FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20524
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 33-19598-D
SUNLIGHT SYSTEMS, LTD.
(Exact name of registrant as specified in its charter)
Nevada 84-0992908
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
5222 South Holly, Greenwood Village, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-779-1900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON $0.001
(Title of class)
Indicate by check mark whether the registrant (1) has 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
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Rule 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of June 30, 1997, there were Eleven Million Five Hundred Thousand and
Sixty-Four (11,500,064) common shares outstanding, Two million, Five
Hundred and Ninety-One Thousand, Forty-Two (2,591,042) of which were held
by non-affiliates. The market as of that date for the common stock of the
Registrant was $.18 bid, $.75 asked. Therefore, the aggregate market value
of the non-affiliated common shares, as of that date, was approximately
$2,070,012.
2
<PAGE>
PART I
ITEM 1.
BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
Sunlight Systems, Ltd. (the "Company") is a Nevada corporation. It was
formerly known as Mendell-Denver Corporation. The Company was incorporated on
June 25, 1996 as a Nevada corporation in order to change the corporate domicile
of the former Mendell-Denver Corporation, a Colorado corporation, and to effect
a corporate reorganization with Mendell-Denver Corporation.
On July 17, 1996, the Company became a wholly owned subsidiary of
Mendell-Denver Corporation ("Mendell"). Pursuant to shareholder approval,
Mendell merged into the Company on July 22, 1996, pursuant to the laws of the
State of Nevada, with the Company being the surviving entity.
As a result of the Merger, the Company exchanged one (1) share of its
common stock for each five (5) shares of the issued and outstanding common stock
of Mendell, on the effective date of the Merger. As a result of this exchange,
the Company, as the surviving entity of the Merger, had Two Million,
Ninety-Eight Thousand, Three Hundred and Twelve (2,098,312) shares issued and
outstanding.
Subsequent to the Merger, the Company issued an additional Eight
Million, Nine Hundred and One Thousand, Seven Hundred and Fifty-Two (8,901,752)
restricted shares to subscribers. As a result of both the Merger and the
issuance of the additional restricted shares, the Company, as of the date of
this Report has approximately Eleven Million Five Hundred Thousand and
Sixty-Four (11,500,064) shares issued and outstanding.
From May 1, 1992 to June 30, 1996, Mendell was essentially inactive and
its activities were primarily devoted to "winding up" operations as a result of
the sale of its oil and gas properties. The former Mendell operated, from its
inception on July 22, 1985, as an independent oil and gas company engaged in the
business of developing and producing crude oil and natural gas reserves in the
United States, primarily in the Watenberg Field, Denver Julesburg Basin, Weld
County, Colorado, until May 1,1992 when it sold all of its oil and gas
properties and effectively ceased operations.
SINCE THE FORMER MENDELL HAS NOT BEEN ENGAGED IN ANY SIGNIFICANT,
OPERATIONAL ACTIVITIES FOR THE PAST TWO YEARS PRECEDING JUNE 30, 1996 AND SINCE
THE PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY, AS DESCRIBED IN THIS ITEM ARE
MATERIALLY DIFFERENT FROM THE PRIOR ACTIVITIES, ANY DISCLOSURE RELATING TO THE
PRIOR HISTORICAL ACTIVITIES OF MENDELL IS CONSIDER IMMATERIAL AND IRRELEVANT TO
AN INFORMED UNDERSTANDING OF THE COMPANY AND THEREFORE, IS OMITTED. PERSONS
INTERESTED IN SUCH PREVIOUS HISTORICAL INFORMATION SHOULD CONSULT PRIOR FILINGS
MADE BY MENDELL-DENVER CORPORATION WITH THE SECURITIES EXCHANGE COMMISSION.
In connection with the Merger, the Company also has elected new officers and
directors. (See Item 10.)
3
<PAGE>
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
---------------------------------------------
The Company has been involved in one industry segment and line of
business, namely the sale and distribution of a skylight, known as the Sun
Tunnel(R) in the natural lightning industry. The sun Tunnel is primarily
utilized in the residential housing industry. (See NARRATIVE DESCRIPTION OF
BUSINESS AND FINANCIAL STATEMENTS.) Since this line of business failed to be
profitable, the Company discontinued it and sold its related assets.
(c)(1) NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
The Company was engaged in the marketing and sale of a skylight, known
as the Sun Tunnel(R). The Company had two (2) Dealer Agreements and a
Distributorship Agreement with Sun Tunnel Systems, Inc., a California
corporation. This business segment was continued as of November 1, 1996.
The Company's present business activities are to locate and evaluate
business opportunities for potential merger or acquisition.
(i) THE PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED
The Company is currently not marketing any products since the
discontinuance of its skylight activities.
(ii) SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company is does not require raw materials since the discontinuance
of its skylight activities.
. (iii) PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS HELD
The Company has no intellectual property rights.
