FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OR THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 33-8819-D
HALLMARK PROPERTIES, INC.
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(Name of small business issuer in its charter)
Colorado 84-1036901
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7810 W. 70th Drive
Arvada, Colorado 80004
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(Address of principle executive offices) (Zip code)
Issuer's telephone number: (303) 901-4238
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicated by check mark whether the issuer (1) filed all reports
required by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for at least the
past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 Regulation S-b in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in this Form 10-K or any amendment to this Form
10-K. [X]
Issuer's revenues for its most recent fiscal year: $-0-
Aggregate market value of voting stock held by non-affiliates as of
July 15, 1998: $-0-
There is currently no trading market for the Registrant's securities.
Number of shares of Common Stock, no par value, outstanding as of March
31, 1998: 43,393,333.
Documents incorporated by reference: None.
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HALLMARK PROPERTIES, INC.
FORM 10-K/A
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(A) BUSINESS DEVELOPMENT.
Hallmark Properties, Inc., ("Hallmark" or the "Company") was organized
under the laws of the State of Colorado on August 11, 1986, for the purpose of
evaluating and seeking merger candidates. Commencing in December, 1986, under
the name of Diversified Management Acquisitions, Inc., the Registrant sold in a
public offering 15,000,000 units at $0.02 per unit, for total proceeds of
$300,100 which closed on April 28, 1987. Each unit contained one share of Common
Stock and one Callable Common Stock Purchase Warrant. All Warrants expired,
without exercise, on December 2, 1988. In fiscal 1992, the Company changed its
name to Tierra Environmental Corporation, in connection with a merger
transaction with a corporation so named; such merger transaction was not
consummated, however, and the Company changed its name again (to Hallmark
Properties, Inc.) in fiscal 1997. See Item 6, "Management's Discussion and
Analysis or Plan of Operations," years ended March 31, 1997 and 1998.
(B) BUSINESS OF ISSUER.
Since inception in 1986, management of Hallmark has been actively
seeking business opportunities. Several potential candidates were identified
between 1986 and the end of fiscal 1998, however, no combination with any of
these companies was ever completed. The Company has no agreement in principle or
any formal contract to acquire or enter into any business opportunity as of the
date of this 10-K/A Report.
The Company has engaged in limited activities but has been hampered in
its efforts due to its lack of capital. It is likely that the Company will need
a substantial amount of additional capitalization before it will be able to
participate in any merger activities. There is no assurance that the Company
will obtain any additional capitalization.
The Company competes with numerous companies and firms which are larger,
better established, have greater financial and other resources, more employees,
and more extensive facilities than the Company. The Company is at a competitive
disadvantage to these other entities.
The Investment Company Act of 1940 defines an "investment company" as an
issuer which is or holds itself out as being engaged primarily in the business
of investing, reinvesting or trading in securities. While the Company does not
intend to engage in such activities, the Company could become subject to
regulation under the Investment Company Act of 1940 in the event the Company
obtains or continues to hold a minority interest in a number of enterprises. The
Company could be
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expected to incur significant registration and compliance cost if required to
register under the Investment Company Act of 1940.
The Company intends to structure any merger or acquisition in such a
manner as to minimize federal and state tax consequences to the Company and any
target company.
The Company presently is a "shell" or "blank check" company, because it
has no specific business plan or purpose; the Company intends to locate and
consummate a merger or acquisition with a company or companies, or other
entities or persons. Under Section 7(b) of the Securities Act of 1933, as
amended (the "1933 Act"), and rule 419 adopted by the Securities and Exchange
Commission (the "Commission"), the ability of the Company (as a shell or blank
check company) to raise capital through a public offering of its securities by a
registration statement filed with the Commission is subject to certain
limitations. These limitations, which would apply to the Company if it were to
conduct a registered public offering as a blank check or shell company,
generally are as follows: All securities issued by the Company in connection
with such an offering and the gross proceeds from the offering must be deposited
promptly into an escrow account with an insured depository institution (usually
a commercial bank) covered by insurance maintained by the Federal Deposit
Insurance Corporation ("FDIC"). The funds are held in escrow for the benefit of
the investors in the offering. Initial payments out of the escrow account are
permitted only to pay underwriting commissions, underwriting expenses and dealer
allowances; an additional amount of up to 10 percent of the amount remaining
after payment of commissions, expenses and dealer allowances may be paid to the
Company; and the balance must remain in escrow. The securities issued in
connection with the offering also must be deposited into the escrow account, for
the benefit of the purchasers thereof, with the purchasers retaining any voting
rights with respect to the securities which they otherwise would have.
The securities and offering proceeds are required to remain in the
escrow account until such time as the Company were to execute an agreement to
acquire a business or assets that will constitute the business (or a line of
business) of the Company and for which the fair value of the business or net
assets to be acquired represents at least 80 percent of the net public offering
proceeds (including any proceeds received or to be received from exercise of
securities such as warrants which were purchased in the public offering). Upon
execution of such an agreement, the Company would be required to file with the
Commission a post-effective amendment to the original registration statement,
which amendment would disclose detailed information about the business or assets
to be acquired.
Within five business days after the post-effective amendment to the
registration statement is declared effective by the Commission, the Company
would be required to send the prospectus (which would be part of the amendment)
to each of the purchasers of securities in the public offering. Each purchaser
would have not less than 20 and no more than 45 business days to decide, based
on the information in the prospectus as so amended, whether to remain an
investor or get his or her money back out of escrow. If by the end of the 45th
business day, the Company had not received the affirmative written election by a
purchaser to remain an investor, the Company would have to return that
purchaser's funds (plus interest) to that purchaser. If enough purchasers
elected to remain investors so that their invested funds equal at least 80
percent of the net public offering
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proceeds, then the acquisition could be consummated by the Company and the
investors would receive certificates for the securities of the Company which
they had paid for in the public offering.
