SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission File No. 0-6456
REACT SYSTEMS, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Nevada 87-0287034
- ------------------------------- ------------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
1787 East Ft. Union Blvd., #106, Salt Lake City, Utah 84121
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Include Area Code: (801) 942-7722
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.05 par value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90)
days. Yes No X
----- -----
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $0.
As of August 30, 1996, 524,277 shares of common stock of the Registrant
were outstanding. As of such date, no market existed for the Registrant's common
stock. Accordingly, the aggregate market value of the common stock held by
non-affiliates was $0.
DOCUMENTS INCORPORATED BY REFERENCE
No annual reports to security holders, proxy or information statements, or
prospectuses filed pursuant to Rule 424(b) or (c) are incorporated by reference
in this report.
Transitional Small Business Disclosure Format: Yes No X
----- -----
<PAGE>
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL STATEMENTS
Item 1. Description of Business..................................3
Item 2. Description of Properties................................3
Item 3. Legal Proceedings........................................3
Item 4. Submission of Matters to a Vote of Security Holders......3
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters......................................4
Item 6. Management's Discussion and Analysis.....................4
Item 7. Financial Statements.....................................4
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................5
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section
16(a) of the Exchange Act................................5
Item 10. Executive Compensation ..................................6
Item 11. Security Ownership of Certain Beneficial Owners
and Management...........................................6
Item 12. Certain Relationships and Related Transactions...........6
Item 13. Exhibits and Reports of Form 8-K.........................7
SIGNATURES..............................................................8
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
React Systems, Inc. (the "Company") was organized under the laws of the
State of Nevada on November 18, 1955, under the name "Dolomite King, Inc." The
Company was originally formed to engage in mining operations. The Company
subsequently changed its name and business on several occassions. Since December
of 1974, the Company has been dormant other than undertaking limited efforts in
the last year to acquire an operating business.
Subsequent to December 31, 1995, in connection with the Company's efforts
to acquire an operating business, in August of 1996 the Company declared a
1-for-30 reverse stock split and issued 63,500 shares of common stock to Jensen
Services, Inc. and 100,000 shares to each of the Company's three officers and
directors for services rendered. Following the reverse split and issuance of
shares in August of 1996, the Company had 524,227 shares of common stock issued
and outstanding.
Business
Since 1974, the Company has not engaged in any material business operations
other than its limited efforts to seek and acquire and operating business.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has no properties or assets. Jensen Services provides offices
for use in performing administrative matters free of charge.
ITEM 3. LEGAL PROCEEDINGS
The Company is not the subject of any pending legal proceedings; and to the
knowledge of management, no proceedings are presently contemplated against the
Company by any federal, state or local governmental agency.
Further, to the knowledge of management, no director or executive officer
is party to any action which any has an interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders through
the solicitation of proxies or otherwise, during the fourth quarter of the
Company's fiscal year ended December 31, 1995.
3
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is presently no established trading market for the Company's common
stock. The Company intends to apply for listing of its common stock on the OTC
Bulletin Board. Management does not expect any public market to develop in the
Company's common stock unless and until the Company completes an acquisition or
merger, if ever. There can be no assurance that any such trading market which
may develop will be sustained.
Holders
The number of record holders of the Company's common stock as of December
31, 1995 was 603. This number does not include an indeterminate number of
stockholders whose shares are held by brokers in street name.
Dividends
The Company has not paid any dividends with respect to its common stock,
and does not intend to pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
The Company has not engaged in any material operations in the period ending
December 31, 1995, or since December 31, 1974. The Company intends to continue
to seek out the acquisition of assets, property or business that may be
beneficial to the Company and its stockholders.
The Company's only foreseeable cash requirements during the next 12 months
are expected to relate to maintaining the Company in good standing in the State
of Nevada, and keeping its records current with the Securities and Exchange
Commission. The Company anticipates that Jensen Services and other shareholders
will advance funds as needed to meet the Company's cash requirements for the
foreseeable future. No obligation exists, however, pursuant to which any
shareholders, or other persons, have agreed to provide funding to the Company.
Results of Operations
The Company has had no operations since December of 1974.
ITEM 7. FINANCIAL STATEMENTS
See page F-1 for an index of the financial statements included herewith.
4
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors and Executive Officers
The following table sets forth the names, nature of all positions and
offices held by all directors and executive officers of the Company at December
31, 1995 and as of the date of this report, and the period or periods during
which each such director or executive officer has served in his or her
respective positions.
Name Position(s) Held Term of Office
- ------------------- --------------------------------- ---------------
Thomas J. Howells........ President and Director 4/95 to Present
Joyce Kaufer............. Vice President and Director 4/95 to Present
Stacie H. Jensen......... Secretary, Treasurer and Director 4/95 to Present
Term of Office
The terms of office of the current officers and directors shall continue
until the next annual meeting of stockholders.
Business Experience
Thomas J. Howells, age 24, has served as President of the Company since
April of 1995. Mr. Howells is an investment consultant with Jensen Services,
Inc., a privately held mergers and acquisition firm. Previously, Mr. Howells
served as Chief Financial Officer of Eccles Lines & Designs, Inc.
