U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-45838-C
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BEACON CAPITAL INVESTMENT, INC.
(Name of Small Business Issuer as specified in its charter)
Delaware 36-3729989
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No)
515 Red Cypress 60013
Cary, Illinois (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (847) 516-2900
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
The Issuer's revenues for the fiscal year ending September 30, 1996 were
$12,158.
There is currently no active market for the Issuer's common stock. As of
December 21, 1995, there were 1,160,458 shares of common stock issued and
outstanding, 510,504 of which were owned by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
General
The Company was formed November 13, 1991, for the purpose of investing in
any and all types of assets, properties and businesses. In 1992, the Company
filed a registration statement with the Securities and Exchange Commission
("SEC") relating to the offer and sale of the Company's securities in an initial
public offering. On March 23, 1992, the SEC declared the Registration Statement
effective. The Registration Statement related to an offering of 1,000,000 Units
of the Company's common stock and warrants to purchase shares of common stock,
offered at $1.00 per Unit. The Company's offering closed in March 1993. A total
of 700,275 Units were sold in the public offering. The offering was a "blind
pool" or "blank check" offering. The gross offering proceeds were $700,275.
The Company was formed to acquire or merge with another operating company
or another entity or to acquire a technology or other asset. ("Potential
Business Acquisition"). In some instances, a Potential Business Acquisition may
involve the acquisition of 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. Some Potential Business Acquisitions may seek to
become a public company through merging with, being acquired by or selling their
assets to an existing public company. There are numerous reasons why an existing
privately-held company would seek to become a public company through a merger or
acquisition rather than by doing its own public offering. Such reasons include
avoiding the time delays involved in a public offering; retaining a larger share
of voting control of the publicly-held company; reducing the cost factors
incurred in becoming a public company; and avoiding any dilution requirements
set forth under various states' blue sky laws.
The Company has entered into a Letter of Intent to acquire Millennium
Memory, Inc. ("Millennium"), a privately-held California corporation engaged in
the business of selling computer memory products. The Company and Millennium
have negotiated the terms of a definitive Agreement and Plan of Merger (the
"Agreement") and anticipate executing the Agreement in the immediate future. The
acquisition transaction proposed by the Letter of Intent (the "Millennium
Acquisition") and the Agreement are subject to numerous conditions and there can
be no assurance that all of such conditions will be fulfilled or waived and
there can be no assurance that the Millennium Acquisition will be completed. If
the Millennium Acquisition is completed, the Company will be in the business of
selling computer memory products and will no longer be in the business of
looking for Potential Business Acquisitions. However, inasmuch as the Millennium
Acquisition is subject to such conditions and there can be no assurance that the
Millennium Acquisition will be completed, the disclosure set forth in this Item
I continues to describe the Company's historical business plan rather than a
description of Millennium's business operations.
The Company has not restricted its search for Potential Business
Acquisitions to any particular industry or to any particular geographic area.
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If the Millennium Acquisition does not close and if the Company is then
required to look for other Potential Business Acquisitions, it is anticipated
that knowledge of Potential Business Acquisitions will be made known to the
Company by various sources, including its officers and directors, shareholders,
professional advisors such as attorneys and accountants, securities broker-
dealers, venture capitalists, members of the financial community, and others who
may present unsolicited proposals. The Company became aware of Millennium
through the Company's President, Douglas P, Morris who was introduced to a
director of Millennium in an unrelated transaction.
Since its inception, the Company has discussed Potential Business
Acquisitions and other investments with a number of private companies but has
not acquired any Potential Business Acquisition nor has it entered into a
definitive acquisition agreement with any Potential Business Acquisition. The
Company has discussed an acquisition possibility with Millennium for several
months and expects to enter into the Agreement in the near future.
Selection of Opportunities
As a result of the potential acquisition of Millennium, the Company is not
currently looking for other Potential Business Acquisitions. If the Millennium
Acquisition does not close, the Company will again commence looking for
alternative Potential Business Acquisitions.
