UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended February 28, 1999
[ ] 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: 33-2128-D
Kelly's Coffee Group, Inc.
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(Name of Small Business Issuer in Its Charter)
Colorado 84-1062062
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock ($0.001 Par Value) None
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will 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 total consolidated revenues for the year ended February 28, 1999,
were $ 0.
The aggregate market value of the registrant's Common Stock, $0.001 par value
(the only class of voting stock), held by non-affiliates was approximately
$684,336 based on the average closing bid and asked prices for the Common Stock
on November 18, 1999.
At November 18, 1999, the number of shares outstanding of the registrant's
Common Stock, $0.001 par value (the only class of voting stock), was 51,446,019.
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business.............................................1
Item 2. Description of Property.............................................5
Item 3. Legal Proceedings...................................................5
Item 4. Submission of Matters to a Vote of Security-Holders................ 6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............6
Item 6. Management's Discussion and Analysis or Plan of Operation...........7
Item 7. Financial Statements................................................9
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure..........................10
PART III
Item 9. Directors and Executive Officers ..................................10
Item 10. Executive Compensation.............................................10
Item 11. Security Ownership of Certain Beneficial Owners and Management.....11
Item 12. Certain Relationships and Related Transactions.....................12
Item 13. Exhibits, List and Reports on Form 8-K.............................12
Signatures.........................................................13
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PART I
This Report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to continue its expansion strategy,
changes in costs of raw materials, labor, and employee benefits, as well as
general market conditions, competition and pricing. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this Annual Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
ITEM 1. DESCRIPTION OF BUSINESS
As used herein the term "Company" refers to Kelly's Coffee Group, Inc., a Nevada
corporation and its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was incorporated under the laws of the State of Colorado
on April 20, 1987. The Company has undergone several name changes since its
organization. The Company has also been involved in several business activities,
all of which have been discontinued. The Company's principal business activity
From December 1995 to February of 1998 was the manufacture of store fixtures,
showcases and other specialty items for jewelers and other retailers. The
Company decided to discontinue its manufacturing and distribution of store
fixtures due to a lack of funding and increased losses on February 28, 1998. The
Company is currently a shell company whose purpose will be to acquire operations
through an acquisition or merger. For more information on the Company's prior
manufacturing and distribution operations, see "Item 1. Description of Business"
in the Company's February 28, 1997, Form 10KSB incorporated herein by reference.
Since the Company discontinued its operations it has attempted to identify and
acquire a favorable business opportunity. The Company has reviewed and evaluated
a number of business ventures for possible acquisition or participation by the
Company. The Company has not entered into any agreement, nor does it have any
commitment or understanding to enter into or become engaged in a transaction as
of the date of this filing. The Company continues to investigate, review, and
evaluate business opportunities as they become available and will seek to
acquire or become engaged in business opportunities at such time as specific
opportunities warrant.
To date, opportunities have been made available to the Company through its
officers and directors and through professional advisors including securities
broker-dealers and through members of the financial community. It is anticipated
that business opportunities will continue to be available primarily from these
sources.
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis regarding the quality of the other firm's
management and personnel, the asset base of such firm or enterprise, the
anticipated acceptability of new products or marketing concepts, the merit of
the firms business plan, and numerous other factors which are difficult, if not
impossible, to analyze through the application of any objective criteria.
The Company currently has no commitment or arrangement to participate in a
business and cannot now predict what type of business it may enter into or
acquire. It is emphasized that the business objectives discussed herein are
extremely general and are not intended to be restrictive on the discretion of
the Company's management.
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There are no plans or arrangements proposed or under consideration for the
issuance or sale of additional securities by the Company prior to the
identification of an acquisition candidate. Consequently, management anticipates
that it may be able to participate in only one potential business venture, due
primarily to the Company's limited capital. This lack of diversification should
be considered a substantial risk, because it will not permit the Company to
offset potential losses from one venture against gains from another.
Selection of a Business
The Company anticipates that businesses for possible acquisition will be
referred by various sources, including its officers and directors, professional
advisors, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited proposals. The
Company will not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its officers and
directors and their affiliates, as well as indirect associations between them
and other business and professional people. By relying on "word of mouth", the
Company may be limited in the number of potential acquisitions it can identify.
While it is not presently anticipated that the Company will engage unaffiliated
professional firms specializing in business acquisitions or reorganizations,
such firms may be retained if management deems it in the best interest of the
Company.
Compensation to a finder or business acquisition firm may take various forms,
including one-time cash payments, payments based on a percentage of revenues or
product sales volume, payments involving issuance of securities (including those
of the Company), or any combination of these or other compensation arrangements.
Consequently, the Company is currently unable to predict the cost of utilizing
such services.
