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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended: June 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 (NO FEE REQUIRED)
For the transition period from ________ to ________.
Commission file number 33-12613-NY
CELESTIAL VENTURES CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 22-2814206
------ ----------
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
382 Route 59, Section 310, Monsey, New York 10952
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 369-0132
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, par value $.001 per share None
Preferred Stock, par value $.001 per share None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant has: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 the past 90 days. [ ] Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not 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 aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant June 30, 1999, based on the average bid and
asked price on such date, was approximately $20,223,225.
Number of shares of Common Stock outstanding as of June 30, 1999: 3,235,716.
Number of shares of Preferred Stock outstanding as of June 30, 1999: 258,853.
No annual reports to security holders, proxy or information statements, or
prospectuses filed pursuant. Rule 424(b) or (c) have been incorporated by
reference in this report.
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When used in this Annual Report on Form 10-KSB, the words "estimate",
"project", "intend", "expect" and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial position. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial position to differ materially. Such factors are
described in detail elsewhere under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
release publicly the result of any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
PART I
Item I. Business
Celestial Ventures Corporation, a Nevada corporation (the "Company"),
was incorporated on January 28, 1987. The Company's initial business was the
acquisition of real estate and real estate development. The Company is no longer
involved in real estate investment or development. Since 1993, the Company has
primarily been engaged in the acquisition of businesses, divisions of
businesses, or the assets of businesses, that the Company's management
identified as having significant potential for business success. These
businesses have included valve coating and direct mail subsidiaries in the past.
As of June 30, 1997, all of the operating divisions of the Company have been
sold. In August 1997, the Company entered into an agreement in principle to
merge with a high performance materials company. In March 1998, the Company
entered into a definitive agreement. (See "Recent Developments" below.) As of
June 30, 1999, the merger has not yet been consummated.
Disposition of Direct Mail Business.
On November 21, 1996, the Company, effective October 1, 1996, sold all
of the issued and outstanding capital stock (the "Shares") of Remarkable Office
Products, Inc ("Remarkable") to Dynamic Products Corp. ("Dynamic"), for
$1,406,250.00. The assets of Remarkable included equipment, inventory, and
accounts receivable. The consideration paid to the Company was as follows: (i)
repayment of intercompany balance due to Remarkable as of November 20, 1996 of
$106,450.85; (ii) payment on November 21, 1996, of $43,539.15 in cash; (iii) a
promissory note for $450,000.00 due February 21, 1997, payment of which was
extended until March 21, 1997; and (iv) assumption of certain liabilities of the
Registrant totaling $806,250.00. The Company realized a gain of $431,512 on the
sale. The purchase price of Remarkable was determined in the manner of an arms
length transaction. The principles followed by the parties in determining the
consideration were as follows: Shares of Remarkable were valued at book value,
and the repayment of intercompany balance on November 20, 1996, the cash payment
on November 21, 1996, the note payable due on March 21, 1997, and the assumption
of certain liabilities of the Company were each calculated at cash value. An
officer, director, and stockholder of the Purchaser is also the President,
director and stockholder of the Company. The transaction was unanimously
approved and ratified by the Company's Board of Directors in accordance with
Nevada corporate law.
Pursuant to an agreement dated June 20, 1997, the Company agreed to
transfer to Mr. John L. Patten, a significant shareholder of the Company, its
rights under the remaining past due $300,000 subordinated note receivable from
the purchaser in exchange for Mr. Patten's assumption of the Company's
obligations for the U.S. Powder Coaters, Inc. note payable of
2
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$170,000 to R.M. Engineering. To date, R.M. Engineering has not released the
Company from its obligation under the note payable; accordingly, the liability
remained recorded at June 30, 1999. See "Notes to Consolidated Financials." The
transaction was unanimously approved and ratified by the Registrant's Board of
Directors in accordance with Nevada corporate law.
Recent Developments - Pending Merger; and Private Placement
On August 21, 1997, the Company announced that it had entered into a letter of
intent to merge with a high performance materials company which management
believed fit the Company's parameters for an acquisition candidate. On October
30, 1997, the Company worked towards securing the acquisition, as well as
providing future operating revenue for the Company, by completing an overseas
private placement of common stock pursuant to the exemptions afforded by
Regulation S. The offering produced total proceeds of $4,059,000 from investors
in connection with the transaction, whereby a total of 1,353,000 common shares,
par value $0.001, were issued for a purchase price of $3.00 per share. Of the
$4,042,960 of the proceeds received from the offering, after payment of $16,040
in costs of the offering, $ 4,000,000 was remitted to Polymer Dynamics, Inc
("Polymer"), the enterprise with which the Company intended to merge, in
exchange for promissory notes totaling $4,000,000 originally due December 30,
1997, bearing interest at an annualized rate of seven percent (7%). This
maturity date was later extended to December 31, 1999 by written agreement.
However, the notes remained unpaid, and the proposed acquisition unconsummated,
at June 30, 1999, and the Company has decided to reserve fully against the
entire amount of the notes as of that date. The Company will not recognize any
interest income on these notes, and will apply any payments received to reduce
the principal.