Joyce Kaufer, age 24, has served as Vice President and a Director of the
Company since April of 1995. Ms. Kaufer has served as an account executive with
Citadel Broadcasting since 1993. Previously, Ms. Kaufer served as an account
executive for U.S. Radio Group from 1992 to 1993 and as business manager of
Radio Management Service from 1991 to 1992.
Stacie H. Jensen, age 26, has served as Secretary, Treasurer and a Director
of the Company since April of 1995. Ms. Jensen is employed as a loan officer for
American Lending Network. Previously, Ms. Jensen served as a loan officer for
Mortgage Associates, Inc. from 1995 to 1996, and as a marketing assistant for
Northwestern Mutual Life and Baird Securities from 1993 to 1995.
Compliance with Section 16(a) of the Exchange Act
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during 1995. All of the filing requirements
were satisfied on a timely basis in 1995. In making these disclosures, the
Company has relied solely on written statements of its directors, executive
officers and shareholders and copies of the reports that they filed with the
Commission.
5
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
No cash compensation was paid to any of the officers or directors of the
Company during 1994 or 1995. Each of the Company's present officers and
directors, being Thomas J. Howells, President and Chief Executive Officer, Joyce
Kaufer, Vice President, and Stacie H. Jensen, Secretary/Treasurer, received
100,000 shares of common stock for services rendered during 1995.
The Company has no employment agreements with any of its officers or
directors. Additionally, there are no compensatory plans or arrangements,
including payments to be received from the Company, with respect to any officer
or director which would in any way result in payments to any such person because
of his or her resignation, retirement or other termination of such person's
employment with the Company or its subsidiaries, or any change in control of the
Company, or a change in the person's responsibilities following a change in
control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table is furnished as of August 31, 1996, to indicate
beneficial ownership of shares of the Company's Common Stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Common Stock, (2) each director, nominee for
director and Named Officer of the Company, individually, and (3) all officers
and directors of the Company as a group. The information in the following table
was provided by such persons.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership(1) Percent of Class
Thomas J. Howells.............. 100,000 19.1%
2071 E. Royal Harvest Way #11
Salt Lake City, UT 84121
Joyce Kaufer................... 100,000 19.1%
2559 East 3020 South
Salt Lake City, UT 84109
Stacie H. Jensen............... 100,000 19.1%
1419 E. Noelle Rd.
Salt Lake City, UT 84092
Jensen Services, Inc........... 96,834 18.5%
1787 E. Fort Union Blvd. #106
Salt Lake City, UT 84121
All executive officers and directors
as a group (3 persons)........ 300,000 57.3%
Changes in Control
To the knowledge of management, there are no present arrangements or
pledges of securities of the Company which may result in a change in control of
the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the two calendar years ended December 31, 1995, there were no
material transactions or any currently proposed transactions, or series of
similar transactions, to which the Company was or is to be a party, in which the
amount involved exceeds $60,000 and in which any director or executive officer,
or any security holder who is known to the Company to own of record or
beneficially more than 5% of any class of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had an interest.
6
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
------- ----------------------
3.1 Articles of Incorporation, as amended *
3.2 Bylaws, as amended *
---------------
* Incorporated by reference pursuant to Exchange Act Rule 12b-23.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1995.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REACT SYSTEMS, INC.
Date: September 3, 1996 By: /s/ Thomas J. Howells
----------------------------------
Thomas J. Howells
President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
/s/ Thomas J. Howells President and Director September 3, 1996
- ----------------------- (Principal Executive Officer)
Thomas J. Howells
/s/ Joyce Kaufer Vice President and Director September 3, 1996
- -----------------------
Joyce Kaufer
Stacie H. Jensen Treasurer and Director September 3, 1996
- ----------------------- (Principal Financial Officer)
Stacie H. Jensen
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
No annual report or proxy material has been forwarded to securities holders
of the Registrant during the period covered by this Report; however, if any
annual report or proxy material is furnished to security holders in connection
with the annual meeting of stockholders to be held in 1996, a copy of any such
annual report or proxy materials shall be forwarded to the Commission when it is
forwarded to security holders.
8
<PAGE>
REACT SYSTEMS, INC.
Index to Financial Statements
Page
Number
------
Independent Accountants' Report F-2
Balance Sheet - December 31, 1995 F-3
Statements of Operations for the Years Ended
December 31, 1995 and 1994 F-4
Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1995 and 1994 F-5
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
MANTYLA, McREYNOLDS AND ASSOCIATES, C.P.A's
A Professional Corporation
Independent Auditors' Report
The Board of Directors and Shareholders
React Systems, Inc.
We have audited the accompanying balance sheet of React Systems, Inc. as of
December 31, 1995, and the related statements of operations, stockholders,
deficit, and cash flows for the years ended December 31, 1995 and December 31,
1994. These financial statements are the responsibility of the Company's
management. our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of React Systems, Inc. as of
December 31, 1995, and the results of their operations and their cash flows for
the years ended December 31, 1995 and December 31, 1994 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
React Systems, Inc. will continue as a going concern. As discussed in note 2 to
the financial statements, the Company has accumulated losses from operations,
has no assets, and has a net working capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 2. The financial statements
do not include any adjustment that might result from the outcome of this
uncertainty.
