<PAGE>
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, 2000.
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)
600 E Crescent Ave Suite 202 Upper Saddle River NJ 07458
--------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 934-2100
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. [X] Yes [ ] 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, 2000, based on the average bid and
asked price on such date, was approximately $14,372,039.
Number of shares of Common Stock outstanding as of June 30, 2000: 3,330,716.
Number of shares of Preferred Stock outstanding as of June 30, 2000: 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.
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 $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, 2000. 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.
2
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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, 2000, 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,
pursuant to the loan agreement, has exercised their rights to convert all of the
outstanding debt plus accrued interest into common stock of Polymer Dynamics.
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 600 E Crescent Avenue Suite
202 Upper Saddle River, New Jersey, 07458. This facility is currently leased by
the holding company of The Remarkable Group, Inc., which expires on December 31,
2004 and provides for an option to renew for one five-year period. 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.
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
3
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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. Pursuant to
a settlement agreement in October 2000, the Plaintiff received $50,000 as full
settlement of all outstanding claims.
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 an assertion 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.
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.
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.
4
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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 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
Fiscal 2000
September 30, 1999 $5.75 $5.75
December 31, 1999 $6.00 $5.75
March 31, 2000 $5.00 $5.00
June 30, 2000 $4.38 $4.25
There were approximately 1,639 shareholders of record of the Company's
common stock on June 30, 2000.
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, 2000, 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.
5
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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,
pursuant to the loan agreement, has exercised their rights to convert all of the
outstanding debt plus accrued interest into common stock of Polymer Dynamics.
For the year ended June 30, 2000 the Company issued 95,000 shares of common
stock to Mr. John Patten for consulting services to the Company. 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.
6
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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 47 CEO, President, Chief Financial Officer and
Director
Robert W. Trause 58 Director
Mark Wolchock 48 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.
7
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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 2000, 1999, and 1998 in order to assist the Company in meeting its
cash flow needs and to support its capital expenditures.
The following table discloses for the fiscal years ended June 30, 2000, 1999,
and 1998, individual compensation information relating to the Chief Executive
Officer of the Company and no other officers of the Company earned in excess of
$100,000 during fiscal year 2000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Annual Restricted Options LTIP All Other
Name and Salary Bonus Compensation Stock Awards /SARS Payouts Compensation
Principal Position ($)/(1) ($) ($) ($) ($) ($) 0
------------------ ------ ----- ------------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Irwin Schneidmill
Chief Executive Officer &
President
2000 0 0 - 0 0 0 0
1999 30,000 0 - 0 0 0 550,000(3)
1998 71,667 0 - 0 0 0 318,500(2)
</TABLE>
(1) Mr. Schneidmill has forgone large portions of his salary and other benefits
during fiscal years 2000, 1999 and 1998 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
No option grants were made during fiscal year 2000 to the Executive Officers.
Aggregated Option/SAR Exercises In Last fiscal Year and F/Y End
Option/SAR Values
No stock appreciation rights ("SAR") were granted in the fiscal year ended June
30, 2000.
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.
8
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Mr. Schneidmill has forgone large portions of his compensation and other
benefits from the Company during fiscal years 2000, 1999, 1998 and 1997 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.
9
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Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of November 14, 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 21.02%
c/o Morgan Guaranty Trust
9 West 57th Street 11th Floor
New York, NY 10019
Directors & Executive Officers
Irwin Schneidmill ** 224,165 6.73%
Cathy Santo ** 4,334 0.13%
Robert Trause ** 75,000 2.25%
Mark Wolchock ** 5,000 0.15%
Officers and directors 308,499 9.26%
as a group (4 persons)
---------------------
** The address of each named person is c/o 600 E Crescent Avenue Suite 202
Upper Saddle River, NJ 07458.
(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.
10
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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
Numbers Description
++ 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.
<PAGE>
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, 2000.
* 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.
12
<PAGE>
SIGNATURES
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.
CELESTIAL VENTURES CORPORATION.
By: _________________________
Irwin Schneidmill
President, Chief Executive, and
Financial Officer and a Director
Dated: November 14, 2000
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
President Chief Executive November 14, 2000
------------------------------------ and Financial Officer, and
Irwin Schneidmill a Director (Principal
Executive and Financial Officer)
Director November 14, 2000
------------------------------------
Robert Trause
Director November 14, 2000
------------------------------------
Mark Wolchock
</TABLE>
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 2000 and 1999
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Table of Contents
Page
Independent Auditors' Report F-2
Consolidated Financial Statements
F-3
Balance Sheet
June 30, 2000
F-4
Statements of Operations
For the Years Ended June 30, 2000 and 1999
Statements of Stockholders'(Deficit) F-5
For the Years Ended June 30, 2000 and 1999
Statements of Cash Flows F-6
For the Years Ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements F-7-9
BAUM & COMPANY, P.A.
