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 29, 2000
[ ] 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
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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
Incorporation or Organization) Identification No.)
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
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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
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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 29, 2000,
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
$3,630,510 based on the average closing bid and asked prices for the Common
Stock on June 12, 2000.
At June 12, 2000, the number of shares outstanding of the registrant's Common
Stock, $0.001 par value (the only class of voting stock), was 51,864,427.
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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..............5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.........6
Item 6. Management's Discussion and Analysis or Plan of Operation........8
Item 7. Financial Statements............................................10
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.............................11
PART III
Item 9. Directors and Executive Officers................................11
Item 10. Executive Compensation..........................................12
Item 11. Security Ownership of Certain Beneficial
Owners and Management...........................................12
Item 12. Certain Relationships and Related Transactions..................13
Item 13. Exhibits, List and Reports on Form 8-K..........................13
Signatures......................................................14
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ITEM 1. DESCRIPTION OF BUSINESS
As used herein the term "Company" refers to Kelly's Coffee Group, Inc., a
Colorado 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 10-KSB
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.
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.
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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 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 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.
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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
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.
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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.
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, will devote only such time to the affairs of the Company as
they deem appropriate, which is estimated to be approximately 10 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.
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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.
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. This case was settled on January 25, 2000 with
payment of $5,000 in cash and issuance of 100,000 restricted shares of the
Company's common stock.
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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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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, 1998 and
1997 are as Follows.
YEAR QUARTER ENDING HIGH LOW
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1998 February 28, 1998 $0.035 $0.01
May 31, 1998 $0.14 $0.05
August 31, 1998 $0.10 $0.02
November 31, 1998 $0.02 $0.02
1999 February 28, 1999 $0.625 $0.0
May 31, 1999 $0.10 $0.02
August 31, 1999 $0.10 $0.04
November 30, 1999 $0.09 $0.02
2000 February 29, 2000 $0.41 $0.12
May 31, 2000 $1.62 $0.06
On June 12, 2000, The number of issued and outstanding shares of the Company's
common stock was 51,864,427, and the number of holders of record of the
Company's common stock was 285. No cash dividends were paid during the fiscal
years ending February 29, 2000 and February 28, 1999.
RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all securities sold by the Company within the last
three years including, where applicable, the identity of the person who
purchased the securities, title of the securities, and the date sold are
outlined below.
All shares are adjusted to reflect a 6 to 1 reverse split effected on May 12,
1999
On June 23, 1998, the Company issued 2,000,000 shares of its common stock to
Flexweight Corporation in exchange for 25,000 shares of common stock of
Flexweight Corporation and 1,500,000 shares of its common stock to AmeriResource
Corporation in exchange for 2,678,571 shares of common stock of AmeriResource
Corporation pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there were only two offerees who were issued
stock for stock in an exchange of shares; (3) the offerees did not resell the
stock but have continued to hold it for two years; (4) there were no subsequent
or contemporaneous public offerings of the stock; (5) the stock was not broken
down into smaller denominations; and (6) the negotiations for the sale of the
stock took place directly between the offerees and the Company.
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On August 7, 1998, the Company issued 2,500,000 shares of its common stock to
Flexweight Corporation in exchange for 10,526 shares of common stock of
Flexweight Corporation and 5,000,000 shares of its common stock to AmeriResource
Corporation in exchange for 15,384,615 shares of common stock of AmeriResource
Corporation pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there were only two offerees who were issued
stock for stock in an exchange of shares; (3) the offerees did not resell the
stock but have continued to hold it for twenty two months; (4) there were no
subsequent or contemporaneous public offerings of the stock; (5) the stock was
not broken down into smaller denominations; and (6) the negotiations for the
sale of the stock took place directly between the offerees and the Company.
On August 24, 1998, the Company issued 1,100,000 shares of common stock to
Hudson Consulting Group, Inc. as compensation for consulting services rendered
to the Company, pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offerree who was issued stock
for services rendered to the Company; (3) the offeree did not resell the stock
but has continued to hold it for twenty two months; (4) there were no subsequent
or contemporaneous public offerings of the stock; (5) the stock was not broken
down into smaller denominations; and (6) the negotiations for the sale of the
stock took place directly between the offeree and the Company.