(v) WORKING CAPITAL ITEMS
The Company is not required to carry significant working capital since
business activities are to locate and evaluate business opportunities for
potential merger.
(vi) MAJOR CUSTOMERS
The Company is not dependent upon any one or a few specific customers.
(vii) RENEGOTIATION OR TERMINATION OF GOVERNMENT CONTRACTS
No portion of the Company's business, in its current state, is subject
to renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
4
<PAGE>
(viii) COMPETITIVE CONDITIONS
Since business activities are to locate and evaluate business
opportunities for potential merger the company is not subject to competitive
conditions.
(ix) RESEARCH AND DEVELOPMENT ACTIVITIES
The Company does not engage in any research and development activities
and does not contemplate engaging in such activities in the future.
(x) ENVIRONMENTAL COMPLIANCE
The Company in its business is not subject to any federal, state and
local material provisions which have been enacted or adopted regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment which require capital expenditures or which would
have an impact on the earnings or competitive portion of the Company.
(xi) EMPLOYEES
As of June 30, 1997 , the Company has no employees except Patricia E.
Johnston, President and Chief Executive Officer of the Company.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
----------------------------------------------------------------------
SALES
-----
The Company does not have sales to customers outside of the United
States.
5
<PAGE>
ITEM 2.
PROPERTIES
OFFICE FACILITIES
- -----------------
The Company has no principal executive offices. The Company's president
utilizes an office at her residence at 5222 South Holly, Greenwood Village,
Colorado 80111 at no cost to the Company. The phone number for this office is
303-779-1900.
6
<PAGE>
ITEM 3.
LEGAL PROCEEDINGS
No legal proceedings to which the Company (or any officer or director
of the Company, or any affiliate or owners of record or beneficially of more
than 5% of the common stock) to Management's knowledge, is a party or to which
the property of the Company is subject, is pending and no such proceedings are
known by Management of the Company to be contemplated.
7
<PAGE>
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The shareholders of the former Mendell-Denver Corporation and
Mendell-Denver Corporation as the sole shareholder of the Company prior to the
Merger, described in Item 1 convened a meeting on July 18, 1996 to vote upon or
consent to the Merger. The Merger was approved by the necessary vote and consent
of the shareholders of both corporations.
8
<PAGE>
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The common stock of the Company has only recently been approved for
trading and consequently trading activity is extremely limited. The Company's
common stock is traded on the NASDAQ Bulletin Board, under the symbol "SUNY".
While a limited market did exist for the Company's common stock under its former
name of Mendell-Denver Corporation, it was so insignificant as to not be a true
market. Accordingly, any information relating to former market activity is
deemed immaterial and irrelevant.
The Company has paid no dividends on its common stock and does not
expect to pay dividends in the foreseeable future. All revenues received by the
Company will be reinvested into the business.
As of June 30, 1997, the Company had eighty-two (82) record
shareholders of the Eleven Million Five Hundred Thousand and Sixty-Four
(11,500,064) shares of its common stock.
9
<PAGE>
<TABLE>
<CAPTION>
ITEM 6
SELECTED FINANCIAL DATA
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
For the year:
Oil and gas sales $ -0- $ -0- $ -0- $ -0-
Other revenues 4,274 8,993
Earnings (loss) (487,092) (3,577) (12,316) (33,320)
Earnings (loss) per common
share (.0461) (.0007) (.0022) (.0061)
At June 30:
Total Assets $270,070 $ 407 $ 6,229 $28,450
Stockholders' Equity 238,570 407 3,884 16,200
Working Capital (13,584) 407 3,884 16,200
The Company has no long term debt.
</TABLE>
10
<PAGE>
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996.
- ---------------------------------------------
(a) LIQUIDITY.
---------
At June 30, 1997, the Company had negative working capital of
$(13,584). This negative position is from the operating losses exceeding cash
proceeds from the sale of stock. At June 30, 1996, the Company had a positive
working capital of $407. This position was accounted for by the receipt option
revenue, interest income and a tax refund.
Cash Flow from Operations was ($402,134) in 1997 as compared to
($1,777) in 1996.
(b) CAPITAL RESOURCES.
-----------------
Total assets of the Company as of June 30, 1997 were $270,070 as
compared to $407 at June 30, 1996. The increase in the assets the reflects
acquisition the assets acquired through the issuance of stock and from the sale
of discontinued operation.
Stockholder's equity of $238,570 at June 30, 1997, as compared to
stockholder's equity of $407 at June 30, 1996, is the result of issuing stock
less operating losses. The Company had no capital commitments at June 30, 1997.
(c) RESULTS OF OPERATIONS.
---------------------
The Company had sales of $37,894 during the period until November 1,
1996 when the company discontinued its operations as a dealer and distributor of
skylights. Revenues since November 1, 1996 were $4,274 from amortizing the
discount of the notes receivable and $31,781 from the sale of securities held as
investments.
