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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 033-27508-LA
SUN HARBOR FINANCIAL RESOURCES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 33-0338441
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5001 East Commercenter Drive, Suite 245, Bakersfield, California 93309
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (805) 637-1000
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 No X
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of 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. / /
State issuer's revenues for its most recent fiscal year: $277,277.
The aggregate market value of the voting stock held by non-affiliates
(23,465,200 shares of Common Stock) was $234,652.00 as of June 3, 1996. The
stock price for computation purposes was $0.01, based on the closing sale price
for the Registrant's Common Stock on NASDAQ Bulletin Board on June 3, 1996.
This value is not intended to be a representation as to the value or worth of
the Registrant's shares of Common Stock. The number of shares of non-affiliates
of the Registrant has been calculated by subtracting shares held by persons
affiliated with the Registrant from outstanding shares. The number of shares
outstanding of the Registrant's Common Stock as of June 3, 1996 was 29,465,200
shares.
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SUN HARBOR FINANCIAL RESOURCES, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-KSB
Page
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PART I
Item 1. DESCRIPTION OF BUSINESS & PLAN OF OPERATION. . . . . . . . 3
Item 2A. FACTORS THAT MAY AFFECT FUTURE RESULTS . . . . . . . . . . 8
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . 11
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . 12
Item 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 13
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 13
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL
PERSON; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . 14
Item 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 17
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 18
Item 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . 19
Item 13. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 19
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
COMPANY BACKGROUND
Sun Harbor Financial Resources, Inc., a Delaware Corporation ("the
Company"), was incorporated in the State of Delaware on May 3, 1988. On August
25, 1988, the Company effectuated a tax free reorganization ("the Acquisition")
under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. As
a result of the Acquisition, the Company acquired Sun Harbor Mortgage, Inc., a
California Corporation ("SHMI"), incorporated in the State of California on
January 26, 1981, which became a wholly-owned subsidiary of the Company. SHMI
is a financial intermediary and operates a mortgage banking firm with activities
in San Diego , California. In addition, the Company's second wholly-owned
subsidiary, Peninsula Funding Corporation ("PFC"), is a trustee corporation that
SHMI specifies in it's Deeds of Trust to represent the beneficiary, supervise
foreclosure proceedings, and issue reconveyances. The Company derives
reconveyance and trustee fee revenues through PFC operations. On September 11,
1989 a third wholly-owned subsidiary, Pacific Empire Escrow, Inc. ("PEEI") was
incorporated as a California corporation. Pacific Empire Escrow, Inc. was
intended to be an independent Escrow company operating in the state of
California. However, Pacific Empire Escrow never became operational, and SHMI
formed an Escrow Department to provide Escrow Services for loans that directly
involve SHMI. On July 27, 1993, Pacific Empire Escrow, Inc. formally amended
its Articles of Incorporation to change its name to Sun Harbor Insurance
Services, Inc. ("SHISI"). SHISI offered insurance agency services within San
Diego county during the final two quarters of 1993 and for a portion of the
first quarter of 1994. However, as a result of a management decision, SHISI's
operations were terminated in March 1994. In September, 1994 Sun Harbor
Insurance Services, Inc. formally amended its Articles of Incorporation to
change its name to Sun Harbor Leasing, Inc. ("SHLI"). SHLI offers a wide range
of leases on automobiles, aircraft, boats, office equipment, etc. to Lessees in
San Diego and other Southern California counties. SHLI became operational
during the fourth quarter of 1994.
1995 ACTIONS RE: DIVESTITURE
On October 31, 1995, the Company's Board of Directors approved the
proposed sale of the Company's three wholly-owned subsidiaries, Sun Harbor
Mortgage, Inc., Sun Harbor Leasing, Inc., and Peninsula Funding Corporation
(collectively, the "Subsidiaries"). The proposed sale of the Subsidiaries is
subject to the approval of the Company's shareholders for which the Company will
be filing a proxy with the U.S. Securities and Exchange Commission.
The sale was undertaken pursuant to a Board of Director's resolution
previously adopted in May 1995 and after the Board of Directors reviewed the
cumulative history of losses incurred by the Company over the past five years
and the limited profitable business opportunities that the Board of Directors
identified in the Company's mortgage banking business. On this basis, the Board
of Director retained the services of an independent valuation expert retained to
establish the fair market value of the three subsidiaries as of June 29, 1995.
After review of the valuation opinion received, the Board of Directors
voted to sell the three subsidiaries to David W. Langill, at a selling price of
fifteen thousand dollars in accordance with the terms of the "Stock Purchase
Agreement Between Sun Harbor Financial Resources, Inc. and David W. Langill"
(the "Agreement"). Mr. Langill is a co-founder of the Subsidiaries and a co-
founder, officer, and director of the Company. If the sale of the Subsidiaries
is approved by the Company's shareholders, the Company will have no remaining
operating businesses and its only assets will be certain cash assets and the
Promissory Note (the "Note") that the Company received from Mr. Langill in
exchange for the sale of the Subsidiaries.
Under the terms of the Agreement, Mr. Langill has agreed to assume all
liabilities, known or unknown, whether asserted or unasserted, whether
liquidated or unliquidated, and whether due or to become due, including and
liability for taxes, office equipment, and other leases, rents, and other
obligations of the Subsidiaries except for certain limited obligations. The
Note bears interest at 8%, with a principal amount of fifteen thousand dollars
and requires a monthly payment of five hundred dollars beginning January 15,
1996. All unpaid principal and interest is due the Company in full no later
than June 29, 1998.
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The "Company", as used herein, refers to the consolidated entity
unless otherwise noted.
BUSINESS SERVICES PRIOR TO JUNE 30, 1995
Prior to June 30, 1995 and subject to approval of the Company's
shareholders, Company has had three wholly-owned subsidiary corporations, Sun
Harbor Mortgage, Inc. ("SHMI"), Peninsula Funding Corporation ("PFC") and Sun
Harbor Leasing, Inc. ("SHLI"). SHMI, PFC and SHLI are California corporations.