On November 1, 1998, the Company issued 8,000,000 shares of common stock to
Richard D. Surber as compensation for consulting services rendered to the
Company, pursuant to section 4(2) of the Securities Act of 1933 in an isolated
private transaction by the Company which did not involve a public offering. The
Company made this offering based on the following factors: (1) The issuance was
an isolated private transaction by the Company which did not involve a public
offering; (2) there was only one offerree who was issued stock for services
rendered to the Company; (3) the offeree did not resell the stock but has
continued to hold it for twenty two months; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
On January 25, 2000, the Company issued 100,000 shares of common stock to Denver
Pavilions Corporation as part of a settlement of a pending lawsuit titled Denver
Pavilions, L. P. v. Kelly's Coffee Group, Inc., filed in the district court for
the city and county of Denver, Colorado (See Item 3, "Litigation"). The shares
were issued pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offerree who was issued stock
for services rendered to the Company; (3); there were no subsequent or
contemporaneous public offerings of the stock; (4) the stock was not broken down
into smaller denominations; and (5) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
On March 6, 2000, the Company issued 5,000 shares of common stock to Robert
Pallotta as part of a settlement of all outstanding claims asserted by Mr.
Pallotta against the Company, pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering. The Company made this offering based on the following factors:
(1) The issuance was an isolated private transaction by the Company which did
not involve a public offering; (2) there was only one offerree who was issued
stock for services rendered to the Company; (3); there were no subsequent or
contemporaneous public offerings of the stock; (4) the stock was not broken down
into smaller denominations; and (5) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
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On March 6, 2000, the Company issued 20,204 shares of common stock to Mick
Schumacher and 20,204 shares of common stock to Terry Seipert as part of a
settlement of all outstanding claims asserted by Mr. Schumacher and Mr. Seipert
against the Company, pursuant to section 4(2) of the Securities Act of 1933 in
an isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offerree who was issued stock
for services rendered to the Company; (3); there were no subsequent or
contemporaneous public offerings of the stock; (4) the stock was not broken down
into smaller denominations; and (5) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Plan of Operations
The Company=s plan of operation for the coming year, as discussed above, is to
identify and acquire a favorable business opportunity. The Company does not plan
to limit its options to any particular industry, but will evaluate each
opportunity on its merits. Since the Company has no operations at present, its
cash needs are minimal. The Company believes it can meet its cash needs for the
foreseeable future from its current assets.
The Company will continue in its attempts to settle its remaining liabilities at
a discount.
The Company has no plans for the purchase or sale of any plant or equipment.
The Company is a development stage company and currently has no employees. The
Company has no current plans to make any changes in the number of employees.
Results of Operations
The Company recorded $0 in sales for the fiscal year ended February 29, 2000 and
$0 for the year ended February 28, 1999. The Company discontinued its operations
in the year ended February 28, 1998.
Income / Losses
Net income for the year ended February 29, 2000 was $492,884 compared to a net
loss of $350,228 in the year ended February 28, 1999. The $843,112 increase was
attributable to settlement of debt and sales of securities.
The Company expects that it may incur losses until such time as it acquires
profitable operations.
Expenses
General and administrative expenses for the year ended February 29, 2000, were
$428,022 compared to $350,228 for the year ended February 28, 1999. The increase
in General and Administrative expenses resulted from increased activities in
resolving outstanding liabilities and claims
The Company had no depreciation and amortization expenses for the years ended
February 28, 1999 and February 29, 2000.
Cost of Sales
The Company had no cost of sales for the years ended February 28, 1999 and
February 29, 2000.
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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
Cash flow generated from financing activities was $0 for the year ended February
28, 1999 and $0 for the year ended February 29, 2000.
Cash flow used by investing activities was $261,512 for the year ended February
29, 2000 and $0 for the year ended February 28, 1999. The increase was due to an
increase in securities buying and selling.