The Company discontinued its operations as a dealer and distributor of
skylights on November 1, 1996. The company recognized a loss of $(173,911) from
operating this business segment and recognized a loss of $(134,947) from the
sale of its assets.
General and administrative expenses of $214,289 for the year ended
June 30, 1997 were due to initiating the Company's business activities as a
dealer and distributor of skylights and seeking other acquisition or merger
opportunities. Depreciation and amortization expenses in 1997 were $4,104 and
$5,600, respectively. Depreciation and amortization were entirely related to the
discontinued business segment.
11
<PAGE>
The Company had no revenues from the sale of oil and gas for the fiscal
year ended June 30, 1996. Revenues as previously mentioned were derived from
option revenues, interest income and a tax refund. The funds realized from such
revenues were used to pay general administrative costs and to fund the buy-out
of an option. Total expenses were $12,570 resulting in a net loss for the fiscal
year ended June 30, 1996 of ($2,464).
At June 30, 1996, the Company had substantially finished the
discontinuation of its oil and gas activities. There were no Production Costs in
1996. There was no Depreciation, Depletion and Amortization Expense in 1996,
since the Company owned no oil and gas properties, real estate of any type,
furniture or equipment.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995.
- ----------------------------------------------
(a) LIQUIDITY.
---------
At June 30, 1996, the Company had positive working capital of $407.00.
This positive position is accounted for by the receipt of option revenue,
interest income and a tax refund. At June 30, 1995, the Company had a positive
working capital of $3,884.00. This position was accounted for by the receipt of
severance payments in 1994 in the amount of $2,084.00
Cash Flow from Operations was ($1,777.00) in 1996 as compared to
($26,366.00) in 1995.
(b) CAPITAL RESOURCES.
-----------------
Total assets of the Company as of June 30, 1996 were $407.00 as
compared to $6,279.00 at June 30, 1995. The decrease in the assets reflects the
further discontinuance of the Company's oil and gas operations.
Stockholder's equity of $407.00 at June 30, 1996, as compared to
stockholder's equity of $3,884.00 at June 30, 1995, is accounted for by
continuing operational losses. The Company had no capital commitments at June
30, 1996. The Company was continuing to liquidate and close its corporate
affairs as of June 30, 1996.
(c) RESULTS OF OPERATIONS.
---------------------
The Company had no revenues from the sale of oil and gas for the fiscal
year ended June 30, 1996. Revenues as previously mentioned were derived from
option revenues, interest income and a tax refund. The funds realized from such
revenues were used to pay general administrative costs and to fund the buy-out
of an option. Total expenses were $12,570.00 resulting in a net loss for the
fiscal year ended June 30, 1996 of ($2,464.00).
At June 30, 1996, the Company had substantially finished the
discontinuation of its oil and gas activities. There were no Production Costs in
1996. There was no Depreciation, Depletion and Amortization Expense in 1996,
since the Company owned no oil and gas properties, real estate of any type,
furniture or equipment.
12
<PAGE>
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SUNLIGHT SYSTEMS, LTD.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
Table of Contents F-1.01
Independent Auditors' Reports F-1
Balance Sheet - June 30, 1997 F-2, F-3
Statements of Operations - For the Years Ended June 30, 1997 and 1996 F-4
Statements of Changes in Stockholders' Equity - For the Years Ended
June 30, 1997 and 1996 F-5
Statements of Cash Flows - For the Years Ended June 30, 1997 and 1996 F-6, F-7
Notes to Financial Statements F-8 to
F-13
The schedules for which provision is made in
Regulation S-X are not required under the
instructions contained therein, are inapplicable, or
the information required is in the financial
statements or footnotes.
13
<PAGE>
Sunlight Systems, Ltd..
(Formerly Mendell-Denver Corporation)
Financial Statements
June 30, 1997
Table of Contents
Page
----
Independent Auditor's Report F-1
Financial Statements
Balance Sheet F-2 to F-3
Statements of Operations F-4
Statements of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6 to F-7
Notes to Financial Statements F-8 to F-13
F-1.01
<PAGE>
Larry O'Donnell, CPA, P.C.
Telephone 745-4545
2280 South Xanadu Way
Suite 370
Aurora, Colorado 80014
Board of Directors
Sunlight Systems, Ltd.
Greenwood Village, Colorado
Independent Auditor's Report
I have audited the accompanying balance sheet of Sunlight Systems, Ltd.
(formerly Mendell-Denver Corporation) as of June 30, 1997 and the related
statements of operations, changes in stockholders' equity and cash flows for the
two 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 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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing their accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sunlight Systems, Ltd. (formerly
Mendell-Denver Corporation) as of June 30, 1997 and the results of its
operations and its cash flows for the two years then ended in conformity with
generally accepted accounting principles.
