SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(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 December 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from _______________ to
________________
Commission File No. 33-15096-D
MILESTONE CAPITAL, INC.
-----------------------
(Name of Small Business Issuer in its Charter)
Colorado 84-1111224
- -------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
26 West Dry Creek Circle, Suite 600
Littleton, Colorado 80120
- --------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 794-9450
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
-------------------------
(Title of Class)
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Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes No X
----- -----
As of January 31, 2000, 7,879,138 shares of the Registrant's no par value
Common Stock were outstanding. As of January 31, 2000, there was no market value
of the Registrant's no par value Common Stock, since such stock was not trading
on any exchange.
Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not be contained, to the best
of the 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 Registrant's revenues for its most recent fiscal year were negligible.
The following documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
The following is a summary of certain information contained in this Report
and is qualified in its entirety by the detailed information and financial
statements that appear elsewhere herein. Except for the historical information
contained herein, the matters set forth in this Report include forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties are detailed throughout the Report and
will be further discussed from time to time in the Company's periodic reports
filed with the Commission. The forward-looking statements included in the Report
speak only as of the date hereof.
Introduction
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.
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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.
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.
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
2
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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.
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
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
3
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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
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.
4
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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.
5
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Upon effectiveness of the Company's 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.
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.
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).
6
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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
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.
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' 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.
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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.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's lack of financial resources and limited management
availability, the Company will continue to be at a significant competitive
disadvantage compared to its competitors. The Company will also be competing
with a large number of small, widely-held companies located throughout the
United States, as well as other publicly-held companies.
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.
Reports to Security Holders
Upon the effectiveness of the Company's Form 10-SB, the Company will be
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.
ITEM 2. 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, Colorado
80120. The Company is not responsible for reimbursement for out-of-pocket office
expenses, such as telephone, postage or supplies.
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ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is not a party to any litigation and, to its knowledge, no
action, suit or proceedings have been threatened against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------------
The Company's Common Stock is not traded on any market system.
As of January 31, 1999, the Company had approximately 123 record and
beneficial stockholders and a total of 7,879,138 shares of the Company's Common
Stock were outstanding.
Dividend Policy
The Company has not paid any dividends since its 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 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- -----------------------------------------------------------------
Results of Operation
Year Ended December 31, 1999 vs. Year Ended December 31, 1998.
In 1999, the Company's efforts continued to be centered around bringing its
books and records up to date. No operating revenues were generated in 1999 or
1998. Operating expenses increased by $39,139 to $51,207 for 1999 compared to
$12,068 for 1998. This increase in operating expenses resulted from professional
fees incurred in connection with updating the Company's books and records and
costs of filing a Registration Statement on Form 10-SB. The Company's net loss
increased to $51,207 for 1999 compared to $12,061 for 1998.
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.
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ITEM 7. FINANCIAL STATEMENTS
- -----------------------------
LARRY LEGEL, CPA
5100 NORTH FEDERAL HIGHWAY, #409
FORT LAUDERDALE, FL 33308
(954) 493-8900
INDEPENDENT AUDITOR'S REPORT
----------------------------
Stockholders
Milestone Capital, Inc.
Englewood, Colorado
I have audited the accompanying balance sheet of Milestone Capital, Inc. as of
December 31, 1999 and 1998, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, the
financial position of Milestone Capital, Inc. as of December 31, 1999 and 1998,
and the results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The continuation of the Company's business is
dependent upon its ability to maintain adequate financing arrangements and
ultimately, upon future profitable operations. These matters raise substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
LARRY LEGEL
/S/ Larry Legel
Certified Public Accountant
February 10, 2000
Fort Lauderdale, Florida
F-1
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MILESTONE CAPITAL, INC.
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BALANCE SHEET
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AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
1999 1998
------------ -----------
A S S E T S
-----------
CURRENT ASSETS:
Cash and cash equivalents $ 958 $ 59
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 13 200 $ 4 315
Loans payable to stockholder 3 084 11 525
Accrued interest 637 -0-
Notes payable 24 500 -0-
------------ -----------
Total current liabilities 41 421 15 840
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STOCKHOLDERS' EQUITY:
Common stock, no par value, 20,000,000
shares authorized 7,879,139 &
1,247,914 shares
issued and outstanding 507 603 481 078
Treasury stock, 680 shares at cost (200) (200)
Retained earnings (accumulated deficit) (547 866) (496 659)
------------ -----------
Total stockholders' equity (40 463 (15 781)
------------ -----------
TOTAL $ 958 $ 59
============ ===========
The accompanying notes are an integral part of these financial statements.