If there is no acquisition consummated within 18 months of the effective
date of the original registration statement for the public offering, all of the
funds in the escrow account would have to be returned to investors by the
Company, and the securities would be retired to authorized and unissued status
by the Company.
If an acquisition were to be consummated by the Company under rule 419,
all security holders of the Company would be entitled to receive audited
financial statements for the first full fiscal year of operations following such
consummation, and other information, no later than 90 days after the end of the
Company's fiscal year.
The Company presently is filing periodic reports under the Securities
Exchange Act of 1934 (the "1934 Act") on a voluntary basis. These reports
consist of annual reports on Form 10-K, quarterly reports on Form 10-Q, and
interim reports on Form 8-K Current Report. Under Section 15(d) of the 1934 Act,
the Company was required to file such reports through the remainder of the
fiscal year when its public offering registration statement was declared
effective by the Commission (December 1986). Thereafter, the Company was not
required to file such reports because the Company never has had the 300
shareholders of record which would make such reporting mandatory under Section
15(d).
At such time as the Company were to consummate an acquisition of a
business or assets after conducting a registered public offering as a blank
check or shell company, the Company would be required to file audited financial
statements for the first full fiscal year of operations after consummation of
such an acquisition (see above). Thereafter, the Company would be required to
file reports with the Commission only if the Company had voluntarily registered
a class of its securities with the Commission under Section 12(g) of the 1934
Act, or if the Company had more than $10 million in assets as of the last day of
its most recent fiscal year. It should be noted that if the Company raised funds
in a public registered offering as a shell or blank check company, any business
or assets acquired would have to have financial statements which either had been
audited or were capable of audit, in order for the Company to be able to acquire
such business or assets.
If an acquisition were to be made by the Company without funds from a
registered public offering, the Company nonetheless would acquire only a
business or assets which had been or could be audited. The Company would be
required to file a Form 8-K Current Report to report the acquisition, including
audited financial statements for the business or assets acquired.
The Company presently does not intend to use any public notices or
general advertisements in its search for business opportunities. Instead, the
Company intends to rely primarily upon the business contacts of its President
and Secretary in locating possible acquisition candidates.
The Company has had no discussions with any particular consultants
regarding the business of the Company or possible acquisition candidates for the
Company. The Company has no
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agreements or understandings with any consultant. None of the Company's
officers, directors or principal shareholders in the past have used particular
consultants or advisers on a regular basis.
Any independent consultants which the Company may hire would be retained
on the basis of their experience in evaluating business opportunities. Any such
hires probably would be on a per project as needed basis. If the Company had
cash funds, such consultants would be paid cash fees, and possibly also be
issued small amounts of restricted shares of Common Stock.
The Company presently does not have any funds to loan to prospective
business acquisition candidates in advance of consummation of an acquisition
transaction. Such loans would not be made even if the Company were to obtain
cash funds in the future, which funds would be used for general and
administrative expenses and to pay the costs of evaluating prospective
acquisition candidates.
As an alternative to the raising of capital through registered public
offerings under rule 419, it is possible that the Company may seek to raise cash
funds through the private placement of its securities under rule 506 of
Regulation D. See below.
It is likely that the Company will undergo a change in its control in
the event an acquisition transaction is consummated, because the Company most
likely will issue a significant amount of restricted shares of Common Stock as
the main component of the consideration in such a transaction. For example, a
business could be acquired by the issuance of sufficient shares of Common Stock
so that such acquired business or its shareholders owned more than 80 percent,
on a pro forma basis, of the shares of Common Stock outstanding after
consummation of such a transaction
The Company will not borrow funds and use the proceeds therefrom to make
any payments to promoters of the Company, or officers or directors of the
Company or any of their affiliates or associates. Further, the Company will not
enter into any agreement to acquire any entity or assets in which any officer,
director or principal shareholder of the Company has any direct or indirect
interest of any kind.
The officers and directors of the Company will not seek any different or
additional consideration for their shares of Common Stock, or otherwise, in
connection with an acquisition transaction. For example, if the Company acquires
an entity by issuing additional shares of Common Stock to the shareholders of
the entity, all of the shareholders of the Company (including its officers and
directors and principal shareholders) will be diluted equally with respect to
the percentage of outstanding shares such persons own after consummation of the
transaction. Further, the officers and directors of the Company would not
consent to a proposed purchase of their stock in the Company, in connection with
an acquisition transaction, which proposed purchase would not be offered pro
rata to all shareholders of the Company. This is a policy of the board of
directors which will not be changed by the board of directors.
The officers and directors of the Company will negotiate the terms and
conditions of any acquisition transaction. Approval by the shareholders will not
be required under Colorado law to
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consummate any proposed acquisition transaction, and the board of directors will
not seek to obtain such approval.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs. However, non-management shareholders will
continue to have voting rights to elect directors to the Company's board of
directors pursuant to Colorado law.
No finder's fees (whether in the form of cash or debt or equity) will be
paid to anyone in connection with the business of the Company. Further, no
finder's fees or other acquisition related compensation will be paid to
officers, directors, promoters or their affiliates or associates from the
revenues or other funds of an acquisition or merger candidate, or by the
issuance of debt or equity of such an entity.
The Company will not acquire or merge with a business or company in
which the Company's promoters, management or their affiliates or associates,
directly or indirectly, have any ownership or other type of interest. This is a
policy adopted by the board of directors of the Company by resolution. However,
it should be noted that if the Company were to violate this policy, any legal
remedy available to the shareholders of the Company under Colorado corporate or
other laws would most likely be prohibitively expensive and time consuming for
the shareholders of the Company to seek to have enforced.
Because the Company does not have cash funds to acquire a business or
assets of another company, the Company would effect a consummation of such a
business or assets by the issuance of a large number of shares of Common Stock.
As a result of such a transaction, the control of the Company would be shifted
away from the current shareholders over to the new shareholders, who would then
be in position to replace current directors with persons of their own choosing.