Pursuant to the Financial Consulting Agreement between the Company and Hudson
Consulting Group, Inc. Hudson may be entitled to 10% of the Company's issued and
outstanding shares after reorganization in addition to an undetermined amount of
cash to cover costs, expenses and fees. Hudson is a majority shareholder of the
Company whose officers and directors are the same as the Company's.
The Company will not restrict its search to any particular business, industry,
or geographical location, and management reserves the right to evaluate and
enter into any type of business in any location. The Company may participate in
a newly organized business venture or a more established company entering a new
phase of growth or in need of additional capital to overcome existing financial
problems. Participation in a new business venture entails greater risks since in
many instances the management of such a venture will not have proved its
ability, the eventual market of such a venture's product or services will likely
not be established, and the profitability of the venture will be unproved and
cannot be predicted accurately. If the Company participates in a more
established firm with existing financial problems, it may be subjected to risk
because the financial resources of the Company may not be adequate to eliminate
or reverse the circumstances leading to such financial problems.
In seeking a business venture, the decision of management will not be controlled
by an attempt to take advantage of any anticipated or perceived appeal of a
specific industry, management group, product, or industry, but will be based on
the business objective of seeking long-term capital appreciation in the real
value of the Company.
The analysis of new businesses will be undertaken by or under the supervision of
the officers and directors. In analyzing prospective businesses, management will
consider, to the extent applicable, the available technical, financial, and
managerial resources; working capital and other prospects for the future; the
nature of present and expected competition; the quality and experience of
management services which may be available and the depth of that management; the
potential for further research, development, or exploration; the potential for
growth and expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trade or service marks; name
identification; and other relevant factors. It is anticipated that the
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results of operations of a specific firm may not necessarily be indicative of
the potential for the future because of the requirement to substantially shift
marketing approaches, expand significantly, change product emphasis, change or
substantially augment management, and other factors.
The Company will analyze all available factors and make a determination based on
a composite of available facts, without reliance on any single factor. The
period within which the Company may participate in a business cannot be
predicted and will depend on circumstances beyond the Company's control,
including the availability of businesses, the time required for the Company to
complete its investigation and analysis of prospective businesses, the time
required to prepare appropriate documents and agreements providing for the
Company's participation, and other circumstances.
Acquisition of a Business
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, or other reorganization with
another corporation or entity; joint venture; license; purchase and sale of
assets; or purchase and sale of stock, the exact nature of which cannot now be
predicted. Notwithstanding the above, the Company does not intend to participate
in a business through the purchase of minority stock positions. On the
consummation of a transaction, it is likely that the present management and
shareholders of the Company will not be in control of the Company. In addition,
a majority or all of the Company's directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new directors without a vote
of the Company's shareholders.
In connection with the Company's acquisition of a business, the present
shareholders of the Company, including officers and directors, may, as a
negotiated element of the acquisition, sell a portion or all of the Company's
Common Stock held by them at a significant premium over their original
investment in the Company. As a result of such sales, affiliates of the entity
participating in the business reorganization with the Company would acquire a
higher percentage of equity ownership in the Company. Although the Company's
present shareholders did not acquire their shares of Common Stock with a view
towards any subsequent sale in connection with a business reorganization, it is
not unusual for affiliates of the entity participating in the reorganization to
negotiate to purchase shares held by the present shareholders in order to reduce
the amount of shares held by persons no longer affiliated with the Company and
thereby reduce the potential adverse impact on the public market in the
Company's common stock that could result from substantial sales of such shares
after the business reorganization. Public investors will not receive any portion
of the premium that may be paid in the foregoing circumstances. Furthermore, the
Company's shareholders may not be afforded an opportunity to approve or consent
to any particular stock buy-out transaction.
In the event sales of shares by present shareholders of the Company, including
officers and directors, is a negotiated element of a future acquisition, a
conflict of interest may arise because directors will be negotiating for the
acquisition on behalf of the Company and for sale of their shares for their own
respective accounts. Where a business opportunity is well suited for acquisition
by the Company, but affiliates of the business opportunity impose a condition
that management sell their shares at a price which is unacceptable to them,
management may not sacrifice their financial interest for the Company to
complete the transaction. Where the business opportunity is not well suited, but
the price offered management for their shares management will be tempted to
effect the acquisition to realize a substantial gain on their shares in the
Company. Management has not adopted any policy for resolving the foregoing
potential conflicts, should they arise, and does not intend to obtain an
independent appraisal to determine whether any price that may be offered for
their shares is fair. Stockholders must rely, instead, on the obligation of
management to fulfill its fiduciary duty under state law to act in the best
interests of the Company and its stockholders.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration under applicable federal and
state securities laws. In some circumstances, however, as a negotiated element
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as a negotiated element of the transaction, the Company may agree to register
such securities either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. Although the terms of such
registration rights and the number of securities, if any, which may be
registered cannot be predicted, it may be expected that registration of
securities by the Company in these circumstances would entail substantial
expense to the Company.