SHMI is a Mortgage Banking and Brokerage firm, PFC is a Trustee corporation and
SHLI offers vehicle leasing services. Through its operating subsidiaries, the
Company had seven business services:
1). Equity Lending
2). Loan Servicing
3). Residential Mortgage Banking Services
4). Commercial Loan Brokering Services
5). Reconveyance and Trustee Fee Services
6). Escrow Services
7). Vehicle Leasing Services
PLAN OF OPERATION
The Company, pending the approval of its shareholders, will
become a "clean public shell" and thereby seek to either merge with or acquire
an operating company with operating history and assets. The Securities and
Exchange Commission has defined and designated these types of companies as
"blind pools" and "blank check" companies.
The primary activity of the Company will likely involve seeking
merger or acquisition candidates with whom it can either merge or acquire. The
Company has not selected any company for acquisition or merger and does not
intend to limit potential acquisition candidates to any particular field or
industry, but does retain the right to limit acquisition or merger candidates,
if it so chooses, to a particular field or industry. The Company's plans are in
the conceptual stage only.
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. The discussion of the
proposed business under this caption 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.
The Company intends to obtain funds in one or more private
placements to finance the operation of any acquired business. Persons
purchasing securities in these placements and other shareholders will likely
not have the opportunity to participate in the decision relating to any
acquisition. The Company's proposed business is sometimes referred to as a
"blind pool" because any investors will entrust their investment monies to
the Company's management before they have a chance to analyze any ultimate
use to which their money may be put. Consequently, the Company's potential
success is heavily dependent on the Company's management, which will have
virtually unlimited discretion in searching for and entering into a business
opportunity. There can be no assurance that the Company will be able to
raise any funds in private placements.
Management anticipates that it will only participate in one
potential business venture. This lack of diversification should be considered a
substantial risk in investing in the Company because it will not permit the
Company to offset potential losses from one venture against gains from another.
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The Company may seek a business opportunity with a firm which
only recently commenced operations, or a developing company in need of
additional funds for expansion into new products or markets, or seeking to
develop a new product or service, or an established business which may be
experiencing financial or operating difficulties and is in the need for
additional capital which is perceived to be easier to raise by a public
company. In some instances, a business opportunity may involve the
acquisition or merger with a corporation which does not need substantial
additional cash but which desires to establish a public trading market for
its common stock. The Company may purchase assets and establish wholly owned
subsidiaries in various businesses or purchase existing businesses as
subsidiaries.
The Company anticipates that the selection of a business
opportunity in which to participate will be complex and extremely risky.
Because of 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 benefits of a publicly traded corporation.
Such perceived benefits of a publicly traded corporation may include
facilitating or improving the terms on which additional equity financing may be
sought, providing liquidity for the principals of a business, creating a means
for providing incentive stock options or similar benefits to key employees,
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders, and other factors. Potentially available business opportunities
may occur 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.
As is customary in the industry, the Company may pay a finder's
fee for locating an acquisition prospect. If any such fee is paid, it will be
approved by the Company's Board of Directors and will be in accordance with the
industry standards. Such fees are customarily between 1% and 5% of the size of
the transaction, based upon a sliding scale of the amount involved. Such fees
are typically in the range of 5% on a 41,000,000 transaction ratably down to 1%
in a $4,000,000 transaction.
The Company has insufficient capital with which to provide the
owners of business opportunities with any significant cash or other assets.
However, management believes the Company will offer owners of business
opportunities the opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering.
The owners of the business opportunities will, however, incur
significant post-merger or acquisition registration costs in the event they wish
to register a portion of their shares for subsequent sale. The Company will
also incur significant legal and accounting costs in connection with the
acquisition of a business opportunity including the costs of preparing post-
effective amendments, Forms 8-K, agreements and related reports and documents,
nevertheless, the officers and directors of the Companies 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.
The company does not intend to make any loans to any prospective
merger or acquisition candidates or to unaffiliated third parties.
EVALUATION OF OPPORTUNITIES
The analysis of new business opportunities will be undertaken by
or under the supervision of the officers and directors of the Company.
Management intends to concentrate on identifying prospective business
opportunities which may be brought to its attention through present associations
with management. 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
operation, if any; prospects for the future; 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. Officers and directors of each Company will meet personally
with management and key personnel of the firm sponsoring the business
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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. It may be anticipated that any
opportunity in which the Company participates will present certain risks. Many
of these risks cannot be adequately identified prior to selection of the
specific opportunity, and the Company's shareholders must, therefore, depend on
the ability of management to identify and evaluate such risk. In the case of
some of the opportunities available to the Company, it may be anticipated that
the promoters thereof have been unable to develop a going concern or that such
business is in its development stage in that it has not generated significant
revenues from its principal business activities prior to the Company's
participation.
There is a risk, even after the Company's participation in the
activity and the related expenditure of the Company's funds, that the combined
enterprises will still be unable to become a going concern or advance beyond the
development stage. Many of the opportunities may involve new and untested
products, processes, or market strategies which may not succeed. Such risks
will be assumed by the Company and, therefore, its shareholders.
The Company will not restrict its search for any specific kind of
business, 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 currently impossible to predict the status of any
business in which the Company may become engaged, in that such business may need
additional capital, may merely desire to have its shares publicly traded, or may
seek other perceived advantages which the Company may offer.
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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, franchise or licensing agreement with another
corporation or entity. It may also purchase stock or assets of an existing
business. On the consummation of a transaction, it is possible 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 officers and directors
may, as part of the terms of the acquisition transaction, resign and be replaced
by new officers and directors without a vote of the Company's shareholders.
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 this transaction, the Company may agree to register
such securities either at the time the transaction is consummated, under certain
conditions, or at a specified time thereafter. The issuance of substantial
additional securities and their potential sale into any trading market which may
develop in the Company's Common Stock 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 avoid the creation of a taxable
event and thereby structure the acquisition in a so called "tax-free"
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to obtain tax free treatment under the Code, it
may 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, including investors in this offering, would retain less than 20% of
the issued and outstanding shares of the surviving entity, which could result in
significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of
the Company will meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check reference of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
The manner in which each Company participates in an opportunity
will depend on the nature of the opportunity, the respective needs and desires
of the Company and other parties, the management of the opportunity, and the
relative negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with
target company management will be expected to focus on the percentage of the
Company which target company shareholders would acquire in exchange for 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 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 dilative effect on the percentage of shares held
by the Company's then shareholders, including purchasers in this offering. (See
"Factors That May affect Future Results").