The officers and directors of the Company are expected to devote from a
few hours per week, up to their full time on the business of the Company,
depending on the level of activities at the time. For example, relatively little
time may be required when acquisition candidates have been identified but
further evaluation awaits delivery of documents and background information on
the candidates. However, a great deal of time would be required to evaluate the
candidate once documents are available, and to negotiate and finalize the terms
of an acquisition transaction.
It is not anticipated that additional securities of the Company will be
issued to management or promoters of the Company, or to the associates or
affiliates of such persons.
The officers and directors of the Company presently have no interests in
any other blank check or shell companies. If such persons were to acquire
interests in such other companies, they would be faced with conflicts of
interest in resolving how they would choose, for different companies, among
different acquisition or merger candidates which became available. The Company
presently does not have a policy for dealing with such an eventuality, because
that type of situation does not appear likely to develop. However, if such a
conflict of interest should be
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presented, the officers and directors of the Company which would be confronted
with such a conflict would be asked by directors and officers which were not so
involved, either to not vote on approving or rejecting conflicting
opportunities, or to resign their positions as officers and directors.
The Company anticipates that additional securities of the Company may be
offered for sale in a private placement of securities under rule 506 of
Regulation D, to raise cash to cover future general and administrative expenses,
and the costs of evaluating and negotiating with prospective acquisition
candidates. However, there is no assurance such an offering would be successful,
and no such private placement is presently contemplated to be undertaken in the
immediate future.
Officers and directors of the Company intend to increase their
communications to their existing business contracts, to determine if such
contacts include persons and companies which may be interested in an acquisition
transaction with the Company. The communications will be made personally by
letter or private telecommunications. No advertising campaign will be initiated
by the Company.
In late summer 1997 the Company discussed with Lumiere Securities, Inc.,
a small NASD brokerage firm in Denver, Colorado, whether that firm would be
interested in making a market in the securities of the Company. Lumiere
expressed preliminary interest in the proposal, and submitted an application to
the NASD on Form 211 for permission to initiate quotation and trading activities
in the Company's securities in the NASD's Electronic Bulletin Board trading
system. In late 1997, Lumiere withdrew its application from the NASD, and
advised the Company that it was no longer interested in participating with the
Company in the proposal.
In the future, the Company intends to initiate discussions with other
brokerage firms regarding market making activities for the Company's securities.
To date the Company has not initiated any such discussions, but the officers and
directors of the Company may begin such discussions with one or more firms in
July or August 1998. No consultants will be used in connection with such
discussions.
The promoters and management of the Company have been involved in the
following previous blank check offerings: Mr. Wynn was president, a director,
and principal shareholder of Diversified Management Acquisitions, II, Inc.
("DMAII"), a Colorado corporation which completed an initial public offering (as
a blind pool) of shares in May 1988 for net proceeds of approximately $420,000
($.01 per share). In November 1988 DMAII completed an acquisition of
Constellation Development Corporation, a private marble quarry company, and Mr.
Wynn resigned as an officer and director. Thereafter, in 1996, DMAII acquired
Carpet Holdings, Inc. and changed its name from DMAII to Carpet Holdings, Inc.
Mr. Wynn had no involvement in Constellation Development or Carpet Holdings. Mr.
Wynn has had no involvement in DMAII since 1988, and has owned a nominal amount
of shares in that corporation since 1996.
The former officers and directors of the Company (Louis Porter and James
Porter), who resigned in April, 1998, had been involved in one other blank check
offering: Strategic International, Inc. ("SII"), a blind pool which raised
approximately $420,000 in its initial public offering in 1987. Messrs. Porter
were the executive officers, principal shareholders and directors of SII; they
resigned
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their positions and sold their stock in connection with a change in control of
SII in 1991. The subsequent history of SII is not known to the Company.
The shares of Common Stock of the Company are defined as "penny stock"
under rule 3a51- 1 adopted by the Commission under the 1934 Act. In general,
"penny stock" includes securities which (i) are not listed on the principal
stock exchanges or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"); or (ii) securities which are not so listed and
which have a bid price in the market of less than $5.00; or (iii) securities of
an issuer with net tangible assets of less than $2 million ($5 million if the
issuer has been in continuous operation for less than three years), or which has
had average revenue of less than $6 million for the last three years.
As "penny stock," the Company's securities are subject to rule 15g-9
adopted by the Commission under the 1934 Act. Rule 15g-9 imposes additional
sales practice requirements on broker-dealers which sell such securities to
persons other than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1 million or annual incomes exceeding
$200,000, or $300,000 together with their spouses, or individuals who are the
officers or directors of the issuer of the securities). For transactions covered
by this rule, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, the rule may adversely affect the
ability of broker-dealers to sell the Company's securities, and therefore may
adversely affect the ability of owners of the Company's securities, whenever
purchased, to resell any of the securities of the Company in the public market.
The Company will provide to all of its shareholders complete
documentation of any acquisition candidate with which the Company has signed a
definitive acquisition agreement, including audited financial information for
such candidate if available, at such time as the Company files a Current Report
on Form 8-K with the Commission regarding the execution of such acquisition
agreement and the terms and conditions thereof.
As of the date of this Form 10-K, none of the officers, directors, or
promoters of the Company, or any of their affiliates or associates, have had any
preliminary contact or discussions with and there are no present plans,
proposals, arrangements or understandings with any representatives of the owners
of any business or company regarding the possibility of an acquisition or merger
transaction.
The present management of the Company became acquainted with the Company
when it was organized in 1986. Mr. Wynn was president and a director of the
Company from 1986 until he resigned such positions in 1988. Mr. Wynn
subsequently (in April 1998) again became president and a director in connection
with his purchase of shares from Louis Porter and James Porter, in a transaction
to which the Company was not a part. From the time he resigned in 1988, until he
became president in April, 1998, Mr. Wynn was not involved with the management
of the Company directly or indirectly, and he did not provide any services to
the Company during that 10 year period of time.
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There are no agreements or understandings for any officer or director to
resign at the request of another person. None of the officers or directors of
the Company are acting on behalf of or will act at the direction of any other
person.