The issuance of substantial additional securities and their potential sale into
any trading market which may develop in the Company's securities may have a
depressive effect on such market.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to structure the acquisition as a so- called
"tax-free" event under sections 351 or 368(a) of the Internal Revenue Code of
1986, (the "Code"). In order to obtain tax-free treatment under section 351 of
the Code, it would be necessary for the owners of the acquired business to own
80% or more of the voting stock of the surviving entity. In such event, the
shareholders of the Company would retain less than 20% of the issued and
outstanding shares of the surviving entity. Section 368(a)(1) of the Code
provides for tax- free treatment of certain business reorganizations between
corporate entities where one corporation is merged with or acquires the
securities or assets of another corporation. Generally, the Company will be the
acquiring corporation in such a business reorganization, and the tax-free status
of the transaction will not depend on the issuance of any specific amount of the
Company's voting securities. It is not uncommon, however, that as a negotiated
element of a transaction completed in reliance on section 368, the acquiring
corporation issue securities in such an amount that the shareholders of the
acquired corporation will hold 50% or more of the voting stock of the surviving
entity. Consequently, there is a substantial possibility that the shareholders
of the Company immediately prior to the transaction would retain less than 50%
of the issued and outstanding shares of the surviving entity. Therefore,
regardless of the form of the business acquisition, it may be anticipated that
stockholders, immediately prior to the transaction, will experience a
significant reduction in their percentage of ownership in the Company.
Notwithstanding the fact that the Company is technically the acquiring entity in
the foregoing circumstances, generally accepted accounting principles will
ordinarily require that such transaction be accounted for as if the Company had
been acquired by the other entity owning the business and, therefore, will not
permit a write-up in the carrying value of the assets of the other company.
The manner in which the Company participates in a business will depend on the
nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require specific
representations and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by each of the parties prior to such closing, will
outline the manner of bearing costs if the transaction is not closed, will set
forth remedies on default, and will include miscellaneous other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business will be
dependent on the nature of the business and the interest acquired. The Company
is unable to predict whether the Company will be in control of the business or
whether present management will be in control of the Company following the
acquisition. It may be expected that the business will present various risks,
which cannot be predicted at the present time.
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Governmental Regulation
It is impossible to predict the government regulation, if any, to which the
Company may be subject to until it has acquired an interest in a business. The
use of assets and/or conduct of businesses which the Company may acquire could
subject it to environmental, public health and safety, land use, trade, or other
governmental regulations and state or local taxation. In selecting a business in
which to acquire an interest, management will endeavor to ascertain, to the
extent of the limited resources of the Company, the effects of such government
regulation on the prospective business of the Company. In certain circumstances,
however, such as the acquisition of an interest in a new or start-up business
activity, it may not be possible to predict with any degree of accuracy the
impact of government regulation. The inability to ascertain the effect of
government regulation on a prospective business activity will make the
acquisition of an interest in such business a higher risk.
Competition
The Company will be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by virtue
of their stronger financial resources and prior experience in business. There is
no assurance that the Company will be successful in obtaining suitable
investments.
Employees
The Company is a development stage company and currently has no employees.
Executive officers, who are not compensated for their time contributed to the
Company, will devote only such time to the affairs of the Company as they deem
appropriate, which is estimated to be approximately 20 hours per month per
person. Management of the Company expects to use consultants, attorneys, and
accountants as necessary, and does not anticipate a need to engage any full-time
employees so long as it is seeking and evaluating businesses. The need for
employees and their availability will be addressed in connection with a decision
whether or not to acquire or participate in a specific business industry.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real property. The Company currently uses the offices,
office equipment and support staff of Hudson Consulting Group, Inc. at 268 West
400 South, Suite 300, Salt Lake City, Utah 84101. The Company currently no
written lease agreement.
ITEM 3. LEGAL PROCEEDINGS
Irby Industries, Inc. f/k/a Berg Showcase Manufacturing, Inc., Berg Selector
Distributors, Inc. and Terry Irby vs. Mitchel Feinglas, Kelly's Coffee Group,
Inc., Kelly-Berg Corporation of Colorado, Inc. and Stuart Benson, Case No.
97-CV-649-3 - In December 1995, the Company purchased the assets of Showcase.