On March 18, 1998, the Company and Polymer entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement") providing for transactions that, if
consummated, would have resulted in Polymer being merged with and into the
Company. Because the conditions to the closing of the merger were not satisfied,
the merger agreement terminated by its terms on December 31, 1998. The Company
is currently in negotiations with Polymer concerning the repayment of its
indebtedness to the Company discussed above.
In the event additional working capital is needed, the Company intends to seek
to raise it through the sale of common stock or loans from significant
shareholders.
Item 2. Properties
The Company maintains its corporate headquarters at 382 Route 59, Section 310,
Monsey, New York, 10952. This facility is currently leased by Remarkable Office
Products, Inc., which expires on December 31, 2002 and provides for an option to
renew for two successive five-year periods. Although there is no formal sublease
agreement between the Company and Remarkable, the Company has agreed to
reimburse Remarkable for any use of the space by the Company as well as for the
use of Remarkable's personnel.
Item 3. Legal Proceedings
Janet M. Johnson, individually and as Next Friend of Lauren Brel Clark and Eryn
Renee Clark, Minors and as Executor of the Estate of Annie M. Murray vs. Central
Valve Services, Inc., Celestial Ventures Corporation, Heuermann & Associates,
Inc. and Tony Heuerman, No. 96-42066, In the District Court of Harris County,
Texas, 80th Judicial District.
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The Plaintiffs' First Amended Original petition was served upon the Company (one
of many defendants) on April 23, 1997. The Plaintiffs allege that they were
injured as a result of certain misrepresentations made by Tony Heuermann (a
Texas investment manager unconnected to the Company) which induced the
Plaintiffs into investing monies into the Company and its wholly-owned
subsidiary, Central Valve Services, Inc. ("Central"). The alleged investment
includes payment for 25,343 (prior to the 1 for 15 reverse split) shares of the
Company's common stock as well as numerous promissory notes issued by Central in
which Bob Sudderth (former President of the Company) also signed on behalf of
Central and the Company as Guarantor. The Plaintiffs claim that these notes are
in default and the shares are trading below the promised value. Accordingly, the
Plaintiffs now seek damages from the Company (as well as Central, Sudderth and
Heuermann) to recoup these monies lost as a result of these alleged false
representations and violations of Texas Deceptive Trade Practices Act in the
amount of $62,092 plus interest, costs and punitive damages. A partial summary
judgment based on default in the amount of $70,000 was awarded but is now being
challenged vigorously, as are claims for interest, costs and punitive damages.
The other parties to the litigation have agreed to address this matter in
non-binding mediation. Should the parties fail to resolve this matter by such
mediation, and the court schedules a hearing for this matter, the Company
intends to defend this action vigorously.
Sirco Systems, LLC vs. Gold Coast Powder Coatings, Inc., Celestial Ventures
Corporation, Custom Coatings, Inc., W. G. Dodson, William V. Reynolds, Herbert
W. Reynolds, et al., Civil Action No. CV 98-2215, In the Circuit Court of
Jefferson County, Alabama.
The Plaintiff brought suit in 1998, concerning a contractual dispute with a
former subsidiary of the Company, and obtained a judgment against all defendants
in the amount of $122,000. The Company vigorously contested responsibility for
any portion of the judgment through local counsel, and reached an agreement with
plaintiff to settle any alleged liabilities. Pursuant to the settlement
agreement in October 1999, the plaintiff received $10,000 and 10,000 shares of
the Company's stock held by John L. Patten, a stockholder of the Company.
W. A. Salzman, et al., vs. Celestial Ventures Corp., et al., No. 98-2948; in the
334th Judicial District of Harris County, Texas.
This matter arises out of the sale of T. J. Lingle Company to Celestial Ventures
Corp. and Central Valve Company. The allegations involved assert that the assets
of T. J. Lingle Company were misrepresented by R. J. Sudderth (former President
of the Company). There is a note that plaintiff believed obligated Celestial
Ventures Corp. to pay between $400,000 and $500,000, based on these
misrepresentations. The Company vigorously disputed this assertion. The
plaintiff, Mr. Salzman, passed away and the case is inactive.
Rouselle, I. D. vs. Celestial Ventures Corp., R. J. Sudderth., Individually, and
William Salzman, Individually; In the County Court at law Number Four (4) of
Harris County, Texas, No. 647763.
The Company has been named in the matter which we believe involves the same
business dealings and operative facts involving the sale of T. J. Lingle Co. as
the sale described above in the Salzman matter, but involving smaller dollar
amounts. According to local counsel, the Company has not yet been properly
served in this matter.
Dixie Pine Sales, Inc. vs. T. J. Lingle Co. and Celestial Ventures Corp., In the
Judicial District of Harris County, Texas, No. 643629.
The Company has been named in the matter, which we believe involves similar
allegations as the Salzman matter described above, but involving smaller dollar
amounts. According to local counsel, the Company has not yet been properly
served in this matter.
4
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Item 4 Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders for the
period covered by this Report.
5
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Company's common stock is currently traded on the NASDAQ Electronic
Bulletin Board under the symbol "CVNR", and has several market makers. The high
and low bid (price which a market maker is willing to pay for the shares)
quotations for the Company's Shares, as reported to the Company's management by
brokerage firms listed on the specified dates by the National Daily Quotation
System, Inc.'s "Pink Sheets" as making markets in the Company's securities are
listed in the following chart. These quotations are between dealers, do not
include retail mark-ups, mark-downs or other fees and commissions, and may not
represent actual transactions.