The Company's analysis of Potential Business Acquisitions in the past has,
and if the Millennium Acquisition is not completed, will in the future, be
undertaken by or under the supervision of the officers and directors of the
Company. The Company has unrestricted flexibility in seeking, analyzing and
participating in Potential Business Acquisitions. In its efforts to analyze
potential acquisition targets, the Company will consider the following kinds of
factors:
(a) Potential for growth, indicated by new technology, anticipated market
expansion or new products;
(b) Competitive position as compared to other firms of similar size and
experience within the industry segment as well as within the industry as a
whole;
(c) Strength and diversity of management, either in place or scheduled for
recruitment;
(d) Capital requirements and anticipated availability of required funds, to
be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements or from other
sources;
(e) The cost of participation by the Company as compared to the perceived
tangible and intangible values and potentials;
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(f) The extent to which the business opportunity can be advanced;
(g) The accessibility of required management expertise, personnel, raw
materials, services, professional assistance and other required items; and
(h) Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling,
management will attempt to analyze all factors in the circumstances and make a
determination based upon reasonable investigative measures and available data.
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. Due to the Company's limited capital available
for investigation and management's limited experience in business analysis, the
Company may not discover or adequately evaluate adverse facts about the
opportunity to be acquired.
Form of Acquisition
The manner in which the Company participates in a business opportunity will
depend upon the nature of the opportunity, the respective needs and desires of
the Company and the promoters of the opportunity, and the relative negotiating
strength of the Company and such promoters.
If the Millennium Acquisition is closed, the Company will issue shares of
its common stock to the Millennium shareholders. If the Millennium Acquisition
does not close and the Company looks for other Potential Business Acquisitions,
it is likely that the Company will also acquire its participation in a business
opportunity through the issuance of common stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended, depends upon
the issuance to the shareholders of the acquired company of at least 80 percent
common stock of the combined entities immediately following the reorganization.
If a transaction were structured to take advantage of these provisions rather
than other "tax free" provisions provided under the Internal Revenue Code, all
prior shareholders would in such circumstances retain 20% or less of the total
issued and outstanding shares. This could result in substantial additional
dilution to the equity of those who were shareholders of the Company prior to
such reorganization.
The Millennium Acquisition is to be structured as a tax-free, reverse
triangular merger and if the Millennium Acquisition is completed, a newly formed
subsidiary of the Company will merge into Millennium, Millennium will become a
wholly-owned subsidiary of the Company and the shares of Millennium owned by its
shareholders will be converted into shares of the Company's common stock. If the
Millennium Acquisition is completed, of which there can be no assurance, the
shareholders of Millennium will become the controlling shareholders of the
Company after the completion of the acquisition.
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<PAGE>
If the Millennium Acquisition is closed, the current management of the
Company will resign and the officers and directors of Millennium will be come
the officers and directors of the Company; provided, however, that Douglas P,
Morris, who is currently president and a director of the Company will continue
to be a director after the Millennium Acquisition and will be appointed a vice
president of the Company.
The investigation of Millennium and the negotiation, drafting and execution
of relevant agreements, disclosure documents and other instruments required
substantial management time and attention and substantial costs for accountants,
attorneys and others. This will also be the case if the Company does not
complete the Millennium Acquisition and is required to look for other Potential
Business Acquisitions. If a decision is made not to participate in a specific
business opportunity, the costs theretofore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific business opportunity, the failure to
consummate that transaction may result in the loss to the Company of the related
costs incurred.
Employees
The Company has no employees. Millennium currently has 20 full time and one
part time employee.