The former owners of Showcase attempted to rescind the agreement in March of
1996 claiming non-performance by the Company and its former officers who signed
as guarantors. The dispute was submitted to binding arbitration. The arbitrators
awarded $775,270 to the former owners, but did not rescind the transaction. The
Company and its officers who signed as guarantors were held jointly and
severally liable for this amount. The entire amount has been recorded as a
liability on the Company's balance sheet because collection from the former
officers is uncertain. On July 21, 1999, the Company entered into a Settlement
Agreement in which the Company was released from all liabilities relating to the
dispute in exchange for a $20,000 cash payment.
In March 1997, the Company and Terrence A. Buttler, the Company's President,
filed an action against Mr. Benson, and certain relations and associated
entities of Mr. Benson. The action was filed in the United
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States District Court for the District of Colorado. No entry of appearance or
responsive pleading was filed by or on behalf of any of the defendants. The
Clerk of the Court entered default on June 30, 1997. The defendants filed a
motion to set aside default and for leave to file answer in July 1997, which was
denied by the Court in November 1997 as to Mr. Benson and certain of the other
defendants. Action with respect to the other defendants is pending. In the
Complaint, the Company and Mr. Buttler contend that while Mr. Benson was an
officer and director of the Company, he misused company funds for his personal
benefit. The Company and Mr. Buttler also contend that Mr. Benson has not
surrendered certain corporate records to the Company and that Mr. Benson was
unjustly enriched at the expense of the Company and Mr. Buttler. The Company has
taken no further action on this claim based upon a subjective cost/benefit
analysis.
Denver Pavilions, L. P. v. Kelly's Coffee Group, Inc. On January 11, 1999,
Denver Pavilions, a Colorado limited partnership filed this cause of action
against the Company in the District Court, City and County of Denver Colorado,
Civil Action No. 99CV 0203. Service was not made on the suit until October 5,
1999. The Company has entered into discussions to determine the basis upon which
the suit can be settled. At present, Denver Pavilions has agreed to delay the
filing of an answer by the company while settlement discussions take place. The
only offer of the Plaintiffs to settle has been in exchange for a payment in the
amount of $50,000, the Company has countered and is awaiting a response from
Denver Pavilions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fiscal year covered by this Report to a vote
of security holders, and therefore, this item is inapplicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Electronic Bulletin Board under the
symbol, KLYS. Trading in the common stock in the over-the-counter market has
been limited and sporadic and the quotations set forth below are not necessarily
indicative of actual market conditions. Further, these prices reflect
inter-dealer prices without retail mark-up, mark-down, or commission, and may
not necessarily reflect actual transactions. The high and low bid prices for the
common stock for each quarter of the fiscal years ended February 28, 1999 and
1998 are as follows:
Quarter High Low
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5/31/97 $0.21 $0.07
8/31/97 $0.15 $0.04
11/31/97 $0.065 $0.02
2/28/98 $0.035 $0.01
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Quarter High Low
------- ---- ---
5/31/98 $0.045 $0.02
8/31/98 $0.06 $0.02
11/31/98 $0.02 $0.011
2/28/99 $0.045 $0.012
Quarter High Low
------- ---- ---
5/31/99 $0.08 $0.02
8/31/99 $0.09 $0.031
In October, 1999, the number of holders of record of the Company's common stock
was 331. No cash dividends were paid during the fiscal years February 28, 1999
and 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During the next 12 months, the Company intends locate an operating business
through an acquisition or merger. The Company will also attempt to settle all
remaining liabilities at a substantial discount through the issuance of stock.
Results of Operations
The Company recorded $0 in sales for the fiscal year ended February 28, 1999 and
1998. The Company discontinued its operations for the year ended February 28,
1998.
Income / Losses
Net losses for the year ended February 28, 1999 decreased to $350,228 from
$1,297,007 for the year ended February 28, 1998. The substantial decrease in
losses was attributable the Company's decision to discontinue operations and
from the disposal of all the assets relating to the Company's operations in
1998.
The Company expects to continue to incur losses until such time as it acquires
profitable operations.
Expenses
Selling, general and administrative expenses for the year ended February 28,
1999, were $350,228 compared to $0 for the year ended February 28, 1998. The
increase in selling general and administrative expenses was the result of the
Company's issuances of its common stock for services.
The Company had no depreciation and amortization expenses for the year ended
February 28, 1999. During the year ended February 28, 1998. depreciation and
amortization was $67,061.
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Cost of Sales
The Company had no cost of sales for the years ended February 28, 1999 or
February 28, 1998.
Impact of Inflation
The Company believes that inflation may have a negligible effect on future
operations. The Company believes that it may be able to offset inflationary
increases in the cost of sales by increasing sales and improving operating
efficiencies.
Liquidity and Capital Resources
The Company had no operations for the years ended February 28, 1999 and 1998,
consequently there were no cash flows generated for these periods.
