<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER 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 UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER: 33-18778
POTENCO, INC.
---------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 99-0259494
------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3730 KIRBY SUITE 1200
HOUSTON, TEXAS 77098
-------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 587-4645.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.001 PER SHARE.
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 12 MONTHS (OR FOR
SUCH SHORTER PERIOD THAT THE ISSUER WAS REQUIRED TO FILE SUCH REPORTS), AND
(2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES . NO X .
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO
ITEM 405 OF REGULATION S-B IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE
WILL 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. [ ]
THE ISSUER HAD NO REVENUES IN ITS MOST RECENT FISCAL YEAR.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
COMPUTED BY REFERENCE TO THE PRICE AT WHICH STOCK WAS SOLD, OR THE AVERAGE
BID AND ASKED PRICES OF SUCH STOCK, AS OF MARCH 31, 2000 WAS: $0.00
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF APRIL 19, 2000, WAS: 11,613,871
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
1
</Page>
<PAGE>
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Item 1. Description of Business . . . . . . . . . . . . . . . . . . .4
General . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Employees . . . . . . . . . . . . . . . . . . . . . . . . . .4
Executive Officers of the Registrant. . . . . . . . . . . . .4
Item 2. Description of Property. . . . . . . . . . . . . . . . . . . .4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .4
Item 4. Submission of Matters to a Vote of Security Holders. . . . . .4
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Item 5. Market for the Registrant's Common Equity and
Related
Stockholder Matters
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . .5
General . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . .6
Results of Operations . . . . . . . . . . . . . . . . . . . .6
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . .6
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . . . . .7
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 9 Directors, Executive Officers, Promoters and
Control Persons;Compliance With Section 16(a)
of the Exchange Act . . . . . . . . . . . . . . . . . . . . .7
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . .7
Compensation of Directors
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 11. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . .8
Item 12. Certain Relationships and Related Transactions . . . . . . . .8
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2
</Page>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
POTENCO, Inc., (the "Company" or the "Registrant") is a Nevada
corporation. As used herein, the terms the "Company" and the "Registrant"
refer to the Company, unless the context otherwise requires.
For financial information regarding the segments of the Registrant's
operations, see the information contained in the Consolidated Financial
Statements incorporated by reference in Item 7 hereof. The Registrant has
not had any revenues since 1990.
The Registrant was incorporated on September 25, 1987 under the name
of Potenco, Inc., Inc. as a development stage company. In August 1988, the
Registrant participated in the time-share resort real estate business
through its then wholly-owned subsidiary, Colonial Properties, Inc., a
Florida corporation. As a result of adverse business circumstances, no
material business operations have been conducted by the Registrant since
1990.
EMPLOYEES
At December 31, 1999, the Registrant had no employees.
EXECUTIVE OFFICERS OF THE REGISTRANT
At December 31, 1999, the Registrant had no executive officers.
ITEM 2. DESCRIPTION OF PROPERTY.
Not applicable.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Registrant is or will be involved in litigation
relating to claims arising out of its operations in the normal course of
its business. The Registrant believes that it is not presently a party to
any litigation the outcome of which would have a material adverse effect on
its results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
3
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Registrant's Common Stock trades on the OTC Pink Sheets of the
National Association of Securities Dealers, Inc. (the "NASD") in the United
States. The range of the high and low bid information for the Common Stock
for each full quarterly period within the two most recent fiscal years is
shown on the following table. As of December 31, 1999, the Registrant was
authorized to
issue 50,000,000 shares of the Common Stock, of which there were issued and
outstanding 16,600,000 shares.
<TABLE>
<CAPTION>
COMMON STOCK
BID PRICE
--------- ---------
CALENDAR YEAR 1999 Low High
--------- ---------
<S> <C> <C>
First Quarter $ 0.00 $ 0.00
Second Quarter 0.00 0.00
Third Quarter 0.00 0.00
Fourth Quarter 0.00 0.00
--------- ---------
CALENDAR YEAR 1998 Low High
--------- ---------
First Quarter $ 0.00 $ 0.00
Second Quarter 0.00 0.00
Third Quarter 0.00 0.00
Fourth Quarter 0.00 0.00
</TABLE>
As of March 31,1999 the high and low bids with respect to the price of
the Common Stock were no trades made.
As of December 31, 1999, there were 58 holders of record of the Common
Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the Registrant's financial condition
and results of operations. This discussion should be read in conjunction
with the Consolidated Financial Statements of the Registrant appearing
under Item 7 of this Report. Statements contained in this "Management's
Discussion and Analysis of Financial Conditions and Results of Operations,"
which are not historical facts may be forward-looking statements. Such
information involves risks and uncertainties, including those created by
general market conditions, competition and the possibility that events may
occur which could limit the ability of the Registrant to maintain or
improve its operating results or execute its primary growth strategy.
