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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
MILESTONE CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1111224
(State of Incorporation) (I.R.S. Employer I.D. No.)
26 West Dry Creek Circle, Suite 600
Littleton, CO 80120
(Address of principal executive offices, including zip code)
(303) 794-9450
(Registrant's telephone number, including area code)
Copies to:
Gary A. Agron
5445 D.T.C. Parkway, Suite 520
Englewood, CO 80111
(303) 770-7254
Securities to be registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) Business Development.
Milestone Capital, Inc. (the "Company") was organized under the laws of the
State of Colorado on February 6, 1987, under the name Shield Enterprises, Inc.
for the purpose of engaging in a merger with, or acquisition of, one or a small
number of private companies, partnerships or sole proprietorships. In 1989, the
Company completed an initial public offering of its securities. In May 1990, the
Company merged with Milestone Capital, Inc., a Delaware corporation engaged in
the business of investing in and providing managerial assistance to developing
companies and the Company changed its name to Milestone Capital, Inc. The
Company is seeking business opportunities through a merger with, or acquisition
of, one or more private companies. The Company has had no material operations in
the past three years.
The Company believes that there is a demand by non-public corporations for
shell corporations that have a public distribution of securities, such as the
Company. The Company believes that demand for shell corporations has increased
dramatically since the Securities and Exchange Commission (the "Commission")
imposed additional requirements upon "blank check" companies pursuant to Reg.
419 of the Securities Act of 1933, as amended (the "Act"). According to the
Commission, Rule 419 was designed to strengthen regulation of securities
offerings by blank check companies, which Congress has found to have been a
common vehicle for fraud and manipulation in the penny stock market. See
Securities Act Releases No. 6891 (April 17, 1991), 48 SEC Docket 1131 and No.
6932 (April 13, 1992) 51 Docket 0382, SEC Docket 0382. The foregoing regulation
has substantially decreased the number of "blank check" offerings filed with the
Commission, and as a result has stimulated an increased demand for shell
corporations. While the Company has made the foregoing assumption, there is no
assurance that the same is accurate or correct and, accordingly, no assurance
that the Company will merge with or acquire an existing private entity.
(b) General.
The Company proposes to seek, investigate and, if warranted, acquire an
interest in one or more business opportunity ventures. As of the date hereof,
the Company has no business opportunities or ventures under contemplation for
acquisition or merger but proposes to investigate potential opportunities with
investors or entrepreneurs with a concept which has not yet been placed in
operation, or with firms which are developing companies. The Company may seek
out established businesses which may be experiencing financial or operation
difficulties and are in need of the limited additional capital the Company could
provide. The Company anticipates that it will seek to merge with or acquire an
existing business. After the merger or acquisition has taken place, the
surviving entity will be the Company, however, management from the acquired
entity will in all likelihood operate the Company. There is a remote possibility
that the Company may seek to acquire and operate an ongoing business, in which
case the existing management might be retained. Due to the absence of capital
available for investment by the Company, the types of business seeking to be
acquired by the Company will invariably be smaller and higher risk types of
businesses. In all likelihood, a business opportunity will involve the
acquisition of or merger with a corporation which does not need additional cash
but which desires to establish a public trading market for its Common Stock.
Accordingly, the Company's ability to acquire any business of substance will be
extremely limited.
The Company does not propose to restrict its search for investment
opportunities to any particular industry or geographical location and may,
therefore, engage in essentially any business, anywhere, to the extent of its
limited resources.
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It is anticipated that business opportunities will be available to the
Company and sought by the Company from various sources throughout the United
States, including its officers and directors, professional advisors such as
attorneys and accountants, securities broker/dealers, venture capitalists,
members of the financial community, other businesses and others who may present
solicited and unsolicited proposals. Management believes that business
opportunities and ventures will become available to it due to a number factors,
including, among others: (a) management's willingness to enter into unproven,
speculative ventures; (b) management's contacts and acquaintances; and (c) the
Company's flexibility with respect to the manner in which it may structure
potential financing, mergers and/or acquisitions. However, there is no assurance
that the Company will be able to structure, finance, merge with and/or acquire
any business opportunity or venture.
(c) Operation of the Company.
The Company intends to search throughout the United States for a
merger/acquisition candidate, however, because of its lack of capital, the
Company believes that the merger/acquisition candidate will be conducting
business within a limited geographical area. The Company intends to maintain its
corporate headquarters and principal place of business at 26 West Dry Creek
Circle, Suite 600, Littleton, Colorado 80120. All corporate records will be
maintained at said office, and it is anticipated that all shareholders' meetings
will take place in Colorado. In the event that a merger or acquisition of the
Company takes place, no assurance can be given that the corporate records or
headquarters will continue to be maintained at Littleton, Colorado, or that
shareholders' meetings will be held in Colorado.
The Company's sole executive officer will seek acquisition/merger
candidates and/or orally contact individuals or broker/dealers and advise them
of the availability of the Company as an acquisition candidate. The Company's
sole executive officer will review material furnished to him by the proposed
merger/acquisition candidates and decide if a merger/acquisition is in the best
interests of the Company and its shareholders.
The Company may employ outside consultants until a merger/acquisition
candidate has been targeted by the Company, however, management believes that it
is impossible to consider the criteria that will be used to hire such
consultants. While the Company may hire independent consultants, it has not
considered any criteria regarding their experience, the services to be provided,
or the term of service. The Company has not had any discussions with any
consultants and there are no agreements or understandings with any consultants.
Other than as disclosed herein, there are no other plans for accomplishing the
business purpose of the Company.
(d) Selection of Opportunities.
The analysis of new business opportunities will be undertaken by or under
the supervision of the Company's sole executive officer and director who is not
a professional business analyst and has had little previous training or
experience in business analysis. Inasmuch as the Company will have no funds
available to it in its search for business opportunities and ventures, the
Company will not be able to expend significant funds on a complete and
exhaustive investigation of such business or opportunity. The Company will
however, investigate, to the extent believed reasonable by its management, such
potential business opportunities or ventures.
As part of the Company's investigation, representatives of the Company will
meet personally with management and key personnel of the firm sponsoring the
business opportunity, may visit and inspect plants and facilities, obtain
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independent analysis or verification of certain information provided, check
references of management and key personnel, and conduct other reasonable
measures, to the extent of the Company's limited financial resources and
management and technical expertise.
Prior to making a decision to recommend to shareholders participation in a
business opportunity or venture, the Company will generally request that it be
provided with written materials regarding the business opportunity containing
such items as a description of products, services and company history;
management resumes; financial information; available projections with related
assumptions upon which they are based; evidence of existing patents, trademarks
or service marks or rights thereto; current and proposed forms of compensation
to management; a description of transactions between the prospective entity and
its affiliates during relevant periods; a description of current and required
facilities; an analysis of risks and competitive conditions; and other
information deemed relevant.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and costs for accountants, attorneys and others. The Company's sole
executive officer anticipates funding the Company's operations, including
providing funds necessary to search for acquisition candidates, until an
acquisition candidate is found, without regard to the amount involved.
Accordingly, no alternative cash resources have been explored.