The Company will not have sufficient funds (unless it is able to
raise funds in a private placement) to undertake any significant development,
marketing and manufacturing of any products which may be acquired. Accordingly,
following the acquisition of any such product, the Company will, in all
likelihood be required to either seek debt or equity financing or obtain funding
from third parties, in exchange for which the Company would probably be required
to give up a substantial portion of its interest in any acquired product. There
is no assurance that the Company will be able either to obtain additional
financing or interest third parties in providing funding for the further
development, marketing and manufacturing of any products acquired.
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It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs therefore incurred in the related investigation would not
be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business incurred.
EMPLOYEES
The Company has a total of two employees, both of whom are salaried
employees serving in management and administrative capacities.
ITEM 2A. FACTORS THAT MAY AFFECT FUTURE RESULTS
1. NEW COMPANY: NO REVENUES FROM OPERATION; RISK OF LOSS. The Company faces
all of the risks inherent in a new business, coupled with the risks involved
with a blind pool/blank check company. Since the Company, subject to
shareholder approval, has sold its existing businesses, there is no information
at this time upon which to base an assumption that its plans will either
materialize or prove successful. There can be no assurance that any of the
Company's business activities will result in any operating revenues or profits.
Investors should be aware that they may lose all or substantially all of their
investment.
2. NO FULL-TIME EMPLOYEES. The Company has no full-time employees and
management and none of its officers devote their full time to the Company's
proposed business affairs. None of the officers or directors receives a salary,
but are reimbursed for any expenses they may incur in the activities of the
Company. Due to the fact that no salaries are paid to officers of the Company
and that members of management are engaged in activities outside the operation
of the Company, the ability and speed for the Company to effect a merger or
acquisition may be significantly impaired.
3. RELIANCE UPON OFFICERS; LIMITED TIME TO DEVOTE TO COMPANY BUSINESS. The
Company is dependent upon the personal efforts and abilities of its two officers
and directors, who devote only limited time to the affairs of the Company. The
officers and directors of the Company have certain business experience but have
limited experience in acquisition or merger activities. The officers and
directors have not agreed to expend any specific amount of time on behalf of the
Company, but will devote such time as necessary to identify and consummate a
merger or acquisition.
4. LIMITED FINANCIAL RESOURCES AND NEED FOR ADDITIONAL FINANCING. The Company's
financial resources are minimal. The Company needs to obtain additional
financing from the sale of the Company's Common Stock, Debt, or some combination
thereof in order to undertake further business plans. The Company's ability to
operate as a going concern is contingent upon its receipt of additional
financing through private placements or by loans. The Company's business may
require additional funds in the future. There can be no assurance that if
additional funds are required they will be available, or, if available, that
they can be obtained on terms satisfactory to Management. In the event the
Company elects to issue stock to raise additional capital, any rights or
privileges attached to such stock may either (i) dilute the percentage of
ownership of the already issued common shares or (ii) dilute the value of such
shares. No rights or privileges have been assigned to the stock and any such
rights and privileges will be at the total discretion of the Board of Directors
of the Company. There can be no guarantee that the Company will be able to
obtain additional financing, or if successful, that it will be able to do so on
terms that are reasonable in light of current market conditions.
5. LIMITED TRADING MARKET FOR COMMON STOCK. The Company's Common Stock is
traded (OTC) on the Electronic Bulletin Board. Trading for the stock is
sporadic and at present there is a limited market for the Company's Common
Stock. At the present time, there is a limited public market for the Company's
Common Stock, and there can be no assurance that a market will in fact develop.
Even if a market does develop, it may not be sustained.
6. LIMITED FACILITIES AND LOCATION. The Company presently maintains initial
principal offices at the offices of its President. The office space is supplied
at no cost. The Company pays its own charges for long distance telephone calls
and other miscellaneous secretarial, photocopying and similar expenses.
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7. LACK OF REVENUES AND DEVELOPMENT STAGE COMPANY. The Company faces all of the
risks inherent in a new business. There is no information at this time upon
which to base an assumption that its plans will either materialize or prove
successful. There can be no assurance that any of the Company's business
activities will result in any operating revenues or profits. Investors should
be aware that they may lose all or substantially all of their investment.
8. LACK OF DIVIDENDS. The company has not paid dividends and does not
contemplate paying dividends in the foreseeable future.
9. COMPETITION. The Company is an insignificant participant among firms which
engage in business combinations with, or financing of, development stage
enterprises. There are many established management and financial consulting
companies and venture capital firms which have significantly greater financial
and personnel resources, technical expertise and experience than the Company.
In view of the Company's limited financial resources and management
availability, the Company will continue to be at significant competitive
disadvantage vis-avis the Company's competitors.
10. REGULATION & TAXES. The Investment Company Act of 1940 defines an
"investment company" as an issuer which is or holds itself out as being engaged
primarily in the business of investing, reinvesting or trading of securities.
While the Company does not intend to engage in such activities, the Company
could become subject to regulation under the Investment Company Act of 1940 in
the event the Company obtains or continues to hold a minority interest in a
number of development stage enterprises. The Company could be expected to incur
significant registration and compliance costs if required to register under the
Investment Company Act of 1940. Accordingly, management will continue to review
the Company's activities from time to time with a view toward reducing the
likelihood the Company could be classified as an "investment company." The
Company intends to structure a merger or acquisition in such manner as to
minimize Federal and State tax consequences to the Company and to any target
company.
11. POSSIBLE RULE 144 STOCK SALES. A total of 28,470,000 shares of the Company's
outstanding Common Stock are "restricted securities" and may be sold only in
compliance with Rule 144 adopted under the Securities Act of 1933 or other
applicable exemptions from registration. Rule 144 provides that a person
holding restricted securities for a period of two years may thereafter sell in
brokerage transactions, an amount not exceeding in any three month period the
greater of either (i) 1% of the Company's outstanding Common Stock, or (ii) the
average weekly trading volume during a period of four calendar weeks immediate
preceding any sale. Persons who are not affiliated with the Company and who
have held their restricted securities for at least three years are not subject
to the volume limitation. Possible or actual sales of the Company's Common
Stock by present shareholders under Rule 144 may have a depressive effect on the
price of the Company's Common Stock in any market which may develop.
