SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-25582
GRACE DEVELOPMENT, INC.
-----------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1110469
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2685 So. Dayton Way Unit 42 Denver, CO 80231
--------------------------------------------
(Address of principal executive offices, including zip code)
303-337-5700
------------
(Registrant's telephone number, including area code)
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |_| No |X|
As at July 1, 1999, the registrant had outstanding 7,599,962 shares of Common
Stock.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS.
Please see enclosed financial statements.
PART 2 - OTHER INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion should be read in conjunction with the Financial
Statements and Notes thereto contained elsewhere herein. Please note that no
assurance exists as to the actual future outcome of Management's plans,
assumptions, or estimates.
MISSION STATEMENT. The current mission of the Company is to seek out and acquire
qualified business acquisition opportunities that may satisfy certain needs, to
be modified from time to time as determined by Management. Generally these needs
include the following considerations: The experience or ability of management of
the acquisition. The financial history of the acquisition; the opportunity of
the acquisition to generate significant future revenues and profits in its
business area or areas; the ability of the acquisition to satisfy the cash needs
of an operating public company; and the ability to expand business operations in
the future.
PLAN OF OPERATION. Currently, the Company has no or nominal revenues, while
operating as a company seeking mergers, acquisitions and similar opportunities.
The Company's plan of operation for the next twelve-month period is to focus
upon the acquisition and/or establishment of revenue generating businesses. The
Company believes it can satisfy current cash requirements. Management believes
the ability of the Company to achieve profitability is conditioned upon several
variables, but primarily the successful pursuit of acquisitions, including the
establishment of new operating businesses. Prior Management had approved
transactions which eventually were not consummated, or were canceled or
rescinded. In connection with these transactions, the Company took the position
that a total of approximately 1,109,190 shares of the record total of 7,599,962
shares reported herein are also canceled or the issuances are rescinded, and has
or will place stop-transfer instructions on such shares. Persons holding such
shares may or may not agree in certain cases, and litigation may ensue. Current
Management, sensitive to these past matters, will endeavor to avoid such
problems by taking steps to deliver shares only upon the full consummation of
the subject matter, or by other steps upon advice of counsel.
FORWARD STATEMENTS. Certain statements herein constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "could," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential," or
"continue" or the negative of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither any other person nor
we assumes responsibility for the accuracy and completeness of such statements.
The Company does not undertake to update any of the forward-looking statements
herein.
YEAR 2000 (Y2K) READINESS DISCLOSURE. The Company may be subject to external
Year 2000-related failures or disruptions that might generally affect industry
and commerce. Moreover, businesses might experience substantial slow-downs in
business if consumers avoid products and services such as air
<PAGE>
travel both before and after January 1, 2000 arising from concerns about
reliability and safety because of the Year 2000 issue. All of these factors
could have a material adverse effect on the business, financial condition and
results of operations during this calendar year change. Information technology
time and date data processes including, but not limited to, calculating,
comparing and sequencing data from, into and between the 20th and 21st centuries
contained in the products and services which may be offered by the Company
through future endeavors should function accurately, continuously and without
degradation in performance and without requiring intervention or modification in
any manner that will or could adversely affect performance, given Management's
position not to start any business or acquire any business unless satisfactory
confirmation of Y2K readiness is addressed (as best as reasonable).
SIGNATURES
Pursuant the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Grace Development, Inc.
(Registrant)
by: /s/ Jacob Barrocas
-------------------------------------
President and Treasurer (Principal
Executive Officer and Principal
Financial Officer)
Date 07/16/99
<PAGE>
GRACE DEVELOPMENT, INC.