The Company plans to liquidate its marketable securities in order to maintain
its corporate status 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
The Year 2000 Issue and the Nature and Effects of the Year 2000 on Information
Technology (IT) and Non- IT Systems was a concern prior to January 1, 2000. As
of June 7, 2000, the Company had experienced no problems as a result of the Year
2000 Issue.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended February 29,
2000 are attached hereto as pages F-1 through F-13.
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KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report.................................................F-3
Consolidated Balance Sheet...................................................F-4
Consolidated Statements of Operations........................................F-5
Consolidated Statements of Stockholders' Equity (Deficit)....................F-6
Consolidated Statements of Cash Flows........................................F-7
Notes to the Consolidated Financial Statements...............................F-9
F-2
<PAGE>
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 29,
2000, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years ended February 29, 2000 and
February 28, 1999 and from inception of the development stage on March 1, 1998
through February 29, 2000. 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 above 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
29, 2000, and the results of their operations and their cash flows for the years
ended February 29, 2000 and February 28, 1999 and from inception of the
development stage on March 1, 1998 through February 29, 2000 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/ HJ & Associates, LLC
--------------------------
HJ & Associates, LLC
Salt Lake City, Utah
June 10, 2000
F-3
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
ASSETS
February 29, 2000
-----------------
<S> <C>
CURRENT ASSETS
Cash $ 14,848
Marketable securities - trading (Notes 1 and 6) 19,690
Investments (Note 7) 456,040
Related party receivable (Note 8) 50,000
------------------
Total Current Assets 540,578
------------------
TOTAL ASSETS $ 540,578
==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 378
Net liabilities of discontinued operations (Note 5) 1,658,048
------------------
Total Current Liabilities 1,658,426
------------------
TOTAL LIABILITIES 1,658,426
------------------
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, 51,921,019 shares issued and outstanding 51,921
Additional paid-in capital 3,210,461
Accumulated deficit prior to the development stage (4,522,886)
Retained earnings from inception of development
stage on March 1, 1998 142,656
------------------
Total Stockholders' Equity (Deficit) (1,117,848)
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 540,578
==================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From
Inception of
Development
Stage on
For the Years Ended March 1,
--------------------------------------- 1998 Through
February 29, February 28, February 29,
2000 1999 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
SALES $ - $ - $ -
------------------ ------------------ ------------------
OPERATING EXPENSES
General and administrative 428,022 350,228 778,250
------------------ ------------------ ------------------
Total Operating Expenses 428,022 350,228 778,250
------------------ ------------------ ------------------
LOSS FROM OPERATIONS (428,022) (350,228) (778,250)
------------------ ------------------ ------------------
OTHER INCOME (EXPENSE)
Gain on sale of securities 328,808 - 328,808
Unrealized loss on securities (40,724) - (40,724)
Interest expense (122,448) - (122,448)
------------------ ------------------ ------------------
Total Other Income (Expense) 165,636 - 165,636
------------------ ------------------ ------------------
LOSS BEFORE EXTRAORDINARY GAIN (262,386) (350,228) (612,614)
EXTRAORDINARY GAIN
Gain on settlement of debt (Note 4) 755,270 - 755,270
------------------ ------------------ ------------------
Total Extraordinary Gain 755,270 - 755,270
------------------ ------------------ ------------------
INCOME TAX EXPENSE - - -
------------------ ------------------ ------------------
NET INCOME (LOSS) $ 492,884 $ (350,228) $ 142,656
================== ================== ==================
BASIC INCOME (LOSS) PER SHARE
Loss from operations $ (0.01) $ (0.01)
Gain from extraordinary item 0.02 -
------------------ ------------------
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
================== ==================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 46,191,938 34,892,629
================== ==================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
F-5
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
---------------------------------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
--------- ---------- ------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
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)
Common stock issued for
services at $0.04 per share - - 8,000,000 8,000 272,000 -
Common stock issued for
litigation settlement at
$0.10 per share - - 100,000 100 9,900 -
Common stock issued for
services at $0.40 per share - - 250,000 250 99,750 -