Date High Bid Low Bid
Fiscal 1998
September 30, 1997 $6.25 $6.00
December 31, 1997 $6.50 $6.50
March 31, 1998 $5.25 $5.25
June 30, 1998 $5.75 $5.75
Fiscal 1999
September 30, 1998 $6.00 $5.50
December 31, 1998 $5.38 $5.00
March 31, 1999 $5.25 $4.75
June 30, 1999 $6.75 $5.88
There were approximately 1,643 shareholders of record of the Company's
common stock on June 30, 1998.
The Company has not paid dividends on its Common Stock. The Company
intends to retain any future earnings to finance its growth.
Item 6. Management's Plan of Operation
On August 21, 1997, the Company announced that it had entered into a letter of
intent to merge with a high performance materials company which management
believed fit the Company's parameters for an acquisition candidate. On October
30, 1997, the Company worked towards securing the acquisition, as well as
providing future operating revenue for the Company, by completing an overseas
private placement of common stock pursuant to the exemptions afforded by
Regulation S. The offering produced total proceeds of $4,059,000 from investors
in connection with the transaction, whereby a total of 1,353,000 common shares,
par value $0.001, were issued for a purchase price of $3.00 per share. Of the
$4,042,960 of the proceeds received from the offering, after payment of $16,040
in costs of the offering, $ 4,000,000 was remitted to Polymer Dynamics, Inc
("Polymer"), the enterprise with which the Company intended to merge, in
exchange for promissory notes totaling $4,000,000 originally due December 30,
1997, bearing interest at an annualized rate of seven percent (7%). This
maturity date was later extended to December 31, 1999 by written agreement.
However, the notes remained unpaid, and the proposed acquisition unconsummated,
at June 30, 1999, and the Company has decided to reserve fully against the
entire amount of the notes as of that date. The Company will not recognize any
interest income on these notes, and will apply any payments received to reduce
the principal.
6
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On March 18, 1998, the Company and Polymer entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement") providing for transactions that, if
consummated, would have resulted in Polymer being merged with and into the
Company. Because the conditions to the closing of the merger were not satisfied,
the merger agreement terminated by its terms on December 31, 1998. The Company
is currently in negotiations with Polymer concerning the repayment of its
indebtedness to the Company discussed above.
For the year ended June 30, 1999 the Company issued 300,000 shares of common
stock to Mr. John Patten for consulting services to the Company. In addition the
Company issued 100,000 shares of common stock to its President, Irwin
Schneidmill for director's fees. The value of these services are reflected in
the financial statements in general and administrative expenses based on the
market value of the securities of the date issued.
In the event additional working capital is needed, the Company intends to seek
to raise it through the sale of common stock or loans from significant
shareholders.
Effects of Inflation
The impact of inflation on the Company's plan of operation has not been
significant.
Item 7. Financial Statements
The response to this Item is submitted as a separate section of this
report commencing on page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
7
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PART III
Item 9 Directors and Executive Officers of the Registrant
The current executive offices and directors of the Company are
set forth below:
Name Age Position
Irwin Schneidmill 46 CEO, President, Chief Financial
Officer and Director
Robert W. Trause 57 Director
Mark Wolchock 47 Director
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and have qualified. Directors have
received shares of the Company's common stock as remuneration for their services
as such and may be reimbursed for expenses incurred in connection therewith,
such as the cost of travel to Board meetings. Officers serve at the pleasure of
the Board of Directors until their successors have been elected and have
qualified.
Irwin Schneidmill has been the President, Chief Executive
Officer and the Director of the Company since August 1, 1995. From January 1991
to July 1993, Mr. Schneidmill had been a partner at Cataino & Schneidmill, CPAs,
a public accounting firm. From July 1993 to October 1994, Mr. Schneidmill had
been the sole stockholder of Irwin Schneidmill, P.C., a public accounting firm.
Mr. Schneidmill is currently the President and Chief Executive Officer of
America's Shopping Mall, Inc .
Robert W. Trause has served as a Director since March 4, 1996.
He has twenty-five years of professional experience in administration,
management, marketing and sales within small to mid-size companies. Mr. Trause
has served as a Professional Insurance Broker since 1991 with Professional
Insurance Associates, Inc., Carlsdadt, New Jersey, as well as a consultant on
employee benefits for Employer Solutions, Farmingdale, New York, in 1990-1991.
From 1988-1990 he was Senior Vice President of Administration for J.T. Moran &
Company, Incorporated, an investment banking firm where he directed
administration for the New York corporate headquarters and 26 branches (in
excess of 1000 employees).
Mark Wolchock has served as a Director since January 8, 1997.
He has also been employed as Regional Sales Manager for the Cannon Corporation,
a publicly held corporation from 1985 until 1991. Currently, Mr. Wolchock is
acting as Regional Sales Manager of Baxter Health Care, a public corporation and
President of Majestic Solutions Inc., a privately held corporation.
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Item 10. Executive Compensation
Mr. Irwin Schneidmill became the President and Chief Executive Officer of the
Company in August, 1995 at an annual salary of $140,000 per annum. Mr.