Larry O'Donnell, CPA, PC
September 24, 1997
F-1
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Balance Sheet
June 30, 1997
ASSETS
Current assets
Cash $ 8,128
Current portion of notes receivable 9,788
--------
Total current assets 17,916
--------
Other assets
Investment in oil and gas properties 171,970
Available for sale securities:
Energy Corporation, common stock
Unrestricted, including allowance for
increase in market value of $31,483 31,483
Intercell Corporation, common stock
Unrestricted, including allowance for
increase in market value of $6,800 6,800
Notes receivable, discounted for imputed
interest at 10%, net of current portion 37,811
Deposits 4,090
--------
252,154
--------
$270,070
========
See Notes to Financial Statements
F-2
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Balance Sheet (Continued)
June 30, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable-related party $ 31,500
--------
Total current liabilities 31,500
--------
Stockholders' equity
Preferred stock, $.0001 par value
5,000,000 shares authorized, none issued
Common stock, $.0001 par value
45,000,000 shares authorized, 11,500,064
issued and outstanding 1,150
Additional paid in capital 686,229
Unrealized gain on securities available for sale 38,283
Accumulated deficit (487,092)
--------
238,570
--------
$270,070
========
See Notes to Financial Statements
F-3
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Statements of Operations
Years ended June 30, 1997 and 1996
1997 1996
---- ----
Revenues $ 4,274 $ 8,993
General and administrative expenses 214,289 12,570
--------- ---------
Loss from continuing operations (210,015) (3,577)
--------- ---------
Gain on sale of securities 31,781
Discontinued Operations
Loss from operations of
discontinued segment (173,911)
Loss on sale of
discontinued segment (134,947)
--------
(308,858)
--------
Net loss $(487,092) $ (3,577)
========= =========
Net loss per common shares $ (.0461) $ (.0007)
========= =========
Weighted average number of common
shares outstanding 10,554,859 5,491,558
========== =========
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Statements of Changes in Stockholders' Equity
Years Ended June 30, 1997 and 1996
Sunlight Systems, Ltd. Mendell-Denver Corporation
------------------------------------------------------------ --------------------------------------
Additional Unrealized
Common Stock Paid-In Gain On Accumulated Common Stock Accumulated
Shares Amount Capital Securities Deficit Shares Amount Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 5,491,558 $ 5,492 $(1,608)
Sale of common stock 5,000,000 100 (4,900)
Net loss for the year (3,577)
-------
Balance, June 30, 1996 10,491,558 5,592 (10,085)
Exchange of Mendell-Denver
Corporation stock for
Sunlight Systems, Ltd
stock at 5 for 1 2,098,312 $ 210 $ 197 (10,491,558) (5,592) 10,085
Issuance of common stock
for cash and other property 9,401,752 940 1,439,312
Net loss for the year (487,092)
Unrealized gain on securities 38,283
---------- ------- ---------- ------- --------- ----------- ------- -------
Balance, June 30, 1997 11,500,064 $ 1,150 $1,439,509 $38,283 $(487,092) -- $ -- $ --
========== ======= ========== ======= ========= =========== ======= =======
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Statements of Cash Flows
Years Ended June 30, 1997 and 1996
1997 1996
---- ----
Cash flows from operating activities
Net loss $(487,092) $ (3,577)
Adjustments to reconcile net loss to net cash
from operating activities
Loss on sale of long term assets 52,118
Depreciation and amortization 9,704
Amortized discount on notes receivable (4,274)
Change in assets and liabilities:
(Increase) decrease in:
Accounts and escrow receivable 3,032
Deposits (4,090)
Income tax refunds receivable 1,113
Increase (decrease) in:
Accounts payable 31,500 (2,345)
--------- ---------
Net cash used by operating activities (402,134) (1,777)
--------- ---------
Cash flows from investing activities
Purchase of property and equipment (71,172)
Purchase of distribution and dealerships (42,546)
Increase in start-up costs (30,627)
Proceeds from sale of assets 18,700
Payments received on notes receivable 20,500
---------
Net cash used by investing activities (105,145)
---------
Cash flows from financing activities
Proceeds from sale of common stock 515,000 100
--------- ---------
Net cash flows from financing activities 515,000 100
--------- ---------
Net increase(decrease) in cash flows 7,721 (1,677)
Cash, beginning 407 2,084
--------- ---------
Cash ending $ 8,128 $ 407
========= =========
See Notes to Financial Statements
F-6
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Statements of Cash Flows (Continued)
Years Ended June 30, 1997 and 1996
Noncash investing and financing activities:
Assets acquired by issuance of common stock:
Investment in oil and gas property $171,970
Marketable equity securities
of Energy Corporation $ --
Marketable equity securities
of Intercell Corporation $ --
Note receivable acquired for
sale of assets $ 72,053
See Notes to Financial Statements
F-7
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements
June 30, 1997
1 Organization, Business and Merger of Mendell-Denver Corporation with
Sunlight Systems, Ltd.
Mendell-Denver Corporation (Mendell) was formed on July 22, 1985 for the
purpose of acquiring, exploring and developing oil and gas properties. On
May 1, 1992, Mendell sold all of its interests in oil and gas properties
and has since had no business operations.