The Company will have unrestricted flexibility in seeking, analyzing and
participating in business opportunities. In its efforts, the Company will
consider the following kinds of factors:
(i) Potential for growth, indicated by new technology, anticipated market
expansion or new products;
(ii) Competitive position as compared to other firms engaged in similar
activities;
(iii) Strength of management;
(iv) Capital requirements and anticipated availability of required funds
from future operations, through the sale of additional securities,
through joint ventures or similar arrangements or from other sources;
and
(v) Other relevant factors.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize that due to
the Company's limited capital available for investigation and management's
limited experience in business analysis, the Company may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more. The
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Company does not plan to raise any capital at the present time, by private
placements, public offerings, pursuant to Regulation S promulgated under the
Act, or by any means whatsoever. Further, there are no plans, proposals,
arrangements or understandings with respect to the sale or issuance of
additional securities prior to the location of an acquisition or merger
candidate.
(e) Form of Acquisition.
The manner in which the Company participates in an opportunity will depend
upon the nature of the opportunity, the respective needs and desires of the
Company and the promoters of the opportunity, and the relative negotiating
strength of the Company and such promoters. The exact form or structure of the
Company's participation in a business opportunity or venture will be dependent
upon the needs of the of the particular situation. The Company's participation
may be structured as an asset purchase agreement, a lease, a license, a joint
venture, a partnership, a merger, or acquisition of securities.
As set forth above, the Company may acquire its participation in a business
opportunity through the issuance of Common Stock or other securities in the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1954, as amended, may depend
upon the issuance to the shareholders of the acquired company of at least eighty
percent (80%) of the Common Stock of the combined entities immediately following
the reorganization. If a transaction were structured to take advantage of these
provisions rather than other "tax free" provisions provided under the Internal
Revenue Code, all prior shareholders may, in such circumstances, retain twenty
percent (20%) or less of the total issued and outstanding Common Stock. If such
a transaction were available to the Company, it will be necessary to obtain
shareholder approval to effectuate a reverse stock split or to authorize
additional shares of Common Stock prior to completing such acquisition. This
could result in substantial additional dilution to the equity of those who were
shareholders of the Company prior to such reorganization. Further, extreme
caution should be exercised by any investor relying upon any tax benefits in
light of the proposed new tax laws. It is possible that no tax benefits will
exist at all. Prospective investors should consult their own legal, financial
and other business advisors.
The present management and the shareholders of the Company will in all
likelihood not have control of a majority of the voting shares of the Company
following a reorganization transaction. In fact, it is most probable that the
shareholders of the acquired entity will gain control of the Company. The terms
of sale of the shares presently held by management of the Company may not be
afforded to other shareholders of the Company. As part of any transaction, the
Company's then directors may resign and new directors may be appointed without
any vote by shareholders.
The Company may not borrow funds and use funds to make payments to Company
promoters, management or their affiliates or associates.
The Company has an unwritten policy that it will not acquire or merge with
a business or company in which the Company's management or their affiliates or
associates directly or indirectly have an ownership interest. Management is not
aware of any circumstances under which the foregoing policy will be changed and
management, through their own initiative, will not change said policy.
Upon effectiveness of this Form 10-SB and pursuant to regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company will be required to obtain and file with the Commission
audited financial statements of the acquisition candidate not later than 60 days
from the date the Form 8-K is due at the Commission disclosing the
acquisition/merger.
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(f) Rights of Dissenting Shareholders.
Under the Colorado Corporation Code, a business combination typically
requires the approval of two-thirds of the outstanding shares of both
participating companies. The Company's Articles of Incorporation reduce the
voting requirement to a majority of the Company's outstanding Common Stock.
Shareholders who vote against any business combination in certain instances may
be entitled to dissent and to obtain payment for their shares pursuant to
Sections 7-4-123 and 7-4-124 of the Colorado Corporation Code. The requirement
of approval of the Company's shareholders in any business combination is limited
to those transactions identified as a merger or a consolidation. A business
combination identified as a share exchange under which the Company would be the
survivor does not require the approval of the Company's shareholders, nor does
it entitle shareholders to dissent and obtain payment for their shares.
Accordingly, unless the acquisition is a statutory merger, requiring shareholder
approval, the Company will not provide shareholders with a disclosure document
containing audited or unaudited financial statements, prior to such acquisition.
Prior to any business combination for which shareholder approval is
required, the Company intends to provide its shareholders complete disclosure
documentation concerning the business opportunity or target company and its
business. Such disclosure will in all likelihood be in the form of a proxy
statement which will be distributed to shareholders at least 20 days prior to
any shareholder's meeting.
None of the Company's officers, directors, promoters, their affiliates or
associates have had any preliminary contact or discussions with and there are no
present plans, proposals, arrangements or understandings with any
representatives of the owners of any business or company regarding the
possibility of an acquisition or merger transaction contemplated in this
registration statement.
(g) Not an "Investment Adviser."
The Company is not an "investment adviser" under the Federal Investment
Advisers Act of 1940, which classification would involve a number of negative
considerations. Accordingly, the Company will not furnish or distribute advice,
counsel, publications, writings, analysis or reports to anyone relating to the
purchase or sale of any securities within the language, meaning and intent of
Section 2(a)(11) of the Investment Advisers Act of 1940, 15 U.S.C. 80b2(a)(11).
(h) Not an "Investment Company."
The Company may become involved in a business opportunity through
purchasing or exchanging the securities of such business. The Company does not
intend however, to engage primarily in such activities and is not registered as
an "investment company" under the Federal Investment Company Act of 1940. The
Company believes such registration is not required.
The Company must conduct its activities so as to avoid becoming
inadvertently classified as a transient "investment company" under the Federal
Investment Company Act of 1940, which classification would affect the Company
adversely in a number of respects. Section 3(a) of the Investment Company Act
provides the definition of an "investment company" which excludes an entity
which does not engage primarily in the business of investing, reinvesting or
trading in securities, or which does not engage in the business of investing,
owning, holding or trading "investment securities" (defined as "all securities
other than United States government securities or securities of majority-owned
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subsidiaries") the value of which exceeds forty percent (40%) of the value of
its total assets (excluding government securities, cash or cash items). The
Company intends to implement its business plan in a manner which will result in
the availability of this exemption from the definition of "investment company."
The Company proposes to engage solely in seeking an interest in one or more
business opportunities or ventures.
Effective January 14, 1981, the Commission adopted Rule 3a-2 which deems
that an issuer is not engaged in the business of investing, reinvesting, owning,
holding or trading in securities for purposes of Section 3(a)(1), cited above,
if, during a period of time not exceeding one year, the issuer has a bona fide
intent to be engaged primarily, or as soon as reasonably possible (in any event
by the termination of a one year period of time), in a business other than that
of investing, reinvesting, owning, holding or trading in securities and such
intent is evidenced by the Company's business activities and appropriate
resolution of the Company's Board of Directors duly adopted and duly recorded in
the minute book of the Company. The Rule 3a-2 "safe harbor" may not be relied on
more than one single time.
(i) The Company's Office.
The Company's office is located at 26 West Dry Creek Circle, Suite 600,
Littleton, Colorado 80120, and the telephone number is (303) 794-9450. The
Company's office is located in the office of Ernest Mathis, Jr., the Company's
Chief Executive Officer, Chief Financial Officer, Secretary and Director. The
Company's office will remain at Mr. Mathis's office until an acquisition has
been concluded. There are no written documents memorializing the foregoing. The
Company is not responsible for reimbursement for out-of-pocket office expenses,
such as telephone, postage or supplies.