The activities of the following persons will be material to the
operations of the Company: its President and its directors. The President and
directors of the Company are the only promoters of the Company.
Until the end of fiscal 1998, the Company's office facility was provided
to the Company without cost by Shield Technology Corporation, which is a private
corporation engaged in private business consulting and management services.
Shield Technology Corporation is affiliated with Louis Porter and James Porter,
former officers and directors of the Company. The Company's current offices are
located at 7810 W. 70th Drive, Arvada, Colorado, in a building owned by Karen
Bejarano, an officer and director of the Company. The offices are provided
without cost to the Company. There are no present plans to move the office of
the Company.
There are approximately 127 record holders of the Common Stock of the
Company, as of the date of this Report on Form 10-K. See Item 5(b), below.
The securities laws, rules and/or regulations of numerous states
prohibit or limit both the initial sale of securities of blank check or shell
companies to investors in such states, as well as the resale of such securities
by any person or brokerage firm to investors in such states. The Company has an
obligation not to violate such laws with respect to sales of its securities
effected by the Company through its officers and directors. The Company does not
presently intend to conduct any offering, public or private, of its securities.
If the Company or its affiliates were to conduct sales of the Company's
securities (for the Company or for their own accounts) in states wherein such
activities were prohibited, the Company and such affiliates could be subjected
to injunctive proceedings initiated by state securities administrators in state
courts and to fines or penalties for violations of law. In addition, the
purchasers of such securities could initiate proceedings for rescission of their
investments. The initiation of any of these proceedings would be costly for the
Company to defend, and the imposition of fines or penalties and/or the
adjudication of civil liability for illegal sales of securities would impair the
Company's ability to continue in business.
If a brokerage firm initiates market making and other activities with
respect to the Company's securities, the compliance officers of such brokerage
firm must supervise the brokerage firm personnel to prevent sales to residents
of states where such transactions are illegal.
Numerous states (including the following states) do not allow resale of
securities of shell or blank check companies; certain of the states do not allow
resale of companies which are not listed on the principal stock exchanges or
NASDAQ, other states require companies to meet minimum operating revenues or net
worth tests, and other states prohibit resales of securities of blank check or
shell companies. In any of these jurisdictions, the result is the same for a
company such as Hallmark Properties, Inc., i.e., no trading could commence in
such states until an acquisition is consummated, and until such time,
shareholders in the restrictive states may not be able to resell their shares.
Those states which do not allow such resales include: Arkansas, Connecticut,
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Massachusetts, California, Delaware, Idaho, Illinois, Indiana, Kentucky,
Louisiana, Michigan, Minnesota, Oklahoma, Pennsylvania, Tennessee, Texas and
Utah. The foregoing list could be expanded in the future.
Because the Company conducted its original initial public offering
before rule 419 was enacted by the Commission, and before laws and regulations
similar to rule 419 were enacted by many states, none of the shareholders of the
Company are subject to any "lock up" letter agreement. Such lock up agreements
are often entered into by blank check companies in connection with their initial
public offerings of securities, by which agreements the founders and other
holders of restricted securities of blank check companies agreed not to sell
their respective shares until a merger or acquisition had been consummated.
During the fiscal year ended March 31, 1997, the Company issued a total
of 40 million shares of restricted Common Stock to two persons (Louis Porter and
James Porter). The issuances in 1996 to Louis Porter and James Porter were made
by the Company in reliance upon Section 4(2) of the 1933 Act and Rule 501 of
Regulation D, because such persons were officers or directors of the Company at
that time and therefore were deemed to be "accredited investors." No underwriter
was involved in these transactions.
With respect to possible computer malfunctions at the turn of the
millennium on December 31, 1999, the Company uses personal computers ("PCS")
which incorporate software which does not permit programming errors regarding
the year 2000. As part of its future evaluation of any acquisition candidate,
the Company will assess the ability of the computer systems of such candidate to
transition to year 2000 without malfunction. It is possible that a candidate
would be rejected if its systems do not adequately address possible year 2000
malfunction issues, and such candidate evidences reluctance to revise its
operating systems to avoid such malfunctions.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant's current offices are located at 7810 W. 70th Drive,
Arvada, Colorado 80004. These facilities are provided free for the Registrant.
See above.
ITEM. 3 LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings and no such
proceedings are known to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) MARKET INFORMATION.
The Company's Common Stock is not eligible for listing on the NASDAQ
system, and trading, if any, has been limited to the over-the-counter market.
The Common Stock has been quoted from time to time in the "Pink Sheets"
maintained by the National Quotation Bureau, Inc., however, the Common Stock has
not been so quoted for the last three fiscal years.
(B) HOLDERS.
(b)(1) The approximate number of record holders of the Company's Common
Stock, no par value, as of March 31, 1998 (and as of the date this Form 10-K is
filed) was 127. This figure does not reflect an indeterminable number of
shareholders whose shares are held in "street name."
(C) DIVIDENDS.
The Company has not paid a dividend with respect to its Common Stock and
is not expected to pay a dividend on its Common Stock in the foreseeable future.
The Company's ability to pay dividends is restricted by provisions of
the Colorado Business Corporation Act which provides that a Colorado corporation
may only pay dividends if, after giving effect to the dividend, the corporation
would be able to pay its debts as they become due in the usual course of
business, or the corporation's total assets would be less than its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time the dividend, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the dividend.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Years Ended March 31, 1997 and 1998.
The Company raised $300,100 in April 1987 in consideration for the
issuance of 15,000,000 shares of the Company's Common Stock in a public
offering. The Company was essentially inactive from 1990 until the 1996 fiscal
year. The Company spent all of its public offering cash in unsuccessful merger
transactions prior to fiscal 1997.