Letter of Intent
The Company has entered into a Letter of Intent to acquire Millennium which
is engaged in the business of selling "DRAM", which is a computer memory
product. The Millennium Acquisition is subject to a number of conditions,
including the raising of additional capital by Millennium. In the event the
Millennium Acquisition is effected, the financial condition, capital resources
and liquidity of the Company would be significantly different that its financial
condition, capital resources at September 30, 1996. If the Millennium
Acquisition is completed, the Company would no longer be a non-operating
company, but would be engaged in the operations currently conducted by
Millennium and it would be generating operating revenues, paying operating costs
and making capital expenditures.
For accounting purposes only, the proposed Millennium Acquisition will
likely be treated as a reverse merger with Millennium deemed to be the survivor
of the merger. If the Millennium Acquisition is completed, all but one of the
Company's current officers and directors will resign and persons now affiliated
with Millennium will become the officers and directors of the Company and the
shareholders of Millennium will own a controlling interest in the Company.
The Millennium Acquisition is subject to a number of conditions and there
can be no assurance that the proposed Millennium Acquisition will be effected.
If the Millennium Acquisition is not completed, the Company will continue to
look for other investment and acquisition opportunities.
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The general terms of the proposed Millennium Acquisition transaction are as
follows:
1. Reverse Split. As a condition to the transaction, the Company will
effect a 1-for-2.5 reverse split of its issued and outstanding shares, options
and warrants. In such event, the total number of shares of the Company's common
stock currently issued and outstanding would be reduced from 1,160,458 to
464,183. As a result of the reverse split, the exercise price of the options and
warrants to purchase shares of the Company's common stock now issued and
outstanding will be increased from $1.25 per share to $3.125 per share.
2. Merger Transaction. If the acquisition is effected, pursuant to a
reverse triangular merger wherein (i) the Company will form a new wholly-owned
subsidiary ("Subsidiary") for the sole purpose of the merger; (ii) the
Subsidiary will merge into Millennium; and (iii) all of the shares of Millennium
will be converted into shares of the Company's common stock.
3. Shares to be Issued. As a condition to the merger, Millennium must raise
additional capital. The number of shares of the Company's common stock to be
issued in the merger will depend upon the total amount of new capital raised by
Millennium. It is anticipated that the maximum number of shares of the Company's
common stock issued to Millennium shareholders will be 6,778,868 and the minimum
number will be 6,528,868. These numbers are calculated after giving effect to
the the above-mentioned 1-for.2.5 reverse stock split.
4. Management. If the merger is effected, the Company management of
Millennium will be appointed as the officers and directors of the Company in
place of curent management. However, Douglas P. Morris, who is currently the
president and a director of the Company, will remain as a director of the
Company and will serve as a vice president of the Company.
5. Management Options. Management has agreed to cancel one half of
management stock options, reducing the number of shares issuable upon the
exercise of such stock options from 1,320,000 to 660,000.
The proposed Millennium Acquisition is subject to a number of conditions,
including approval by the Company's shareholders, and there can be no assurance
that the Millennium Acquisition will close.
ITEM 2. PROPERTIES
The executive offices of the Company are presently located at the home of
its president, Douglas P. Morris, at 515 Red Cypress Road, Cary, IL 60013. The
Company's executive offices are sufficient for the present purposes of the
Company. Upon the consummation of an acquisition or merger, the Company's
offices will be moved to the principal offices of the company acquired or merged
with. If the Millennium Acquisition is completed, the Company's offices will
move to Millennium's offices which consists of 3,600 square feet of office space
in Laguna Beach, CA.
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ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or
of which any of its property or wholly owned subsidiary is subject and no such
proceedings are known to the Company to be threatened or contemplated against
it. The Company has been informed that Millennium is engaged in no litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No Meeting of Shareholders was held during the last fiscal quarter. The
Company anticipates that its meeting of shareholders will be held primarily for
the purpose of voting upon the proposed acquisition of Millennium and related
matters.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND WARRANTS AND RELATED
SECURITY HOLDER MATTERS
A. Market for Common Stock. The Company's public offering was closed in
March 1993. Since that time there has not been an active market for the
Company's securities and it is unlikely that there will be an active market
until and unless the Company acquires a Potential Business Opportunity.