Although management believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and there can therefore be no assurance that the
4
</Page>
<PAGE>
forward-looking statements included herein will prove to be accurate. The
inclusion of such information should not be regarded as a representation by
management or any other person that the objectives and plans of the
Registrant will be achieved. Moreover, such forward-looking statements are
subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. Readers are cautioned not to
place undue reliance on these forward-looking statements that speak only as
of the date hereof.
GENERAL
Management intends for the Registrant to proceed in its efforts to
expand holdings through the purchase of existing, profitable, private,
companies where there is a demonstrable gain in productivity through the
minimization of general and administrative costs which are duplicative.
Management will seek to implement a capital structure which affords the
greatest flexibility for future acquisitions while maintaining an adequate
base of equity to cushion against fluctuations in the business cycle.
Currently the company is a developement stage corporation.
LIQUIDITY AND CAPITAL RESOURCES
In order to complete the any acquisitions, the Registrant will require
additional funding. Management believes that this funding is available
through investment bankers who may expressed an interest in providing
equity and debt funding. There can be no assurance as to the availability
or terms of this financing.
Certain transactions may require the Registrant to incur additional
debt, and the degree to which the Registrant may be leveraged could have
important consequences, including the following: (i) the possible
impairment of the Registrant's ability to obtain financing in the future
for potential acquisitions, working capital, capital expenditures or
general corporate purposes; (ii) the necessity for a substantial portion of
the Registrant's cash flow from operations to be dedicated to the payment
of principal and interest on its indebtedness; (iii) the potential for
increased interest expense due to fluctuations in interest rates; and (iv)
the potential for increased vulnerability of the Registrant to economic
downturns and possible limitation of its ability to withstand competitive
pressures. The Registrant's ability to meet its debt service obligations
will be dependent upon the Registrant's future performance, which will be
subject to general economic conditions and to financial, business and other
factors affecting the operations of the Registrant, many of which are
beyond its control.
RESULTS OF OPERATIONS
The Registrant has generated no revenues since 1990, and has had no
activity since 1990.
ITEM 7. FINANCIAL STATEMENTS.
The information required by this Item 7 appears on pages 10 through 12
of this Report, and is incorporated herein by reference.
5
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<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.
The information set forth under "Item 1. Description of Business
-Executive Officers of the Registrant" is incorporated herein by reference.
At the date of this Report, there are no officers of the Registrant..
In the years prior to December 31, 1999, various officers and
directors of the Registrant have failed to file a Form 3 on a timely basis
upon becoming an executive officer and director of the Registrant.
Set forth below are the directors of the Registrant, together with
their ages as of the date of this Report. Each director is elected for a
one year term and serves until his successor is elected and qualified.
<TABLE>
<CAPTION>
Name Age Position Director Since
--------------------------------------------------------------------------
<S> <C> <C> <C>
Quigg Lawrence 64 Chairman, President & Director February 16, 2000
--------------
Robert Reisinger 50 Director February 16, 2000
----------------
Steven Chase 43 Director February 16, 2000
------------
</TABLE>
Certain information with respect to the members of the Board of
Directors of the Registrant is set forth above in "Item 1. Description of
Business - Executive Officers of the Registrant."
ITEM 10. EXECUTIVE COMPENSATION.
Since 1990, the Registrant has not paid salaries or other form
compensation to any of its officers or directors.
COMPENSATION OF DIRECTORS
The Registrant does not compensate any of its directors for their
services to the Registrant as directors. However, the Registrant does
reimburse its directors for expenses incurred in attending board meetings.
6
</Page>
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table presents certain information regarding the
beneficial ownership of all shares of the Common Stock at April 19, 2000
(i) each person who owns beneficially more than five percent of the
outstanding shares of the Common Stock, (ii) each director of the Company,
(iii) each named executive officer, and (iv) all directors and officers as
a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name of Beneficial Owner (1) Number Percent (2)
-------------------------------------------------------------------------
<S> <C> <C>
E. Growth Partners 4,125,500 35.52%
Couger Capital 3,683,600 31.72%
All directors and officers
as a group (N/A)
</TABLE>
(1) Unless otherwise indicated, each person named in the above-described
table has the sole voting and investment power with respect to his
shares of the Common Stock beneficially owned.
