which,
according to the information supplied to the Company, were
beneficially owned by (i) each person who is currently a director
of the Company, (ii) each executive officer, (iii) all current
directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the
beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table
have sole voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
Common Options(1) Percent of
Shares Class(2)
Name and Address
Richard B. Stuart (3) 175,680 200,000 9.9
10 West 100 South, Suite 610
Salt Lake City, Utah 84101
Philip C. Gugel (3) 131,760 200,000 8.7
10 West 100 South, Suite 610
Salt Lake City, Utah 84101
Jack M. Gertino (3) 175,680 200,000 9.9
10 West 100 South, Suite 610
Salt Lake City, Utah 84101
All Executive officers and 483,120 600,000 25.8
Directors as a Group
(3 persons)
(1) These figures represent options that are vested or will vest
within 10 years from the date as of which information is
presented in the table.
(2) These figures represent the percentage of ownership of the
named individuals assuming each of them alone has exercised his
or her options, and percentage ownership of all officers and
directors of a group assuming all such purchase rights held by
such individuals are exercised.
(3) Messrs. Stuart, Gugel and Gertino are all of the officers
and directors of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no proposed transactions and no transactions during the
past two years to which the Company was a party and in which any
officer, director, or principal stockholder, or their affiliates
or associates, was also a party.
ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
Copies of the following documents are included as exhibits to
this report pursuant to Item 601 of Regulation S-B.
Exhibit SEC Ref. Title of Document Location
No. No.
1 (3)(i) Articles of Incorporation, as amended *
11
<PAGE>
2 (3)(ii) By-Laws *
3 (10) Option granted to Richard B. Stuart *
March 11, 1999
4 (10) Option granted to Philip C. Gugel *
March 11, 1999
5 (10) Option granted to Jack M. Gertino *
March 11, 1999
6 (10) Warrant granted to Mark E. Lehman *
March 11, 1999
7 (27) Financial Data Schedules **
.
* These exhibits are incorporated herein by this reference to
the Company's Registration Statement on Form 10-SB filed with the
Securities and Exchange Commission on May 13, 1999.
** The Financial Data Schedule is included only in the
electronic filing of this report with the Securities and Exchange
Commission.
Form 8-K Filings
No reports on Form 8-K were filed in the last calendar quarter of
1999.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMET TECHNOLOGIES, INC.
Date: March 28, 2000 By: /s/ Richard B. Stuart
Richard B. Stuart, President
In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: March 28, 2000 /s/ Richard B. Stuart, Director
Dated: March 28, 2000 /s/ Philip Gugel, Director
Dated: March 28, 2000 /s/ Jack M. Gertino, Director
13
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Financial Statements
December 31, 1999 and 1998
CONTENTS
Independent Auditors' Report F-2
Balance Sheet F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to the Financial Statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Comet Technologies, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Comet
Technologies, Inc. (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 inception on February 7, 1986 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.
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 Comet Technologies, Inc. (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
inception on February 7, 1986 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 4 to the financial statements, the Company is a
development stage company with no significant operating results
to date, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to
these matters are also described in Note 4. The financial
statements do not include any adjustments that might result from
the outcome of the uncertainty.
Jones, Jensen, & Company
Salt Lake City, Utah
March 6, 2000
F-2
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1999
CURRENT ASSETS
Cash and cash equivalents $ 199,075
Total Current Assets 199,075
TOTAL ASSETS $ 199,075
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
Taxes payable 100
Total Current Liabilities 100
Total Liabilities 100
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 5,000,000
shares authorized; none issued or outstanding -
Common stock, $0.001 par value, 20,000,000
shares authorized; 3,598,000 issued and
outstanding 3,598
Capital in excess of par value 238,561
Deficit accumulated during the development stage (43,184)
Total Stockholders' Equity 198,975
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 199,075
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
February 7,
For the Years Ended 1986 through
December 31, December 31,
1999 1998 1999
REVENUES $ - $ - $ -
EXPENSES
General and administrative 7,961 9,224 171,694
Total Expenses 7,961 9,224 171,694
LOSS FROM OPERATIONS (7,961) (9,224) (171,694)
OTHER INCOME (LOSS)
Dividend income - - 5,493
Interest income 8,106 7,463 129,667
Unrealized loss from
marketable securities - - (6,650)
Total Other Income (Loss) 8,106 7,463 128,510
NET INCOME (LOSS) $ 145 $ (1,761) $ (43,184)
BASIC INCOME (LOSS) PER SHARE $ 0.00 $ 0.00
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,598,000 3,598,000