B. Holders. The number of record holders of the Company's common stock as
of December 21, 1996 was approximately 103.
C. Dividends. The Company has not paid any cash dividends to date and does
not anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for the
development of the Company's business. Even if the Millennium Acquisition is
closed, it is not anticipated that dividends will be paid to the Company's
shareholders in the foreseeable future.
D. Warrants. A total of 700,275 Units of the Company's securities were sold
in the Company's initial public offering. Each Unit consisted of one share of
common stock, $.001 par value and four Common Stock Purchase Warrants each of
which entitle the holder to purchase one share of common stock at $1.25 per
share exercisable during a twenty four month period commencing 30 days from the
date of the closing of the offering. The offering was closed on March 30, 1993.
The original exercise period of the warrants was initially scheduled to expire
on April 30, 1995, however, the Company's Board of Directors has extended the
exercise period on several occasions. On September 30, 1996, one half of the
warrants expired and are no longer outstanding. The exercise period of the
remaining warrants (which entitle the holders to purchase 1,400,500 shares of
the Company's common stock) have been extended to March 31, 1997. As a condition
to
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the acquisition of Millennium, the Company has agreed, subject to the close
of the Millennium Acquisition, not to extend the remaining warrants past March
31, 1997. Accordingly, if the Millennium Acquisition closes, the remaining
warrants will expire on March 31, 1997. The Company has the right to call the
warrants for redemption, in whole or in part, upon 30 days prior written notice
at a price of $.001 per warrant. If the warrants are called for redemption, they
may be exercised at any time prior to the close of business on the day preceding
the date fixed for redemption. Any rights to purchase common stock subject to
the warrants will be forfeited to the extent such warrants are not exercised
prior to such date.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company was formed November 13, 1991, for the purpose of investing in
any and all types of assets, properties and businesses. In 1992, the Company
filed a registration statement with the Securities and Exchange Commission
("SEC") relating to the offer and sale of the Company's securities in an initial
public offering. On March 23, 1992, the SEC declared the Registration Statement
effective. The Registration Statement related to an offering of 1,000,000 units
of the Company's common stock and warrants to purchase shares of common stock,
offered at $1.00 per unit. The Company's offering closed in March 1993. A total
of 700,275 Units of the Company's securities were sold in the public offering.
The offering was a "blind pool" or "blank check" offering. The gross offering
proceeds were $700,275. The Plan of Operation of the Company is further
described in Item 1 of this Form 10-KSB.
Prior to September 30, 1996, there were outstanding warrants which entitled
the holders to purchase 2,801,000 shares of the Company's common stock at a
price of $1.25 per share. These warrants were part of the Units sold by the
Company in its initial public offering. The warrants were scheduled to expire on
September 30, 1996; however, the Company's Board of Directors extended the
exercise period for some of the warrants (representing the right to purchase
1,400,500 shares of the Company's common stock) to March 31, 1997. The balance
of the warrants expired on September 30, 1996. As a result of the reverse stock
split which is a condition of the Millennium acquisition, the remaining warrants
will have an exercise price of $3.125 per share. The Company is precluded under
the Agreement with Millennium from extending the remaining warrants beyond March
31, 1997. If the holder of a warrant surrenders his warrant certificates for
exercise, Beacon may be required to seek to register or similarly qualify the
shares to be issued upon the exercise of the warrants under federal and state
securities laws. There can be no assurance that a registration statement will be
filed or declared effective prior to March 31, 1997, the date the warrants
expire. Under such circumstances, the expiration date of such warrants sought to
be exercised may be extended to permit such registration or other qualification.