(2) Unless otherwise provided, the calculation of percentage ownership is
based on the total number of shares of the Common Stock outstanding
as of April 19, 2000 any shares of the Common Stock which are not
outstanding as of such date but are subject to options, warrants, or
rights of conversion exercisable within 60 days of March 31, 2000
shall be deemed to be outstanding for the purpose of computing
percentage ownership of outstanding shares of the Common Stock by such
person but shall not be deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Documents Filed with this Report.
(1) Consolidated Financial Statements, POTENCO, Inc. and subsidiary
companies--
Report of Schvaneveldt & Company, P.C., independent certified
public accountants,
dated December 30, 1999. . . . . . . . . . . . . . . . . . . . 11
Balance Sheet-for the Years Ended December 31, 1999. . . . . . 12
Notes to Consolidated Financial Statements as of December 31,
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7
</Page>
<PAGE>
All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has
been omitted as not applicable or not required.
(2) Exhibits-- The exhibits indicated by an asterisk (*) are
incorporated by reference.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
23(a)* Consent of Schvaneveldt & Company, P.C., certified public
accountants.
27* Financial Data Schedule.
(c) Financial Statement Schedules.
No schedules are required as all information required has been
presented in the audited financial statements.
8
</Page>
<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.
POTENCO, INC.
May 23, 2000 /S/ Quigg Lawrence
-----------------------------
Quigg Lawrence
President, Director
May 23, 2000 /S/ Robert Reisinger
-----------------------------
Robert Reisinger
Secretary, Director
9
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Financial Statements
December 31, 1999 & 1998
10
</Page>
<PAGE>
[Letterhead]
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
----------------------------
Board of Directors
Potenco, Inc.
(A Development Stage Company)
I have audited the accompanying balance sheets of Potenco, Inc., (a
development stage company), as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' equity, and cash flows
accumulated from September 25, 1987 (Inception) to December 31, 1999 and
the years ended December 31, 1999 and 1998. 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 audit.
I conducted my audit 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 misstatements. 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 the significant estimates made by management, as well as
evaluating the overall financial statements presentation. I believe that
my audit provides a reasonable basis for my opinion.
In my opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Potenco, Inc., (a
development stage company), as of December 31, 1999 and 1998, and the
results of its operations and its cash flows accumulated from September 25,
1987 (Inception) to December 31, 1999 and the years ended December 31, 1999
and 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #4 to the
financial statements, the Company has an accumulated deficit and a negative
net worth at December 31, 1999. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note #4. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
May 2, 2000
11
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
December December
31, 1999 31, 1998
----------- -----------
<S> <C> <C>
Assets
Current Assets $ -0- $ -0-
----------- -----------
Total Assets $ -0- $ -0-
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities
-------------------
Accounts Payable $ 143,317 $ 900
Stockholders' Equity
--------------------
Common Stock; 50,000,000 Shares Authorized
at $0.001 Par Value, 560,312 & 60,312 Shares
Issued & Outstanding Retroactively Restated 560 60
Paid In Capital 1,666,811 1,666,811
Deficit Accumulated in the Development Stage (1,810,688) (1,667,771)
----------- -----------
Total Stockholders' Equity ( 143,317) ( 900)
----------- -----------
Total Liabilities & Stockholders' Equity $ -0- $ -0-
=========== ===========
The accompanying notes are an integral part of these financial statements
12
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Statement of Operations
Accumulated from September 25, 1987 (Inception) to December 31, 1999
and the Years Ended December 31, 1999, 1998 and 1997
</TABLE>
<TABLE>
<CAPTION>
Accumulated 1999 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ -0- $ -0- $ -0- $ -0-
------------ ------------ ------------ ------------
Expenses
--------
Filings & Fees 1,000 100 100 100
Interest Expenses 14,993 -0- -0- -0-
Time Share Activities 240,113 -0- -0- -0-
Motel Activities 162,108 -0- -0- -0-
Administrative Expenses 301,413 142,817 -0- -0-
Loss of Subsidiaries 1,091,061 -0- -0- -0-
------------ ------------ ------------ ------------
Total Expenses 1,810,688 142,917 100 100
============ ============ ============ ============
Net Loss ($1,810,688) ($ 142,917) ($ 100) ($ 100)
============ ============ ============ ============
Basic & Diluted Earnings
Per Share ($ 2.36) ($ 0.00) ($ 0.00)
Weighted Average Shares
Outstanding Retroactively
Restated 60,312 60,312 60,312
</TABLE>
The accompanying notes are an integral part of these financial statements
13
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From September 25, 1987 (Inception) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Paid In Development
Shares Amount Capital Stage
------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 25, 1987 -0- $ -0- $ -0- $ -0-