In the course of the audit of financial statements for prior years, the
Company determined that significant reductions in the number of outstanding
shares of Common Stock, and other changes to prior entries in the books and
records of the Company, were needed. Included in the changes
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were a reduction in the total number of outstanding shares of Common Stock. The
amount of such reduction was 43,281,637 shares, as a result of the following
adjustments:
First, 11,281,637 shares of Common Stock issued in 1992 in connection
with the proposed merger transaction between the Company, and Tierra
Environmental, Inc. and Dichlor Chemical Co., were canceled and retired to
authorized unissued share capital of the Company, because the merger was
abandoned and never consummated.
Second, 2,000,000 of the shares resulting out of a 1 for 15 reverse
split of the outstanding shares of Common Stock (the 2,000,000 shares were
issued in the name of "DMA I") in December 1997 were canceled and retired to
authorized unissued share capital of the Company. These 2,000,000 shares had
originally been issued in connection with the Tierra - Dichlor transaction
subsequently abandoned, and the subject shares had been shown in the stock
transfer books and on the books of the Company as being held in "DMA Treasury."
Third, 30,000,000 shares of Common Stock issued in connection with the
1986 proposed merger transaction with Tunnelvision, Inc. and its division
Viewpoint Video, which shares were returned to the Company because the
transaction was abandoned, were canceled and retired to the status of authorized
unissued share capital of the Company.
Reference is made to the financial statements and notes thereto included
with this Form 10-K report.
LIQUIDITY AND CAPITAL RESOURCES
The Company had been without adequate funds to conduct any actual
business from 1990 through the date of this Report. The Company settled its
outstanding debt ($24,386.81) with proceeds of sale of restricted shares of
Common Stock in fiscal 1997. The debt consisted of legal and accounting fees,
and transfer agent fees. See Item 12. The Company presently has no cash or other
liquid assets.
PLAN OF OPERATIONS
In August 1996, the Company sold 40,000,000 shares of restricted Common
Stock to two individuals for $24,386.81 cash, which the Company used to pay
debts the Company had incurred. In connection with the change in control of the
Company resulting from the issuance of such 40,000,000 shares of its Common
Stock, the Company subsequently changed its name to Hallmark Properties, Inc. No
brokers were involved in this transaction and no commission or discounts were
paid. The Company relied on the 4(2) exemption from registration to sell these
restricted securities.
For the year ending March 31, 1999, the Company will continue reviewing
opportunities to merge with or acquire other companies. The Company may need a
substantial amount of capital from third parties to close any merger or
acquisition transaction, however there can be no assurance that the Company will
be able to raise such needed funds.
12
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are filed as a part of this Form 10-K
immediately following the signature page:
Report of Independent Certified Public
Accountants............................................F-1
Balance Sheet - March 31, 1997 and 1998..................F-2
Statement of Operations - For the Years
Ended March 31, 1997 and 1998
and Cumulative Amounts from Inception
of the Development Stage (August
11, 1986) through March 31, 1998.......................F-3
Statement of Stockholders' Equity
(Deficit) For the Period from
Inception of the Development
Stage (August 11, 1986) through
March 31, 1998.........................................F-4-7
Statements of Cash Flows - For the
Years Ended March 31, 1997 and 1998
and Cumulative Amounts from
Inception of the Development Stage
(August 11, 1986)
through March 31, 1998.................................F-8
Notes to Financial Statements - For the
Years Ended March 31, 1997 and 1998....................F-9-10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
During the fiscal year ending March 31, 1998, the Company filed a report
on Form 8-K in December 1997 reporting the change (as of October 16, 1997) of
independent public accountants. The Company dismissed J. Karean Henderson
("Henderson") as its principal independent public accountant. Henderson had been
engaged in 1997 to audit the Company's financial statements for the two fiscal
years which ended on March 31, 1997. During the period when Henderson was
engaged, there were no disagreements with Henderson on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which if not resolved to the satisfaction of Henderson would have
caused Henderson to make reference to any such matter in her reports, nor were
there any other reportable events.
13
<PAGE>
Henderson's reports on the financial statements of the registrant for
the two fiscal years ended March 31, 1997 did not contain an adverse opinion or
a disclaimer of opinion nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
The decision to change the Company's principal independent public
accountants was approved by its Board of directors.
As of December 8, 1997 the Board of Directors appointed a new firm of
independent public accountants to audit the financial statements of the Company.
The new firm is Tannenbaum & Company, P.C., 1873 south Bellaire, Suite 908,
Denver, Colorado 80222. The new firm has audited the financial statements of the
Company for the three fiscal years ended March 31, 1998. This Form 10-K report
includes the financial statements and audit reports thereon for 1997 and 1998.
The Company has not consulted with Tannenbaum & Company, P.C. regarding
either the application of accounting principles to a specified transaction or
the type of audit opinion that might be rendered.
A letter from Henderson addressed to the Securities and Exchange
Commission, which letter concurs with the statements made by the Company
concerning Henderson in its Form 8-K report was filed as an exhibit with the
Form 8-K report, and is incorporated into this Form 10-K by reference.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(A) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The directors of the Company are elected to hold office until the next
meeting of shareholders and until their respective successors have been elected
and qualified. Officers of the Company are elected by the Board of Directors and
hold office until their successors are elected and qualified.
Name Age Position
- ---- --- --------
Miles D. Wynn 44 Director, President and Treasurer
Karen J. Bejarano 51 Director and Secretary
Miles D. Wynn, President, Treasurer and a Director, has served as the
President and as a Director of the Registrant since April 9, 1998. Mr. Wynn has
been a licensed commercial realtor in Denver, Colorado since 1982.
14
<PAGE>
Karen J. Bejarano, Secretary and a Director, has been Secretary and a
Director of the Company since April 9, 1998. For the past 10 years, she has been
employed by a family real estate construction company in Arvada, Colorado.
The officers and directors of the Company are expected to devote from a
few hours per week, up to their full time on the business of the Company,
depending on the level of activities at the time. For example, relatively little
time may be required when acquisition candidates have been identified but
further evaluation awaits delivery of documents and background information on
the candidates. However, a great deal of time would be required to evaluate the
candidate once documents are available, and to negotiate and finalize the terms
of an acquisition transaction. After consummation of an acquisition, the
officers and directors of the Company would probably resign to let new
management operate the Company, however, it is possible that the original
officers and directors would continue to serve the Company.