BY: MANTYLA, McREYNOLDS & ASSOCIATES
-------------------------------------
MANTYLA, McREYNOLDS & ASSOCIATES
Salt Lake City, Utah
June 4, 1996
F-2
<PAGE>
REACT SYSTEMS, INC.
Balance Sheet
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Assets $ 0
-----------------
Total Assets $ 0
=================
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Liabilities:
Current Liabilities:
Note payable - note 4 $ 94,300
----------------
Total Current Liabilities 94,300
----------------
Total Liabilities 94,300
----------------
Stockholders' Deficit:
Common stock, $.05 par value;
authorized 50,000,000 shares; issued
and outstanding 2,984,118 shares 149,206
Additional paid in capital 344,600
Accumulated deficit (588,106)
----------------
Total Stockholders' Deficit (94,300)
----------------
Total Liabilities and Stockholders Deficit $ 0
================
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
REACT SYSTEMS, INC.
Statements of Operations
For the Years Ended December 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Revenue:
Revenues from operations $ 0 $ 0
--------- ----------
Total Revenue 0 0
General and Administrative Expenses 0 0
--------- ----------
Net income before taxes 0 0
Income taxes 0 0
---------- ----------
Net income $ 0 $ 0
========== ==========
Loss per share $ 0.00 $ 0.00
========== ==========
Weighted Average Shares Outstanding 2,984,118 2,984,118
========== ==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
REACT SYSTEMS, INC.
Statements of Stockholders' Deficit For the Years Ended
December 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
Additional Net
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Deficit
--------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 149,206 $ 344,600 $ (588,106) $ (94,300)
Net income for the year
ended December 31, 1994 0 0
--------- --------- ---------- ---------
Balance, December 31, 1994 $ 149,206 $ 344,600 $ (588,106) $ (94,300)
Net income for the year
ended December 31, 1995 0 0
--------- --------- ---------- ---------
Balance, December 31, 1995 $ 149,206 $ 344,600 $ (588,106) $ (94,300)
========= ========= ========== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
REACT SYSTEMS, INC.
Statements of Cash Flows
For the Years Ended December 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Cash Flows Provided by operating Activities:
Net Loss $ 0 $ 0
Adjustments to reconcile net income to net
cash provided by operating activities: 0 0
---------- --------
Net Cash Provided by operating Activities 0 0
Cash Flows Provided by Financing Activities 0 0
Cash Flows Provided by Investing Activities 0 0
---------- --------
Net Increase in cash 0 0
Beginning Cash 0 0
---------- --------
Ending Cash $ 0 $ 0
========== ========
Supplemental Disclosure of Cash
Flow Information
Cash paid during the periods for:
Interest $ 0 $ 0
========== =========
Taxes $ 0 $ 0
========== =========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
REACT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1995
Note 1. Organization and Summary of Significant Accounting Policies
(a) Organization
React Systems, Inc. [Company] incorporated under the laws of the State
of Nevada in 1955. The Company has been dormant for a number of years.
(b) Income Taxes
Effective April 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 [the Statement],
"Accounting for Income Taxes." The Statement requires an asset and
liability approach for financial accounting and reporting for income
taxes, and the recognition of deferred tax assets and liabilities for
the temporary differences between the financial reporting bases and
tax bases of the Company's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or settled.
The cumulative effect of this change in accounting for income taxes as
of December 31, 1995 is $0 due to the valuation allowance established
as described below.
(c) Net Income Per Common Share
Net income per common share is based on the weighted average number of
shares outstanding.
(d) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers
cash on deposit in the bank to be cash. The Company has $0 cash at
December 31, 1995.
Note 2. Liquidity
The Company has accumulated losses through December 31, 1995 amounting to
$588,106, has no assets, has a net working capital deficiency of $94,300 at
December 31, 1995, and does not anticipate generating sufficient cash flows
from operations to meet the Company's cash requirements. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
Management's plans include seeking a well-capitalized merger candidate to
recommence its operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
F-7
<PAGE>
Note 3. Income Taxes
The Company adopted Statement No. 109 as of April 1, 1993. Prior years,
financial statements have not been restated to apply the provisions of
Statement No. 109. No provision has been made in the consolidated financial
statements for income taxes because the Company has accumulated substantial
losses from operations.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset at December 31, 1995 have no impact on
the financial position of the Company. A valuation allowance is provided
when it is more likely than not that some portion of the deferred tax asset
will not be realized. Because of the lack of taxable earnings history, the
Company has established a valuation allowance for all future deductible
temporary differences.
Note 4. Note Payable
The Company has an unsecured note payable to a law firm (of which a partner
is also a shareholder of equity securities of the Company). On May 22,
1996, the Board of Directors of React Systems, Inc. authorized the issuance
of 50,000 shares of common stock of the Company in exchange for a "Waiver
of Debt" which dissolved all of the balance due on the note.
F-8
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 0
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 9,430
<BONDS> 0
0
0
<COMMON> 149,206
<OTHER-SE> (243,506)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