In additional to the outstanding warrants, there are outstanding options
which entitle the holders to purchase 1,320,000 shares of the Company's common
stock. As a condition to the closing the Millennium Acquisition, one-half of
these options must be canceled. These options are owned
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by management and former management of the Company. Each of these options
is exercisable at $1.25 per share. After the reverse stock split which is a
condition to the Millennium acquisition, such options will be reduced in number
to 264,000 and will have an exercise price of $3.125 per share.
As discussed below in the "Liquidity and Capital Resources" section of this
Item 6, the Company has entered into a non-binding Letter of Intent to acquire a
privately-held company engaged in the business of selling computer memory chips
and modules. If the Millennium Acquisition closes, of which there can be no
assurance, the financial condition and results of operations of the Company will
be significantly different than its historical financial condition and results
of operations.
Liquidity and Capital Resources
At September 30, 1996, the Company had cash of $533,210 and no other
assets. At September 30, 1995, the Company had cash of $563,803. The Company
anticipates that its only assets will be cash until such time as it acquires
Millennium or some other Company. At September 30, 1996, the Company had
liabilities of $1,211 and shareholders' equity of $531,999. At September 30,
1995, the Company had liabilities of $3,075 and shareholders' equity of
$560,728.
The Company has entered into a Letter of Intent to acquire Millennium. The
Millennium Acquisition is subject to a number of conditions, including the
raising of additional capital by Millennium. In the event the Millennium
Acquisition is effected, the financial condition, capital resources and
liquidity of the Company would be significantly different than its financial
condition at September 30, 1996. If the Millennium Acquisition is completed, the
Company would no longer be a non-operating company, but would be engaged in the
operations currently conducted by Millennium and it would be generating
operating revenues, paying operating costs, and making capital expenditures.
For accounting purposes only, the proposed Millennium Acquisition will
likely be treated as a reverse merger with Millennium deemed to be the survivor
of the merger.
If the Millennium Acquisition is not completed, the Company will continue
to look for other investment and acquisition opportunities.
Results of Operations
The Company has not commenced any active operations as of the date hereof
except for registration and sale of securities in its initial public offering
and efforts to search for and analyze Potential Business Acquisitions. For the
year ended September 30, 1996, the Company had revenues of $12,158 (consisting
entirely of interest income), expenses of $40,887 and a net loss of $28,729.
This compares to revenues of $16,706, expenses of $35,363 and a net loss of
$18,657 for the year ended September 30, 1995.
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The decrease in revenues was the result of a decrease in the interest
earned on the Company's cash deposits. The increase in expenses was the result
of increased general and administrative costs including travel expenses and
professional fees relating to the search for and review of Potential Business
Acquisitions in general and specifically to the proposed Millennium transaction.
The Company also incurred legal fees and expenses in connection with a
matter involving its former president. Such former president used $125,000 of
the Company's funds for his own purposes and without authorization by the
Company. When the Company's Board of Directors learned of this misuse of funds,
it immediately dismissed such person as an officer and director of the Company.
At the time of the unauthorized use of the funds, the Company's funds were on
deposit in a bank account which required the signatures of two directors in
order to remove the funds from such account. On March 13, 1996, the former
president (who was also a director of the Company) instructed the bank to wire
$125,000 of the Company's funds to an account personally owned and controlled by
him. The requested amount was wired by the bank to the personal account of the
former president.
Upon learning of the transfer of the funds to the personal account of the
former president, the Company made demand on him for repayment of the $125,000
and also made demand on the bank for reimbursement of the $125,000. The former
president did not repay such $125,000 to the Company, however, on June 20, 1996,
the Company and the bank entered into a Compromise and Settlement Agreement
whereby the bank reimbursed the Company for the entire amount of $125,000. In
consideration thereof, the Company released any and all claims it might have
against the bank and assigned to the bank all of its claims against its former
president. Accordingly, as of June 20, 1996, the Company's cash position
increased by $125,000. The Company estimates that it incurred legal fees and
other costs of approximately $7,000 in connection with the resolution of this
matter.