Schneidmill has forgone large portions of his salary and other benefits during
fiscal years 1999, 1998 and 1997 in order to assist the Company in meeting its
cash flow needs and to support its capital expenditures. In addition, during
fiscal year 1997, the Company paid $570 per month for the lease on Mr.
Schneidmill's car plus automobile insurance.
The following table discloses for the fiscal years ended June 30, 1999, 1998 and
1997, individual compensation information relating to the Chief Executive
Officer of the Company and no other officers of the Company earned in excess of
$100,000 during fiscal year 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Name and Salary Bonus Other Annual Restricted Options LTIP All Other
Principal Position Compensation Stock Awards /SARS Payouts Compensation
($)/(1) ($) ($) ($) ($) ($) 0
<S> <C> <C> <C> <C> <C> <C> <C>
Irwin Schneidmill
Chief Executive Officer &
President
1999 30,000 0 - 0 0 0 550,000 (3)
1998 71,669 0 - 0 0 0 318,500 (2)
1997 0 0 - 0 0 0 0
</TABLE>
(1) Mr. Schneidmill has forgone large portions of his salary and other benefits
during fiscal years 1999, 1998 and 1997 in order to assist the Company in
meeting its cash flow needs and to support its capital expenditures. However, in
fiscal 1999 and 1998, he received $30,000 and $71,667 respectively in salary.
None of the amounts forgone has been accrued, nor has any forgone amount be
treated as deferred compensation.
(2) Based upon the closing price of the Company's Common Stock on September 29,
1997, the date of the grant of 49,000 shares of the Company's Common Stock to
Mr. Schneidmill.
(3) Based upon the closing price of the Company's common stock on September 15,
1998, the date of the grant of 100,000 shares of the Company's common stock to
Mr. Schneidmill.
Option/SAR Grants In Last Fiscal Year
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No option grants were made during fiscal year 1999 to the Executive Officers.
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Aggregated Option/SAR Exercises In Last fiscal Year and F/Y End
Option/SAR Values
The following table sets forth information with respect to option exercises and
fiscal year-end option values for the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Value Options/SARs in-the-money Options/SARs at
Acquired On Realized at FY-End FY-End (1)(4)
Name Exercise (#) ($) (1) Exercisable/Unexercisable (3) Exercisable/Unexercisable
- ---- ------------ ------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Irwin Schneidmill 15,000 (2) 48,750 -0- $0.00/0
</TABLE>
(1) Based upon the bid price of the Company's Common Stock on June 30, 1999 of
$6.25.
(2) 15,000, adjusted to reflect a 1 for 15 share reverse stock split, effective
May, 1996.
(3) No stock appreciation rights ("SAR") were granted in the fiscal year ended
June 30, 1999.
(4) The remainder of Mr. Schneidmill's options expired in September 1998.
Employment Agreement
Mr. Schneidmill has entered into a five-year employment agreement dated March 1,
1996 with the Company to act as President and Chief Executive Officer; which
provides for an initial annual base salary of $140,000. Mr. Schneidmill has
forgone large portions of his compensation and other benefits from the Company
during fiscal years 1998, 1997 and 1996 in order to assist the Company in
meeting its cash flow needs and to support its capital expenditures. However,
during fiscal 1999 and 1998, he received $30,000 and $71,669 respectively, in
salary. In addition, for the year ended June 30, 1999 the Company issued 100,000
shares of common stock to Mr. Schneidmill for director's fees.
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Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 7, 2000, the record and
beneficial ownership of Common Stock of the Company by each officer and
director, all officers and directors as a group, and each person known to the
Company to own beneficially or of record five percent or more of the outstanding
shares of the Company:
Number of Percentage
Shares Owned of Shares
Name and Address Beneficially(1)(2) Outstanding
- ---------------- --------------------- -----------
Five-Percent Stockholders
Ware & Co. 700,000 23.84%
c/o Morgan Guaranty Trust
9 West 57th Street 11th Floor
New York, NY 10019
Directors & Executive Officers
Irwin Schneidmill ** 224,165 6.93%
Cathy Santo ** 4,334 0.13%
Robert Trause ** 75,000 2.26%
Mark Wolchock ** 5,000 0.17%
Officers and directors 308,499 9.53%
as a group (4 persons)
- ---------------------
** The address of each named person is c/o 382 Route 59, Section 310,
Monsey, NY 10952.
(1) Shares of Common Stock which are not outstanding but which a person has the
right to acquire within sixty days pursuant to outstanding options are
deemed outstanding for the purpose of computing such person's ownership of
Common Stock owned by such person, but are not deemed to be outstanding for
the purpose of computing number of shares or the percentage of Common Stock
owned by any other person.
(2) Does not include 258,853 of Preferred Stock of the Company which is
currently exercisable into Common Stock.
11
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Item 12. Certain Relationships and Related Transactions
See "Executive Compensation" for a description of Mr. Schneidmill's
employment arrangements and director's compensation.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-B).
Exhibit
<TABLE>
<CAPTION>
Numbers Description
<S> <C>
++ 2(a) - Copy of Agreement and Plan of Merger, dated as of March 18, 1998, between
Celestial Ventures Corporation and Polymer Dynamics, Inc.