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on February 7, 1986 through December 31, 1999
Deficit
Accumulated
Capital in During
Common Stock Excess of Development
Shares Amount Par Value Stage
Balance at Inception on
February 7, 1986 - $ - $ - $ -
Issuance of 1,098,000 shares
of common stock to officers,
directors and other
individuals for $0.023
per share on
February 7, 1986 1,098,000 1,098 23,902 -
Public offering of the
Company's common stock
(Note 2) 2,500,000 2,500 247,500 -
Deferred offering costs
offset against capital
in excess of par value - - (32,841) -
Net loss from inception on
February 7, 1986 through
December 31, 1997 - - - (41,568)
Balance, December 31, 1997 3,598,000 3,598 238,561 (41,568)
Net loss for the year ended
December 31, 1998 - - - (1,761)
Balance, December 31, 1998 3,598,000 3,598 238,561 (43,329)
Net income for the year ended
December 31, 1999 - - - 145
Balance, December 31, 1999 3,598,000 $ 3,598 $ 238,561 $ (43,184)
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
February 7,
For the Years Ended 1986 through
December 31, December 31,
1999 1998 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from operations $ 145 $ (1,761) $ (43,184)
Adjustments to reconcile net
income (loss) to net cash (used)
provided by operating activities:
Amortization - - 301
Change in operating assets and
liabilities:
(Increase) decrease in prepaid
expenses 101 (101) -
Increase in taxes payable - - 300
Increase (decrease) in
accounts payable (2,246) 2,129 (201)
Net Cash Provided (Used) by
Operating Activities (2,000) 267 (42,784)
CASH FLOWS FROM INVESTING ACTIVITIES - - -
CASH FLOWS FROM FINANCING ACTIVITIES
Organizational costs - - (300)
Net stock offering proceeds - - 242,159
Net Cash Provided by
Financing Activities - - 241,859
INCREASE IN CASH AND CASH
EQUIVALENTS (2,000) 267 199,075
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 201,075 200,808 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 199,075 $ 201,075 $ 199,075
CASH PAID FOR:
Taxes $ - $ - $ -
Interest $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The financial statements presented are those of Comet
Technologies, Inc. (the "Company"). The Company was
incorporated in the State of Nevada on February 7, 1986.
The Company was incorporated for the purpose of providing
a vehicle which could be used to raise capital and seek
business opportunities believed to hold a potential for
profit. The Company has not presently identified a
specific business area or direction that it will follow.
Therefore, no principal operations have yet begun.
b. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has adopted a
calendar year end.
c. Basic Income (Loss) Per Share
The computation of basic income (loss) per share of
common stock is based on the weighted average number of
shares issued and outstanding during the period of the
financial statements as follows:
December 31,
1999 1998
Numerator - income (loss) $ 145 $ (1,761)
Denominator - weighted average number of
shares outstanding 3,598,000 3,598,000
Income (loss) per share $ 0.00 $ 0.00
d. 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.
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 $43,000
at December 31, 1999 expire in 2002 through 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.
F-7
<PAGE>
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. 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.
NOTE 2 - PUBLIC OFFERING OF UNITS
In July of 1986, the Company completed a public offering
of 2,500,000 shares of its previously authorized but
unissued common stock to the public. An offering price
of $0.10 per share was arbitrarily determined by the
Company. Offering costs totaled $32,841 and were offset
against capital in excess of par value. The net proceeds
to the Company from the offering were $217,159, which
equals $250,000 minus offering costs of $32,841.
NOTE 3 - PREFERRED STOCK
None of the Company's authorized 5,000,000 shares of
preferred stock is issued and outstanding and the Company
currently has no plans to issue any preferred stock. The
Company's board of directors has authority, without
action by the shareholders, to issue all or any portion
of the authorized but unissued preferred stock in one or
more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion
rights and other rights of such series. The preferred
stock, if and when issued, may carry rights superior to
those of the common stock.
NOTE 4 - 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 operating revenues
sufficient to cover its operating costs and to allow it
to continue as a going concern. It is the intent of the
Company to seek a merger with an existing, operating
company. In the interim, shareholders of the Company
have committed to meeting its minimal operating expenses.
F-8
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 199,075
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199,075
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 199,075
<CURRENT-LIABILITIES> 100
<BONDS> 0
0
0
<COMMON> 3,598
<OTHER-SE> 238,561
<TOTAL-LIABILITY-AND-EQUITY> 199,075
<SALES> 0
<TOTAL-REVENUES> 8,106
<CGS> 0
<TOTAL-COSTS> 7,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 145
<INCOME-TAX> 0
<INCOME-CONTINUING> 145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
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