12. RISKS OF LOW PRICED STOCKS. Limited and sporadic trading for the Company's
Common Stock currently exists in the over-the-counter market in the so-called
"pink sheets," or the NASD's "Electronic Bulletin Board." Consequently, a
shareholder may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities. In the absence of a
security being quoted on NASDAQ, or the Company having $2,000,000 in net
tangible assets, trading in the Common Stock is covered by Rule 3a51-1
promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and non-
exchange listed securities. Under such rule, broker/dealers who recommend such
securities to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or an annual income exceeding $200,000 or
$300,000 jointly with their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale.
Securities are also exempt from this rule if the market price is at
least $5.00 per share, or for warrants, if the warrants have an exercise price
of at least $5.00 per share. The Securities Enforcement and Penny Stock Reform
Act of 1990 requires additional disclosure related to the market for penny
stocks and for trades in any stock defined as a penny stock. The Commission has
recently adopted regulations under such Act which define a penny stock to be any
NASDAQ or non-NASDAQ equity security that has a market price or exercise price
of less than $5.00 per share and allow for the enforcement against violators of
the proposed rules.
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In addition, unless exempt, the rules require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule prepared by
the Commission explaining important concepts involving the penny stock market,
the nature of such market, terms used in such market, the broker/dealer's duties
to the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies in
case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative, current quotations for the
securities, and if the broker/dealer is the sole market-maker, the broker/dealer
must disclose this fact and its control over the market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. While many NASDAQ stocks are covered by the
proposed definition of penny stock, transactions in NASDAQ stock are exempt from
all but the sole market-maker provision for (i) issuers who have $2,000,000 in
tangible assets ($5,000,000 if the issuer has not been in continuous operation
for three years), (ii) transactions in which the customer is an institutional
accredited investor and (iii) transactions that are not recommended by the
broker/dealer. In addition, transactions in a NASDAQ security directly with the
NASDAQ market-maker for such securities, are subject only to the sole market-
maker disclosure, and the disclosure with regard to commissions to be paid to
the broker/dealer and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its
requirements for continued listing so that any issuer with less then $2,000,000
in net tangible assets or stockholder's equity would be subject to delisting.
These criteria are more stringent than the proposed increased in NASDAQ's
maintenance requirements.
The Company's securities are subject to the above rules on penny
stocks and the market liquidity for the Company's securities could be severely
affected by limiting the ability of broker/dealers to sell the Company's
securities.
ITEM 2. PROPERTIES
EXECUTIVE OFFICES
The Company's current offices at 5001 Commercenter Drive, Suite 245,
Bakersfield, California 93309 are provided rent-free by the Company's President,
Peter H. Norman.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently the subject of any existing litigation.
However, the Company has received a claim by a Frank Merchat, a shareholder of
the Company, who seeks the Company's payment of $25,000 on a promissory note
together with other assorted claims. The Company is currently evaluating Mr.
Merchat's claim and has had discussions with him. The Company is not able to
assess or predict the outcome of these discussions and the amount and costs of
any settlement it may incur in connection with this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The last meeting of the Company's shareholders was held on May 18,
1989. There were no matters submitted to a vote of shareholders during the
fiscal year ending December 31, 1995.
10
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock is traded on the NASDAQ Bulletin Board.
The following table reflects the high and low prices of the Company's Common
Stock for the two years ended December 31, 1995.
1994 High ($) Low ($)
- ---- -------- -------
1st Quarter. . . . . . . . . 0.01 0.01
2nd Quarter. . . . . . . . . 0.01 0.01
3rd Quarter. . . . . . . . . 0.02 0.01
4th Quarter. . . . . . . . . 0.02 0.01
1995
- ----
1st Quarter. . . . . . . . . 0.02 0.01
2nd Quarter. . . . . . . . . 0.02 0.01
3rd Quarter. . . . . . . . . 0.01 0.01
4th Quarter. . . . . . . . . 0.01 0.01
The Company has followed the policy of reinvesting earnings in the
business and, consequently, has not paid any cash dividends. At the present
time, no change in this policy is under consideration by the Board of
Directors. The payment of cash dividends in the future will be determined by
the Board of Directors in light of conditions then existing, including the
Company's earnings, financial requirements and condition, opportunities for
reinvesting earnings, business conditions and other factors. The number of
shareholders of record of Common Stock on June 3, 1996 was approximately 737.
11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
From the Company's incorporation in 1988 to June 30, 1995, the Company
has offered mortgage banking and brokering, loan servicing and trustee services.
During this period, Company's revenues were derived from its various
business activities. Origination fee income was derived by virtue of the
Company's equity loan program, residential mortgage banking service and
commercial loan brokering service. Servicing income was derived from the
Company's loan servicing activity. Reconveyance and foreclosure fees were
derived by the Company's trustee. Escrow fees were derived from the Company's
Escrow activities. And leasing fees and income were derived from the Company's
vehicle leasing activities which represent a combination of lease servicing fees
and origination fees.
The Company also derived revenue from interest obtained from borrower
payments on primissory notes secured by Deeds of Trust that were owned by the
Company.
RESULTS OF OPERATIONS
Total Revenues for the year ended December 31, 1995 were $277,277
(representing revenues for the six month period prior to June 30, 1995, the date
at which the Company's executed the agreement to sell the Company's three
subsidiaries), a decrease of more than 68% compared with the year ended December
31, 1994 (the latter, representing the full 12 month fiscal year revenues from
the three subsidiaries). The decrease from 1994 to 1995 was primarily due to:
(i.) the sale of the Company's three subsidiaries to
Mr. Langill on June 30, 1995 (as discussed above); and
(ii.) the declining monthly operating rate of the Company
due to a deteriorating real estate market in Southern
California.
General Administrative & Selling Expenses as a percentage of total
revenue were 122% and 113% in 1995 and 1994, respectively. The increase in the
General Administrative & Selling Expenses percentage from 1994 to 1995 was
primarily the result of the fixed cost characteristics of these salary, legal,
accounting, audit, and office expenses.
Depreciation Expense was $7,000 in fiscal 1995 compared to $26,215 in
1994. The decline in these expenses was impacted largely by the sale of the
Company's three subsidiaries to Mr. Langill (as discussed above). Interest
Expense was $12,590 compared to 1994's $23,277. The 46% decrease from 1994 to
1995 in Interest Expense was primarily due to Mr. Langill's assumption of nearly
all of the Company's debt (pursuant to the sale agreement discussed above).