As discussed above, the Company is attempting to acquire Millennium in a
merger transaction. The Company will incur accounting, legal and other fees and
expenses in connection with such proposed acquisition. If the Millennium
Acquisition is not completed, the Company will continue to expend funds to
search for and evaluate other Potential Business acquisitions. These expenses
will include professional fees, travel expenses, consulting fees and related
expenses
The Company anticipates that its only revenues will be interest income
until such time as it acquires a Potential Business Acquisition. If the Company
completes the Millennium Acquisition, its revenues will primarily related to the
sale of computer memory products.
Plan of Operation
The Company's current plan of operation is to continue with its efforts to
acquire Millennium and to thereafter commence operations in the business of
selling computer memory products. If the Company does not complete the
acquisition of Millennium, it will continue to look for other investment and
acquisition opportunities pursuant to the plan described in Item 1 of this Form
10-KSB.
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Inflation
The Company does not believe that inflation will negatively impact its
business plans.
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Financial Statements
Independent Accountants' Report
Balance Sheet -
September 30, 1996
Statement of Operations
Years ended September 30, 1996 and 1995
Statement of Changes in Stockholders' Equity -
Years ended September 30, 1996 and 1995
Statement of Cash Flows -
Years ended September 30, 1996 and 1995
Notes to Financial Statements
- -----------------------------------------------------
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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INDEPENDENT AUDITORS' REPORT
To The Board of Directors and
Stockholders of
Beacon Capital Investment, Inc.
We have audited the accompanying balance sheet of Beacon Capital
Investment, Inc. (a development stage company) as of September 30, 1996, and the
related statements of operations, stockholders' equity and cash flows for the
years ended September 30, 1996 and 1995 and for the period November 13, 1991,
(date of inception) to September 30, 1996. 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 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 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 Beacon Capital Investment,
Inc. (a development stage company) as of September 30, 1996, and the results of
its operations and its cash flows for the years ended September 30, 1996 and
1995 and for the period from November 13, 1991 (date of inception) to
September 30, 1996, in conformity with generally accepted accounting principles.
Tanner + Co.
Salt Lake City, Utah
October 7, 1996
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BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Balance Sheet
September 30, 1996
Assets
Current assets - cash $533,210
Liabilities and Stockholders' Equity
Current liabilities - accounts payable $ 1,211
Stockholders' equity:
Common stock - $.001 par value. 25,000,000
shares authorized, 1,160,458 shares
issued and outstanding 1,160
Additional paid-in capital 581,015
Retained deficit (50,176)
Total stockholders' equity 531,999
---------
$533,210
=========
See accompanying notes to financial statements.
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BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Statement of Operations
Cumulative
Year Ended Amounts
September 30, From
1996 1995 Inception
_______________________
Revenue - interest income $ 12,158 16,706 53,857
General and administrative 40,887 35,363 103,963
expenses
Loss before income taxes (28,729) (18,657) (50,106)
Provision for income taxes - - (70)
Net loss $(28,729) (18,657) (50,176)
Loss per share $(.02) (01) (.05)
Weighted average shares 1,160,458 1,160,458 1,019,303
========= ========== =========
See accompanying notes to financial statements.
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BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Total
Additional Retained Stock-
Common Stock Paid-in Earnings holders'
Shares Amount Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance, November 13, 1991 - $ - - - -
Common stock issued for cash
at $.02 per share 660,000 660 14,340 - 15,000
Net loss - - - (115) (115)
_______ _______ _______ _______ _________
Balance, September 30, 1992 660,000 660 14,340 (115) 14,885
Common stock issued for cash
at $1.00 per share net of
offering costs of $133,100 700,275 700 566,475 - 567,175
Cancellation of originally
issued shares pursuant to
public stock offering
agreement (199,817) (200) 200 - _
Net income - - - 359 359
_________ ________ ________ ________ _________
Balance, September 30, 1993 1,160,458 1,160 581,015 244 582,419
Net loss - - - (3,034) (3,034)
_________ ________ ________ ________ _________
Balance, September 30, 1994 1,160,458 1,160 581,015 (2,790) 579,385
Net loss - - - (18,657) (18,657)
_________ ________ ________ _________ _________
Balance, September 30, 1995 1,160,458 1,160 581,015 (21,447) 560,728
Net loss - - - (28,729) (28,729)
_________ ________ ________ _________ _________
Balance, September 30, 1996 1,160,458 $1,160 581,015 (50,176) 531,999
========= ======== ======== ========= =========
</TABLE>
See accompanying notes to financial statements.