<PAGE>
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
We have audited the accompanying consolidated balance sheet of Celestial
Ventures Corporation and Subsidiaries as of June 30, 2000, and the related
consolidated statements of operations, stockholders' (deficit), and cash flows
for the years ended June 30, 2000 and 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, 2000, and the results of its
operations and its cash flows for the years ended June 30, 2000 and 1999 in
conformity with generally accepted accounting principles.
November 3, 2000
Coral Springs, Florida
F-2
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CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 2000
Assets
Current assets
Cash In Bank $ 90
============
Liabilities and Stockholders' (Deficit)
Current Liabilities
Accounts payable and accrued expenses $ 18,169
Note payable - stockholder 13,000
------------
31, 169
Other Liabilities
Net liabilities of discontinued operations 170,000
------------
Total liabilities 201,169
------------
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 3,330,716 shares 3,331
Additional paid-in capital 12,700,556
Accumulated (deficit) (12,905,225)
------------
Total Stockholders' (Deficit) (201,079)
------------
Total Liabilities and Stockholders' (Deficit) $ 90
============
F-3
<PAGE>
See Notes to Consolidated Financial Statements.
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For The Years Ended
June 30,
2000 1999
--------------------------------
Revenues $ - 0 - $ - 0 -
Operating (Income) and Expenses
Selling, general and administrative 388,213 2,437,485
------------ -------------
(Loss) from Operations (388,213) (2,437,485)
------------ -------------
Other Income and (Expense)
Recovery of Bad Debt - 0 - 139,666
------------ -------------
Total Other Income and (Expense) - 0 - 139,666
------------ -------------
Net (Loss) (388,213) (2,297,819)
============ =============
Weighted Average Common Share Outstanding 3,314,466 2,930,087
------------ -------------
Basic and Diluted (Loss) Per Share from
Continuing Operations $ (.18) $ (.78)
------------ -------------
Basic and Diluted Net (Loss) Per Share $ (.18) $ (.78)
------------ -------------
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, 2000 and 1999
<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, 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)
Stocks issued for indemnification
of corporate liabilities 75,000 75 318,675 318,750
Stocks issued for satisfaction
of debt 20,000 20 29,980 30,000
Net (loss) (388,213) (388,213)
--------- ------ --------- -------- ----------- ------------ ----------
Balance-June 30, 2000 258,853 $ 259 3,330,716 $ 3,331 $12,700,556 $ 12,905,225 $ (201,079)
========= ====== ========= ======== =========== ============ ==========
</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
-----------------------------
2000 1999
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) $ (388,213) $(2,297,819)
Adjustments to reconcile net (loss) to net cash (used for) operating
activities:
Issuance of common stock for indemnification of debt 318,750 -0-
Issuance of common stock for satisfaction of debt 30,000 -0-
Decrease in:
Other receivables - 0 - 3,795
Increase in:
Accounts payable and accrued expenses 2,919 14,503
---------- -----------
Net cash used in continuing operations (36,544) (2,279,521)
Cash Flows from Financing Activities
Proceeds from issuance of common stock - 0 - 232,001
Proceeds of loans from stockholders 13,000 - 0 -
Reduction of loans from stockholders - 0 - 22,500
---------- -----------
13,000 254,501
---------- -----------
Net Increase (Decrease) in Cash 23,544 22,980
Cash - beginning of period 23,634 654
---------- -----------
Cash - end of period $ 90 $ 23,634
========== ===========
Supplemental Disclosures
Non-cash investing and financing transactions:
Common stock issued for services $ 348,750 $ 2,250,000
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
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. 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, 2000
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,
----------------------------
2000 1999
------ ------
Assets
Net operating loss carryforwards $ 2,390,147 $2,001,934
Less: Valuation allowance 2,390,147 2,001,934
----------- ----------
$ - 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.
3 - Capital
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.
4 - Related Party Transactions
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, 2000.
As of June 30, 2000, 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.
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. For the year ended June
30, 2000, Mr. Patton received 75,000 shares of common stock for
indemnifying various corporate liabilities. Additionally, he received
20,000 shares of common stock in satisfaction of a loan to the Company.
The Company leases office space from Remarkable Office Products, Inc. and
reimburses them for expenses paid on the Company's behalf. During the
fiscal year ended June 30, 2000 and 1999, the Company paid $45,540 per
year.
F-8
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
5 - Litigation
Janet M. Johnson, individually and as next friend of Lauren Brel Clark and
Eryn Renee Clark, minors as as Executor of the Estate of Annie M. Murray
vs. Central Value Services, Inc., Celestial Ventures Corporation, Heuerman
& Associates, Inc. and Tony Heuerman, No. 96-42066, in the District Court
of Harris County, Texas This case was subsequently settled for a payment of
$ 50,000 in October 2000.
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 an assertion 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. 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 - Conversion of debt
On August 21, 1997, the Company entered into a letter of intent to merge
with Polymer Dynamics, Inc. ("PDI"). As part of the agreement $ 4,000,000
was remitted to PDI in exchange for unsecured convertible Notes bearing
interest at 7% per annum. The Company, pursuant to the loan agreement, has
exercised their rights to convert all of the outstanding debt plus accrued
interest into common stock of Polymer Dynamics.
F-9