As a result, the Company recorded a Net Loss of $83,490 in 1995
compared to a Net Loss of $130,905 in 1994. The Company's Loss Per Share in
1995 were $0.0028 compared to a Loss Per Share of $0.0094 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
There are several components which affect the Company's ability to
meet its financial needs, including funds generated from operations, levels
of accounts receivable, capital expenditures, short-term borrowing capacity
and the ability to obtain long-term capital on reasonable terms. For the
year ended December 31, 1995, the Company experienced a cash flow before
financing activities of $602. After financing activities, which utilized
$21,969, the Company recorded a net decrease in cash for 1995 of $76,516. In
1994, the Company experienced a positive cash flow before financing
activities of $30,479. After financing activities, which used funds of
$62,573, the Company recorded a net decrease in cash for 1994 of $102,259.
12
<PAGE>
IMPACT OF INFLATION
Inflation has not had a significant effect on the Company's operation
during the three years ending December 31, 1995.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and related financial information required to
be filed hereunder are indexed on page 20 of this report and are incorporated
herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None during 1995. On June 13, 1996 the Company was informed that
Cashuk, Wiseman and Goldberg was resigning as the Company's auditor. The
Company has had no disagreements of any type with Cashuk, Wiseman and Goldberg
at any time since inception of its engagement of Cashuk, Wiseman and Goldberg in
April 1988. However, the Company has appointed Lawrence P. Rub, CPA as its
auditor.
13
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSON; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the Directors and Executive Officers of the
Company are as follows:
NAME AGE POSITION SINCE
---- --- -------- -----
Peter H. Norman . . . 57 Chairman, President, & CEO 04-18-95
Lisa Norman . . . . . 57 Secretary, Treasurer, & Director 10-05-95
Allison Gilbert . . . 67 Director 06-10-90
David W. Langill. . . 35 Director 05-20-88
Paul N. Gray. . . . . 79 Director 04-12-92
The Directors serve until the next annual meeting of shareholders or
until their successors are elected.
PETER H. NORMAN was elected Chairman of the Board, President, and
Chief Executive Officer of the Company since October 5, 1995 and was elected a
Director on April 18, 1995. From 1993 to the present, Mr. Norman has been
President of the Ancona Group, Ltd., a public company traded on the Electronic
Bulletin Board (OTC). From 1992 to the present, Mr. Norman has been President
of American Tree Farms, Inc. From 1992 to the present, Mr. Norman has been
President of Great Life, Inc. From 1991 to the present, Mr. Norman has been
President of American Home Alliance Industries, Ltd., a public company traded on
the Electronic Bulletin Boards (OTC) and its subsidiary, American Home Alliance,
Inc., a real estate and construction company of Bakersfield, California. From
1990 to the present, Mr. Norman has been President of Summit Fine Arts and
President of Valparaiso Industries. Mr. Norman is also the husband of Lisa
Norman, the Company's Secretary, Treasurer, and Director.
LISA NORMAN was elected Secretary, Treasurer, and Director of the
Company on October 5, 1995. From 1993 to the present, Ms. Norman has been Vice
President, Secretary, and Treasurer of American Home Alliance, Inc., a real
estate and construction company of Bakersfield, California. From 1993 to the
present, Ms. Norman has been Vice President, Secretary, and Treasurer of Ancona
Group, Ltd., a public company traded on the Electronic Bulletin Board (OTC).
From 1992 to the present, Ms. Norman has been Vice President, Secretary, and
Treasurer of American Tree Farms, Inc. and Vice President, Secretary, and
Treasurer of Great Life, Inc. From 1991 to the present, Ms. Norman has been
Vice President, Secretary, and Treasurer of American Home Alliance Industries,
Ltd., a public company traded on the Electronic Bulletin Board (OTC) and its
subsidiary, American Home Alliance, Inc., a real estate and construction
company. From 1990 to the present, Ms. Norman has been Vice President,
Secretary, and Treasurer of Summit Fine Arts and Vice President, Secretary, and
Treasurer of Valparaiso Industries. From 1978 to 1994, Ms. Norman was Vice
President and Secretary of Victorian Mortgage of Mission Veijo and San Clemente,
California. From 1978 to 1994 she was Vice President and Secretary-Treasurer of
Peter Norman and Associates, a private investment company. From 1969 to 1978,
Ms. Norman was Assistant to the President and CEO of Rocca Finanz AG, Glarus,
Switzerland. From 1967 to 1969 she was Executive Secretary and Translator for
Booz, Allen, Hamilton Management Consultants in Dusseldorf, Germany. From 1963
to 1967 she was Executive Secretary to the Personnel Manager of American
Celanese Corporation at various locations throughout Europe. Ms. Norman is the
wife of Peter H. Norman, the Company's Chairman, President, and CEO.
14
<PAGE>
ALLISON GILBERT has been a Director of the Company since June 12,
1990. Mr. Gilbert is now retired. Prior to retirement, he was a College
Administrator and Professor at Mira Costa College in Oceanside, California, and
had been involved in the field of education since 1953. Highlights of Mr.
Gilbert's career included being chosen as Community College Dean of the Year in
the State of California, and as High School Football Coach of the Year in San
Diego County. Mr. Gilbert played baseball in the Detroit Tiger organization
after receiving his discharge from the United States Marine Corps.
DAVID W. LANGILL has been a Director of the Company since May 20,
1988. From January 1987 to the present, he has been Executive Vice President of
SHMI. In this capacity, he generally administers the Company's Equity Loan
program, and specifically locates investors to fund these Equity Loans. He is
also responsible for SHMI loan servicing and loan tracking, and for all
Peninsula Funding Corporation activities. Mr. Langill maintains the Company's
Trust Accounts, supervises payroll, personnel, accounting and bookkeeping, and
reports to the State of California Department of Real Estate, Department of
Corporations, Franchise Tax Board and the US Internal Revenue Service. He
generally functions as the Company's Comptroller. From July 1985 to January
1987, Mr. Langill was a Loan Officer for Sundstrom Mortgage Company, Inc. of San
Diego, California. In this capacity, he was responsible for the processing,
underwriting packaging and brokering of commercial, industrial and multi-family
loans. In 1985, he was Task Force Member at Bankers Funding Corporation (now
Goldome Realty) in Newport Beach, California. His duties included paying taxes
of FHA/VA and conventional residential loans in fifteen states, problem solving
of serviced loans, tracking of problem loans serviced by the company, and
segregating loans for the foreclosure department. Prior to this, Mr. Langill
was Research Assistant of Marcus and Millichap Real Estate in Long Beach,
California. His responsibilities included researching multi-family commercial
and industrial properties, primarily focusing on rental rates, tenant mixes,
rent per square foot, demographics, loan-to-values, construction breakdowns and
property profit and loss statements. he also tracked buyers and sellers by
price range and suitability. Mr. Langill holds a Bachelor of Science Degree in
Business Administration from California State University at Long Beach,
California. He also holds a California Real Estate Brokers License.