There are no agreements or understandings with respect to the office
facility subsequent to the completion of an acquisition. Upon a merger or
acquisition, the Company intends to relocate its office to that of the
acquisition candidate.
(j) Employees.
The Company has no salaried employees and none of its officers, directors
or principal stockholders will receive any compensation for any assistance they
may provide the Company. Management of the Company expects to use consultants,
attorneys and accountants as necessary, and does not anticipate a need to engage
any full-time employees so long as it is seeking and evaluating business
opportunities. The need for employees and their availability will be addressed
in connection with the decision whether or not to acquire or participate in a
specific business opportunity.
(k) Reports to Security Holders.
As a result of its filing of this Form 10-SB, the Company will become
subject to reporting obligations under the Exchange Act. These obligations
include an annual report under cover of Form 10-KSB, with audited financial
statements, unaudited quarterly reports and the requisite proxy statements with
regard to annual shareholder meetings. The public may read and copy any
materials the Company files with the Commission at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information of the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0030. The Commission maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
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RISK FACTORS
In addition to the other information contained in this Registration
Statement, the following risk factors should be considered carefully before
investing in the Company. This Registration Statement contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth below.
No Operating History. The Company was incorporated in the state of Colorado
on February 6, 1987. The Company has conducted only organizational business and
has no operating history. There can be no assurance that the Company's
activities will be profitable. As of the date hereof, the Company has not
entered into any arrangement to participate in any business ventures or purchase
any products.
Assets of the Corporation. The Company has no substantial, material,
tangible assets as of the date hereof. The Company's present assets are
extremely limited. Any business activity that the Company eventually undertakes
may require substantial capital.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the companies with which the
Company may merge or which it acquires. While management intends to seek a
merger or acquisition of privately held entities with established operating
histories, there can be no assurance that the Company will be successful in
locating an acquisition candidate meeting such criteria. In the event the
Company completes a merger or acquisition transaction, of which there can be no
assurance, the success of the Company's operations will be dependent upon
management of the successor firm and numerous other factors beyond the Company's
control. The Company anticipates that it will seek to merge with or acquire an
existing business. After the merger has taken place, the surviving entity will
be the Company, however, management from the acquired entity will in all
likelihood operate the Company. There is, however, a remote possibility that the
Company may seek to acquire and operate an ongoing business, in which case the
existing management might be retained.
Securities are Subject to Penny Stock Rules. The Company's shares are
"penny stock" and consequently are subject to the Commission's regulations which
impose sales practice requirements upon brokers and dealers to make risk
disclosures to customers before effecting any transactions therein.
Dilution in Merger or Acquisition Transaction. The Company's plan of
operation is based upon a merger with or acquisition of a private concern, which
in all likelihood would result in the Company issuing securities to shareholders
of any such target concern. The issuance of previously authorized and unissued
Common Stock of the Company would result in substantial dilution to present and
prospective shareholders of the Company, which may necessarily result in a
change in control or management of the Company.
Dependence on Management; Limited Participation of Management. The success
of the Company will largely be dependent upon the active participation of
Earnest Mathis Jr., the Company's Chief Executive Officer, Chief Financial
Officer, Secretary and Director. Mr. Mathis has limited experience in the
business in which the Company proposes to engage and, accordingly, the Company
may be required to obtain independent outside professionals to effectively
evaluate and appraise potential use and markets for and to render evaluations
relating to potential opportunity, product, investment or business acquisition.
Mr. Mathis has other full time employment and will be available to participate
in management decisions only on a part time or as needed basis. Mr. Mathis
devotes approximately one percent (1%) of his time to the business affairs of
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the Company. The amount of time which Mr. Mathis will be able to devote to
Company business may be inadequate to properly attend to Company business. Mr.
Mathis will not be compensated prior to a merger or acquisition. Once the
Company acquires a business opportunity, Mr. Mathis will probably be asked to
resign. The time which the officers and directors devote to the business affairs
of the Company and the skill with which they discharge their responsibilities
will substantially impact the Company's success.
Impact of Limited Time Devoted to the Company. Opportunities available to
the Company for mergers or acquisitions may be lost or delayed as a result of
the limited amount of time devoted to the Company by management. As a result, an
acquisition or merger may never take place.
No Business Plan. The Company has not identified the business opportunities
in which it will attempt to obtain an interest. The Company therefore cannot
describe the specific risks presented by such business. In general, it may be
expected that such business will present such a level of risks that conventional
bank financing would not be available on favorable terms. Such business may
involve an unproven product, technology or marketing strategy, the ultimate
success of which cannot be assured. The acquired business opportunity may be in
competition with larger, more established firms over which it will have no
competitive advantage. The Company's investment in a business opportunity may be
expected to be highly illiquid and could result in a total loss to the Company
if the opportunity is unsuccessful.
Conflicts of Interest. Mr. Mathis is associated with other firms or
occupations involving a range of business activities. Because of these
affiliations and because Mr. Mathis will devote only a minor amount of time to
the affairs of the Company, there are potential inherent conflicts of interest
in his acting as the sole director and officer of the Company. Mr. Mathis is or
may in the future be a director or controlling shareholder of other entities
engaged in a variety of businesses which may in the future have various
transactions with the Company. Additional conflicts of interest and non-arm's
length transactions may also arise in the future in the event Mr. Mathis is
involved in the management of any firms with which the Company transacts
business. Management has adopted a policy that the Company will not seek a
merger with or an acquisition of any entity with which Mr. Mathis serves as an
officer, director or partner or in which Mr. Mathis or any of Mr. Mathis' family
members own or hold an ownership interest. Business combinations with entities
owned or controlled by affiliates or associates of the Company will not be
considered, however, securities owned or controlled by the affiliates and
associates of the Company may be sold in the business combination transaction
without affording all existing shareholders a similar opportunity. A buy-out of
Mr. Mathis' shares could occur from an offer by existing shareholders, or by an
offer from a merger/acquisition candidate. In addition, Mr. Mathis is not aware
of any circumstances which would precipitate a change in his intention not to
negotiate for the buy-out of his stock. Public shareholders will not be entitled
to receive any portion of the buy-out premium and will not have an opportunity
to approve such related party transaction.
Rights of Dissenting Shareholders. A shareholder of the Company shall have
the right to dissent to any plan of merger or consolidation to which the Company
is a party under Colorado state law. A dissenting shareholder shall have the
right to have his or her shares purchased by the Company at the fair market
value thereof as of the day prior to the date which the vote was taken approving
the proposed corporation action. Such action by a dissenting shareholder could
result in a cancellation of any proposed merger or acquisition. Colorado state
law governs the rights of shareholders to dissent. No other state's laws
regarding the Company's shareholders rights to dissent are applicable.
Dependence on Outside Advisors. In order to supplement the business
experience of management, the Company may employ accountants, technical experts,
appraisers, attorneys or other consultants or advisors. The selection of any
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such advisors will be made by management and without any control from
shareholders. Additionally, it is anticipated that such persons may be engaged
by the Company on an independent basis without a continuing fiduciary or other
obligation to the Company.