* 3(a) - Certificate of Incorporation of the Company
* 3(b) - Bylaws of the Company
** 4(a) - Form of Common Stock Certificate
** 10(a) - Purchase Agreement between the Company and Gulf Coast Powder Coatings, Inc., and ATCO
Corporation for the purchase of Gulf Coast Powder Coatings, Inc. by ATCO Corporation dated August 31,
1995.
** 10(b) - Purchase Agreement between the Company and Valves International, Inc., Central Valve
Services, Inc, Alloy Valve International, Inc. (d/b/a CVC International and/or T.J. Lingle
International) (collectively, the "Subsidiaries") and ATCO Corporation for the purchase of the
Subsidiaries by ATCO Corporation, dated August 31, 1995.
*** 10(c) - Employment Agreement between Irwin Schneidmill and the Company dated March 1, 1996.
*** 10(d) - Stock Option Certificate and Agreement between the Company and Irwin Schneidmill dated
September 15, 1995.
+ 10(e) - Assumption Agreement between John Patten and the Company for the R. M. Engineering
note and the Dynamic subordinated note.
+ 10(f) - Indemnification Agreement between John Patten and the Company for the Johnson vs.
Central Valve Services, Inc., et al., litigation.
+++ 10(g) - Informal lease agreement between Remarkable and the Company.
</TABLE>
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In accordance with Item 601 (b) (2) of Regulation S-B, the exhibits
described in the Table of Contents of Exhibit (2) have not been filed.
The Registrant hereby agrees to furnish supplementary copies of such
exhibits to the Commission upon request.
(b) Reports on Form 8-K - The Registrant did not file any reports on Form
8-K during the last quarter of the fiscal year ended June 30, 1999.
* Incorporated by reference to the Company's Registration Statement on Form S-8
dated September 18, 1995.
** Incorporated by reference to the Company's Report on Form 8-K dated August
31, 1995.
*** Incorporated by reference to the Company's Report on Form 10-KSB for the
period ended June 30, 1995.
+ Incorporated by reference to the Company's Report on Form 10-KSB for the
period ended June 30, 1997.
++ Incorporated by reference to the Company's Report on Form 8-K dated March 30,
1998.
+++ Incorporated by reference to the Company's Report on Form 10-KSB for the
period ended June 30, 1998.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By:
------------------------------------
Irwin Schneidmill
President, Chief Executive, and
Financial Officer and a Director
Dated: March 10, 2000
Name Title Date
- ------------------------------ President Chief Executive March 10, 2000
and Financial Officer, and
a Director (Principal
Executive and Financial
Officer)
- ------------------------------ Director March 10, 2000
Robert Trause
- ------------------------------ Director March 10, 2000
Mark Wolchock
14
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CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1999 and 1998
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Table of Contents
Page
Independent Auditors' Report F-2
Consolidated Financial Statements
Balance Sheet F-3
June 30, 1999
Statements of Operations F-4
For the Years Ended June 30, 1999 and 1998
Statements of Stockholders'(Deficit) F-5
For the Years Ended June 30, 1999 and 1998
Statements of Cash Flows F-6
For the Years Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements F-7-12
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BAUM & COMPANY, P.A.
Certified Public Accountants
1515 University Drive - Suite 209
Coral Springs, Florida 33071
(954) 752-1712
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Celestial Ventures Corporation and Subsidiaries
Monsey, New York
We have audited the accompanying consolidated balance sheet of Celestial
Ventures Corporation and Subsidiaries as of June 30, 1999, and the related
consolidated statements of operations, stockholders'(deficit), and cash flows
for the years ended June 30, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 consolidated financial position of Celestial Ventures
Corporation and Subsidiaries as of June 30, 1999, and the results of its
operations and its cash flows for the years ended June 30, 1999 and 1998 in
conformity with generally accepted accounting principles.