Sunlight Systems, Ltd. (Sunlight) was formed on June 22, 1996. On July 17,
1996 it became a wholly-owned subsidiary of Mendell. Mendell was merged
with and into Sunlight with Sunlight being the surviving corporation.
Shareholders of Mendell received one common share of Sunlight for five
shares of Mendell.
Sunlight was a dealer in Colorado and Nevada and a distributor in Illinois,
Ohio, Michigan and Indiana of skylights manufactured or imported by Sun
Tunnel Systems, Inc. As discussed in Note 4, on November 1, 1997 the
Company sold its dealerships and distributorships. The Company is actively
seeking business opportunities for potential acquisition or merger.
2. Significant Accounting Policies
Inventories - Inventories are valued at the lower of cost or market using
the first-in, first-out (FIFO) method for determining cost. Inventories
consist of skylights and components.
Property and Equipment - Property and equipment are carried at cost. Major
additions and betterments are capitalized while replacements and
maintenance and repairs that do not improve or extend the life of the
respective assets are expensed. When property is retired or otherwise
disposed of, the related costs and accumulated depreciation and
amortization are removed from the accounts and any gain or loss is
reflected in operations.
Depreciation and amortization of property and equipment are calculated on
the straight-line method over the estimated useful lives of three to seven
years.
F-8
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements (Continued)
June 30, 1997
2. Significant Accounting Policies (Continued)
Intangible Assets - Intangible assets subject to amortization include
start-up costs and dealer and distributor costs. Start-up costs are being
amortized on a straight-line basis over five years. Dealer and distributor
costs are being amortized over the life of the dealer and distributor
agreements of three years.
Investment in Marketable Securities - The Company classifies its marketable
equity securities as "available for sale". Securities classified as
"available for sale" are carried in the financial statements at fair value
unless they are restricted from trade. Restricted securities are carried at
cost. Realized gains and losses, determined using the first-in, first-out
method, are included in earnings; unrealized holding gains and losses are
reported as a separate component of stockholders' equity.
Oil and Gas Properties - The Company followed the successful efforts method
of accounting for its oil and gas activities. Under this method, costs
associated with the acquisition, drilling, and equipping of successful
exploratory wells are capitalized and amortized ratably over the life of
production from related proved reserves. Geological and geophysical costs,
delay rentals, and drilling costs of unsuccessful exploratory wells are
charged to expense as incurred. Costs of drilling, both successful and
unsuccessful development wells, are also capitalized and amortized ratably
over the life of production from related proved reserves. Undeveloped
properties are assessed periodically to determine whether the properties
have been impaired, and when impairment occurs, a loss is recognized.
Property acquisition costs for unproved oil and gas properties are
initially capitalized. The acquisition costs for unproved properties are
assessed at least annually, and if necessary, an impairment in value
recognized. Proceeds from sales of partial interests in unproved leases are
accounted for as a recovery of cost without recognizing any gain or loss.
Costs of properties abandoned are expensed on the date of abandonment.
Loss Per Common Share - Loss per common share is computed on the basis of
the weighted average number of common shares outstanding during the
respective periods.
F-9
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements (Continued)
June 30, 1997
2. Significant Accounting Policies (Continued)
Cash Equivalents - For purposes of reporting cash flow, the Company
considers cash and certificates of deposit with original maturity of three
months or less to be cash equivalents.
3. Investment in Energy Corporation
The company owned One Hundred and Sixty-Six Thousand, Six Hundred and Sixty
Seven (166,667) restricted shares of Energy Corporation. Energy Corporation
is a public company whose stock, as a result of it's decision to implement
a voluntary Plan of Liquidation Dissolution, is not currently trading. As a
result of the sale of all it's assets to Intercell Corporation
(NASDAQ;INCE) on July 7, 1996, Energy Corporation received Five Million,
Four Hundred and Twelve Thousand, Three Hundred and Fifty Five (5,412,355)
restricted shares of Intercell Corporation in exchange for such assets.
Energy Corporation and Intercell Corporation have agreed to register and
distribute to the shareholders of Energy Corporation the Five Million, Four
Hundred and Twelve Thousand, Three Hundred and Fifty-Five (5,412,355)
shares held by Energy Corporation. All beneficial owners of common stock of
Energy Corporation, as of July 8, 1996 will be entitled, over a three (3)
year period, in six (6) equal installments, payable in January and April of
each year commencing 1997 through 1999, to receive for each share of
Intercell Corporation such holder owns, one (1) registered share of
Intercell Corporation. Intercell Corporation is currently preparing the
Registration Statement for filing with the Securities and Exchange
Commission. On August 25, 1997 the Company received its shares of Intercell
Corporation.
The shares of Energy Corporation were acquired in a noncash transaction in
exchange for shares of the Company. The shares have been recorded at no
cost because the Company is unable to determine the cost of Energy
Corporation shares of its predecessor owners.
