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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: December 31, 1999
Commission File No. 0-25519
MERCURY CAPITAL CORP.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1504384
- ------------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
5770 South Beech Court, Greenwood Village, Colorado 80121
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(Address of principal executive offices including zip code)
Issuer's Telephone Number, Including Area Code: (303) 721-0605
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
--------------------------
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the 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 disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is 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]
State Issuer's revenues for its most recent fiscal year: $-0-.
As of December 31, 1999, 4,000,000 shares of common stock were outstanding.
Documents incorporated by reference: NONE.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Mercury Capital Corp. (the "Company") was incorporated on December 9,
1996, under the laws of the State of Colorado, to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date. Other than issuing shares to its original
shareholders, the Company never commenced any operational activities. The
Board of Directors of the Company has elected to commence implementation of
the Company's principal business purpose, described below under "Description
of Business". As such, the Company can be defined as a "shell" company, whose
sole purpose at this time is to locate and consummate a merger or acquisition
with a private entity.
In March 1999, the Company filed a registration statement with the
Securities and Exchange Commission on Form 10-SB; wherein it registered its
common stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "34 Act"). As a result, the Company became a fully reporting
company under the 34 Act, which management believed enhanced the Company's
ability to attract a suitable private merger or acquisition candidate.
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other
company regarding the possibility of an acquisition or merger between the
Company and such other company as of the date of this registration statement.
The Company's Board of Directors intends to provide its shareholders with
complete disclosure documentation concerning a potential business opportunity
and the structure of the proposed business combination prior to consummation
of the same, which disclosure is intended to be in the form of a proxy
statement. While such disclosure may include audited financial statements of
such a target entity, there is no assurance that such audited financial
statements will be available. The Board of Directors does intend to obtain
certain assurances of value of the target entity's assets prior to
consummating such a transaction, with further assurances that an audited
statement would be provided within seventy-five days after closing of such a
transaction. Closing documents relative thereto will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents.
The Company's offices are located at 5770 South Beech Court, Greenwood
Village, Colorado 80121, and its telephone number is (303) 721-0605.
On October 25, 1999, the Company entered into a share purchase agreement
with Gain Master, Ltd., a company organized under the laws of the British
Virgin Islands. The Company filed a Form 8-K on November 19, 1999 disclosing
the structure and the terms of the share purchase agreement and included the
share purchase agreement as an exhibit to the Form 8-K filing. The
transaction closing date was to occur on or before December 1, 1999. The time
period to close the transaction has elapsed. In connection with the share
purchase agreement with Gain Master, Ltd., the Company filed a Form S-4 with
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the Commission on November 19, 1999. On March 4, 2000 the Form S-4 filing was
withdrawn. The transaction has been terminated.
DESCRIPTION OF BUSINESS
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search
to any specific business, industry, or geographical location and the Company
may participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant
to be restrictive of the Company's virtually unlimited discretion to search
for and enter into potential business opportunities. Management anticipates
that it will be able to participate in only one potential business venture
because the Company has nominal assets and limited financial resources. See
Item F/S, "Financial Statements." This lack of diversification should be
considered a substantial risk to shareholders of the Company because it will
not permit the Company to offset potential losses from one venture against
gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some
industries and shortages of available capital, management believes that there
are numerous firms seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key employees,
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders and other factors. Business opportunities may be available in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or
other assets. However, management believes the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8-K's, 10-K's or 10-KSB's, agreements and related
reports and documents. The Securities Exchange Act of 1934 (the "34 Act"),
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings relevant to complying
with the 34 Act. Nevertheless, the officers and directors of the Company have
not conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction
for the owners of a business opportunity.