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BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Statement of Cash Flows
Cumulative
Year Ended Amounts
September 30, From
1995 1994 Inception
Cash flows from operating activities:
Net loss $ (28,729) (18,657) (50,176)
Adjustments to reconcile net loss
to net cash used in operations:
Increase (decrease) in accounts (1,864) 2,608 1,211
payable
Net cash used in
operating activities (30,593) (16,049) (48,965)
Cash flows from investing activities - - -
__________ _________ __________
Cash flows from financing activities
proceeds from sale of stock - - 582,175
__________ _________ __________
Increase (decrease) in cash (30,593) (16,049) 533,210
Cash, beginning of period 563,803 579,852 -
Cash, end of period $533,210 563,803 533,210
======== ======= =======
See accompanying notes to financial statements.
16
<PAGE>
BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(1) Summary of Significant Accounting Policies
Organization
Beacon Capital Investment, Inc. (a development stage company) began
activity on November 13, 1991, (date of inception) when proceeds were received
from the sale of stock to Company officers and Directors. Articles of
Incorporation were filed under the laws of the state of Delaware on November 13,
1991. The Company has elected a fiscal year end of September 30. The Company has
not commenced planned principal operations. The Company proposes to use the
proceeds from the sale of stock to seek business acquisitions and combinations
which, in the opinion of management, will be in the best interest of the
Company. Further, the Company is considered a development stage Company as
defined in SFAS No. 7. The Company has, at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Earnings (Loss) Per Share
Earnings per share were calculated by dividing net operations by the
weighted average number of shares of common stock outstanding during the period.
Common stock equivalents were not included in the earnings per share calculation
as they are antidilutive.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of cash.
The Company maintains its cash in bank deposit accounts which, at times may
exceed federally insured limits. The Company has not experienced any losses in
such account and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
(2) Related Party Transaction
The Company currently has an oral agreement with its president to use as
its business office, a portion of his home, at no cost to the Company. The
Company paid $25,000 consulting fee to the president of the Company for services
provided.
17
<PAGE>
BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(3) Stock Options
The officers/directors of the Company have the option to purchase an
additional two shares of common stock for each share owned. The options,
concurrent with the common stock purchase warrants, are exercisable until March
31, 1997, at a price of $1.25 per share. A total of 1,320,000 options are
outstanding at September 30, 1996. None of the options have been exercised at
September 30, 1996.
(4) Warrants
In connection with the public stock offering dated March 31, 1993, the
Company issued 2,801,000 warrants to purchase common stock. Each warrant
entitles the holder thereof to purchase one share of common stock, $.001 par
value, at the price of $1.25 per share. On September 30, 1996, 1,400,500
warrants expired while 1,400,500 warrants are exercisable until March 31, 1997.
The Company has the right to call the warrants for redemption upon 30 days prior
written notice at a price of $.001 per warrant. If the warrants are called for
redemption, they may be exercised at any time prior to the close of business of
the day preceding the date fixed for redemption. None of these warrants have
been exercised as of September 30, 1996.