ALLISON E. GILBERT has been a director of the Company since June 12,
1990. Mr. Gilbert is now retired. Prior to retirement, he was a College
Administrator and Professor at Mira Costa College in Oceanside, California, and
has been involved in the field of education since 1953. Highlights of Mr.
Gilbert's career included being chosen as Community College Dean of the Year in
San Diego County. Mr. Gilbert played baseball in the Detroit Tiger organization
after receiving his discharge from the United States Marine Corps.
PAUL N. GRAY has been a director of the Company since April 20, 1992.
He is the President of Universal Technology International, located in Milpitas,
California, a company engaged in the sale of various weapon systems to Korea,
Taiwan, Japan, Singapore, Malaysia and other Asian countries. Prior to forming
UTI, Mr. Gray was Director of Foreign Military Sales for Litton Industries, and
lived in Tokyo for eight years. Mr. Gray retired from the United States Navy
after serving honorably in WWII, Korea and Vietnam, being awarded numerous
medals and citations including the Distinguished Service Medal, Silver Star,
Bronze Star, 2 Purple Hearts, etc. Upon graduation from the U.S. Naval Academy,
Mr. Gray was assigned to the battleship U.S.S. South Dakota where he
participated in the battles of Santa Cruz and Guadalcanal. Upon returning to
the United States in 1942, he underwent flight training and was subsequently
returned to the Pacific as a dive bomber pilot, being involved in the invasion
of Guam and Saipan. He was flying from the carrier U.S.S. Lexington when WWII
ended. During the Korean war, he was the Commanding Officer of Attack Squadron
54, based on the U.S.S. Essex. After completing the National War College in
1968, Mr. Gray was assigned to Vietnam as Commander of the River Patrol Force
based in the Mekong Delta. He also has been the Commanding Officer of the Naval
Air Station at New Orleans, the Attack Carrier U.S.S. Kearsarge and the Fleet
Base at Yokosuka, Japan. Mr. Gray is a graduate of the U.S. Naval Academy, the
national War College and the Naval Postgraduate School. He holds a Masters
Degree in International Economics from George Washington University and a
Masters of Business Administration from National University of San Diego. Mr.
Gray is currently retired from the U.S. Navy and is also a member of CIRA, the
Central Intelligence Agency Retired Association.
15
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and persons who own
more than 10% of the Company's Common Stock (collectively "Covered Persons") to
file initial reports of ownership (Form 3) and reports of changes in ownership
of Common Stock (Forms 4 and Forms 5) with the Securities and Exchange
Commission (the "Commission") as well as the Company and any exchange upon which
the Company's Common Stock is listed.
The Company is required to identify Covered Persons that the Company
knows have failed to file or filed late Section 16(a) reports during the
previous fiscal year. To the Company's knowledge, the following Covered Persons
during the fiscal year ended December 31, 1995 failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act:
<TABLE>
<CAPTION>
NUMBER OF REPORTS NOT FILED ON A
NAME POSITION TIMELY BASIS(1)
---- -------- --------------------------------
<S> <C> <C>
Peter H. Norman . . . President, Chairman of Form 3; Form 4 (1 report); Form 5
the Board, CEO
Lisa Norman . . . . . Secretary, Treasurer,
Director (1) Form 3; Form 5
Allison Gilbert . . . Director Form 3; Form 4 (1 report); Form 5
David W. Langill. . . Director Form 5
Paul N. Gray. . . . . Director Form 5
</TABLE>
__________________________
(1)To the Company's knowledge, based solely on a review of the
copies of the reports furnished to the Company by such persons in the fiscal
year ended December 31, 1995, such persons have subsequently filed the reports
required by Section 16(a) of the Exchange Act.
16
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table shows for the fiscal years ended December 31,
1995, 1994, and 1993 the cash compensation paid by the Company as well as
certain other compensation paid or accrued for the year, to the Chief Executive
Officer and the executive officers of the Company whose aggregate compensation
was more than $100,000 for such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMP.
AWARDS ----------------------------------- -----------
- ------ SHARES
FISCAL OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#)
- --------------------------- ------ ------ ----- ------------ -----------
Peter H. Norman 1995 $0 $ 0 * __
Chairman of the Board
President & CEO
Lisa Norman 1995 $0 0 * --
Secretary, Treasurer, &
Director
_______________
* The dollar value of compensation, perquisites, and other personal benefits was
less than the reporting thresholds established by the Securities and Exchange
Commission for all of the Company's officers and directors during the 1993,
1994, and 1995 period. No officer received any compensation under stock plans
during 1995. No director's fees were paid during 1993, 1994, and 1995.
17
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership as of June 3, 1996 of the Company's Common Stock, by any person who is
known to the Company to be the beneficial owner of more than 5% of the Company's
voting securities and by each Director and by Officers and Directors of the
Company as a group. The Company has only one class of common stock. The
percentages shown below are computed based on 29,515,200 shares of the Company's
Common Stock outstanding as of December 31, 1995.
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
- ---------------- ----------- ----------
Norman Family Trust. . . . . . . . . . . . . 6,000,000(1) 20.33%
4275 Executive Drive, Ste. 800
La Jolla, CA 92037
Allison Gilbert. . . . . . . . . . . . . . . 50,000 .17%
4275 Executive Drive, Ste. 800
La Jolla, CA 92037
David W. Langill . . . . . . . . . . . . . . 0 0%
4275 Executive Drive, Ste. 800
La Jolla, CA 92037
Paul N. Gray . . . . . . . . . . . . . . . . 0 0%
4275 Executive Drive, Ste. 800
La Jolla, CA 92037
All Officers and
Directors as a Group (5 persons) . . . . . . 6,050,000 20.50%
__________________________
(1) The Norman Family Trust is a trust in which Peter H. Norman and Lisa
Norman, both company officers and directors, are trustees.