(B) SIGNIFICANT EMPLOYEES.
The Company has no significant employees at the present time.
(C) FAMILY RELATIONSHIPS.
Karen J. Bejarano is a sister of Miles D. Wynn.
(D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
During the past five years, no director, executive officer, promoter or
control person of the Company has:
(1) Had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that date;
(2) Been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) Been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently r temporarily enjoining, barring, suspending or likewise limiting
his involvement in any type of business, securities or banking activities; or
(4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, where the judgment has not been
reversed, suspended, or vacated.
15
<PAGE>
(E) COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGE ACT.
Not applicable.
ITEM 10. EXECUTIVE COMPENSATION
CASH COMPENSATION.
During the past three fiscal years, no officer of the Company received
any cash compensation. Neither James L. Porter, the Company's former president
and chief executive officer, nor Louis Porter, the Company's former,
vice-president received any stock options employee benefits, or other form of
direct or indirect remuneration from the Company during the 1995, 1996 and 1997
fiscal years. Messrs. Porter resigned as officers and directors on April 9,
1998. Mr. Wynn is not paid for his services to the Company. He is currently
devoting such time as is necessary to the affairs of the Company.
COMPENSATION UNDER PLANS.
Stock Options and Bonus Plans. No stock options or bonuses have been
granted under any stock option or bonus plan.
OTHER COMPENSATION.
No other compensation was paid or distributed to any officer or director
of the Company for services rendered as such, during the last three fiscal
years.
COMPENSATION OF DIRECTORS.
The Company does not pay its directors for their services in that
capacity; however, officers and directors will receive reimbursement for
out-of-pocket expenses incurred by them in connection with the business of the
Company, and would be paid therefor when the Company had any money. Currently,
the Company does not pay any directors fees for attendance at board meetings.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL.
The Company has no compensation plan or arrangement with respect to any
executive officer in connection with the resignation, retirement or other
termination of such individual's employment with the Company. The Company has no
plan or arrangement with respect to any persons which will result in a change in
control of the Company or a change in the individual's responsibilities
following a change in control.
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A)(B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of the date of filing of
this Report as to the beneficial ownership of shares of the Company's Common
Stock, by each person who, to the knowledge of the Company at that date, was a
beneficial owner of 5% or more of the outstanding shares of Common Stock, by
each person who is an officer and/or director of the Company and by all officers
and directors of the Company as a group. The table does not include information
regarding shares of Common Stock held in names of certain depositories/clearing
agencies as nominee for various brokers and individuals. No such broker or
individual is believed to hold more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Percent
Title of of Beneficial Beneficial of
Class Owner Ownership Class
- ----- ----- --------- -----
<S> <S> <C> <C>
Common Karen J. Bejarano* -0- -0-
Stock 7810 W. 70th Drive
Arvada, CO 80004
Common Esther Entertainment, Inc. 21,500,000 51%
Stock 4415 Cahita Court
Denver, CO 80216
Common Miles D. Wynn* 29,000,000(1) 69%
Stock 4415 Cahita Court
Denver, CO 80216
Common Robert Chester 6,000,000 14%
Stock 1507 Macley Court
Kelowna, BC, Canada V1Y 9L6
Common Officers and directors 29,000,000 69%
Stock as a group (two persons)
</TABLE>
*Officers and directors.
(1) Includes 7,500,000 shares owned directly, and 21,500,000 shares
owned by Esther Entertainment, Inc., a private corporation controlled by Mr.
Wynn. Esther Entertainment, Inc. is a private housing construction company based
in Denver, Colorado.
Robert Chester is not an affiliate of Miles D. Wynn or any former
officers or directors of the Company.
17
<PAGE>
The Porters, who offered and sold the restricted securities of the
Company to other individuals, conducted such efforts pursuant to the exemption
from registration under the 1933 Act, which is provided by Section 4(1) of the
1933 Act, if the securities are restricted from subsequent resale, the
purchasers are able to fend for themselves in investment affairs, and all
material information about the issuer of the securities (the Company) is
provided to the purchasers before the sales transaction is effected.
(C) CHANGES IN CONTROL.
Management is not aware of any arrangements which may result in a change
of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A)(B)(C) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
In fiscal 1997, James L. Porter and Louis Porter, directors and officers
of the Company who resigned in April, 1998, invested $24,387 cash in the
Company, for which the Company issued 20,000,000 restricted shares of Common
Stock to James L. Porter and an additional 20,000,000 restricted shares of
Common Stock to Louis Porter. The Company used the capital to pay third party
accounts payable, legal and accounting bills, and transfer agent fees.
(D) TRANSACTIONS WITH PROMOTERS.
Not applicable.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed are listed below and, except where
incorporated by reference, immediately follow the Financial Statements.
Number Description
- ------ -----------
3.1 Articles of Incorporation, as amended, incorporated by
reference from the Annual Report on Form 10-K for the five
fiscal years ended March 31, 1991.
3.2 Bylaws, incorporated by reference form the Annual Report
on Form 10-K for the five fiscal years ended March 31, 1991.
3.3 Articles of Amendment to the Articles of Incorporation,
incorporated by reference from the Form 8-K dated August
19, 1996 filed August 21, 1996.
(b) During the last quarter of the period covered by this report the
Company filed no reports on Form 8-K. During the first quarter (ended June 30,
1998) of fiscal 1999, the Company filed a Form 8-K Report for the change in
control of the Company, which resulted in the ownership of Common Stock as set
forth under Item 11 hereof.