October 11, 1999
Coral Springs, Florida
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1999
Assets
Current assets
Cash In $ 23,634
============
Liabilities and Stockholders (Deficit)
Current Liabilities
Accounts payable and accrued expenses $ 15,250
------------
Other Liabilities
Net liabilities of discontinued operations 170,000
------------
185,250
------------
Stockholders'(Deficit)
Convertible Preferred Stock-$.001 par
value; authorized 500,000,000 shares,
issued and outstanding 258,853 shares 259
Common Stock-$.001 par value; authorized
500,000,000 shares, issued and
outstanding 3,235,716 shares 3,236
Additional paid-in capital 12,351,901
Accumulated (deficit) (12,517,012)
------------
(161,616)
$ 23,634
============
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For The Years Ended
June 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues $ - 0 - $ - 0 -
Operating (Income) and Expenses
Selling, general and administrative 2,437,485 802,829
---------- ----------
(Loss) from Operations (2,437,485) (802,829)
---------- ----------
Other Income and (Expense)
Write-Off of note receivable to Polymer
Dynamics, Inc. (Note 6) - 0 - (4,000,000)
Recovery of Bad Debt 139,666 - 0 -
---------- ----------
Total Other Income and (Expense) 139,666 (4,000,000)
---------- ----------
Net (Loss) (2,297,819) (4,802,829)
========== ==========
Weighted Average Common Share Outstanding 2,930,087 2,406,072
---------- ----------
Basic and Diluted (Loss) Per Share from
Continuing Operations $ (.78) $ (2.00)
---------- ----------
Basic and Diluted Net (Loss) Per Share $ (.78) $ (2.00)
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For The Years Ended June 30, 1999 and 1998 and 1997
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional
------------------- ------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit) Total
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-June 30, 1997 258,853 $ 259 1,247,869 $ 1,248 $ 5,239,938 $ (5,416,364) $ (174,919)
Stock issued in overseas
offering - 0 - -0- 1,353,000 1,353 4,041,607 - 0 - 4,042,960
Exercise of warrants - 0 - -0- 31,665 32 94,963 - 0 - 94,995
Exercise of options - 0 - -0- 56,665 57 169,938 - 0 - 169,995
Stocks issued for directors'
fees - 0 - -0- 74,000 74 480,926 - 0 - 481,000
Net (loss) - 0 - -0- - 0 - - 0 - - 0 - (4,802,829) (4,802,829)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Balance-June 30, 1998 258,853 259 2,763,199 2,764 10,027,372 (10,219,193) (188,798)
Exercise of options 22,517 22 74,979 75,001
Stocks issued for consulting
fees 300,000 300 1,424,700 1,425,000
Stocks issued for directors'
fees 150,000 150 824,850 825,000
Net (loss) (2,297,819) (2,297,819)
Balance-June 30, 1999 258,853 $ 259 3,235,716 $ 3,236 $12,351,901 $(12,517,012) $ (161,616)
=========== =========== =========== =========== =========== ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For The Years Ended
June 30,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) $(2,297,819) $(4,802,829)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Write-off of advance to Polymer Dynamics, Inc. - 0 - 4,000,000
Expenses paid through the issuance of common stock - 0 - 481,000
Decrease in:
Other receivables 3,795 1,205
Increase (decrease) in:
Accounts payable and accrued expenses 14,503 (15,607)
----------- -----------
Net cash used in continuing operations (2,279,521) (336,231)
Cash Flows from Investing Activities
Advances to Polymer Dynamics, Inc - 0 - (4,000,000)
----------- -----------
Cash Flows from Financing Activities
Proceeds from issuance of common stock 232,001 4,307,950
Proceeds of loans from stockholders - 0 - 22,500
Reduction of loans from stockholders 22,500 - 0 -
----------- -----------
254,501 4,330,450
Net Increase (Decrease) in Cash 22,980 (5,781)
Cash - beginning of period 654 6,435
----------- -----------
Cash - end of period $ 23,634 $ 654
============ ===========
Supplemental Disclosures
Non-cash investing and financing transactions:
Common stock issued for services $ 2,250,000 $ - 0 -
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
1 - Business and Summary of Significant Accounting Policies
Celestial Ventures Corporation ("CVC") was organized under the laws of
the State of Nevada on January 28, 1987. CVC purchased a wholly-owned
subsidiary on July 1, 1995, Success Direct, Inc., which is the business
of Business to Business direct mail marketing in the United States and
Canada. In December, 1995, the corporate name of Success Direct, Inc.,
was changed to Remarkable Office Products, Inc. ("Remarkable").
Effective October 1, 1996, CVC sold Remarkable to Dynamic products Corp
("DPC"). As of June 30, 1997, all of the operating divisions of the
Company have been sold.
Significant accounting policies follow:
1. Principles of Consolidation - The consolidated financial
statements include the accounts of CVC and its subsidiaries
(the "Company"). All subsidiaries are included up until their
date of disposition. All intercompany accounts and
transactions are eliminated upon consolidation.
2. Income Taxes - Current income taxes are based on the taxable
income for the year, as measured by the current year's tax
returns. Deferred income taxes arise primarily due to various
temporary differences between financial and income tax
reporting. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized.
3. Earnings Per Share - The Company has adopted the provisions of
Statements of Financial Accounting No. 128 Earnings Per Share.
Basic earnings per share is computed by dividing the net loss
by the weighted average number of shares outstanding during
the year. Diluted earnings per share include securities which
are convertible into common stock to the extent such inclusion
would be dilutive. The Company has applied this standard
retroactively for all periods presented. Such retroactive
application had no effect on previously reported earnings per
share.
4. Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
5. Reclassifications - Various accounts in the prior year
financial statements have been reclassified for comparative
purposes to conform with the presentation in the current
year's financial statements. These reclassifications had no
impact on the results of operations.
F-7
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
1 - Business and Summary of Significant Accounting Policies (Continued)
6. Stock-Based Compensation - in accordance with FAB 123, the
Company records its stock-based compensation at fair value.
7. Recently Issued Accounting Pronouncements - Recently issued
accounting pronouncements, which the Company has not yet
adopted, include SFAS 130 - Reporting Comprehensive income,
effective for fiscal years beginning after December 15, 1997;
SFAS 131 - Disclosures about Segments of an Enterprise,
effective for periods beginning after December 15, 1997; SFAS
132 - Employer's Disclosure about Pensions and Other Post-
retirement Benefits, effective for fiscal year beginning after
December 15, 1997; and SFAS 133 - Accounting for Derivative
Instruments and hedging Activities effective for periods
beginning after June 15, 1999.