Year 2000 Compliance. There are issues associated with the programming code
in existing computer systems as the year 2000 approaches. The "year 2000
problem" is pervasive and complex, as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company has reviewed its internal computer systems and products and
their capability of recognizing the year 2000 and years thereafter. The Company
expects that any costs relating to ensuring such systems to be year 2000
compliant will not be material to the financial condition or results of
operations of the Company. However, significant uncertainty exists concerning
the potential costs and effects associated with any year 2000 compliance.
No Dividends Anticipated. At the present time the Company does not
anticipate paying dividends, cash or otherwise, on its Common Stock in the
foreseeable future. Future dividends will depend on earnings, if any, of the
Company, its financial requirements and other factors. Investors who anticipate
the need of an immediate income from their investment in the Company's Common
Stock should refrain from the purchase of the Company's securities.
No Business Opportunities. The Company was recently formed for the purpose
of acquiring interests in one or more business opportunities believed by
management to hold potential for profit. The Company has not yet obtained,
however, any interest in any product, property or business and may not be able
to acquire any such interest upon terms favorable to the Company.
Scarcity of and Competition for Merger or Acquisition Prospects. The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with and acquisitions of small private entities. A large
number of established and well financed entities, including venture capital
firms, are active in mergers and acquisitions of private companies which may be
desirable target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company, and consequently, the Company will be at a
competitive disadvantage in identifying possible merger or acquisition
candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction. The Company has
no arrangement, agreement or understanding with respect to engaging in a merger
with, or acquisition of, any entity private or public. There can be no assurance
the Company will be successful in identifying and evaluating suitable merger or
acquisition candidates or in concluding a merger or acquisition transaction.
Management has not identified any specific business within an industry for
evaluation by the Company. There is no assurance the Company will be able to
negotiate a merger or acquisition on favorable terms.
No Agreement to Vote Shares. Present officers, directors and principal
stockholders have not agreed to vote their respective shares of Common Stock in
accordance with the vote of the majority of all non-affiliated future
stockholders of the Company with respect to any business combination.
Lack of Market Research or Marketing Organization. The Company has neither
conducted nor has the Company engaged other entities to conduct market research
such that management has assurance market demand exists for the transactions
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contemplated by the Company. Moreover, the Company does not have and does not
plan to establish, a marketing organization. Even in the event demand is
identified for a merger or acquisition of the type contemplated by the Company,
there is no assurance the Company will be successful in completing any such
transaction.
Impracticability of Exhaustive Investigation. The Company's limited funds
and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Therefore, management decisions will likely be made without detailed feasibility
studies, independent analysis, market surveys and the like which, if the Company
had more funds available to it, would be desirable. The Company will be
particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. There are numerous individuals, publicly
held companies, and privately held companies seeking merger and acquisition
prospects. There is significant competition among such groups for attractive
merger and acquisition prospects. However, the number of suitable and attractive
prospects is limited and the Company may find a scarcity of suitable companies
with audited financial statements seeking merger partners of the type and size
of the Company.
Possible Lack of Diversification. The Company may be unable to diversify
its business activities, which creates the possibility of a total loss to the
Company and its shareholders should an acquisition by the Company prove to be
unprofitable. The Company's failure or inability to diversify its activities
into a number of areas may subject the Company to economic fluctuations within a
particular business or industry and, therefore, increase the risks associated
with the Company's operations.
The Company May Pay a Finder's Fee. In connection with a merger or
acquisition, the Company may issue "restricted" shares of the Company's Common
Stock to finders. A finder's fee will not be paid, however, to any officer,
director, shareholder or other affiliated party. At the present time, there are
no plans to pay any finder's fees.
Issuance of Additional Shares. Approximately 12,120,861 shares of Common
Stock or 61% of the 20,000,000 authorized shares of Common Stock of the Company
remain unissued. The Board of Directors has the power to issue such shares
subject to shareholder approval and may do so in an exchange offer or a stock
for stock exchange agreement. The Company may also issue additional shares of
Common Stock pursuant to a plan and agreement of merger with a private
corporation. Although the Company presently has no commitments, contracts or
intentions to issue any additional shares to other persons, the Company may in
the future attempt to issue shares to acquire products, properties or
businesses, or for other corporate purposes.
Creation of Subsidiary Entities. The Company will not engage in the
creation of subsidiary entities with a view to distributing their securities to
the shareholders of the Company.
Regulation. Although the Company will be subject to regulation under the
Act and the Exchange Act, management believes the Company will not be subject to
regulation under the Investment Company Act of 1940 insofar as the Company will
not be engaged in the business of investing or trading in securities. In the
event the Company engages in business combinations which result in the Company
holding passive investment interests in a number of entities, the Company could
be subject to regulation under the Investment Company Act of 1940. In such
event, the Company will be required to register as an investment company and
11
<PAGE>
could be expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Commission as to the
status of the Company under the Investment Company Act of 1940, and
consequently, any violation of such Act will subject the Company to material
adverse consequences.
Probable Change in Control and Management. Mergers or acquisitions
involving the issuance of the Company's Common Stock will in all likelihood
result in shareholders of a target company obtaining a controlling interest in
the Company. Any such merger or acquisition candidate may require management of
the Company to sell or transfer all or a portion of the Company's Common Stock
held by them, although management would make no such requirement as a condition
precedent of an acquisition. See "Item 1 - Business." The resulting change in
control of the Company could result in removal of any present officers and
directors of the Company and a corresponding reduction in their participation in
the future affairs of the Company. While management has no present intention to
dispose of its ownership interest in the Company, it is impossible to predict
the extent to which management will participate in the future affairs of the
Company following the completion of a merger or acquisition.
Competition. The Company will have numerous competitors and potential
competitors, many of whom will have considerably greater financial and personal
resources than the Company. There is no assurance that the Company will be
successful in obtaining suitable investments. The Company will be competing with
numerous other entities, most all of which are larger, well established
companies with greater assets and financial reserves than the Company will
possess.
Lack of Public Market for Securities. At present, no market exists for the
Company's securities and there is no assurance that a regular trading market
will develop and if developed, that it will be sustained. A purchaser of stock
may, therefore, be unable to resell the securities offered herein should he or
she desire to do so. Furthermore, it is unlikely that a lending institution will
accept the Company's securities as pledged collateral for loans unless a regular
trading market develops.
Change of Control. As part of the acquisition of a business opportunity,
the Company's sole director, Earnest Mathis, Jr., may resign after appointing
his successor, without shareholder approval. The acquisition of an opportunity
may also involve the issuance of a majority of the Company's stock to promoters
of the opportunity. In such event, purchasers of shares offered hereunder would
be unable to elect or remove directors against the wishes of such promoters.
Control by Majority Stockholder. Earnest Mathis, Jr. beneficially owns
approximately 76% of the outstanding Common Stock. As a result, Mr. Mathis will
have significant influence on all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such ownership may have the effect of delaying or preventing a
change in control of the Company. See " Item 4 - Security Ownership of Certain
Beneficial Owners and Management."