Shares Issued to Incorporators
for $0.02 Per Share
Retroactively Restated 2,727 3 14,997
Net Loss for Year Ended
December 31, 1987 ( 67)
------------------------------------------------
Balance, December 31, 1987
Retroactively Restated 2,727 3 14,997 ( 67)
Contributed Capital 119
Shares Issued with Public
Offering at $0.10 Per Share
Retroactively Restated 9,091 9 249,991
Cost of Public Offering ( 28,860)
Shares Issued in Connection
with Reverse Acquisition
Retroactively Restated 48,494 48 1,430,564
Net Loss for Year Ended
December 31, 1988 ( 304,825)
------------------------------------------------
Balance, December 31, 1988
Retroactively Restated 60,312 60 1,666,811 ( 304,892)
Net Loss for Year Ended
December 31, 1989 ( 1,361,979)
------------------------------------------------
Balance, December 31, 1989
Retroactively Restated 60,312 60 1,666,811 ( 1,666,871)
Net Loss for Year Ended
December 31, 1990 ( 100)
------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements
14
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
From September 25, 1987 (Inception) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Paid In Development
Shares Amount Capital Stage
------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1990
Retroactively Restated 60,312 60 1,666,811 ( 1,666,971)
Net Loss for Year Ended
December 31, 1991 ( 100)
------------------------------------------------
Balance, December 31, 1991
Retroactively Restated 60,312 60 1,666,811 ( 1,667,071)
Net Loss for Year Ended
December 31, 1992 ( 100)
------------------------------------------------
Balance, December 31, 1992
Retroactively Restated 60,312 60 1,666,811 ( 1,667,171)
Net Loss for Year Ended
December 31, 1993 ( 100)
------------------------------------------------
Balance, December 31, 1993
Retroactively Restated 60,312 60 1,666,811 ( 1,667,271)
Net Loss for Year Ended
December 31, 1994 ( 100)
------------------------------------------------
Balance, December 31, 1994
Retroactively Restated 60,312 60 1,666,811 ( 1,667,371)
Net Loss for Year Ended
December 31, 1995 ( 100)
------------------------------------------------
Balance, December 31, 1995
Retroactively Restated 60,312 60 1,666,811 ( 1,667,471)
Net Loss for Year Ended
December 31, 1996 ( 100)
------------------------------------------------
Balance, December 31, 1996
Retroactively Restated 60,312 60 1,666,811 ( 1,667,571)
</TABLE>
The accompanying notes are an integral part of these financial statements
15
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
From September 25, 1987 (Inception) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Paid In Development
Shares Amount Capital Stage
------------------------------------------------
<S> <C> <C> <C> <C>
Net Loss for Year Ended
December 31, 1997 ( 100)
------------------------------------------------
Balance, December 31, 1997
Retroactively Restated 60,312 60 1,666,811 ( 1,667,671)
Net Loss for Year Ended
December 31, 1998 ( 100)
------------------------------------------------
Balance, December 31, 1998
Retroactively Restated 60,312 60 1,666,811 ( 1,667,771)
Shares issued for Services 500,000 500
Net Loss for Year Ended
December 31, 1999 ( 142,917)
------------------------------------------------
Balance, December 31, 1999 560,312 $ 560 $ 1,666,811 ($1,810,688)
================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
16
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Statements of Cash Flows
Accumulated from September 25, 1987 (Inception) to December 31, 1999
and the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated 1999 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
------------------------------------
Net Loss ($1,700,371) ($ 142,917) ($ 100) ($ 100)
Loss on Subsidiaries 852,554 -0- -0- -0-
Amortization 17,825 -0- -0- -0-
Non Cash Expenses 500 500 -0- -0-
Change in Operating Liabilities;
Increase in Accounts Payable 33,000 142,417 100 100
------------ ------------ ------------ ------------
Net Cash Used by Operating
Activities ( 796,492) -0- -0- -0-
Cash Flows from Investing Activities
------------------------------------
Organization Costs ( 17,825) -0- -0- -0-
------------ ------------ ------------ ------------
Net Cash Used in Investing
Activities ( 17,825) -0- -0- -0-
Cash Flows from Financing Activities
------------------------------------
Proceeds of Sales of Common
Stock 240,177 -0- -0- -0-
Contributed Capital 119 -0- -0- -0-
Cash from Revenue Acquisition 574,021 -0- -0- -0-
------------ ------------ ------------ ------------
Net Cash Provided by
Financing Activities 814,317 -0- -0- -0-
------------ ------------ ------------ ------------
Net Increase (Decrease)
In Cash -0- -0- -0- -0-
Cash at Beginning of Period -0- -0- -0- -0-
------------ ------------ ------------ ------------
Cash at End of Period $ -0- $ -0- $ -0- $ -0-
============ ============ ============ ============
Disclosures from Operating Activities
-------------------------------------
Interest $ 14,993 $ -0- $ -0- $ -0-
Taxes -0- -0- -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
17
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Organization
----------------------
Potenco, Inc., (Potenco) was organized in the state of Nevada on September
25, 1987. The Articles of Incorporation state the purpose of the
corporation is to conduct business in the field of financial and business
consulting and operation; to seek for and acquire business opportunities in
the financial field; or transact any lawful business, or to promote or
conduct any legitimate object or purpose, under and subject to the laws of
the state of Nevada.