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The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officers and directors of the Company, none of
whom is a professional business analyst. Management intends to concentrate on
identifying preliminary prospective business opportunities which may be
brought to its attention through present associations of the Company's
President and its two directors, or by the Company's shareholders. In
analyzing prospective business opportunities, management will consider such
matters as the available technical, financial and managerial resources;
working capital and other financial requirements; history of operations, if
any; prospects for the future; 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; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential
for growth or expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. Management will meet personally
with management and key personnel of the business opportunity as part of their
investigation. To the extent possible, the Company intends to utilize written
reports and personal investigation to evaluate the above factors. The Company
will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, will rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated
that any outside consultants or advisors, other than the Company's legal
counsel and accountants, will be utilized by the Company to effectuate its
business purposes described herein. However, if the Company does retain such
an outside consultant or advisor, any cash fee earned by such party will need
to be paid by the prospective merger/acquisition candidate, as the Company has
no cash assets with Which to pay such obligation. There have been no
contracts or agreements with Any outside consultants and none are anticipated
in the future.
The Company will not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which the Company may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However, the Company
does not intend to obtain funds in one or more private placements to finance
the operation of any acquired business opportunity until such time as the
Company has successfully consummated such a merger or acquisition.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may
also acquire stock or assets of an existing business. On the consummation of
a transaction, it is probable that the present management and shareholders of
the Company will no longer be in control of the Company. In addition, 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 or may sell their stock in the Company. Any terms of sale of the
shares presently held by officers and/or directors of the Company will be also
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afforded to all other shareholders of the Company on similar terms and
conditions. Any and all such sales will only be made in compliance with the
securities laws of the United States and any applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated
or at specified times thereafter. If such registration occurs, of which there
can be no assurance, it will be undertaken by the surviving entity after the
Company has successfully consummated a merger or acquisition and the Company
is no longer considered a "shell" company. Until such time as this occurs,
the Company will not attempt to register any additional securities. 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 the value of the Company's securities in the future, if
such a market develops, of which there is no assurance.
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 avoid the creation of a taxable event
and thereby structure the acquisition in a so-called "tax-free" reorganization
under Sections 368a or 351 of the Internal Revenue Code (the "Code").
With respect to any merger or acquisition, negotiations with target
company management is expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in
all likelihood hold a substantially lesser percentage ownership interest in
the Company following any merger or acquisition. The percentage ownership may
be subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the
percentage of shares held by the Company's then-shareholders. While
management of the Company anticipates obtaining the approval of the
shareholders of the Company via a Proxy Statement, the effect will be to
assure such approval where management supports such a business transaction
because management presently controls sufficient shares of the Company to
effectuate a positive vote on the proposed transaction.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the
terms of such agreements cannot be predicted, generally such agreements will
require some 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 and after such closing, will outline the manner of bearing costs,
including costs associated with the Company's attorneys and accountants, will
set forth remedies on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The
Company is subject to all of the reporting requirements included in the 34
Act. Included in these requirements is the affirmative duty of the Company to
file independent audited financial statements as part of its Form 8-K to be
filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as the Company's audited financial statements
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included in its annual report on Form 10-K (or 10-KSB, as applicable). If
such audited financial statements are not available at closing, or within time
parameters necessary to insure the Company's compliance with the requirements
of the 34 Act, or if the audited financial statements provided do not conform
to the representations made by the candidate to be acquired in the closing
documents, the closing documents may provide that the proposed transaction
will be voidable, at the discretion of the present management of the Company.
The Company's officers and shareholders have verbally agreed that they
will advance to the Company any additional funds which the Company needs for
operating capital and for costs in connection with searching for or completing
an acquisition or merger. These persons have further agreed that such
advances will be made in proportion to each person's percentage ownership of
the Company. These persons have also agreed that such advances will be made
interest free without expectation of repayment unless the owners of the
business which the Company acquires or merges with agree to repay all or a
portion of such advances. There is no dollar cap on the amount of money which
such persons will advance to the Company. The Company will not borrow any
funds from anyone other than its current shareholders for the purpose of
repaying advances made by the shareholders, and the Company will not borrow
any funds to make any payments to the Company's promoters, management or their
affiliates or associates.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek an acquisition or merger with any entity in
which any of the Company's Officers, Directors, principal shareholders or
their affiliates or associates serve as officer or director or hold any
ownership interest. Management is not aware of any circumstances under which
this policy, through their own initiative may be changed.