Common stock issued for
services at $0.34 per share - - 15,283 15 5,181 -
Net income for the year
ended February 29, 2000 - - - - - 492,884
--------- ---------- ------------ ----------- ------------ ---------------
Balance, February 29, 2000 - $ - 51,921,019 $ 51,921 $ 3,210,461 $ (4,380,230)
========= ========== ============ =========== ============ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception of
Development
Stage on
For the Years Ended March 1,
--------------------------------------- 1998 Through
February 29, February 28, February 29,
2000 1999 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS OPERATING ACTIVITIES
Net income (loss) $ 492,884 $ (350,228) $ 142,656
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Unrealized loss on trading securities 40,724 - 40,724
Common stock issued for services 395,196 350,228 745,424
Gain on settlement of debt (755,270) - (755,270)
Changes in operating assets and liabilities:
Increase in accounts payable 378 - 378
Increase in net liabilities of discontinued
operations 102,448 - 102,448
------------------ ------------------ ------------------
Net Cash Provided by Operating
Activities 276,360 - 276,360
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Increase in related party receivable (50,000) - (50,000)
Net change in marketable securities and
investments (211,512) - (211,512)
------------------ ------------------ ------------------
Net Cash Used by Investing Activities (261,512) - (261,512)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES - - -
------------------ ------------------ ------------------
INCREASE IN CASH 14,848 - 14,848
CASH, BEGINNING OF PERIOD - - -
------------------ ------------------ ------------------
CASH, END OF PERIOD $ 14,848 $ - $ 14,848
================== ================== ==================
</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)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception of
Development
Stage on
For the Years Ended March 1,
--------------------------------------- 1998 Through
February 29, February 28, February 29,
2000 1999 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
NONCASH FINANCING ACTIVITIES
Common stock issued for marketable
securities $ - $ 304,942 $ 304,942
Common stock issued for services and
litigation settlement $ 395,196 $ 350,228 $ 745,424
</TABLE>
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 29, 2000
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, Kelly's acquired an 85% interest in Kelly - Berg by assuming
liabilities of Kelly - Berg. 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 manufactured store fixtures and merchandise showcases
for jewelry, cosmetics and other retail items. Kelly - Berg did
business as Berg Showcase Manufacturing.
Kelly - Berg Corporation was dissolved on May 1, 1999.
The Company was reclassified as a development stage company on
March 1, 1998.
b. Basic Income (Loss) Per Share
Basic income (loss) per share has been calculated based on the
weighted average number of shares of common stock outstanding
during the period. There are no antidilutive items outstanding,
accordingly, the fully diluted income (loss) per share is the same
as the basic income (loss) per share.
c. Income Taxes
As of February 29, 2000, the Company had a net operating loss
carryforward for federal income tax purposes of approximately
$4,500,000 that may be used in future years to offset taxable
income. The net operating loss carryforward will expire by 2019.
The tax benefit of the cumulative carryforwards has been offset by
a valuation allowance of the same amount.
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
d. Concentrations of Credit Risk
The Company has no significant concentrations of credit risk other
than in the normal course of business.
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 - Trading
The Company has classified its marketable securities as "trading"
securities. Trading securities are stated at fair value.
Unrealized gains and losses are reported as a separate portion of
other income (expense).
Marketable securities - trading at February 29, 2000 were $19,690
and have been included in current assets.
h. Revenue Recognition
The Company currently has no source of revenues. Revenue
recognition policies will be determined when principal operations
begin.
i. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The adoption of this statement had no material
impact on the Company's financial statements.
F-10
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
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 consolidated 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. The Company has not started planning
principal operations. It is the intent of management to continue
to finance the cash flow needs of the Company through sales of
investments.
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 was recorded as a
liability of the Company because collection from the former
officers was uncertain. On August 10, 1999, the liability was
settled for $20,000. Accordingly, a gain on settlement of debt was
recorded for $755,270.
F-11
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
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 net
liabilities from discontinued operations.