The Company has not yet determined the effect, if any, that
adoption of these standards will have on the Company's
financial statements.
2 - Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities
recognized for financial reporting and the amounts recognized for
income tax purposes. The significant components of the deferred tax
asset are as follows:
June 30,
------------------------
1999 1998
---- ----
Assets
Net operating loss carryforwards $2,001,934 $2,200,000
Less: Valuation allowance 2,001,934 2,200,000
---------- ----------
$ - 0 - $ - 0 -
========== ==========
The net deferred tax asset continues to be fully offset by a valuation
allowance due to uncertainties surrounding the ultimate realization of
those assets. At June 30, 1998, approximately $6,600,000 of net
operating loss carryforwards, which expire in various periods through
2012, are available to offset future taxable income. The valuation
allowance increased by $1,894,000 as compared to June 30, 1997 due to
increased net operating loss carryforwards.
3 - Stock
The Company's preferred stock is convertible into the Company's common
stock at the rate of 15 shares of preferred for each share of common.
No dividends have been declared and there is no dividend requirement.
The holders of the preferred stock are entitled to a preference in the
event of the Company's liquidation.
F-8
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
4 - Discontinued Operations, Sale of Subsidiary and
Related Party Transactions
On November 21, 1996, (effective October 1, 1996) the Company sold all
of the issued and outstanding capital stock of a subsidiary, Remarkable
Office Products ("Remarkable") to DPC a company under common
management, for $1,406,250. The president and chief executive officer
of the Company is also the president, chief executive officer and
principal stockholder of DPC. In connection with the disposal of this
wholly-owned subsidiary. The Company realized a gain of approximately
$731,512, calculated as the difference between the value received of
$1,406,250 and the net assets of $674,738 of Remarkable at October 1,
1996. On June 20, 1997, the Company entered into an agreement with John
Patten, a significant stockholder, whereby the Company transferred its
rights under the remaining past due $300,000 note receivable from DPC
in exchange for Mr. Patten's assumption of the Company's obligation for
the USPC note payable of $170,000 to R.M. Engineering discussed below.
To date, R.M. Engineering has not released the Company from its
obligation under the note payable; accordingly, the liability remains
recorded at June 30, 1998. The total gain calculated above has been
reduced by this transfer resulting in a net gain on sale of subsidiary
of $431,512. Since Remarkable was sold within two years of its
acquisition, which was accounted for similar to a pooling of interest,
the gain is shown as an extraordinary item. The prior period financial
statements have been restated to reflect the discontinued operations of
Remarkable.
As of June 30, 1998, the Company's aggregate net liabilities relating
to the discontinued operations of USPC amounted to $170,000, which
represents a demand note obligation due to R.M. Engineering relating to
a previous equipment purchase. The note is due on demand and bears
interest at 4%. The obligation to pay this note has been assumed by Mr.
Patten, as previously discussed.
In connection with his guarantees of various liabilities of the Company
and other services rendered, the Company issued 93,316 shares of common
stock to Mr. Patten in June, 1997. The related expense of $320,074 is
included in other expenses. For the year June 30, 1999, Mr. Patten
received 300,000 shares of common stock for consulting services to the
Company and its president received 100,000 shares of common stock for
Director fees. The value of these services are reflected in the
financial statements in general and administrative expenses based on
the market value of the securities of the date issued.
The Company leases office space from D.P.C. And reimburses it for
expenses paid on the Company's behalf. During the fiscal year ended
June 30, 1999 and 1998, the Company paid D.P.C. $45,540 and $45,540
respectively.
5 - Litigation
The Company is involved in various lawsuits: Janet M. Johnson,
individually and as Next Friend of Lauren Brel Clark and Eryn Renee
Clark, Minors and as Executor of the Estate of Annie M. Murray vs.
Central Valve Services, Inc., Celestial Ventures Corporation, Heuermann
& Associates, Inc. and Tony Heuerman, No. 96-42066, In the District
Court of Harris County, Texas, 80th Judicial District.
<
F-9
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
5 - Litigation (Continued)
The Plaintiffs' First Amended Original petition was served upon the
Company (one of many defendants) on April 23, 1997. The Plaintiffs
allege that they were injured as a result of certain misrepresentations
made by Tony Heuermann (a Texas investment manager unconnected to the
Company) which induced the Plaintiffs into investing monies into the
Company and its wholly-owned subsidiary, Central Valve Services, Inc.
("Central"). The alleged investment includes payment for 25,343 (prior
to the 1 for 15 reverse split) shares of the Company's common stock as
well as numerous promissory notes issued by Central in which Bob
Sudderth (former President of the Company) also signed on behalf of
Central and the Company as Guarantor. The Plaintiffs claim that these
notes are in default and the shares are trading below the promised
value. Accordingly, the Plaintiffs now seek damages from the Company
(as well as Central, Sudderth and Heuermann) to recoup these monies
lost as a result of these alleged false representations and violations
of Texas Deceptive Trade Practices Act in the amount of $62,092 plus
interest, costs and punitive damages. A partial summary judgment based
on default in the amount of $70,000 was awarded but is now being
challenged vigorously, as are claims for interest, costs and punitive
damages.