Cash flow generated from financing activities was $0 for the year ended February
28, 1999 and $280,001 for the year ended February 28, 1998.
The Company plans to liquidate its marketable securities in order to maintain
its corporate satus and settle certain liabilities over the next 12 months. In
addition, the Company may issue its securities to raise capital to find an
acquisition or merger.
Year 2000 Implications
Many current installed computer systems and software may be coded to accept only
two-digit entries in the date code field and cannot distinguish 21st century
dates from 20th century dates. As a result, many software and computer systems
may need to be upgraded or replaced. Because the Company currently has no
operations and no computer systems, the Company does not anticipate that the
year 2000 will have any significant effect on the Company. However, the Company
is relying on consultants and other professionals in the preparation of its
financials which includes the use of equipment, software and content, including
non-information technology systems, such as security systems, building equipment
and systems with embedded micro-controllers that may not be Year 2000 compliant.
The Company has taken steps to analyze its technical relationships and ensure
that its third party consultants and other professionals the Company depends on
are also compliant. These include but are not limited to its relationship with
Hudson Consulting Group, Inc., its accountants and attorneys. The Company has
received verification that Hudson Consulting Group, Inc. is compliant. Not all
of the Company's third party distributors have given adequate assurances that
they are or are not compliant and therefore may or may not experience problems
relating to the Year 2000 issues.
Failure of third-party equipment, software or content to operate properly with
regard to the Year 2000 issue could require the Company to incur unanticipated
expenses to remedy problems, which could have a material adverse effect on its
financial condition.
Year 2000 Contingency Plan
No contingency plan is in place due to the fact that the Company has no
operations which would justify such a plan.
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ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended February 28, 1999
are attached hereto as pages F-1 through F-11
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
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CONTENTS
Independent Auditors' Report ................................................F-2
Consolidated Balance Sheet...................................................F-3
Consolidated Statements of Operations .......................................F-4
Consolidated Statements of Stockholders' Equity (Deficit)....................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to the Consolidated Financial Statements ..............................F-8
F-1
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Kelly's Coffee Group, Inc. and Subsidiary
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Kelly's Coffee
Group, Inc. and Subsidiary (a development stage company) as of February 28,
1999, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years ended February 28, 1999 and 1998
and from inception of the development stage on March 1, 1998 through February
28, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the consolidated financial
position of Kelly's Coffee Group, Inc. and Subsidiary (a development stage
company) as of February 28, 1999, and the results of their operations and their
cash flows for the years ended February 28, 1999 and 1998 and from inception of
the development stage on March 1, 1998 through February 28, 1999 in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency which together raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 3. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/
Jones, Jensen & Company
Salt Lake City, Utah
September 9, 1999
F-2
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KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
February 28,
1999
CURRENT ASSETS
Marketable securities - available for sale (Note 1) $ 304,942
--------------
Total Current Assets 304,942
TOTAL ASSETS $ 304,942
==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Net liabilities of discontinued operations (Note 5) $ 2,310,870
--------------
Total Current Liabilities 2,310,870
--------------
TOTAL LIABILITIES 2,310,870
--------------
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value, 50,000 shares
authorized, none issued and outstanding -
Common stock, $0.001 par value, 100,000,000 shares
authorized, 43,555,736 shares issued and outstanding
43,556
Additional paid-in capital 2,823,630
Accumulated deficit (4,522,886)
Accumulated deficit from inception of development
stage on March 1, 1998 (350,228)
--------------
Total Stockholders' Equity (Deficit) (2,005,928)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 304,942
=============
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From
Inception of
Development
Stage on
March 1,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
SALES $ - $ - $ -
------------------ ------------------ ------------------
OPERATING EXPENSES
General and administrative 350,228 - 350,228
------------------ ------------------ ------------------
Total Operating Expenses 350,228 - 350,228
------------------ ------------------ ------------------
LOSS FROM OPERATIONS (350,228) - (350,228)
------------------ ------------------ -------------------
DISCONTINUED OPERATIONS (Note 5)
Loss from discontinued operations - (725,052) -
Loss from disposal of assets - (572,015) -
------------------ ------------------ ------------------
LOSS FROM DISCONTINUED
OPERATIONS - (1,297,067) -
------------------ ------------------ ------------------