Balance at February 28, 1999 $ 2,310,870
Less: settlement of debt (775,270)
Add: interest accrual 122,448
-----------------
Balance at February 29, 2000 $ 1,658,048
=================
NOTE 6 - MARKETABLE SECURITIES
The following is a summary of marketable securities at February
29, 2000:
12,500 shares of Liberty Mint
valued at $1.50 per share $ 18,750
5,000 shares of Trans Energy
valued at $0.188 per share 940
-----------------
Total Marketable Securities $ 19,690
=================
The Company has classified these securities as trading securities
and has recorded an unrealized loss of $40,274 for the year ended
February 29, 2000.
NOTE 7 - INVESTMENTS
<TABLE>
<CAPTION>
The following is a summary of investments at February 29, 2000:
<S> <C>
27,000,000 shares of AmeriResource Technologies, Inc.
valued at $0.004 per share $ 100,000
35,526 shares of Oasis Resorts International, Inc.
valued at $3.51 per share 124,740
100,000 shares of Eagle Wireless International, Inc.
valued at $1.00 per share 100,000
200,000 shares of Twin Faces East Entertainment
Corporation valued at $0.37 per share 62,500
36,000 shares of Health Watch valued at $1.91per share 68,800
-----------------
$ 456,040
=================
</TABLE>
All investments are carried at the lower of cost or market and
represent less than 5% of the outstanding shares in each Company.
F-12
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2000
NOTE 8 - RELATED PARTY RECEIVABLE
The Company paid $50,000 to Rollerball International (Roll) for
62,500 shares of freely tradable common stock pursuant to a
private placement at $0.80 per share. As of the time of this
filing, the shares have not yet been received. Accordingly, this
has been recorded as a related party receivable until the shares
are received.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company loaned $406,600 to Cyber America and associated
subsidiaries in $5,000 - $30,000 increments over the course of
the year. Of the $406,600, $75,300 was repaid in cash
transactions, $100,000 was repaid in AmeriResource Technologies
stock, $100,000 was repaid in Eagle Wireless stock, $68,800 was
repaid in HealthWatch stock, and the remaining $62,500 was repaid
with a stock transfer of 200,000 shares of Twin Faces East
Entertainment valued at $0.3125 per share.
NOTE 10 - SUBSEQUENT EVENT
On March 16, 2000, the Company entered into a settlement
agreement and release with Robert V. Pattola for litigation that
was brought on by Mr. Pattola. In the agreement, the Company
lifted the restricted label on the 250,000 shares of common stock
held by Mr. Pattola and also issued him another 5,000 shares of
restricted common stock.
F-13
<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 27 President and Director
David Wolfson 20 Director
Kevin Schillo 30 Director
Richard Surber, 27, President and Director. Mr. Surber was elected the Company's
President and a Director in May, 1999. Mr Surber, is elected to hold office as a
Director until his successor is elected at an annual or special meeting of the
shareholders. Mr. Surber has substantial experience as a professional consultant
to both public and private companies. Mr. Surber's experience includes managing
and financing public companies, particularly through start-up phases. Mr. Surber
graduated from the University of Utah with a Bachelor of Science degree in
Finance and then with a Juris Doctorate with an emphasis in corporate law;
including securities, taxation, and bankruptcy. He has been an officer and
director of several public companies which include: CyberAmerica Corporation;
Diversified Holdings I, Inc. (president & director from 1992 to the present);
Vaxcel, Inc. (president & director form June, 1999 to the present); Innovative
Property Development Corporation ("IPDC"), N.K.A. China Mall USA.com., Inc.
(president & director 1992 to June, 1999); Eurotronics Corporation, F.K.A.
Hamilton Exploration, Inc. (president & director 1994-1996); Area Investment
Development Company (president & director 1994-1996); Youthline USA, Inc.,
F.K.A. Ult-i-Med Health Centers, Inc. (secretary & director from April 6, 1999
to July 29,1999); and Premier Brands, Inc. (president & director September 1998
- April 1998).