The other parties to the litigation have agreed to address this matter
in non-binding mediation. Should the parties fail to resolve this
matter by such mediation, and the court schedules a hearing for this
matter, the Company intends to defend this action vigorously.
Sirco Systems, LLC vs. Gold Coast Powder Coatings, Inc., Celestial
Ventures Corporation, Custom Coatings, Inc., W. G. Dodson, William V.
Reynolds, Herbert W. Reynolds, et al., Civil Action No. CV 98-2215, In
the Circuit Court of Jefferson County, Alabama.
The plaintiff brought suit in 1998, concerning a contractual dispute
with a former subsidiary of the Company, and obtained a judgment
against all defendants in the amount of $122,000. The Company is
vigorously contesting responsibility for any portion of the judgment
through local counsel, and has recently reached an agreement with
plaintiff to settle any alleged liabilities. Pursuant to the settlement
agreement, the plaintiff is to receive $10,000 and 10,000 shares of the
Company's stock held by John I. Patten, a stockholder of the Company.
The judgment has been marked satisfied. Mr. Patten has agreed to
indemnify the Company and hold it harmless for any costs incurred by
the Company or for any potential award or settlement that might arise
in the future. Mr. Patten has demonstrated to the Company's
satisfaction his financial ability to assume such obligation.
W. A. Salzman, et al., vs. Celestial Ventures Corp., et al., No.
98-2948; in the 334th Judicial District of Harris County, Texas. This
matter arises out of the sale of T. J. Lingle Company to Celestial
Ventures Corp. and Cental Valve Company. The allegations involved
assert that the assets of T. J. Lingle Company were misrepresented by
R. J. Sudderth (former President of the Company). There is a note that
plaintiff believed obligated Celestial Ventures Corp. to pay between
$400,000 and $500,000, based on these
F-10
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
5 - Litigation (Continued)
misrepresentations. The Company vigorously disputed this assertion. The
plaintiff, Mr. Salzman, passed away and the case is inactive.
Rouselle, I. D. vs. Celestial Ventures Corp., R. J. Sudderth.,
Individually, and William Salzman, Individually; In the County Court at
law Number Four (4) of Harris County, Texas, No. 647763. The Company
has been named in the matter which we believe involves the same
business dealings and operative facts involving the sale of T. J.
Lingle Co. as the sale described above in the Salzman matter, but
involving smaller dollar amounts. According to local counsel, the
Company has not yet been properly served in this matter. The Company
does not intend to defend vigorously.
Dixie Pine Sales, Inc. vs. T. J. Lingle Co. and Celestial Ventures
Corp., In the Judicial District of Harris County, Texas, No. 643629.
The Company has been named in the matter, which we believe involves
similar allegations as the Salzman matter described above, but
involving smaller dollar amounts. According to local counsel, the
Company has not yet been properly served in this matter. The Company
does intend to defend vigorously.
6 - Agreement for Merger
On August 21, 1997, the Company formally announced that it had entered
into a letter of intent to merge with Polymer Dynamics, Inc. ("PDI"), a
high performance materials company. On October 30, 1997, the Company
worked toward securing the merger by completing an overseas private
placement of common stock pursuant to the exemptions afforded by
Regulation S. The Company has received $4,042,960, net of $16,040 of
issuance costs, from investors in connection with the transaction,
whereby a total of 1,353,000 common shares, par value $.001, were
issued for a purchase price of $3.00 per share. Of those amounts
received from the offering, $4,000,000 has been remitted to PDI in
exchange for unsecured convertible Subordinated Notes (the "Notes")
totaling $4,000,000. The Notes bear interest at an annualized rate of
7%, and originally bore a maturity date of December 30, 1997. The
maturity date has subsequently been extended to December 31, 1999. The
Company remains confident that the merger will be completed or the
Notes will be repaid in full on or before that date.
On March 18, 1998, the Company and PDI entered into an Agreement and
Plan of Merger (the "Merger Agreement") providing for transactions that
will result in PDI being merged with and into the Company. The company
surviving the merger will be a Nevada corporation that will be called
Polymer Dynamics, Inc. ("Polymer"). Completion of the merger is subject
to, among other things, the approval of the Registrant's and Polymer's
stockholders. Under the Merger Agreement, each outstanding share of the
Company's common stock shall remain unchanged, and each outstanding
share of the Company's preferred stock will be converted into
one-fifteenth of a share of the surviving corporation's common stock.
Each outstanding share of Polymer's common stock and Series A preferred
stock will be converted into a single share of common stock and Series
A preferred stock, respectively, of the surviving corporation.
F-11
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
6 - Agreement for Merger (Continued)
Based on the Company's evaluation of the credit worthiness of PDI, the
Company has decided to fully reserve against the Notes as of June 30,
1998 and not reflect the accrued interest on these Notes due to the
uncertainty of payment. In year ended June 30, 1999, the Company
received $221,756 of interest in arrears plus interest received and
accrued for the current year of $350,000. The Company is also
contingently liable for approximately $25,000 in legal fees related to
the proposed merger.
If the merger is consummated, the transactions will be accounted for as
a reverse acquisition whereby PDI will be treated as the acquirer for
accounting purposes in a combination similar to a pooling-of-interests.
The Notes totaling $4,000,000 will be added to the equity section of
Polymer.
F-12