COMPETITION
The Company is and will remain an insignificant participant among the
firms that engage in mergers with and acquisitions of privately financed
entities. Many established venture-capital and financial concerns have
significantly greater financial and personnel resources and technical
expertise than the Company. In view of the Company's limited financial
resources and limited management availability, the Company will continue to be
at a significant disadvantage compared to the Company's competitors.
EMPLOYEES
The Company has no full time employees. The Company's President has
agreed to allocate a portion of his time to the activities of the Registrant,
without compensation. The President anticipates that the business plan of the
Company can be implemented by his devoting approximately 10 hours per month to
the business affairs of the Company and, consequently, conflicts of interest
may arise with respect to the limited time commitment by such officer.
ITEM 2. DESCRIPTION OF PROPERTY.
Since December 9, 1996 (inception), the Company has maintained its office
in space provided by Timothy J. Brasel, a shareholder and former officer and
director, at no charge. The Company owns no real property.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings, and the Company is not aware of
any threatened legal proceedings to which the Company is a party.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET INFORMATION. No public market for any securities of the
Company has developed, and no firm has undertaken to make a market in the
Company's securities.
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK. The number of record
holders of the Company's no par value common stock at March 28, 2000, was
approximately 31.
(c) DIVIDENDS. No dividends have been declared or paid by the Company
since inception.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
During the period from the Company's inception on December 9, 1996 to
December 31, 1999, the Company engaged in no significant operations other than
the search for possible acquisition candidates. No revenues were received by
the Company during the fiscal year other than a limited amount of interest
income. The Company experienced a net loss of $(9,860) during the period
ended December 31, 1999, which was primarily the result of the legal and
accounting costs of compliance with the reporting requirements of the
securities laws, and general and administrative expenses.
For the remainder of the current fiscal year, the Company anticipates
losses similar in magnitude to those experienced historically. Should the
Company intensify its search for an acquisition candidate, however, losses are
likely to accrue at a greater rate than experienced historically. The Company
anticipates that until a business combination is completed with an acquisition
candidate, it will not generate revenues other than interest income, and may
continue to operate at a loss after completing a business combination,
depending upon the performance of the acquired business.
As of December 31, 1999, the Company had no material commitments for
capital expenditures.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth on pages F-1 through F-8 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE.
There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or practices or financial
statement disclosure since the Company's inception.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Officers of the Company are as follows:
Name Age Positions and Offices Held
---- --- --------------------------
John E. Dhonau 42 President, Secretary, Treasurer
and Director
Set forth below are the names of all Directors and Executive Officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the business
experience of such persons during at least the last five years:
JOHN E. DHONAU. Mr. Dhonau has served as President, Secretary, Treasurer
and Director of the Company since October 1999. Mr. Dhonau founded Merchant
Resources, Inc., a business and management consulting firm, in 1995. Since
inception, Merchant has consulted to a wide range of clientele, including real
estate development firms, hospitality companies, and emerging high tech growth
companies. Originally from Cincinnati, Ohio, Mr. Dhonau now offices and
resides in Las Vegas, Nevada.
All Directors of the Company hold office until the next annual meeting of
the shareholders and until their successors have been elected and qualified.
The Officers of the Company are elected by the Board of Directors at the
first meeting after each annual meeting of the Company's shareholders, and
hold office until their death, or until they shall resign or have been removed
from office.
The date of the next annual meeting of the Company will be determined by
the Company's Board of Directors in accordance with Colorado law.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and certain written representations, no persons who were either a
director, officer, or beneficial owner of more than 10% of the Company's
common stock failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
The Company's sole Officer and its Directors currently receive no salary
from the Company.
It is possible that the Company's Officers and Directors will sell part
or all of their shares of the Company's Common Stock pursuant to the
successful completion of a potential acquisition of a business opportunity.
However, this is dependent upon arm's length negotiations between the
Company's Officers and Directors and management of the potential merger
entity. There currently is no agreement or understanding of any kind whereby
Officers and Directors of the Company will dispose of part or all of their
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shares of the Common Stock of the Company pursuant to an acquisition of the
business opportunity.