FINANCIAL STATEMENTS
JUNE 30, 1999
<PAGE>
CONTENTS
Page
FINANCIAL STATEMENTS
Balance Sheets F3
Statements of Operations F4
Statements of Cash Flows F5
Notes to Financial Statements F7-F8
F-2
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
June 30, December 31,
1999 1998
(Unaudited) (Audited)
----------- ---------
ASSETS
TOTAL ASSETS $ -- $ --
=========== ===========
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accrued liabilities 10,000 9,500
----------- -----------
TOTAL CURRENT LIABILITIES $ 10,000 $ 9,500
COMMITMENTS AND CONTINGENCIES (Note 5)
DEFICIENCY IN ASSETS
Preferred stock; no par value; 10,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock; no par value; 800,000,000 shares
authorized; 7,269,962 shares issued and
outstanding 1,090,150 1,090,150
Deficit accumulated during the development stage (1,100,150) (1,099,650)
----------- -----------
TOTAL DEFICIENCY IN ASSETS (10,000) (9,500)
----------- -----------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ -- $ --
=========== ===========
See accompanying notes.
F-3
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS - (UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months For the Three Months Cumulative
Ended June 30, Ended June 30, Since
---------------------------- ---------------------------- Inception
1999 1998 1999 1998 January 6, 1989
------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES
Interest $ -- $ -- $ -- $ -- $ 3,296
Other operating expenses -- -- -- -- 3,850
Loss on Security Deposit -- -- -- -- 200,000
Professional fees 1,000 1,000 500 500 893,504
------------ ------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES AND NET LOSS $ (1,000) $ (1,000) $ (500) $ (500) $ 1,100,650
============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (PRIMARY AND
FULLY DILUTED) 7,269,962 7,269,962 7,269,962 7,269,962
BASIC NET LOSS PER SHARE
(PRIMARY AND FULLY DILUTED) $ (0.000) $ (0.000) $ (0.000) $ (0.000)
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Cumulative
Ended June 30, Since
-------------------------- Inception
1999 1998 January 6, 1989
----------- ----------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,000) $ (1,000) $(1,100,650)
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock issued for compensation -- -- 885,004
Stock issued for cancellation of debt -- -- 200,000
Changes in assets and liabilities:
Increase in accrued liabilities 1,000 1,000 10,500
----------- ----------- -----------
NET CASH USED BY OPERATING ACTIVITIES -- -- (5,146)
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issuance -- -- 1,796
Additional capital contributed -- -- 3,350
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES -- -- 5,146
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH -- -- --
----------- ----------- -----------
CASH, beginning of year -- -- --
----------- ----------- -----------
CASH, end of year -- -- --
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
FINANCING TRANSACTIONS
Stock issued in satisfaction of debt $ -- $ -- $ 200,000
</TABLE>
See accompanying notes.
F-5
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS HISTORY OF DEVELOPMENT STAGE COMPANY Grace Development, Inc. (the
"Company") was incorporated under the laws of the State of Colorado on January
6, 1989, for the purpose of seeking, investigating and if warranted, acquiring
an interest in business opportunities presented to it by persons or firms that
wish to obtain the perceived advantages of becoming a publicly held corporation.
The Company is still in the development stage as more fully defined in Statement
No. 7 of the Financial Accounting Standards Board because the Company's
principal operations have not yet commenced.
In March 1990, the Company's Board of Directors determined that a planned merger
with another previously unrelated entity, By American U.S.A. ("BAU"), would not
be finalized because of a variety of factors including the fact that the
purported new officers and directors never filled their offices and acted as
officers and directors of the Company, and that the purported new principal
place of business of the Company and BAU were closed with no forwarding
addresses available. Consequently, the 9,000,000 shares of the Company's common
stock which were going to be issued to BAU in connection with this transaction
were returned to the Company and regarded as never issued. The Company's
original Board of Directors was reconstituted in March 1990, once it became
apparent that the proposed merger had not been consummated.
During March 1990, the Company's former officer and director reconveyed his
300,000 shares of the Company's common stock to the Company for no
consideration. These shares were then canceled.
In February 1991, the Company's original officers and directors resigned and new
officers and directors were appointed.
Because of the lack of funds as further described in Note 3, herein, the Company
became inactive in approximately March 1990, and conducted no activities until
April 1993, when it began to perform limited administrative activities.
CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, cash and
cash equivalents would consist of money market funds and demand deposits in
banks. The Company has no such items at June 30, 1999 or December 31, 1998.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates
F-6
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
NET LOSS PER COMMON SHARE Basic per share information is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding. No warrants or options were outstanding
DEVELOPMENT STAGE COMPANY The Company has been devoting its efforts to raising
capital, establishing sources of supply, and developing markets for its planned
operations. Since the Company has had no revenues, it is considered a
development stage company.
INCOME TAXES Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB) Statement No. 109 (SFAS 109), Accounting for
Income Taxes. SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of the difference in events that have been recognized in the
Company's financial statements compared to the tax returns.
FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments are carried at
amounts, which reasonably approximate their fair value due to the short-term
nature of these amounts or due to variable rates of interest, which are
consistent with market rates.
RECLASSIFICATIONS AND RESTATEMENTS Certain amounts in the prior year financial
statements have been reclassified for comparative purposes to conform to the
presentation of the current year financial statements.
2. INCOME TAXES
The Company has accumulated net operating losses, which can be used to offset
future earnings. Accordingly, no provision for income taxes is recorded in the
financial statements. A deferred tax asset for the future benefits of net
operating losses is offset by a 100% valuation allowance due to the uncertainty
of the Company's ability to utilize the losses. As of December 31, 1998, the
Company has net operating loss carryforwards available as follows:
Year
Year Amount Expires
---- ------ -------
1998 $ 2,000 2013
1997 2,000 2012
1996 2,000 2011
1995 322,000 2010
1994 745,276 2009
1993 8,976 2008
1992 774 2007
1991 668 2006
1990 7,554 2005
1989 8,402 2004
----------
$1,099,650
==========
However, if subsequently there are ownership changes in the Company, as
defined in Section 382 of the Internal Revenue Code, as a result of those
changes, the Company's ability to utilize net operating losses and capital
losses available before the ownership change may be restricted to a percentage
of the market value of the Company at the time of ownership change. Therefore,
substantial net operating loss carryforwards could, in all likelihood, be
limited or eliminated in future years due to a change in ownership as defined in
the Code. The utilization of the remaining carryforwards is dependent on the
Company's ability to generate sufficient taxable income during the carryforward
periods and no further significant changes in ownership.
F-7
<PAGE>
GRACE DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
3. GOING CONCERN AND MANAGEMENT'S PLANS
The Company has minima1 capital resources presently available to meet
obligations, which normally can be expected to be incurred by similar companies,
and has an accumulated deficit of $(1,100,650) at June 30, 1999. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. In order to begin any significant operations after its period of
inactivity, the Company will have to pursue other sources of capital, such as
additional equity financing or debt financing. There is no assurance that the
Company will be able to obtain such financing. The financial statements, herein,
do not include any adjustments that might result from the outcome of this
uncertainty.
4. PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock with no
par value. The preferred stock may be issued by the Board of Directors in one or
more series. The Board shall determine the distinguishing features of each,
including preferences, rights and restrictions, by resolution upon the
establishment of such series. No such shares have been issued to date.
5. COMMON STOCK
Stock Issued for Services
During the periods described below, the Company issued shares of its common
stock to consultants for services to the Company. Forms S-8 have been filed with
the Securites and Exchange Commission relative to such issuances of stock.
Shares have been recorded using the maximum offering price unless otherwise
stated. The value of these shares was charged to expense.
On July 24, 1994, the Company issued 1,000,000 shares, valued at $200,000, for
consulting services. These shares were issued in connection with a consulting
agreement with respect to the location, acquisition and financing of business
opportunities and operating an acquisitions fund. The acquisition agreement
which the Company entered into was later rescinded. The Company disputes the
issuance of shares to the consultant and believes these shares should be
cancelled and returned. The subject shares are currently reflected as
outstanding and are considered to be contingently returnable.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Grace
Development, Inc. Form 10QSB and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 10,500
<BONDS> 0
0
0
<COMMON> 1,090,150
<OTHER-SE> (1,100,650)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