F-10
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements (Continued)
June 30, 1997
3. Investment in Energy Corporation (Continued)
Unrealized gains and losses of marketable securities available for sale as
of June 30, 1997 are as follows:
Gross Fair
Shares Cost Unrealized Value
Energy Corporation: Gains
Shares with restrictions
lasting more than one year 46,298 $ -- $ 15,741 $ 15,741
Shares with restrictions
lasting less than one year 92,596 $ -- $ 31,483 $ 31,483
Intercell Corporation 20,000 $ -- $ 6,800 $ 6,800
The unrealized loss on shares with restrictions lasting for more than one
year is not being recognized in the financial statements.
4. Discontinued operations
On November 1, 1997, the Company sold its dealerships and distributorships
in skylights manufactured or imported by Sun Tunnel Systems, Inc. including
all of its assets. In separate transactions, the Company received 1)$18,700
in cash 2) a note receivable for $60,000 and 3) a note receivable for
$30,000. The notes receivable are collaterialized by the assets sold and
require payments of $1,250 and $1,000, respectively. The notes receivable
are discounted to recognize an interest rate of 10%. The Company recognized
a loss on the sale of $134,947. The $30,000 note receivable was further
discounted and collected in full in April, 1997.
5. Related Party Transactions
The Company pays a management fee to Zenith Petroleum Corporation whose
president and a stockholder is the President and a beneficial stockholder
of the Company. Management fees of $91,000 were recorded for the year ended
June 30, 1997 of which $31,500 are included in accounts payable at June 30,
1997.
The president of Energy Corporation is a minority stockholder of the
Company.
F-11
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements (Continued)
June 30, 1997
6. Stockholders' Equity
Sunlight Systems, Ltd. issued stock as follows
Shares Value
Exchange for 10,491,558 shares
Mendell-Denver Corporation
at five shares to one 2,098,312 $ 407
Cash 2,083,960 300,000
Oil and gas property (valued at the cost of
the predecessor owner) 2,083,896 171,970
166,667 shares of Energy
Corporation plus $90,000 cash 2,733,896 90,002
Cash 500,000 125,000
20,000 shares of Intercell Corporation 2,000,000 --
--------- --------
11,500,064 $687,379
========== ========
7. Investment in Oil and Gas Properties
The Company has an investment in overriding royalty on leases which are
held by a large independent oil and gas operator. The leases are fully paid
for the next three years. The leases are presently not producing.
F-12
<PAGE>
Sunlight Systems, Ltd.
(Formerly Mendell-Denver Corporation)
Notes to Financial Statements (Continued)
June 30, 1997
8. Income Taxes
Deferred income taxes arise from the temporary differences between
financial statement and income tax recognition of net operating losses and
unrealized gain and losses of marketable securities.
The components of deferred taxes at June 30, 1997 in the accompanying
balance sheet is summarized below:
Deferred tax assets (liabilities) arising from:
Net operating loss carryover $ 120,000
Unrealized gains on securities (9,000)
Less valuation allowance (111,000)
Deferred taxes - net $ --
========
At June 30, 1997, the Company has approximately $480,000 of unused Federal
net operating loss carryforwards, which expire in the year 2012.
F-13
<PAGE>
<TABLE>
<CAPTION>
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
NAME AND AGE POSITION PERIOD OF SERVICE
<S> <C> <C>
Patricia E. Johnston (39) President, Chief Executive Officer, June 1996 to Present
Chief Financial Offer, Treasurer &
Director
Cheri L. Perry (49) Secretary June 1996 to Present
</TABLE>
The directors hold office until the next annual meeting of shareholders
and until their successors have been duly elected and qualified. The officers
are elected by the Board of Directors at its annual meeting, immediately
following the shareholders annual meeting and hold office until their death or
until they seek an earlier resignation or are removed from office. No current
director has any arrangement or understanding whereby they are or will be
selected as a director or nominee. There are no written or other contracts
providing for the election of directors or term of employment for executive
officers. No family relationship exists between any director, executive officer,
significant employee or person nominated or chosen by the Company to become a
director or executive officer. The Company has not established an executive
committee of the Board of Directors or any committee that would serve similar
functions such as audit, incentive compensation, or nominating committees.
BIOGRAPHICAL INFORMATION ON OFFICERS AND DIRECTORS.
- --------------------------------------------------
PATRICIA E. JOHNSTON. Ms. Johnston has been the President, Chief
Executive Officer, Chief Financial Officer, Treasurer and a Director of the
Company since its incorporation on June 25,1996. From 1991 to the present, Ms.
Johnston has been a licensed real estate agent with Perry & Butler Realty, Inc.,
she serves specifically as a residential Realtor. She has been given the
distinction for four consecutive years of the President Club - "Gold" (Perry &
Butler Realty, Inc. recognition of Top Sale Producers). Prior to that time, she
held various top executive positions with numerous publicly traded and private
companies in the oil and gas investment, mineral exploration and development
industries and was involved in other business activities in the real estate and
investment industries.