The SEC reporting shell companies in which Richard Surber is serving as an
Officer and Director are listed in the following table:
CORPORATION NAME FORM TYPE FILE NUMBER DATE OF FILING
---------------------------------------------------------------------------
Alexandria Holdings, Inc. 10-SB 000-29325 February 3, 2000
Aswan Investments, Inc. 10-SB 000-29321 February 3, 2000
Cairo Acquisitions, Inc. 10-SB 000-29323 February 3, 2000
Cyberbotanical, Inc. 10-SB 000-29383 February 15, 2000
Richard Surber may become involved with other shell companies in the future.
Kevin J. Schillo, 30 was appointed a Director of the Company on January 10th,
2000. Mr. Schillo has extensive experience in the insurance industry and is
currently employed by Canton Financial Services Corporation in Salt Lake City as
Director of Corporate Development. Mr. Schillo holds a Bachelor of Arts degree
in Political Science from Texas Christian University in Ft. Worth, Texas.
David Wolfson was appointed a Director of the Company on January 10, 2000. Mr.
Wolfson is currently the owner and Managing Member of David Michael, LLC, a
business consulting firm based in Salt Lake City, Utah. Mr. Wolfson is also a
Director of Premier Brands. Mr. Wolfson earned a Bachelor of Arts degree from
Emory University in Atlanta, Georgia in 1999.
11
<PAGE>
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 29, 2000 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 $100,000 was awarded to, earned by, or paid to any
executive officer of the Company during the years 1999, 1998 and 1997. The
following table and the accompanying notes provide summary information for each
of the last three fiscal years concerning cash and non-cash compensation paid or
accrued by Richard Surber, the Company's chief executive officer for the past
three years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
-------- --- --- --- --- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terry Buttler 1999 - - - - - - -
President 1998 - - - - - - -
1997 $ 45,000 - - - - - -
1996
Richard Surber 1999 - $100,000 (1) $280,000 (2) - - -
President
</TABLE>
------------------------
(1) 250,000 shares of common stock, registered pursuant to an S-8
Registration Statement filed with the SEC. On the date Mr. Surber received these
shares they were valued at $100,000. However, Mr. Surber liquidated these shares
for only $42,595 in May of 2000.
(2) Richard D. Surber was issued 8,000,000 restricted shares of common
stock for services rendered to the Company. (See Item 5, "Recent Sales of
Unregistered Securities").
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 June 12, 2000, 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.
12
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
CLASS BENEFICIAL OWNER OWNERSHIP CLASS
=================================================================================================================
<S> <C> <C> <C>
Common Stock Richard Surber, President(3) 15,653,340 30.2%
($0.001 par value) 268 West 400 South, Suite 306
Salt Lake City, Utah 84101
Common Stock Oasis International Hotel & 3,143,620 6.1%
($0.001 par value) Casino
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 Hudson Consulting Group, Inc. 3,904,720 7.5%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Directors and Executive 15,653,340 30.2%
($0.001) par value Officers as a Group
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended February 29, 2000, the Company loaned a total of four
hundred six thousand six hundred dollars to CyberAmerica Corporation and its
subsidiaries. The loans were repaid prior to the end of the fiscal year,
$344,100 in cash and the balance of the loan was settled in exchange for 200,000
shares of common stock of Twin Faces East Entertainment, Inc valued at $0.3125
per share. Richard D. Surber, president and director of the Company is also
president of CyberAmerica Corporation.
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 14 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]
-------------------
(3) Richard Surber may be deemed a beneficial owner of 15,653,340 shares of
the Company's common stock by virtue of his position as an officer and director
of Hudson Consulting Group, Inc., CyberAmerica Corporation, and Oasis
International Hotel & Casino, Inc. Of these 15,653,340 common shares, Mr. Surber
personally owns 8,000,000 shares, issued to him on November 1, 1999 for services
rendered.
13
<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 13th day of June, 2000.
Kelly's Coffee Group, Inc.
/s/ Richard Surber
---------------------------------------
Richard Surber, President and 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/ Richard Surber
-----------------------
Richard Surber President and Director June 13, 2000
/s/ David Wolfson
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David Wolfson Director June 13, 2000
/s/ Kevin J. Schillo
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Kevin J. Schillo Director June 13, 2000
14
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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 ).
23 16 Consent of Accountant
27 17 Financial Data Schedule "CE"
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
15
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