NET LOSS $ (350,228) $ (1,297,067) $ (350,228)
================== ================== ==================
BASIC LOSS PER SHARE
Loss from operations $ (0.01) $ 0.00
Loss from discontinued operations 0.00 (0.07)
------------------ ------------------
BASIC LOSS PER SHARE $ (0.01) $ (0.07)
================== ==================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 34,892,629 19,303,497
================== ==================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance,
February 28, 1997 - $ - 12,000,666 $ 12,001 $ 1,600,488 $ (3,225,819)
Common stock issued for
services at $0.03 per
share - - 6,165,430 6,165 178,797 -
Common stock issued for
note payable at $0.03
per share - - 2,268,800 2,269 65,795 -
Common stock issued for
note payable at $0.07
per share - - 150,000 150 10,350 -
Common stock issued for
cash at $0.09 per share - - 331,840 332 29,669 -
Common stock issued for
property at $0.07 per share - - 800,000 800 55,200 -
Contributed capital - - - - 250,000 -
Net loss for the year ended
February 28, 1998 - - - - - (1,297,067)
--------- ---------- ------------ ----------- ------------ ---------------
Balance, February 28, 1998 - - 21,716,736 21,717 2,190,299 (4,522,886)
Common stock issued for
services at $0.03 per share - - 11,450,000 11,450 357,108 -
Common stock issued for
marketable securities at
$0.03 per share - - 11,000,000 11,000 293,942 -
Common stock returned to
treasury at $0.03 per share
for services not performed - - (611,000) (611) (17,719) -
Net loss for the year ended
February 28, 1999 - - - - - (350,228)
--------- ---------- ------------ ----------- ------------ ---------------
Balance, February 28, 1999 - $ - 43,555,736 $ 43,556 $ 2,823,630 $ (4,873,114)
========= ========== ============ =========== ============ ===============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
From
Inception of
Development
Stage on
March 1,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS OPERATING ACTIVITIES
Net loss $ (350,228) $ (1,297,067) $ (350,228)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization - 67,061 -
Loss on disposition of assets - 572,015 -
Common stock issued for services 350,228 184,962 350,228
Allowance for bad debt - (43,038) -
Changes in operating assets and liabilities:
Increase in net liabilities of discontinued
operations - 236,066 -
---------------- --------------- --------------
Net Cash Used in Operating Activities - (280,001) -
---------------- --------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES - - -
---------------- --------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Contributed capital - 250,000 -
Common stock issued for cash - 30,001 -
---------------- --------------- -------------
Net Cash Provided by Financing Activities - 280,001 -
---------------- --------------- -------------
INCREASE (DECREASE) IN CASH - - -
CASH, BEGINNING OF YEAR - - -
---------------- --------------- -------------
CASH, END OF YEAR $ - $ - $ -
================ =============== =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
From
Inception of
Development
Stage on
March 1,
For the Years Ended 1998 Through
February 28, February 28,
1999 1998 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
NONCASH FINANCING ACTIVITIES
Common stock issued for property $ - $ 56,000 $ -
Common stock issued for notes payable $ - $ 78,564 $ -
Common stock issued for marketable
securities $ 304,942 $ - $ 304,942
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 28, 1999 and 1998
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
a. Organization
The consolidated financial statements include those of Kelly's
Coffee Group, Inc. and its 85% owned subsidiary Kelly - Berg
Corporation of Colorado, Inc. (Kelly - Berg) collectively, they
are referred to herein as "the Company". All intercompany accounts
and transactions have been eliminated.
Kelly's Coffee Group, Inc. (Kelly's) was incorporated under the
laws of the State of Colorado on April 20, 1987. The Company was
formerly named Welcom Capital, Incorporated and Great Earth
Vitamin Group, Inc. Subsequent to February 28, 1994 the Company
changed its name to Kelly's Coffee Group, Inc. On December 20,
1995, the Kelly's acquired an 85% interest in Kelly - Berg by
assuming liabilities of Kelly - Berg (Note 7). The Company has
selected the last day of February as its year end. Until November
of 1996, at which time they discontinued these operations, the
Company sold franchises for business which offer gourmet coffees,
teas, hand-made fudge, pastries and other items to retail
customers.
Kelly - Berg was incorporated under the laws of the State of
Colorado on December 19, 1995. Kelly - Berg was organized for the
purpose of owning and holding the assets purchased from Berg
Showcase Manufacturing Corporation, Inc. and to act as the
operating entity resulting from the asset purchase agreement.
Kelly - Berg manufactures store fixtures and merchandise showcases
for jewelry, cosmetics and other retail items. Kelly - Berg does
business as Berg Showcase Manufacturing.
The Company was reclassified as a development stage company on
March 1, 1998.
b. Basic Loss Per Share
Basic loss per share has been calculated based on the weighted
average number of shares of common stock outstanding during the
period.
c. Income Taxes
As of February 28, 1999, the Company had a net operating loss
carryforward for federal income tax purposes of approximately
$5,000,000 that may be used in future years to offset taxable
income. The net operating loss carryforward will begin to expire
in 2014. The tax benefit of the cumulative carryforwards has been
offset by a valuation allowance of the same amount.
d. Concentrations of Credit Risk
The Company has no significant concentrations of credit risk other
than in the normal course of business.