Ms. Johnston graduated from the University of Wisconsin, Madison in 1982 where
she received her Bachelor of Science degree.
Ms. Johnston is the sole officer, director and shareholder of Zenith Petroleum
Corporation, the beneficial owner of more than ten percent (10%) of the issued
and outstanding stock of the Company.
28
<PAGE>
The Company believes, because of Ms. Johnston's professional expertise and
background in the real estate industry that she enjoys a significant knowledge
of features and products considered attractive to home owners and the
construction industry. The Company's primary product is designed for the
residential home market and is a product which she as, the President of the
Company, is an unique position to sponsor and market with people actively
engaged in the real estate industry and whose opinions carry significant weight
with homeowners, builders, remolding and renovation firms and others catering to
the huge housing market industry.
CHERI L. PERRY. Ms. Perry has served as the Secretary of the Company
since its inception. From February 1993 to May 1996, Ms. Perry was employed as a
Product Manager with Automatic Data Processing at its Denver, Colorado office.
From January 1, 1984 to February 1993, she was employed by Securities Industry
Software, Inc., as a Conversion Services and Product Manager in its Denver,
Colorado offices.
Prior to that time Ms. Perry was employed by various brokerage firms located in
the Denver, Colorado area. She was Operations Manager at Morris Bridger
Securities, Inc. from January 1983 until January 1984. From September 1995 to
January 1983, she was employed as the Treasurer/Controller of E.J. Pittock &
Co., Incorporated. From May 1968 to September 1975, she was employed by
Bosworth, Sullivan & Co., in numerous positions.
Prior to the change in control, which became unconditionally effective
on July 22, 1996, management of the company consisted of the following
individuals in the capacities indicated.
PAUL E. MENDELL. Mr. Mendell was Chairman of the Board, President,
Chief Executive Officer and a Director of the Company from inception on July 22,
1985 to July 22, 1996.
CHARLES R. RAYMAN. Mr. Rayman was Vice President, Secretary, Treasurer,
Chief Financial Officer and Director of the Company from April 1, 1989 to July
22, 1996.
DAVID M. HEDGES. Mr. Hedges was a Director of the Company from December
8, 1987 to July 22, 1996.
29
<PAGE>
ITEM 11
EXECUTIVE COMPENSATION
No compensation has been paid to any Executive Officer or Director or
to them as a group during the fiscal year ended June 30, 1997. All officers and
Directors of the Company prior to the change in control have resigned their
positions and consequently no compensation will be paid to them by the Company
in the future.
Present members of Management are currently serving without any
compensation on behalf of the Company. However, Zenith Petroleum Corporation was
paid $91,000 for consulting fees as of June 30, 1997. See Note 5 to Notes to
Financial Statements.
The Company does intend when operating or other funds are available, to
compensate its Executive Officers and key employees in a manner equivalent with
the size of the Company and for comparable services rendered for similar type of
services. The Company further contemplates creating a Compensatory Stock Option
Plan which it intends to register under Form S-8 for the benefit of officers,
directors, key employees, consultants and advisors and others entitled to the
benefit of such plan. At the current time, no options have been granted.
Any amount which may have been paid by the Company in the past fiscal
year or which in the future may be paid, may obviously have certain personal
benefits for the individual concerned, but are not paid in any connection with
any personal matters but solely in connection with the conduct of the Company's
business. Such payments are made to facilitate job performance and to reduce
work related expenses. Although the amount of such personal benefits and the
extent to which they are related to job performance can not be specifically
ascertained, the Company has concluded that the aggregate amount of such
personal benefits will not exceed 5% of cash compensation for any person or
group named.
30
<PAGE>
ITEM 12
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Based upon information which has been made available to the Company by
its Stock Transfer Agent, the following tables sets forth, as of September 23,
1997, the common shares owned by each person, known by the Company to own more
the 5% of the outstanding common stock of the Company and for each officer and
director, and the officers and directors as a group.
NAME & ADDRESS OF NUMBER OF SHARES PERCENTAGE(1)
BENEFICIAL OWNER
Zenith Petroleum Corporation 2,230,619(2) 19.40%
5222 S. Holly (3)
Greenwood Village, CO 80111
Bert Roosen 2,263,117(3) 19.68%
4-4909 32nd Avenue
Surrey, B.C. Canada V4P 1A4
Cheri L. Perry 1,979,222(3) 17.21%
3236 Jellison Street
Wheat Ridge, CO 80033
- ------------------
(1) Based upon 11,500,064 shares issued and outstanding on September 23, 1997.
(2) Patricia E. Johnston, President, Chief Executive Officer, Chief Financial
Officer, Treasurer and a Director of the Company is the Sole Officer, Director
and Shareholder of Zenith Petroleum Corporation.
(3) Each person named has record and/or beneficial ownership of the shares
indicated and sole voting and dispositive rights.