18
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 18, 1995, the Company's Board of Directors approved the sale
of 16,000,000 shares of the Company's Common Stock for an investment of $40,000
in the Company. Of the 16,000,000 shares, 6,000,000 shares were acquired by the
Norman Family Trust.
On October 1, 1995, the Company's Board of Directors rescinded a stock
option for 200,000 shares previously granted to Allison Gilbert and in exchange
for Mr. Gilbert's cancellation of the stock option, issued 50,000 shares of the
Company's Common Stock to him. These shares were valued at $0.01 per share.
On October 31, 1995, the Company's Board of Directors approved the
"Business Valuation Report," dated June 30, 1995 prepared by Economic Dispute
Resolution in connection with the valuation of the Company's three subsidiaries,
Sun Harbor Mortgage, Inc., Sun Harbor Leasing, Inc., and Peninsula Funding
Corporation. The Board of Directors also approved the terms of a Stock Purchase
Agreement and the proposed sale of the Company's three subsidiaries, Sun Harbor
Mortgage, Inc., Sun Harbor Leasing, Inc., and Peninsula Funding Corporation to
David W. Langill in exchange for David W. Langill's issuance, to this Company,
of a secured promissory note in the amount of Fifteen Thousand Dollars
($15,000).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS (a)(1) Financial Statements. Reference is made to the Index to
Financial Statements of the Company on page 20 of this
report.
(10)(a) Stock Purchase Agreement, dated June 30, 1995, filed as
an Exhibit to Form 8-K on November 6, 1995 and incorporated by reference.
(10(b) Secured Non-Negotiable Promissory Note, dated June 30,
1995, filed as an Exhibit to Form 8-K on November 6, 1995 and incorporated by
reference.
REPORTS ON FORM 8-K
(b) Reports on Form 8-K filed during 1995.
On May 12, 1995, the Company filed a Current Report on Form 8-K
relating to the sale of 16,000,000 shares of the Company's Common Stock on a
private placement basis.
On November 6, 1995, the Company filed a Current Report on Form
8-K regarding the action of the Company's Board of Directors approving the sale
of the Company's three subsidiaries to Mr. David W. Langill.
EXHIBIT NO.
- -----------
DESCRIPTION OF EXHIBIT
----------------------
24 Consent of Cashuk, Wiseman & Goldberg, CPAs
27 Financial Data Schedule
19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
CASHUK, WISEMAN AND GOLDBERG
Certified Public Accountants
3333 Camino Del Rio South, Suite 230
San Diego, California 92108-3808
Telephone (619) 563-0145 / 283-7137
FAX (619) 563-9584
To the Board of Directors and Stockholders of
Sun Harbor Financial Resources, Inc.
We have audited the accompanying Consolidated Financial Statements of Sun Harbor
Financial Resources, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sun Harbor Financial
Resources, Inc. and Subsidiaries at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ CASHUK, WISEMAN AND GOLDBERG
CASHUK, WISEMAN AND GOLDBERG
San Diego, California
April 8, 1996
20
<PAGE>
Sun Harbor Financial Resources, Inc.
CONSOLIDATED BALANCE SHEET
December 31, 1995
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents (Note A) $ 114
Receivables 0
Loans Held for Resale 0
Advances 0
Prepaid Expenses 0
Investment (Note B) $ 19,886
----------
Total Current Assets 20,000
FIXED ASSETS
Furniture and Equipment 0
Accumulated Depreciation 0
----------
Net Fixed Assets 0
OTHER ASSETS
Security Deposits 0
Notes Receivable (Note C) 15,000
----------
Total Other Assets 15,000
----------
TOTAL ASSETS $ 35,000
----------
----------
The accompanying notes are an integral part of this statement.
21
<PAGE>
Sun Harbor Financial Resources, Inc.
CONSOLIDATED BALANCE SHEET
December 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ 17,741
Accrued Expenses 3,000
Warehouse Line Payable 0
Current Portion of Long-Term Debts 0
-----------
Total Current Liabilities 20,741
LONG TERM DEBTS (Note D) 0
-----------
TOTAL LIABILITIES 20,741
STOCKHOLDERS' EQUITY
Common Stock - 30,000,000 shares authorized,
1995 - 29,515,200 issued and outstanding
Par Value $.01 Per Share 295,152
Preferred Stock - 5,000,000 shares authorized,
1995 - 34,000 issued and outstanding
Par Value $.01 Per Share 340
Addtional Paid In Capital (228,588)
Treasury Stock 0
Retained Earnings (Deficit) (52,645)
-----------
Total Stockholders' Equity 14,259
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 35,000
-----------
-----------
The accompanying notes are an integral part of these financial statements.
Sun Harbor Financial Resources, Inc.