F-2
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MILESTONE CAPITAL, INC.
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STATEMENT OF OPERATIONS
-----------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
1999 1998
--------------- -------------
REVENUES $ -0- $ 7
EXPENSES 51 207 12 068
--------------- -------------
INCOME (LOSS) BEFORE TAXES (51 207) (12 061)
PROVISION FOR INCOME TAXES -0- -0-
NET INCOME (LOSS) $ (51 207) $ (12 061)
=============== =============
Net income (loss) per share of
common stock:
Basic $ (.01) $ (.01)
=============== =============
Diluted $ (.01) $ (.01)
=============== =============
Weighted average number of
common shares outstanding:
Basic 7 326 537 1 247 914
=============== =============
Diluted 7 326 537 1 247 914
=============== =============
The accompanying notes are an integral part of these financial statements.
F-3
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<TABLE>
<CAPTION>
MILESTONE CAPITAL, INC.
-----------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
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, 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)
Issuance of common stock in liquidation of debt 2 881 225 11 525 11 525
Issuance of common stock for cash 3 750 000 15 000 15 000
Net loss for year ended December 31, 1999 (51 207) (51 207)
----------- --------- ------- ------ ---------- ---------
Balance - December 31, 1999 7 879 139 $507 603 680 (200) $(547 866) $ (40 463)
========== ========= ====== ====== ========== =========
The accompanying notes are an integral part of these financial statements.
F-4
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MILESTONE CAPITAL, INC.
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
1999 1998
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) $ (51 207) $ (12 061)
Adjustments to reconcile net income (Loss) to
net cash (used) by operating activities:
Increase in accounts payable 8 885 2 315
Increase in loans payable to stockholder 3 084 9 525
Increase in accrued expenses 637 -0-
---------- -----------
Net cash (used) by operating activities (38 601) (221)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES: -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 24 500 -0-
Proceeds from sale of common stock 15 000 -0-
---------- -----------
Cash provided by financing activities 39 500 -0-
---------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 899 (221)
BEGINNING OF YEAR-
Cash and cash equivalents 59 280
---------- -----------
END OF YEAR -
Cash and cash equivalents $ 958 $ 59
========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCIING ACTIVITIES:
Conversion of loan payable to stockholder into
common stock $ 11 525 $ -0-
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
MILESTONE CAPITAL, INC.
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
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-6
<PAGE>
MILESTONE CAPITAL, INC.
-----------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
(CONTINUED)
- --------------------------------------------------------------------------------
Fair Value of Financial Instruments - The carrying value of cash, accounts
payable, and notes payable approximates fair value due to the short
maturity of these instruments. The carrying value of short-term debt
approximates fair value based on discounting the projected cash flows using
market rates available for similar maturities. None of the financial
instruments are held for trading purposes.
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 - INCOME TAXES
- ---------------------
Significant components of deferred income taxes as of December 31, 1999 and
1998 are as follows:
1999 1998
--------- ----------
Net operating loss carryforward $ 208 000 $ 188 500
--------- ---------
Total deferred tax asset 208 000 188 500
Less Valuation allowance (208 000) (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 $208,000 and $188,500, respectively, as of December 31, 1999
and 1998 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, 1999, the Company had net operating loss carryforwards
of approximately $547,000. 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 2019.
F-7
<PAGE>
MILESTONE CAPITAL, INC.
-----------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Notes payable to stockholders total $24,500 at December 31, 1999. These
notes are unsecured demand notes and interest is payable at 12% per annum.
The current maturities of the notes payable to stockholders are as follows:
December 31, 2000 $24,500
December 31, 2001 -0-
December 31, 2002 -0-
December 31, 2003 -0-
December 31, 2004 -0-
F-8
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- ----------------------------------------------------------------------
The name, age and position held in the Company by its sole executive
officer and director is as follows:
<TABLE>
<CAPTION>
Officer/Director
Name Age Position Since
- ---- --- -------- ----------------
<S> <C> <C>
Earnest Mathis, Jr. 40 Chief Executive Officer, Chief 1999
Financial Officer, Secretary and
Director
</TABLE>
10
<PAGE>
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 December 1999, Mr. Mathis was 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 June 1997 Express entered into a binding letter of intent with
privately held GreyStone Technology, Inc. ("GreyStone"). In December 1999,
Express completed a business combination with GreyStone, an operating company
engaged in the design, manufacture and marketing of its proprietary software. On
December 22, 1999, Express held a special shareholder's meeting where the
shareholders approved the name change to GreyStone Digital Technology, Inc.