The Company has no retirement, pension, profit-sharing or insurance or
medical reimbursement plans covering its Officers and Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 28, 2000, the stock ownership
of each person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each Director individually and all
Directors and Officers of the Company as a group:
NAME AND ADDRESS AMOUNT OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ -------------------- -------------------
Timothy J. Brasel 1,365,000(1) 34.1%
5770 South Beech Court
Greenwood Village, CO 80121
Joseph J. Peirce 1,415,000 35.4%
5125 West Lake Avenue
Littleton, CO 80123
Brasel Family Partners, Ltd.(2) 645,000 16.1%
5770 South Beech Court
Greenwood Village, CO 80121
LaMirage Trust (3) 720,000 18.0%
5770 South Beech Court
Greenwood Village, CO 80121
Nasus Lesarb, Ltd. (4) 720,000 18.0%
16198 East Prentice Place
Aurora, CO 80015
Kurt Tuerkl IRA 200,000 5.0%
8101 E. Dartmouth, No. 1
Denver, CO 80231
Susan Brasel 1,440,000 (5) 40.0%
16198 East Prentice Place
Aurora, CO 80015
John E. Dhonau -0- -0-
3360 W. Sahara Ave., Suite 200
Las Vegas, NV 89102
All Executive Officers and -0- -0-
Directors as a Group
(1 Person)
__________________
(1) Includes 720,000 shares held by the La Mirage Trust and 645,000 shares
held by Brasel Family Partners, Ltd. Mr. Brasel is a trustee for the La
Mirage Trust and the General Partner of Brasel Family Partners, Ltd.
(2) Brasel Family Partners, Ltd. is a limited partnership. Timothy J. Brasel
is the General Partner.
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(3) Susan Brasel is the trustee of the LaMirage Trust and Timothy J. Brasel
beneficially owns 77% of the trust assets.
(4) The general partner of Nasus Lesarb, Ltd. is Susan Brasel, the sister of
Timothy J. Brasel.
(5) Includes 720,000 shares held by the LaMirage Trust and 720,000 shares
held by Nasus Lesarb, Ltd.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 10, 1996, the Company issued a total of 3,600,000 shares of
Common Stock to the following persons for a total of $50 in cash:
NAME NUMBER OF SHARES TOTAL CONSIDERATION
- --------------------------- ---------------- -------------------
Joseph J. Peirce 1,440,000 $ 20
Brasel Family Partners Ltd. 720,000 10
Nasus Lesarb, Ltd. 720,000 10
La Mirage Trust 720,000 10
On February 1, 1999, the Company issued a total of 400,000 shares of
Common Stock to the following persons for a total of $12,000 in cash:
NAME NUMBER OF SHARES TOTAL CONSIDERATION
- --------------------------- ---------------- -------------------
Mark E. Massa 100,000 $ 3,000
Karma Investment Group 100,000 3,000
Kurt Tuerkl IRA 200,000 6,000
------- -------
Total 400,000 $12,000
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
3 Articles of Incorporation Incorporated by reference to
Exhibit 2.1 to the Registrant's
Form 10-SB Registration
Statement filed on March 9,
1999 (No. 0-25519)
3 Bylaws Incorporated by reference to
Exhibit 2.2 to the Registrant's
Form 10-SB Registration
Statement filed on March 9,
1999 (No. 0-25519)
27 Financial Data Schedule Filed herewith electronically
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
quarter ended December 31, 1999.
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INDEX TO FINANCIAL STATEMENTS
MERCURY CAPITAL CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
F-1
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Mercury Capital Corp.