No Cumulative Voting and Preemptive Rights and Control. There are no
preemptive rights in connection with the Company's Common Stock. Cumulative
voting in the election of Directors is not allowed. Accordingly, the holders of
a majority of the shares of Common Stock, present in person or by proxy, will be
able to elect all of the Company's Board of Directors.
No Marketmaker. There is no assurance that the Company's securities will be
traded on the "Bulletin Board" or in the "Pink Sheets" maintained by members of
the National Association of Securities Dealers, Inc. ("NASD"). The Company has
12
<PAGE>
no agreement with any member of the NASD to act as a marketmaker for the
Company's securities. If the Company is unsuccessful in obtaining one or more
marketmakers, the trading level and/or price of the Company's securities will be
materially adversely affected.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Company's financial
statements, the notes related thereto and the other financial data included
elsewhere in this Registration Statement.
Results of Operations
Nine Months Ended September 30, 1999 vs. Nine Months Ended September 30, 1998.
- ------------------------------------------------------------------------------
No operating revenues were generated during the nine months ended September
30, 1999 and 1998. Operating expenses increased by $15,237 to $22,832 for the
nine months ended September 30, 1999 compared to $7,595 for the nine months
ended September 30, 1998. The increase in operating expenses resulted from
professional fees incurred in connection with updating the Company's books and
records. The Company's net loss increased to $23,144 for the nine months ended
September 30, 1999 compared to $7,595 for the nine months ended September 30,
1998.
Year Ended December 31, 1998 vs. Year Ended December 31, 1997.
- --------------------------------------------------------------
The Company was dormant in 1997. In 1998, the Company's efforts centered
around bringing its books and records up to date. No operating revenues were
generated in 1998 or 1997. Operating expenses increased by $11,948 to $12,068
for 1998 compared to $120 for 1997. This increase in operating expenses resulted
from professional fees incurred in connection with updating the Company's books
and records. The Company's net loss increased to $12,061 for 1998 compared to
$108 for 1997.
Liquidity and Capital Resources
In February 1999, the Company sold 3,750,000 shares of its Common Stock at
$.004 per share resulting in cash proceeds of $15,000. Also in February 1999,
loans payable to a stockholder of $11,525 were converted at $.004 per share into
2,881,225 shares of the Company's Common Stock.
In June 1999, $10,000 was loaned to the Company by two stockholders. The
loans bear interest at 12% and are payable on demand.
As a result of the above transactions, the Company's working capital
increased $3,381 from a deficit of $15,781 as of December 31, 1998 to a deficit
of $12,400 as of September 30, 1999.
The Company does not have sufficient funds to continue its operating
activities. Future operating activities are expected to be funded by loans from
a major stockholder.
Year 2000 Issue
The "Year 2000 Issue" is typically the result of limitations of certain
software written using two digits rather than four to define the applicable
year. If software with date-sensitive functions is not Year 2000 compliant, it
may recognize a date using "00" as the year 1900 rather than the year 2000.
13
<PAGE>
Systems that do not properly recognize such information could generate erroneous
data or cause system failure. The Company recognizes the significance and
complexity of the Year 2000 Issue but since the Company is not producing or
maintaining time-sensitive operations at the present time, the Year 2000 Issue
is not expected to have a significant impact on the Company's operations.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company is provided rent-free office space by an officer and director
of the Company at 26 West Dry Creek Circle, Suite 600, Littleton, CO 80120. The
Company is not responsible for reimbursement of out-of-pocket office expenses
such as telephone, postage or supplies.
The Company owns no property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership of (i) each
person known by the Company to be the beneficial owner of five percent or more
of the Company's Common Stock, (ii) each director individually and (iii) all
officers and directors of the Company as a group as of September 30, 1999. Each
person has sole voting and investment power with respect to the shares of Common
Stock shown, and all ownership is of record and beneficial. The address of each
owner is in care of the Company at 26 West Dry Creek Circle, Suite 600,
Littleton, CO 80120.
Name Number of shares Percent of class
- ---- ---------------- ----------------
Earnest Mathis, Jr. (1) 6,000,330 76.16%
The Earnest Dalton Mathis
III Trust 416,666 5.29%
The William Cole Mathis
Trust 416,667 5.29%
The Madeleine Paige Mathis
Trust 416,667 5.29%
All officers and
directors group
(1 person) (1) 6,000,330 76.16%
(1) Represents 3,016,458 shares held in the names of Mathis Family Partners,
Ltd., a Colorado limited partnership of which Mr. Mathis is the general partner
and 2,983,872 shares held in Earnest Mathis IRA Rollover.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The name, age and position held in the Company by its sole executive
officer and director is as follows:
14
<PAGE>
Officer/Director
Name Age Position Since
- ---- --- -------- -----
Earnest Mathis, Jr. 40 Chief Executive Officer, Chief 1999
Financial Officer,
Secretary and Director
Directors serve in such capacity until the next annual meeting of the
Company's shareholders and until their successors have been elected and
qualified. The Company's officers serve at the discretion of the Company's Board
of Directors, until their death, or until they resign or have been removed from
office.
There are no agreements or understandings for any director or officer to
resign at the request of another person and none of the directors or officers is
acting on behalf of or will act at the direction of any other person. No other
person's activities are material to the operation of the Company.
Earnest Mathis, Jr. - Chief Executive Officer, Chief Financial Officer,
Secretary and Director
From September 1988 to present, Mr. Mathis has been President and director
of Express Capital Concepts, Inc., a blank check company. Express Capital is a
Delaware corporation formed in May 1988. In 1988 Express completed a public
offering after its S-18 registration statement was cleared by the SEC. Mr.
Mathis purchased stock in Express at the time of formation and still owns the
shares. In December 1999 Express merged with GreyStone Technologies, Inc. and
changed its name to Greystone Technologies, Inc. GreyStone is an operating
company engaged in the design, manufacture and marketing of its proprietary
software. Greystone trades on the Bulletin Board under the symbol "GSTN".
From April 1994 to February 1997 Mr. Mathis was President and a director of
Galt Financial Corporation, a Colorado corporation formed in June 1987. Prior to
Mr. Mathis being involved with Galt, the Company had completed a public offering
through a S-18 registration statement. In April 1994, Mr. Mathis restructured
Galt and purchased stock from the corporation. In February 1997, Galt completed
a business combination with Capital Growth Holdings Corporation, a development
stage financial services company and Galt changed its name to Microcap
Financial. Mr. Mathis resigned as an officer and director of Galt upon the
completion of the business combination. No other relationships existed with Galt
after the completion of the business combination. In 1999, the company changed
its name to Globalnet Financial. Com, Inc. and its securities are traded on the
Bulletin Board under the symbol "GLBND".
From May 1994 to September 1996, Mr. Mathis was President and a director of
Dynasty Capital Corporation, a Florida corporation formed in October 1986. Prior
to Mr. Mathis's involvement, in June 1987, Dynasty completed a public offering
of its securities. In May 1994, Mr. Mathis purchased stock from the corporation.
In September 1996, Dynasty completed a business combination with Visitor
Services, Inc., an operating company engaged in travel services. Dynasty changed
its name following the combination to Visitor Services International Corp., and
trades on the Bulletin Board under the symbol "TSIG". Mr. Mathis resigned as an
officer and director upon completion of the combination. No other relationships
existed with the Dynasty after completion of the business combination. Mr.