22
<PAGE>
Sun Harbor
Financial Resources, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31,
1995 1994
---- ----
REVENUE
Origination of Loans $ 254,169 $ 609,642
Servicing and Interest Income 40,944 52,043
Gain (Loss) on Sale of Assets (36,397) 0
Escrow Fees and Other Income 18,561 74,128
---------- ----------
Total Revenue 277,277 735,813
OPERATING EXPENSES
General, Administrative and Selling 338,777 833,279
Depreciation and Amortization 7,000 26,215
Interest 12,590 23,277
---------- ----------
Total Expenses 358,367 882,771
---------- ----------
INCOME (LOSS) BEFORE TAXES
Income Taxes (Credit) - (Notes A & E) 2,400 (16,053)
---------- ----------
NET INCOME (LOSS) $ (83,490) $ (130,905)
---------- ----------
---------- ----------
LOSS PER SHARE (Note A) $ (.0028) $ (.0094)
---------- ----------
---------- ----------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Sun Harbor Financial Resources, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (83,490) $ (130,905)
Adjustments to reconcile net loss used
in operating activities:
Depreciation and amortization 7,000 26,215
Loss on disposal of assets 36,397 0
Changes in current assets and liabilities:
(Increase) decrease in receivables 11,380 (3,288)
(Increase) decrease in other current assets 180,549 (53,589)
(Increase) decrease in prepaid expenses 32,891 (29,707)
Increase (decrease) in accrued expenses (76,533) 63,580
Increase (decrease) in other current
liabilities (169,695) 60,350
Increase (decrease) in deferred income taxes 0 (2,821)
(Additions) reductions to security deposits 6,352 0
Other 0 0
------------ -----------
Net cash used by operating activities (55,149) (70,165)
Cash flows from investing activities:
Purchase of investment (19,886) 0
Purchase of fixed assets (2,594) (17,927)
Proceeds from sale of fixed assets 0 26,112
Net change to notes receivable 23,082 22,294
------------ -----------
Net cash provided by investing activities 602 30,479
Cash flows from financing activities:
Principal payments on long-term debt (5,079) (36,925)
Proceeds from long-term debt 0 44,352
Proceeds from issuance of common and
preferred stock 185,020 0
Redemption of preferred stock 0 (45,000)
Purchase of treasury stock 0 (25,000)
Reduction of additional paid-in capital (201,910) 0
------------ -----------
Net cash used by financing activities (21,969) (62,573)
------------ -----------
Decrease in cash and cash equivalents (76,516) (102,259)
Cash and cash equivalents at beginning of year 58,889 161,148
------------ -----------
Cash and cash equivalents at end of year $ (17,627) $ 58,889
------------ -----------
------------ -----------
Supplemental disclosures of cash flow information:
Interest paid $ 12,590 $ 23,277
Income taxes paid 0 1,220
Non-cash investing and financing activities (Note F)
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Sun Harbor Financial Resources, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
1. Sun Harbor Financial Resources, Inc. (The Company) was
Incorporated under the laws of the State of Delaware on May 3,
1988. The Company has adopted a December 31 calendar year end
for reporting requirements.
2. The consolidated financial statements include the accounts of
the company (parent) and its wholly-owned subsidiaries, Sun
Harbor Mortgage, Inc., Peninsula Funding Corporation and Sun
Harbor Leasing, Inc. for the six months ended June 30, 1995.
As of June 30, 1995, all three wholly-owned subsidiaries were
sold.
3. CASH AND CASH EQUIVALENTS - for purposes of reporting cash
flows, cash and cash equivalents include cash on hand, cash in
checking and savings accounts with banks and stockbrokers.
4. FIXED ASSETS are being depreciated using the straight-line
method over their useful lives.
5. INCOME TAXES - deferred income taxes have been provided for
timing differences resulting from difference between the period
in which certain revenue and expense items are recognized for
financial statement purposes and the period in which they
affect taxable income.
6. EARNINGS PER SHARE is based upon the number of shares of common
stock outstanding pursuant to staff accounting bulletin topic
4D (cheap stock).
NOTE B - INVESTMENT
The Company purchased marketable securities which are stated at
cost. Market value at December 31, 1995 was $19,886.
NOTE C - NOTES RECEIVABLE
Is due to the sale of wholly owned subsidiaries.
25
<PAGE>
Sun Harbor Financial Resources, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE D - LONG TERM DEBTS
Schedule of long-term debts are as follows: 1995 1994
----- ---------
Non-cancelable lease with Danka. 5 year lease,
$686.91 per month, secured by a copy machine. $ 0 $ 41,214
Non-cancelable lease with Graybar Financial.
5 year lease, $134.36 per month, secured by
a telephone system. 0 672
Note payable - RAM computer, due 5/95, secured
by a computer. 0 $ 32,971
----- ---------
NOTE E - INCOME TAXES
Income taxes as of December 31, 1994 is computed as follows:
STATE $ 2,400
----------
TOTAL $ 2,400
----------
----------
NOTE F - NON-CASH INVESTING AND FINANCING ACTIVITIES
Sale of wholly-owned subsidiaries in exchange for
$15,000 note receivable. Date of sale June 30, 1995.
Addition to note receivable $ 15,000
Reduction to fixed assets net of
accumulated depreciation (34,625)
Reduction to long-term debt 38,259
Reduction to notes receivable (28,557)
Loss on sale of subsidiary 36,397
---------
Net addition to additional paid in capital $ 26,474
---------
---------
26
<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.
(Registrant): SUN HARBOR FINANCIAL RESOURCES
By: /s/ PETER H. NORMAN Date: July 2, 1996
------------------------------------
Peter H. Norman
President,
Chief Executive Officer,
Chairman of the Board and
Chief Financial Officer
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
date indicated.
By: /s/ PETER H. NORMAN Date: July 2, 1996
------------------------------------
Peter H. Norman
Director
By: /s/ DAVID W. LANGILL Date: July 2, 1996
------------------------------------
David W. Langill
Director
By: Date:
------------------------------------ --------------
Allison Gilbert
Director
By: /s/ PAUL N. GRAY Date: July 2, 1996
------------------------------------
Paul N. Gray
Director
27
<PAGE>
Sun Harbor Financial Resources, Inc.
INDEX TO EXHIBITS
EXHIBIT NO.
- -----------
DESCRIPTION OF EXHIBIT
----------------------
24 Consent of Cashuk, Wiseman and Goldberg
27 Financial Data Schedule
28
<PAGE>
Exhibit 24
CASHUK, WISEMAN & GOLDBERG
3333 Camino Del Rio South, Suite 230
San Diego, California 92108
(TEL: 619-563-0145)
Board of Directors
Sun Harbor Financial Resources, Inc.
5001 Commercenter Drive, Suite 245
Bakersfield, California 93309
RE: Consent to Use of Opinion in 1995 Form 10-KSB
Dear Sirs:
Please let this letter serve as our consent to the use of our opinion
letter, as an exhibit in the Company's 1995 Form 10-KSB.
Sincerely,
/s/CASHUK, WISEMAN & GOLDBERG
CASHUK, WISEMAN & GOLDBERG
CWG:
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN HARBOR
FINANCIAL RESOURCES, INC. 1995 FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 114
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,000
<CURRENT-LIABILITIES> 20,741
<BONDS> 0
0
340
<COMMON> 295,152
<OTHER-SE> (228,588)
<TOTAL-LIABILITY-AND-EQUITY> 35,000
<SALES> 277,277
<TOTAL-REVENUES> 277,277
<CGS> 0
<TOTAL-COSTS> 358,367
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,590
<INCOME-PRETAX> (81,090)
<INCOME-TAX> (2,400)
<INCOME-CONTINUING> (83,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,490)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> 0
</TABLE>