Aurora, CO
We have audited the accompanying balance sheet of Mercury Capital Corp. (a
development-stage company) as of December 31, 1999, and the related statements
of operations, stockholders' equity and cash flows for the years ended
December 31, 1999 and December 31, 1998 and for the period from December 5,
1996 (date of inception) through December 31, 1999. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements, referred to above, present fairly,
in all material respects, the financial position of Mercury Capital Corp. (a
development-stage company) as of December 31, 1999, and the results of its
operations, changes in its stockholders' equity and its cash flows for the
years ended December 31, 1999 and December 31, 1998 and for the period from
December 5, 1996 (date of inception) through December 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1, the Company
has suffered recurring losses from operations and has minimal capital that
raise substantial doubts about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Schumacher & Associates, Inc.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, CO 80211
February 7, 2000, except for
Note 4 which is as of March 20, 2000
F-2
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MERCURY CAPITAL CORP.
(A Development Stage Company)
BALANCE SHEET
December 31, 1999
ASSETS
Current Assets:
Cash $ 249
-----------
Total Current Assets 249
Organization costs, net of
amortization 6,420
-----------
TOTAL ASSETS $ 6,669
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 899
-----------
Total Current Liabilities 899
-----------
TOTAL LIABILITIES 899
-----------
Stockholders' Equity:
Preferred stock, no par value
5,000,000 shares authorized,
none issued and outstanding -
Common stock, no par value
100,000,000 shares authorized,
4,000,000 issued and outstanding 12,050
Additional Paid In Capital 10,800
Accumulated (Deficit) (17,080)
-----------
TOTAL STOCKHOLDERS' EQUITY 5,770
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,669
===========
The accompanying notes are an integral part of the financial statements.
F-3
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MERCURY CAPITAL CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Period from December 5, 1996 (date of inception)
through December 31, 1999
For the
Period from
December 5,
1996 (date of
inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1999 1998 1999
---------- ---------- ----------
Revenue $ - $ - $ -
---------- ---------- ----------
Expenses
Amortization 1,610 10 1,630
Legal and audit fees 3,696 - 3,696
Rent 1,200 1,200 3,600
Professional fees 2,400 2,400 7,200
Other 954 - 954
---------- ---------- ----------
9,860 3,610 17,080
---------- ---------- ----------
Net (Loss) $ (9,860) $ (3,610) $ (17,080)
---------- ---------- ----------
Per Share $ nil $ nil $ nil
=========== =========== ==========
Weighted Average Shares Outstanding 4,000,000 3,600,000 3,733,333
=========== =========== ==========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
MERCURY CAPITAL CORP.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from December 5, 1996 (date of inception) through
December 31, 1999
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Accumulated
No./Shares Amount No./Shares Amount Capital (Deficit) Total
---------- ------ ---------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 5,
1996 - $ - - $ - $ - $ - $ -
Common stock issued for
cash, at inception, at
$.00005 per share - - 3,600,000 50 - - 50
---------- ------ ---------- ------ ---------- ----------- --------
Balance at December 31,
1996 - - 3,600,000 50 - - 50
Additional paid-in
capital - - - - 3,600 - 3,600
Net loss-year ended
December 31, 1997 - - - - - (3,610) (3,610)
---------- ------ ---------- ------ ---------- ----------- --------
Balance at December 31,
1997 - - 3,600,000 50 3,600 (3,610) 40
Additional paid-in
capital - - - - 3,600 - 3,600
Net loss-year ended
December 31, 1998 - - - - - (3,610) 3,610)
---------- ------ ---------- ------ ---------- ----------- --------
Balance at December 31,
1998 - - 3,600,000 50 7,200 (7,220) 30
Common stock issued for
cash at $.03 - - 400,000 12,000 - - 12,000
Additional paid-in
capital - - - - 3,600 - 3,600
Net loss-year ended
December 31, 1999 - - - - - (9,860) (9,860)
---------- ------ ---------- ------ ---------- ----------- --------
Balance at December 31,
1999 - $ - 4,000,000 $ 12,050 $ 10,800 $ (17,080) $ 5,770
========== ====== ========= ========= ========== =========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
MERCURY CAPITAL CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period from December 5, 1996 (date of inception)
through December 31, 1999
For the
Period from
December 5,
1996 (date of
inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1999 1998 1999
---------- ---------- ----------
Operating Activities:
Net (Loss) $ (9,860) $ (3,610) $ (17,080)
Adjustment to reconcile net
(loss) to net cash provided
by operating activities:
Amortization 1,610 10 1,630
Increase in accounts payable 899 - 899
---------- ---------- ---------
Net Cash (Used in) Operating
Activities (7,351) (3,600) (14,551)
---------- ---------- ---------
Cash Flows from Investing
Activities - - -
---------- ---------- ---------
Cash Flows from Financing
Activities:
Organization costs incurred (8,000) - (8,050)
Increase in additional
paid-in capital 3,600 3,600 10,800
Issuance of common stock 12,000 - 12,050
---------- ---------- ---------
Net Cash Provided by Financing
Activities 7,600 3,600 14,800
---------- ----------- ----------
Increase (decrease) in Cash 249 - 249
Cash, Beginning of Period - - -
---------- ---------- ---------
Cash, End of Period $ 249 $ - $ 249
========== ========== =========
Interest Paid $ - $ - $ -
========== ========== =========
Income Taxes Paid $ - $ - $ -
========== ========== =========
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
MERCURY CAPITAL CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) Summary of Accounting Policies
This summary of significant accounting policies of Mercury Capital Corp.
(Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
(a) Description of Business
The Company was organized on December 5, 1996 for the purpose of
engaging in any lawful business but it is management's plan to seek a
business combination. The Company is a development-stage company
since planned principal operations have not commenced. The Company
has selected December 31 as its year end.
(b) Use of Estimates in the Preparation of Financial Statements
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
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(c) Organization Costs
Costs incurred to organize the Company will be amortized on a
straight-line basis over a sixty month period.
(d) Income Taxes
As of December 31, 1999, the Company had net operating losses
available for carryover to future years of approximately $17,000,
expiring in various years through 2019. Utilization of these
carryovers may be limited if there is a change in control of the
Company. As of December 31, 1999, the Company has total deferred tax
assets of approximately $3,400 due to operating loss carryforwards.
However, because of the uncertainty of potential realization of these
tax assets, the Company has provided a valuation allowance for the
entire $3,400. Thus, no tax assets have been recorded in the
financial statements as of December 31, 1999.
F-7
<PAGE>
MERCURY CAPITAL CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) Summary of Accounting Policies, Continued
(e) 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 minimal capital. Management is attempting to
raise additional capital.
In view of these matters, realization of certain of the assets in
the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to meet its financial requirements, raise
additional capital, and the success of its future operations.
Management is in the process of attempting to raise additional
capital and reduce operating expenses. Management believes that
its ability to raise additional capital and reduce operating
expenses provide an opportunity for the Company to continue as a
going concern.
(2) Common Stock Issued
During the period ended December 31, 1996 the Company issued 3,600,000
restricted shares of common stock for $50 cash. During the year ended
December 31, 1999, the Company issued 400,000 restricted shares of common
stock for $12,000 cash.
(3) Related Party Transaction
The Company uses the office of a shareholder at no cost. The Company expects
this arrangement to continue until the Company commences planned operations.
The Company considered the value of this office facility to be $100 per month
and has accounted for this amount as additional paid-in capital. In addition,
two officers of the Company provided services at no cost to the Company. The
value of these services was determined to be $100 per month per officer which
has been accounted for as additional paid-in capital.
(4) Subsequent Event
During March, 2000, the shareholders of the Company agreed to exchange all the
outstanding shares of the Company for shares of another entity resulting in
the Company becoming a wholly-owned subsidiary of another entity.
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
MERCURY CAPITAL CORP.
Dated: March 30, 2000 By: /s/ John E. Dhonau
John E. Dhonau
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ John E. Dhonau President, Treasurer March 30, 2000
John E. Dhonau and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages F-3 and F-4 of the
Company's Form 10-KSB for the fiscal year ended December 31, 1999, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 249
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 249
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,669
<CURRENT-LIABILITIES> 899
<BONDS> 0
0
0
<COMMON> 12,050
<OTHER-SE> (6,280)
<TOTAL-LIABILITY-AND-EQUITY> 6,669
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,860)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