Mathis has not received any compensation from Dynasty.
15
<PAGE>
From July 1989 to December 1995 Mr. Mathis was President and a director of
Jefferson Capital Corporation a Nevada corporation formed in July 1989.
Jefferson completed a distribution of its stock to public shareholders through
an S-18 registration statement in January 1990. Mr. Mathis purchased stock in
Jefferson in July 1989. In December 1995 Jefferson completed a business
combination with privately held Spirit Gaming Corporation, a development stage
company engaged in the development of Indian casinos and Jefferson changed its
name to Spirit. Spirit trades on the Bulletin Board under the symbol "SPGG". Mr.
Mathis resigned as an officer and director of the corporation upon completion of
the business combination. No other relationships existed with Jefferson after
the completion of the business combination. Mr. Mathis has not received any
compensation from Spirit.
From April 1996 to April 1999, Mr. Mathis was President and a director of
Cancun Acquisitions, Inc., a Colorado corporation formed in April 1989. In March
1996 the principal stockholders of Cancun agreed to sell majority interests to
Earnest Mathis, Gary McAdam, and a third party. Messrs. Mathis and McAdam became
the officers and directors of the Company. In April 1999 Cancun completed a
business combination with privately held Metallico, Inc., an operating company
engaged in fabricating, smelting and refining of lead and non-ferrous scrap
metal recycling. Cancun changed its name to Metalico, Inc. Mr. Mathis resigned
as an officer and director of Cancun upon completion of the business
combination. No other relationships existed with Issuer after the completion of
the business combination. As of August 1999, no market existed for Metalico's
securities. Mr. Mathis has not received any compensation from Metalico. From
February 1996 to February 1998, Mr. Mathis was President and a director of Hai
Enterprises, Inc., a Colorado corporation formed in February 1996. In February
1998 Hai Enterprises, Inc. completed a business combination with Wrapsters, Inc.
Upon completion of the transaction Hai changed its name to Wrapsters, Inc.
Wrapsters is a development stage company engaged in the development of fast food
sandwich shops whose securities trade on the Bulletin Board under the symbol
"WRAP". Mr. Mathis resigned as an officer and director of the corporation upon
the completion of the business combination. No other relationships existed with
Hai after the completion of the business combination. Mr. Mathis has not
received any compensation from Wrapsters.
From February 1996 to September 1998 Mr. Mathis was President and a
director of Gimmel Enterprises, Inc., a Colorado corporation formed in February
1996. In September 1998 Gimmel completed a business combination with Win
Systems, Inc., an operating company engaged in post secondary education. After
the combination took place, Gimmel changed its name to Whitney Information
Network, Inc. The company's securities trade on the Bulletin Board under the
symbol "RUSS". Mr. Mathis resigned as an officer and a director of Gimmel upon
the completion of the business combination. No other relationships existed with
Gimmel after the completion of the business combination. Mr. Mathis has not
received any compensation from Whitney. From February 1996 to March 1999, Mr.
Mathis was President and a director of Zion Enterprises, Inc., a Colorado
corporation formed in February 1996. In March 1999, Zion Enterprises completed a
business combination with Genysis Information Systems, Inc., an operating
company engaged in the development of enterprise software. After the combination
took place, Zion changed its name to Genysis Information Systems, Inc. Mr.
Mathis resigned as an officer and a director of Zion upon the completion of the
business combination. No other relationships existed with Zion after the
completion of the business combination. No market exists for the company's
securities as of August 1999. Mr. Mathis has not received any compensation from
Genysis.
From February of 1996 to present. Mr. Mathis has been President and a
director of Zedik, Tesh and Vov. In July 1999 Mr. Mathis became President of
Chay Enterprises Inc. All of these companies are inactive Colorado Corporations.
From November 1996 to the present, Mr. Mathis has been President and a director
of Mauna Kea Enterprises, Inc., Kahului Enterprises, Inc., Haleakala
16
<PAGE>
Enterprises, Inc., Kihei Enterprises, Inc., Kauai Enterprises, Inc. All are
inactive Colorado corporations. From February 1997 to May 1997, Mr. Mathis was
President and a director of Hana Acquisitions, Inc., a Colorado corporation
formed in May 1991. In May 1997 a principal stockholder of Hana sold control of
Hana to a third party and Mr. Mathis resigned at that time. Mr Mathis received
cash compensation in the amount of $60,000 for his assistance in the sale.
ITEM 6. EXECUTIVE COMPENSATION.
None of the Company's executive officers or directors received compensation
in excess of $100,000 for the years ended December 31, 1998 or 1997 and none
currently receives any compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Mathis Family Partners, Ltd. in October 1997 and Pelican Holdings,
L.L.C. in February 1998, both entities controlled by Earnest Mathis, Jr.,
acquired 325,845 and 293,260 shares, respectively, of the Company's Common Stock
from Gordon Burr for $.032 per share or an aggregate of $20,000.
During 1998, the Company borrowed an aggregate of $11,525 with no interest
thereon from Earnest Mathis IRA Rollover and The Mathis Family Partners, Ltd.,
both of which entities are controlled by Earnest Mathis, Jr.
In February 1999, Earnest Mathis IRA Rollover and the Mathis Family
Partners canceled their loans totaling $11,525 in exchange for 1,440,612 and
1,440,613 shares, respectively, of the Company's Common Stock.
In February 1999, Earnest Mathis IRA Rollover, The Mathis Family Partners,
Ltd. The Madeleine Paige Trust, The William Cole Mathis Trust and the Earnest
Dalton Mathis III Trust, all entities of which are controlled by Earnest Mathis,
Jr., purchased 1,250,000, 1,250,000, 416,667, 416,667, and 416,666 shares,
respectively, of the Company's Common Stock for $.004 per share for an aggregate
of $15,000.
In June 1999, the Company borrowed $5,000 from The Mathis Family Partners,
Ltd. and $5,000 from Earnest Mathis IRA Rollover. The loans bear interest at 12%
and are payable on demand.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 20,000,000 shares of Common Stock, no
par value. The Company is not authorized to issue any preferred stock. As of
September 30, 1999, 7,879,139 shares of Common Stock were outstanding.
(a) Common Stock.
All shares of Common Stock have equal voting rights and are not assessable.
Voting rights are not cumulative and, therefore, the holders of more than 50% of
the Common Stock could, if they chose to do so, elect all of the directors of
the Company. Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be distributed pro
rata to the holders of the Common Stock. The holders of the Common Stock do not
have preemptive rights to subscribe for any securities of the Company and have
17
<PAGE>
no right to require the Company to redeem or purchase their shares. The shares
of Common Stock currently outstanding are validly issued, fully paid and
non-assessable.
(b) Preferred Stock.
Not applicable.
(c) Dividends
Holders of the Common Stock are entitled to share equally in dividends
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefore. No dividend has been paid on the Common Stock since
inception, and none is contemplated in the foreseeable future.
(d) Transfer Agent.
Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive, Suite 430, Denver,
CO 80209 is the Company's transfer agent.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
(a) Market Information.
The Company's Common Stock is not traded on any market system.
(b) Holders.