18
<PAGE>
As of April 9, 1998 Louis Porter, then the president and a director of
the Company, and James Porter, then the vice-president, secretary and a director
of the Company, entered into a private transaction by which they sold to Miles
Wynn and Robert Chester 35,000,000 shares of restricted Common Stock of the
Company held by Louis Porter and James Porter. Louis Porter and James Porter
sold additional amounts of their shares of restricted Common Stock held by them
to several other individuals, each of whom holds less than 5% of the outstanding
shares of Common Stock; such individuals are not related to one another, to the
knowledge of the Company. A total of $75,000 was paid to the Porters in this
transaction ($.002 per share).
Following the sale, to which transaction the registrant was not a party,
Louis Porter and James Porter elected Miles Wynn and Karen Bejarano to be
directors of the Company. Thereafter, Miles Wynn became the president and Karen
Bejarano became the secretary of the Company. Mr. Wynn was the original founder
and president of the Company in 1986; Ms. Bejarano is his sister.
The purchasers acquired the shares with their own personal financial
resources. The purchased shares are owned by the purchasers; there are no pledge
arrangements in place or contemplated with respect to the purchased shares.
There are no arrangements or understandings among members of the former and
members of the new control groups and any of their associates, with respect to
the election of directors (other than the election of Mr. Wynn and Ms. Bejarano,
as disclosed above) or any other matters.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE EXCHANGE ACT:
The Registrant has not sent to its security holders any annual report or
proxy material during the last fiscal year. If such report or proxy material is
furnished to security holders subsequent to the filing of this Form 10-K, the
Registrant shall furnish copies of such material to the Commission when it is
sent to security holders.
-19-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this 10-K report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 20, 1998 HALLMARK PROPERTIES, INC.
By /s/ Miles D. Wynn
---------------------------------
Miles D. Wynn, President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following person on behalf of the Registrant and in the
capacities and on the date indicated.
Dated: July 20, 1998 By /s/ Miles D. Wynn
----------------------------------
Miles D. Wynn, President,
Principle Executive Officer,
Principle Accounting Officer,
Principle Financial Officer,
and Director
Dated: July 20, 1998 By /s/ Karen Bejarano
---------------------------------
Karen Bejarano,
Secretary and Director
20
<PAGE>
May 1, 1998
The Board of Directors
Hallmark Properties, Inc.
Denver, Co.
We have audited the Balance Sheet of Hallmark Properties, Inc. (formerly Tierra
Environmental Corporation), (a development stage company) as of March 31, 1997
and 1998, and the related Statement of Operations, Stockholders' Equity and Cash
Flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Hallmark Properties, Inc. as of
March 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
TANNENBAUM & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
-F1-
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Balance Sheet
(In Thousands, Except Per Share Data)
March 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
---- ----
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents $ - $ -
Accounts receivable - -
Inventory - -
Short term notes receivable - -
---------- ----------
Total current assets - -
---------- ----------
Other assets
Real estate
Other - -
---------- ----------
Total other assets - -
---------- ----------
- -
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable - -
Notes payable - -
---------- ----------
Total current liabilities - -
---------- ----------
Stockholder's Equity
Common stock, no par value, 400,000,000
shares authorized, issued and outstanding
50,900,000 and 50,900,000 at March 31,
1990 and 1991 respectively 296 296
Deficit accumulated during the
development stage. ( 296) ( 296)
---------- ----------
Total Stockholder's Equity $( -) $( - )
========= ==========
$ - $ -
========== ==========
See accompanying notes
</TABLE>
- F2 -
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Operations
(In Thousands, except per share data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Cumulative
amount from
1997 1998 inception
---------- ---------- ----------
<S> <C> <C> <C>
Income from operations $ - $ - $ 7
Cost of sales - - -
---------- ---------- ----------
Gross profit - - 7
---------- ---------- ----------
Expenses
Organizational costs
SEC (State and Federal) - - 1
Bank charges - - -
Dues, fees, postage,
printing and telephone - - 1
Legal, professional and
consulting - - 10
Merger expense - - 261
Miscellaneous - - 4
Rent expense - - 6
Salaries - - 19
Taxes - - -
Travel and entertainment - - 1
---------- ---------- ---------
Total expenses - - 303
---------- ---------- ----------
Net income before income taxes - - ( 296)
---------- ---------- ----------
Income taxes - - -
---------- ----------- ----------
Net income - - ( 296)
Retained Earnings
(Accumulated deficit),
beginning of the year ( 296) ( 296) -
---------- ---------- ----------
(Accumulated deficit),
end of the year $( 296) $( 296) $( 296)
========== ========== ==========
Per share earnings during
reporting period $ - $ - $ -
---------- ---------- ----------
Weighted average number
of shares 18,845,378 43,393,333 33,626,199
----------- ----------- ----------
See accompanying notes
</TABLE>
- F3 -
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Total Stock
Number of Accumulated Stock Sub- Holders
Shares Amount Deficit scriptions Equity
------ ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance August 11, 1986 - $ - $ - $ - $ -
Issuance of stock
for cash, August
12, 1986
($0.0001 per
share 33,500,000 3 - - 3
Issuance of stock
for cash, August
27, 1986
($0.005 per
share 2,200,000 11 - - 11
Issuance of stock
for cash, August
27, 1986
($0.005 per
share 200,000 1 - - 1
Stock subscriptions
received - - 20 20
Loss for period ended
March 31, 1987 - - ( 4) - ( 4)
---------- --------- -------- --------- --------
Balance
March 31, 1987 35,900,000 15 ( 4) 20 31
Issuance of stock
for cash, April
1987 ($.02) per
share 15,000,000 $ 257 $ - $( 20) $ 237
See accompanying notes
</TABLE>
- F4 -
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Total Stock
Number of Accumulated Stock Sub- Holders
Shares Amount Deficit scriptions Equity
------ ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
Loss for period ended
March 31, 1988 - - ( 268) - ( 268)
----------- --------- -------- --------- --------
Balance
March 31, 1988 50,900,000 272 ( 272) - -
Loss for through
period ended
March 31, 1989 - - - - -
----------- --------- --------- --------- ---------
Balance
March 31, 1989 50,900,000 272 ( 272) - -
----------- --------- -------- --------- ---------
Loss for through
period ended
March 31, 1990 - - - - -
----------- --------- --------- --------- ---------
Balance
March 31, 1990 50,900,000 272 ( 272) - -
----------- --------- -------- --------- ---------
Loss for through
period ended
March 31, 1991 - - - - -
----------- --------- --------- --------- ---------
Balance
March 31, 1991 50,900,000 272 ( 272) - -
----------- --------- -------- --------- ---------
Loss for through
period ended
March 31, 1992 - - ( 24) - ( 24)
----------- --------- -------- --------- --------
Balance
March 31, 1992 50,900,000 272 ( 296) - ( 24)
----------- --------- -------- --------- --------
Reverse stock
split (15:1),
November 10,
1992 ($.00 per
share) (47,506,667) - - - -
See accompanying notes.