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 28, 1999 and 1998
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
f. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its 85% owned subsidiary. All material intercompany
accounts and transactions have been eliminated in consolidation.
g. Marketable Securities - Available for Sale
The Company has classified its marketable securities as
"available-for-sale" securities. Trading securities are stated at
fair value. Unrealized gains and losses are reported as a separate
component of equity.
Marketable securities - available for sale at February 28, 1999
were $304,942 and have been included in current assets.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
On October 20, 1996, the Company sold the franchise rights of
Kelly's Coffee & Fudge Factory to Kelly's Franchising of America,
Inc. (KFA), which is controlled by a former officer of the
Company, and a major creditor of the Company. The Asset Purchase
Agreement transfers all obligations regarding franchise
agreements, lease agreements relating to franchises and other
obligations related to the operation of the franchising
operations. Additionally, the obligation to the major creditor who
shares control of KFA totaling $320,000 was assumed by KFA.
It has come to the attention of the Company's management that KFA
may have sold Kelly's Coffee & Fudge Franchises under the name of
Kelly's Coffee Group, Inc. The Company is unaware of any claims
against it as a result of these activities.
NOTE 3 - BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
However, the Company has sustained operating losses since its
inception and has a net capital deficiency. In the interim,
shareholders of the Company have committed to meeting its minimal
operating expenses.
F-9
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 28, 1999 and 1998
NOTE 4 - FAILED ACQUISITIONS
On December 20, 1995, the Company entered into an asset purchase
agreement with Berg Showcase Manufacturing, Inc. (Berg) whereby,
the Company assumed certain liabilities of Berg and its previous
owners in exchange for the assets of Berg including trade names,
patents and fixed assets.
The former owners of Berg attempted to rescind the agreement in
March of 1996 claiming non-performance by the Company and its
officers who signed as guarantors. The dispute was settled through
binding arbitration. The agreement was not rescinded, and Berg was
awarded a settlement of $775,270. The Company and its former
officers who signed as guarantors are held jointly and severally
liable for this amount. The entire amount has been recorded as a
liability of the Company because collection from the former
officers is uncertain.
NOTE 5 - DISCONTINUED OPERATIONS
On February 28, 1998, the Board of Directors of the Company
decided to discontinue the manufacturing and distribution of store
fixtures and merchandise showcases due to a lack of funding and
increased losses. The following is a summary of the loss from
discontinued operations.
For the
Year Ended
February 28, 1998
-----------------
NET SALES $ 1,209,148
COST OF PRODUCTS SOLD 415,150
Gross Profit 793,998
EXPENSES
General and administrative 581,037
Salaries and wages 827,455
Depreciation and amortization 67,061
Bad debt expense 43,497
Loss on disposal of assets 572,015
-----------------
Total Expenses 2,091,065
LOSS BEFORE INCOME TAXES (1,297,067)
INCOME TAX EXPENSE -
NET LOSS $ (1,297,067)
=================
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.07)
=================
F-10
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 28, 1999 and 1998
NOTE 5 - DISCONTINUED OPERATIONS (Continued)
The Company had liabilities of $2,310,870 which are associated
with the discontinued operations. No income tax benefit has been
attributed to the loss from discontinued operations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
F-11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements between the Company and
its accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position(s) and Office(s)
- ---- --- -------------------------
Richard Surber 26 President and Director
Barry Denslow 53 Secretary and Director
Richard Surber was appointed as the Company's president and director on May 6,
1999. Since 1991, Mr. Surber has been a professional consultant for various
public and private companies. Mr. Surber is a graduate of the University of Utah
College of Law where he obtained his Juris Doctorate. Mr. Surber also obtained a
Bachelors of Science degree in Finance from the University of Utah School of
Business. Mr. Surber is also a director of several other public and private
corporations, including Canton Financial Service Corporation and Hudson
Consulting Group, Inc.