As of September 30, 1999, a total of 7,879,139 shares of the Company's
Common Stock were outstanding and there were 123 holders of record of the
Company's Common Stock.
(c) Dividends.
The Company has not paid any dividends since it is inception. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any litigation and, to its knowledge, no
action, suit or proceedings against it has been threatened against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements on accounting and financial disclosures
nor any change in accountants during the past three years.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1999, the Company issued 2,881,225 shares of Common Stock to
existing stockholders in liquidation of $11,525 of loans payable to the
stockholders. On the same day, the Company issued 3,750,000 shares of Common
Stock to existing shareholders in exchange for $15,000 in cash. These issuances
were made in accordance with the exemption from registration afforded by Section
4(2) of the Act and/or Regulation D promulgated thereunder.
18
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Title 7 of the Colorado Revised Statutes, as amended ("CRS"), and the
Company's Articles of Incorporation and Bylaws provide for indemnification of
the Company's directors, officers and controlling persons under certain
circumstances. A summary of the circumstances in which such indemnification is
provided for is set forth below, but this discussion is qualified in its
entirety by reference to CRS, the Company's Articles of Incorporation and
Bylaws.
In general any director, officer, employee and agent of the Company may be
indemnified against reasonable expenses, fines, settlements or judgments in
connection with a legal proceeding to which such person is a party if: (a) the
person conducted himself in good faith, (b) the person reasonably believed: (i)
in the case of conduct in an official capacity with the Company, that his
conduct was in the Company's best interests; and (ii) in all other cases, that
his conduct was at least not opposed to the Company's best interests; and (c) in
the case of a criminal proceeding, the person had no reasonable cause to believe
that his conduct was unlawful. In addition, the Company shall indemnify such a
person against reasonable expenses who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person was a party
because of his status with the Company and to which such party was entitled to
indemnification in accordance with the preceding sentence.
No indemnification shall be made with respect to any claim, issue or matter
in connection with a proceeding by or in the right of the Company in which the
director, officer or agent was adjudged liable to the Company or in connection
with any proceeding charging that such person derived an improper personal
benefit , whether or not involving action in an official capacity, in which such
person was adjudged liable on the basis that he derived a personal benefit. The
circumstances under which indemnification is granted in connection with an
action brought by or in the right of the Company is limited to reasonable
expenses actually incurred in connection with the proceeding.
Indemnification may also be granted pursuant to the terms of agreements
which may be entered into in the future or pursuant to a vote of the
stockholders or directors. CRS and the Company's Bylaws also grant the Company
the power to purchase and maintain insurance which protects the Company's
officers and directors against any liabilities incurred in connection with their
services in such capacities.
PART F/S
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
- -------------------- ----
Unaudited Financial Statements of Milestone
Capital, Inc. as of September 30, 1999 and for
the nine months ended September 30, 1999. F-1
Financial Statements of Milestone Capital, Inc. as of
December 31, 1998 and 1997 and for the years ended
December 31, 1998 and 1997. F-5
19
<PAGE>
MILESTONE CAPITAL, INC.
UNAUDITED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
------
Current Assets:
Cash and cash equivalents $ 1,181
---------
Total Assets $ 1,181
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
Accounts payable:
Trade $ 185
Stockholder 3,084
Notes payable - stockholders 10,000
Accrued interest - stockholders 312
---------
Total Current Liabilities 13,581
---------
Stockholders' Equity (Deficit):
Common stock: no par value, 20,000,000
shares authorized, 7,879,139 issued 507,603
Accumulated deficit (519,803)
---------
(12,200)
Less treasury stock, at cost (680 shares) (200)
---------
Total Stockholders' Equity (Deficit) (12,400)
---------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,181
=========
See notes to unaudited
condensed financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $ --
Operating expenses 2,362 6,391 22,832 7,595
----------- ----------- ----------- -----------
Loss From Operations (2,362) (6,391) (22,832) (7,595)
----------- ----------- ----------- -----------
Other Income (Expense):
Interest expense - stockholders (302) -- (312) --
----------- ----------- ----------- -----------
Total Other Income (Expense) (302) -- (312) --
----------- ----------- ----------- -----------
Net Loss $ (2,664) $ (6,391) $ (23,144) $ (7,595)
=========== =========== =========== ===========
Net loss per share of common stock:
Basic $ -- $ (.01) $ -- $ (.01)
=========== =========== =========== ===========
Diluted $ -- $ (.01) $ -- $ (.01)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 7,878,459 1,247,234 6,955,430 1,247,234
Diluted 7,878,459 1,247,234 6,955,430 1,247,234
See notes to unaudited
condensed financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(23,144) $ (7,595)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Changes in liabilities:
Increase (Decrease) in accounts payable-trade (4,130) 6,373
Increase in accrued interest 312 --
-------- --------
Net Cash (Used) By Operating Activities (26,962) (1,222)
-------- --------
Cash Flows From Financing Activities:
Stockholder advances 3,979 1,148
Repayment of stockholder advances (895) --
Proceeds from stockholders loans 10,000 --
Issuance of common stock 15,000 --
-------- --------
Net Cash Provided By Financing Activities 28,084 1,148
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 1,122 (74)
Cash and Cash Equivalents at Beginning of Period 59 280
-------- --------
Cash and Cash Equivalents at End of Period $ 1,181 $ 206
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ -- $ --
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Conversion of accounts payable - stockholder
into common stock $ 11,525 $ --
See notes to unaudited
condensed financial statements.
F-3
</TABLE>
<PAGE>
MILESTONE CAPITAL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying financial information of the Company is prepared in accordance
with the rules prescribed for filing condensed interim financial statements and,
accordingly, does not include all disclosures that may be necessary for complete
financial statements prepared in accordance with generally accepted accounting
principles. The disclosures presented are sufficient, in management's opinion,
to make the interim information presented not misleading. All adjustments,
consisting of normal recurring adjustments, which are necessary so as to make
the interim information not misleading, have been made. Results of operations
for the nine months ended September 30, 1999 are not necessarily indicative of
results of operations that may be expected for the year ending December 31,
1999. It is recommended that this financial information be read with the
complete financial statements included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998 previously filed with the Securities
and Exchange Commission.
Per Share Information
As of December 31, 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share," which specifies the method of
computation, presentation and disclosure for earnings per share. SFAS No. 128
requires the presentation of two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the average number of common shares
outstanding. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of outstanding
stock options using the "treasury stock" method.
The basic and diluted earnings per share are the same because the Company did
not have any outstanding stock options during the periods presented.