NOTE #2 - Significant Accounting Policies
-----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Basic Earnings Per Shares are computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted Earnings Per Share shall be
computed by including contingently issuable shares with the weighted
average shares outstanding during the period. When inclusion of the
contingently issuable shares would have an antidilutive effect upon
earnings per share no diluted earnings per share shall be presented.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
F. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is amortized over the lesser of the length of
the lease of the related assets of the estimated lives of the assets.
Depreciation and amortization is computed on the straight line method.
G. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
NOTE #3 - Income Taxes
----------------------
Potenco, Inc., has adopted FASB 109 to account for income taxes. Potenco,
Inc., currently has no issues that create timing differences that would
mandate deferred tax expense. Net operating losses would create possible
tax assets in future years. Due to the uncertainty as to the utilization
of net operating loss carryforwards an evaluation allowance has been made
to the extent of any tax benefit that net operating losses may generate.
Subsequent to the report Potenco had a change in officers and a change in
control. When control of an entity changes net operating losses generally
18
</Page>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #3 - Income Taxes -Continued-
----------------------------------
can be used only by the tax payer (Officers) who sustained the losses.
There can be no assurance that the net operating losses sustained before
the change in control will be available for future benefits.
Potenco, Inc., has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal revenue Codes are met. These
losses are as follows:
<TABLE>
<CAPTION> Year of Loss Amount Expiration Date
------------- -------------- ----------------
<S> <C> <C>
1987 - 1998 $ 1,667,771 2007 - 2008
1999 32,102 2019
</TABLE>
<TABLE> 1999 1998
<CAPTION> ------------- --------------
<S> <C> <C>
Current Tax Asset Value of Net Operating Loss
Carryforwards at Current Prevailing Federal Tax Rate $ 577,956 $ 567,042
Evaluation Allowance ( 577,956) ( 567,042)
------------- --------------
Net Tax Asset $ -0- $ -0-
============= ==============
Current Income Tax Expense -0- -0-
Deferred Income Tax Benefit -0- -0-
</TABLE>
NOTE #4 - Going Concern
-----------------------
Potenco, Inc., has no assets and no operations from which it can obtain
working capital. Potenco, Inc., recognizes that it must find a source of
working capital or Potenco, Inc., may not be able to continue its
existence. Current officers of Potenco, Inc., are seeking a business
opportunity through merger or acquisition that would provide operations
with a revenue flow and the possibility of additional capital investment.
NOTE #5 - Stockholders' Equity
------------------------------
Potenco, Inc., is authorized to issue 50,000,000 shares of $0.001 par value
stock.
Pursuant to Form S-18 Registration statement Potenco, Inc., issued
2,500,000 shares at $0.01 per share for gross proceeds of $250,000, cost of
the offering was $28,860.
In the year ended December 31, 1988, Potenco, Inc., issued 13,350,000
shares in a reverse acquisition transaction with Colonial Properties &
Development Corp., and Subsidiaries, a Florida Corporation. Colonial
Properties & Development Corp., and Subsidiaries, ceased operations in 1989
and were suspended by the state of Florida for failure to file an Annual
Report in 1991.
On November 17, 1999, the Board of Directors authorized a one for two
hundred seventy five (1 for 275) reverse split of its outstanding shares.
19 </Page>
<PAGE>
<PAGE>
Potenco, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #5 - Stockholders' Equity -Continued-
------------------------------------------
In December 1999, the Company issued 500,000 shares of common stock, valued
at $500, in consideration for services rendered to the Company.
NOTE #6 - Subsequent Events
---------------------------
Subsequent to its year end the Company issued 2,998,350 shares pursuant to
a Form S-8 Filing in satisfaction of $59,967, additionally, 4,585,000
shares of common stock restricted as to Rule 144K were issued in
satisfaction of accrued expenses of $45.850.
The Company sold 4,029,100 shares of common stock for cash of $40,291.
20
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