("GreyStone Digital"). In connection with the business combination, Mr. Mathis
resigned as an officer and director of the corporation. GreyStone Digital's
shares trade 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' 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
11
<PAGE>
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.
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". In January 2000 Wrapsters changed its name to Uptown Restaurant Group,
Inc. and changed its symbol to "UTRG." 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
12
<PAGE>
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
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 10. EXECUTIVE COMPENSATION
- -------------------------------
None of the Company's executive officers or directors received compensation
in excess of $100,000 for the years ended December 31, 1999 or 1998 and none
currently receive any compensation.
Option Grants in Last Year and Stock Option Grant
The following table provides information on option grants during the year
ended December 31, 1999, to the named executive officers:
Individual Grants
% of Total Options
Granted to
Options Employees
Name Granted in Year Exercise Price Expiration Date
---- ------- ------- -------------- ---------------
Earnest Mathis, Jr. -0- 0% ---- ----
13
<PAGE>
Aggregate Option Exercise of Last Fiscal year and Fiscal Year-End Option Values
There were no executive officers' unexercised options at December 31, 1999.
No shares of Common Stock were acquired upon exercise of options during the
fiscal year ended December 31, 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The following table sets forth the Common Stock ownership, as of the date
of this Report, of (i) each person known by the Company to be the beneficial
owner of 5% or more of the Company's Common Stock, (ii) each director
individually, and (iii) all directors and officers of the Company. 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 all persons
is in care of the Company at 26 West Dry Creek Circle, Suite 600, Littleton,
Colorado 80120.
Amount of Percent of
Name Ownership Class
--------------- --------- ----------
Earnest Mathis, Jr. (1)
6,000,330 76.16%
The Ernest Dalton Mathis III Trust 416,667 5.29%
The William Cole Mathis Trust 416,666 5.29%
The Madeleine Paige Mathis Trust 416,666 5.29%
All officers and
directors as a
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 where Mr.
Mathis is sole beneficiary.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
Management of the Company believes that the transactions described below
were no less fair than the terms of transactions which the Company might
otherwise have entered into with third party nonaffiliated entities. All related
party transactions must be approved by a majority of the disinterested members
of the Company's Board of Directors.
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.
14
<PAGE>
During 1998, the Company borrowed an aggregate of $11,524.90 with no
interest thereon from Inverness Investments Profit Sharing Plan and the Mathis
Family Partners, Ltd. both of which entities are controlled by Earnest Mathis,
Jr. In February 1999, Inverness Investments Profit Sharing Plan and the Mathis
Family Partners cancelled their loans totaling $11,524.90 in exchange for
1,440,612 and 1,440,613 shares, respectively, of the Company's Common Stock.
In February 1999, Inverness Investments Profit Sharing Plan, the Mathis
Family Partners, 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, 416,666, 416,667 shares
respectively, of the Company's Common Stock for $.004 per share or an aggregate
of $15,000.
In June 1999, the Company borrowed $5,000 from The Mathis Family Partners,
Ltd. and $5,000 from Inverness Investments Profit Sharing Plan. The loans bear
interest at 12% and are payable on demand.
In 1999, the Earnest Mathis IRA Rollover was established and the shares
previously held in the Inverness Investments Profit Sharing Plan and in Pelican
Holdings, L.L.C. were transferred to the Earnest Mathis IRA Rollover.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits:
Exhibit No. Title
- ----------- -----
2.01 Articles of Incorporation of the Registrant (1)
2.02 Articles of Amendment to the Articles of Incorporation (1)
2.03 Bylaws of the Registrant (1)
- -----------------
(1) Filed with the Company's Form 10-KSB for the year ended December 31, 1998.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Littleton, Colorado, on February 22, 2000.
MILESTONE CAPITAL, INC.
By /s/ Earnest Mathis, Jr.
---------------------------------------
Earnest Mathis, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Earnest Mathis, Jr. Chief Executive Officer, Chief February 22, 2000
- ----------------------- Financial Officer (Principal
Earnest Mathis, Jr. Accounting Officer), Secretary
and Director
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 958 59
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 958 59
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 958 59
<CURRENT-LIABILITIES> 41,421 15,840
<BONDS> 0 0
0 0
0 0
<COMMON> 507,403 481,078
<OTHER-SE> (547,866) 496,659
<TOTAL-LIABILITY-AND-EQUITY> 958 59
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 51,207 12,061
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (51,207) (12,061)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (51,207) (12,061)
<EPS-BASIC> .01 .01
<EPS-DILUTED> .01 .01
</TABLE>