F-4
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 59 $ 280
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable ............................... $ 4,315 $ 2,000
Loans payable to stockholder ................... 11,525 2,000
--------- ---------
Total current liabilities .................. 15,840 4,000
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, no par value, 20,000,000
shares authorized 1,247,914 shares
issued and outstanding ........................ 481,078 481,078
Treasury stock, 680 shares at cost ............. (200) (200)
Retained earnings (accumulated deficit) ........ (496,659) (484,598)
--------- ---------
Total stockholders' equity ................ (15,781) (3,720)
--------- ---------
TOTAL ..................................... $ 59 $ 280
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
REVENUES ......................................................... $ 7 $ 12
EXPENSES ......................................................... 12,068 120
---------- ----------
LOSS BEFORE TAXES ................................................ 12,061 108
PROVISION FOR INCOME TAXES ....................................... -0- -0-
---------- ----------
NET LOSS ......................................................... $ 12,061 $ 108
========== ==========
Net income (Loss) per share of
common stock:
Basic ............................................................ $ .01 $ .00
========== ==========
Diluted .......................................................... $ .01 $ .00
========== ==========
Weighted average number of common shares outstanding:
Basic ............................................................ 1,247,914 1,247,914
========== ==========
Diluted .......................................................... 1,247,914 1,247,914
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
COMMON STOCK TREASURY STOCK
---------------------- -------------------- RETAINED
NO. OF NO NO. OF NO PAR EARNINGS
SHARES PAR VALUE SHARES VALUE (DEFICIT) TOTAL
------ --------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 ...................... 1,247,914 481,078 680 (200) (484,490) (3,612)
Net loss for year ended December 31, 1997 ........ (108) (108)
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 1997 ...................... 1,247,914 481,078 690 (200) (484,598) (3,720)
Net loss for year ended December 31, 1998 ........ (12,061) (12,061)
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 1998 ...................... 1,247,914 $481,078 680 (200) $ (496,659) $ (15,781)
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) ..................................... $(12,061) $ (108)
Adjustments to reconcile net income (Loss)
to net cash (used) by operating activities:
Increase in accounts payable .......................... 2,315 -0-
Increase in loans payable to stockholder .............. 9,525 -0-
-------- --------
Net cash (used) by operating activities ............... (221) (108)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES: ..................... -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES: ..................... -0- -0-
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ..................................... (221) (108)
BEGINNING OF YEAR-
Cash and cash equivalents ................................ 280 388
-------- --------
END OF YEAR -
Cash and cash equivalents ................................ $ 59 $ 280
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
MILESTONE CAPITAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
- ---------------------------------------------------------------------
Milestone Capital, Inc. was incorporated under the laws of the State of
Colorado as Shield Enterprises Corporation on February 5, 1987. The articles
of incorporation were amended on May 8, 1990 and the name was changed to
Milestone Capital, Inc.
Basis of Presentation - The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to
meet its obligations on a timely basis and to obtain additional financing as
may be required.
The Company's continued existence is dependent upon its ability to secure
loans from its President and/or a principal stockholder. Future operating
expenses will be funded by these loans. The Company's ability to continue to
meet its obligations is dependent upon obtaining the above loans.
Cash and Cash Equivalents - For purposes of the statements of cash flows, the
Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Net Income (Loss) Per Share of Common Stock - As of December 31, 1997, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," which specifies the method of computation, presentation
and disclosure for earnings per share. SFAS No. 128 requires the presentation
of two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the average number of common
shares outstanding. Diluted earnings per share is computed on the basis of
the average number of common shares outstanding plus the dilutive effect of
outstanding stock options using the "treasury stock" method.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
F-9
<PAGE>
MILESTONE CAPITAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - HISTORY
- ----------------
The Company was actively engaged in the business of investing in and
providing managerial assistance to developing growth Companies until 1995.
All previous investments have been sold or become worthless. All debts
previous to those on the current balance sheet have been satisfied or
forgiven.
NOTE 3 - COMMON STOCK
- ---------------------
The Company has issued common stock since its inception in 1987 for both cash
and services. The Company sold stock in a public offering on June 16, 1989.
In the public offering, the Company issued units that contained both common
shares and warrants. All warrants expired June 16, 1992.
NOTE 4 COMMITMENTS AND CONTINGENCIES - THE YEAR 2000
- ----------------------------------------------------
The Company is currently working to resolve the potential impact of the Year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The Year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the
year 2000, which could result in miscalculations or system failures. Costs of
addressing potential problems are expensed as incurred and are not expected
to have a material adverse impact on the Company's financial position,
results of operations or cash flows in future periods. However, if the
Company or its vendors are unable to resolve such processing issues in a
timely manner, it could result in a material financial risk. Accordingly, the
Company plans to devote the necessary resources to resolve all significant
Year 2000 issues in a timely manner. While the Company does not at this time
anticipate significant problems with suppliers, it will develop contingency
plans, if required, with these third parties due to the possibility of
compliance issues.
F-10
<PAGE>
MILESTONE CAPITAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 5 - INCOME TAXES
- ---------------------
Significant components of deferred income taxes as of December 31, 1998 and
1997 are as follows:
1998 1997
---- ----
Net operating loss carryforward $ 188,500 $ 188,500
---------- ----------
Total deferred tax asset 188,500 188,500
Less Valuation allowance (188,500) (188,500)
---------- ----------
Net deferred tax asset $ -0- $ -0-
========== ==========
The Company has assessed its past earnings history and trends and expiration
dates of carryforwards and has determined that it is more likely than not
that no deferred tax assets will be realized. A valuation allowance of
$188,500 as of December 31, 1998 and 1997 is maintained on deferred tax
assets which the Company has not determined to be more likely than not
realized at this time. The Company will continue to review this valuation on
an annual basis and make adjustments as appropriate.
As of December 31, 1998, the Company had net operating loss carryforwards of
approximately $495,000. The net operating losses can be carried forward
twenty years to offset future taxable income. The net operating loss
carryforwards expire in the years 2009 through 2018.
NOTE 6 - SUBSEQUENT EVENTS
- --------------------------
On February 8, 1999, there were two significant events relative to the debt
of the Company and the issuance of common stock.
2,881,225 common shares were issued to existing shareholders in liquidation
of $11,525 of Loans payable to stockholder on the balance sheet.
Also, on the same day, 3,750,000 common shares were issued to existing
shareholders in exchange for $15,000 of cash.
Therefore, as the end of the first quarter at March 31, 1999, 7,879,139
common shares are now outstanding.
F-11
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation, as amended, of the Registrant.*
3.2 Bylaws of the Registrant.*
4.1 Specimen Stock Certificate of the Registrant (To be filed by
amendment).
23.1 Consent of Larry Legel, CPA.
27.1 Financial Data Schedule.
* Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MILESTONE CAPITAL, INC.
By: /s/ Earnest Mathis, Jr.
---------------------------
Earnest Mathis, Jr.,
Chief Executive Officer
Date: December 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Earnest Mathis, Jr. Chief Executive Officer, December 29, 1999
- ----------------------- Chief Financial Officer
Earnest Mathis, Jr. (Principal Accounting
Officer), Secretary and
Director
Exhibit 23.1
Consent of Independent Auditors
I hereby consent to the inclusion in the Registration Statement on Form
10-SB dated December 29, 1999 of Milestone Capital, Inc. of my report dated
February 17, 1999, relating to the financial statements of Milestone Capital,
Inc. for the years ended December 31, 1998 and 1997.
/s/ LARRY LEGEL, CPA.
---------------------
Larry Legel, CPA
Ft. Lauderdale, Florida
December 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,181
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,181
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,181
<CURRENT-LIABILITIES> 13,581
<BONDS> 0
0
0
<COMMON> 507,603
<OTHER-SE> (520,003)
<TOTAL-LIABILITY-AND-EQUITY> 1,181
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 22,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 312
<INCOME-PRETAX> (23,144)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,144)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