Barry Denslow was appointed the Company's secretary and director on October 29,
1999. Mr. Denslow has worked in the construction industry for the past 28 years
as a field tradesman to a project manager. Mr. Denslow has served as the Vice
President, Secretary & Treasurer of Cottonwood Development of K.C., Inc. He has
managed the building of homes on tribal owned property and both large and small
subdivisions.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, the
Company is not aware of any person who at any time during the fiscal year ended
February 28, 1999 was a director, officer, or beneficial owner of more than ten
percent of the Common Stock of the Company, and who failed to file, on a timely
basis, reports required by Section 16(a) of the Securities Exchange Act of 1934
during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of the Company during the years 1999 and 1998. The following
table and the accompanying notes provide summary information for each of the
last three fiscal years concerning cash and non-cash compensation paid or
accrued by Richard Surber, the Company's chief executive officer for the past
three years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
- -------- --- --- --- --- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terry Buttler 1999 - - - - - - -
President 1998 - - - - - - -
1997 $ 45,000 - - - - - -
Richard Surber 1999 - - - - - -
President
</TABLE>
10
<PAGE>
Compensation of Directors
The Company's directors are not currently compensated.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of
the Company's Common Stock as of October 6, 1999, with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided below. As of November 18, 1999, there were 51,446,019 shares of
Common Stock issued and outstanding.
<TABLE>
CAPTION>
Amount and Nature of
Title of Class Name and Address of Beneficial Beneficial Ownership Percent of class
Owner
-------------- ------------------------------ -------------------- ----------------
<S> <C> <C> <C>
Common Stock Terrence Buttler(1) 1,417,570 2.7%
($0.001 par value) 121-16 Ocean Promenade #1E
Rockaway Park, New York
11694
Common Stock Richard Surber, President(2) 24,072,570 46.8%
($0.001 par value) 268 West 400 South, Suite 306
Salt Lake City, Utah 84101
Common Stock Oasis International Hotel & 8,500,000 15.9%
($0.001 par value) Casino
268 West 400 South ,Suite 300
Salt Lake City, Utah 84101
Common Stock Hudson Consulting Group, Inc. 5,817,570 10.9%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock CyberAmerica Corporation 605,000 1.1%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Canton Financial Services Corp 1,150,000 2.2%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Directors and Executive 24,072,570 46.8%
($0.001) par value Officers as a Group
</TABLE>
- --------
(1) Terrence Buttler is included as a beneficial owner by virtue of holding
the positions of Chief Executive Officer and President through May 6, 1999 at
which time he resigned both positions.
(2) Richard Surber may be deemed a beneficial owner of 24,072,570 shares of
the Company's common stock by virtue of his position as an officer and director
of Hudson Consulting Group, Inc., Canton Financial Services Corporation,
CyberAmerica Corporation, and Oasis International Hotel & Casino, Inc. Of these
24,072,570 common shares, Mr. Surber personally owns 8,000,000 shares, issued to
him on November 1, 1999 for services rendered.
11
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 1, 1997, the Company entered into a Consulting Agreement with Canton
Financial Services Corporation pursuant to which the Company issued 1,150,000
shares of it common stock for services rendered in connection with the location
of business opportunities, assistance with the preparation of periodic financial
reports with the Securities and Exchange Commission and other miscellaneous
services. The Company's current president, Richard Surber is also the president
of Canton Financial Services Corporation. At the time the Company entered into
the Consulting Agreement, Richard Surber was not an officer or director of the
Company. Consequently, the transaction may not have been deemed at arms length.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits beginning on page 13 of this Form 10-KSB, which
is incorporated herein by reference.
(b) Reports on Form 8-K. No report on Form 8K have been filed during the periods
covered by this Form 10- KSB.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 18th day of November 1999.
Kelly's Coffee Group, Inc.
/s/
- -------------------------------------------
Richard Surber, President and sole director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
/s/
--------------- President and Director November 18, 1999
Richard Surber
/s/
-------------- Secretary and Director November 18, 1999
Barry Denslow
/s/
------------- Controller November 18, 1999
Wayne Newton
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
13
<PAGE>
Index to Exhibits
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company (incorporated
herein by reference from Exhibit No. 3(i) to the Company's
Form S-18 as filed with the Securities and Exchange
Commission on September 16, 1988 ).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form S-18 as
filed with the Securities and Exchange Commission on
September 16, 1988 ).
4(a) * Form of certificate evidencing shares of "Common Stock" in
the Company (incorporated from Exhibit 4(a) to the Company's
Form S-18 as filed with the Securities and Exchange
Commission on September 16, 1988).
27 15 Financial Data Schedule "CE"
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
HIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED FEBRUARY 28,
1999 THAT WERE FILED WITH THE COMPANY'S REPORT ON FORM 10-KSB AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000833209
<NAME> Kelly's Coffee Group, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-START> Mar-1-1998
<PERIOD-END> Feb-28-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 304,542
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 304,542
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 304,542
<CURRENT-LIABILITIES> 2,310,870
<BONDS> 0
0
0
<COMMON> 43,556
<OTHER-SE> 2,049,484
<TOTAL-LIABILITY-AND-EQUITY> (2,005,928)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 350,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (350,228)
<INCOME-TAX> 0
<INCOME-CONTINUING> (350,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (350,228)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