31
<PAGE>
(b) EXECUTIVE OFFICERS AND DIRECTORS
NAME & ADDRESS NUMBER OF SHARES PERCENTAGE(1)
Patricia E. Johnston 2,230,619(2) 19.40%
5222 S. Holly (3)
Greenwood Village, CO 80111
Cheri L. Perry 1,979,222(3) 17.21%
3236 Jellison Street
Wheat Ridge, CO 80033
All Officers and Directors as a 4,209,841 36.61%
Group (2)
- -------------------
(1) Based upon 11,500,064 shares issued and outstanding on September 23, 1997.
(2) Patricia E. Johnston, President, Chief Executive Officer, Chief Financial
Officer, Treasurer and a Director of the Company is the Sole Officer, Director
and Shareholder of Zenith Petroleum Corporation.
(3) Each person named has record and/or beneficial ownership of the shares
indicated and sole voting and dispositive rights.
32
<PAGE>
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the corporate reorganization disclosed in Item 1,
the Company's existing officers, directors and principal stockholders acquired
their controlling interests in the Company as a result of such reorganization.
Following the acquisition of control, certain subscribers consisting of: Zenith
Petroleum Corporation and Cheri L. Perry, each acquired Two Million,
Eighty-Three Thousand, Eight Hundred and Ninety-Six (2,083,896) restricted
shares of the Company's common stock at an effective per share price of $0.1439
per share. Cheri L. Perry paid the sum of Three Hundred Thousand Dollars
($300,000.00) in cash or cash equivalent for her shares. Zenith Petroleum
Corporation purchased its shares for oil and gas properties valued at Three
Hundred Thousand Dollars ($300,000.00). Bert Roosen purchased One Million,
Eighty-Three Thousand, Eight Hundred and Ninety-Six (1,083,896) in exchange for
restricted securities of Energy Corporation valued at Three Hundred Thousand
Dollars ($300,000.00). The evaluation of the securities and the transferred oil
and gas properties was arbitrarily determined by Management and there is no
specific relationship to any recognized criteria of value. Cheri L. Perry,
gifted Two Hundred and Eighty-Three Thousand, Six Hundred and Ninety (283,690)
restricted shares to seven (7) persons (the children, godchildren and an
employee of her husband) reducing her ownership to One Million, Eight Hundred
Thousand (1,800,000) shares. She subsequently purchased One Hundred and
Seventy-Nine Thousand, Two Hundred and Twenty-Two (179,222) shares from
nonaffiliates of the Company, bringing her ownership to One Million, Nine
Hundred and Seventy-Nine, Two Hundred and Twenty-Two (1,979,222) shares. Bert
Roosen and Zenith Petroleum Corporation subsequently purchased One Hundred and
Seventy-Nine Thousand, One Hundred and Fifty-Seven (179,157) and One Hundred and
Forty-Six Thousand, Six Hundred and Fifty-Nine (146,659) shares from
nonaffiliates. All shares purchased from nonaffiliates were purchased at $0.20
per share.
Except as disclosed herein, there are no other arrangements or
transactions from which related parties may receive a benefit to the best
knowledge of Management. See also Note 5 to Notes to Financial Statements.
33
<PAGE>
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND
REPORTS OF FORM 8-K
a) The following documents and reports have been filed as a part of this
report.
1. Financial Statements.
(a) Independent Auditors' Reports
(b) Balance Sheet - June 30, 1997
(c) Statements of Operations - For the Two Years Ended
June 30, 1997
(d) Statements of Stockholder's Equity -
For the Two Years Ended June 30, 1997
(e) Statements of Cash Flows -
For the Two Years Ended June 30, 1997
(f) Notes to Financial Statements
2. Financial Statement Schedules
Schedules are omitted as they are not required or are not
applicable, or the required information is shown in the
Financial Statements or notes thereto.
3. Exhibits required by Item 601:
No exhibits are required to be filed by Item 601.
4. Reports on Form 8-K:
No current Report on Form 8-K was filed in the last
quarter of the Fiscal Year Ended June 30, 1997.
34
<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.
SUNLIGHT SYSTEMS, LTD.
(Registrant)
/s/ Patricia E. Johnston
Date: September 27, 1997 By: _____________________________________
Patricia E. Johnston,
Chief Executive Officer, President,
Chief Financial Officer, Treasurer, &
Director
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY TO SUCH FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,128
<SECURITIES> 0
<RECEIVABLES> 9,788
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,916
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 270,070
<CURRENT-LIABILITIES> 31,500
<BONDS> 0
0
0
<COMMON> 1,150
<OTHER-SE> 724,512
<TOTAL-LIABILITY-AND-EQUITY> 270,070
<SALES> 0
<TOTAL-REVENUES> 4,274
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 214,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (210,015)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210,015)
<DISCONTINUED> (308,858)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (487,092)
<EPS-PRIMARY> (.045)
<EPS-DILUTED> (.045)
</TABLE>