</TABLE>
-F5-
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Total Stock
Number of Accumulated Stock Sub- Holders
Shares Amount Deficit scriptions Equity
------ ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
Loss for through
period ended
March 31, 1993 - - - - -
Balance
March 31, 1993 3,393,333 272 ( 296) - ( 24)
---------- --------- -------- --------- --------
Income for
year ended
March 31, 1994 - - - - -
Balance
March 31, 1994 3,393,333 272 ( 296) - ( 24)
---------- --------- -------- --------- --------
Income for
year ended
March 31, 1995 - - - - -
Balance
March 31, 1995 3,393,333 272 ( 296) - ( 24)
---------- --------- -------- --------- --------
Income for
year ended
March 31, 1996 - - - - -
Balance
March 31, 1996 3,393,333 272 ( 296) - ( 24)
---------- --------- -------- --------- --------
Issuance of stock
for cash, August 19,
1996 ($.0006)
per share
40,000,000 24 - - 24
See accompanying notes
</TABLE>
-F6-
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Total Stock
Number of Accumulated Stock Sub- Holders
Shares Amount Deficit scriptions Equity
------ ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C>
Income for
year ended
March 31, 1997 - - - - -
Balance
March 31, 1997 43,393,333 296 ( 296) - -
---------- --------- -------- --------- ---------
Income for
year ended
March 31, 1998 - - - - -
Shares canceled
March 30, 1998 (1,409,637) - - - -
---------- --------- -------- --------- ---------
Balance
March 31, 1998 41,983,696 $ 296 $( 296) $ - $ -
========== ========= ======== ========= =========
See accompanying notes.
</TABLE>
-F7-
<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Cash Flows
(In Thousands, except per share data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Cumulative
amount from
1997 1998 inception
---------- ---------- ----------
Cash flows from operating activities
<S> <C> <C> <C>
Net Loss $ - $ - $( 272)
Adjustments to reconcile Net
Loss to Net Cash used in
operating activities
Increase (decrease) in
accounts payable ( 24) - ( 24)
Net cash used in operations ( 24) - ( 296)
---------- ---------- ----------
Cash used in investing activities - - -
---------- ----------- -----------
Cash flows from financing activities
Proceeds from sale of common
Stock 24 - 296
---------- ---------- -----------
Cash balance at beginning of year - - -
----------- ----------- -----------
Cash balance at end of year $ - $ - $ -
=========== =========== ===========
See accompanying notes
</TABLE>
- F8 -
<PAGE>
Hallmark Properties, Inc.
Notes to Financial Statements
March 31, 1998
1. Summary of significant accounting policies
Organization
Hallmark Properties, Inc. ("Hallmark" or the "Company" formerly Tierra
Environmental Corporation) was organized under the laws of the State of
Colorado on August 11, 1986, for the purpose of evaluating and seeking
merger candidates. The Company is currently considered to be in the
development stage as more fully defined in the Financial Accounting
Standards Board Statement No. 7. The Company has engaged in limited
activities, but has not generated significant revenues to date. The
Company is currently seeking business opportunities.
Accounting methods
The Company records income and expenses on the accrual method.
Fiscal year
The Company has selected March 31 as its fiscal year.
Deferred offering cost
Costs associated with any public offering were charged to proceeds of
the offering.
Loss per share
All stock outstanding prior to the public offering had been issued at
prices substantially less than that which was paid for the stock in the
public offering (Note 3). Accordingly, for the purpose of the loss per
share calculation, shares outstanding at the end of the period were
considered to be outstanding during the entire period.
2. Income taxes
Since its inception, the Company has incurred a net operating loss.
Accordingly, no provision has been made for income taxes.
The Company has a net operating loss of approximately $296,000, of which
$272,000 expires in 2003 and $24,000 expires in 2007.
-F9-
<PAGE>
Related Party Transactions
On August 19, 1996 the Company entered into an agreement with James
Porter and Louis Porter whereby the Porters paid $24,817 to the Company
and the Company issued 40,000,000 of its common stock to the Porters
(20,000,000 to each). The Company used the cash to settle outstanding
liabilities (approximately $24,000 at March 31, 1996 and $0 at March 31,
1997).
3. Public Offering
The Company sold to the public 15,000,000 units at a public purchase
price of $0.02 per unit. Each unit consists of one share of the
Company's no par value common stock and common stock purchase warrant.
The warrants entitle the holder to purchase one share of common stock in
the Company at a purchase price of $0.10 per share and are exercisable
for a two-year period commencing January 6, 1987. Upon notice to the
warrantholders, the Company may redeem the warrants at a price of
$0.0001 per warrant. At March 31, 1987, subscriptions for 980,050 units
had been received. At April 28, 1987, the Company had received
subscriptions for the remaining 14,091,950 units and the stock was
issued.
- F10 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE IS TAKEN FROM THE HALLMARK PROPERTIES, INC.
FORM 10-K FOR THE YEAR ENDED MARCH 31, 1998 AND IS LIMITED IN ITS ENTIRETY
BY REFERENCE THERETO.
</LEGEND>
<CIK> 0000802203
<NAME> HALLMARK PROPERTIES, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 296,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