(5) Supplemental Cash Flow Information
The Company paid cash for income taxes and interest as follows:
Cumulative
Year Ended Amounts
September 30, From
1996 1995 Inception
Interest $ - - -
======== ======= ===========
Income taxes $ - - -
======== ======= ===========
(6) Income Taxes
The difference between income taxes at statutory rates for September 30,
1996 and 1995 are the amount presented in the financial statements is the
increase in tax valuation allowance, which offsets the income tax benefit of the
operating loss.
18
<PAGE>
BEACON CAPITAL INVESTMENT, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(6) Income Taxes - Continued
Deferred tax assets at September 30, 1996 are as follows:
September 30,
1996 1995
Operating loss carryforwards $ 15,000 5,600
Valuation allowance (15,000) (5,600)
$ - -
========= ========
The Company has net operating loss carryforward of approximately $50,000
which begin to expire in the year 2006. The amount of net operating loss
carryforward that can be used in any one year will be limited by any significant
change in ownership of the Company and by the applicable tax laws which are in
effect at the time such carryforward can be utilized.
19
<PAGE>
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company and
its accountants on any matter of accounting principles, practices or financial
statement disclosure.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.
A. Identification of Directors and Executive Officers. The current
directors of the Company who will serve until the next annual meeting of
shareholders or until their successors are elected or appointed and qualified,
are set forth below:
Name Age Position
Douglas P. Morris 41 President/Director
515 Red Cypress Road
Barrington, IL 60013
Thomas Richmond 69 Vice President/Director
27046 Mill Pond West
Capistrano Beach, CA 92624
James Monroe 61 Secretary/Treasurer/
1841 Schaeffer Rd. Director
Longrove, IL 60047
Howard D. Talks 42 Director
P.O. Box 886
Palm Beach, FL 33480
The current officers and directors of the Company are listed below. As a
condition to the completion of the Millennium Acquisition, the current officers
and directors of the Company will resign and the officers and directors of
Millennium will be appointed in their place; however, Douglas P, Morris will
continue to be a director of the Company and will serve as the vice president of
the Company.
Douglas P. Morris. Mr. Morris was a appointed a director of the Company in
December 1994 Mr. Morris is, and has been since 1988, the owner of H & M Capital
Investments, Inc., a privately-held business consulting firm. H & M Capital
Investments, Inc. is engaged in consulting with privately-held and publicly-held
companies relating to management, debt financing and equity financing. From 1984
to 1988, Mr. Morris was self-employed in managing his own investments. From 1981
to 1984, he was Assistant City Administrator for the City of Palmdale,
California. From
20
<PAGE>
1979 to 1981, he was the Assistant Mayor of Burbank, California. Mr. Morris
is president/director of Celtic Investment, Inc., a publicly-held company which
is engaged in the factoring business. Mr. Morris received his Masters Degree in
Public Administration at the University of Southern California in 1982 and his
Bachelor of Arts Degree in Judicial Administration from Brigham Young University
in 1978. Mr. Morris is a director of Emerald Capital, Inc., a company engaged in
the business of manufacturing and marketing waste reduction equipment. Mr.
Morris is also a director of Dauphin Technology, Inc., a publicly traded
Company.
Thomas Richmond. Mr. Richmond was employed for U.S. Steel Corporation for
32 years in various sales capacities in its Chicago sales office. He retired
from the Chicago sales office as a Sales Manager. Mr. Richmond then relocated to
California where he was employed as a Sales Consultant with Ferralloy
Corporation, a nationwide processor of steel products. From 1987 to 1990, he was
employed as a sales consultant by Postwindow, a window and door manufacturing
company in San Diego, California. For the last three years, Mr. Richmond has
been retired. Mr. Richmond earned his degree from Dartmouth College in 1950.
James Monroe. Mr. Monroe was and had been since 1968, the Director of
Building and Grounds for Arlington Heights Public School District 25 in
Arlington Heights, Illinois. From 1968 to 1992, Mr. Monroe was a teacher of
industrial arts, health and physical education in the same district. Mr. Monroe
earned his Bachelor of Science degree in 1957 from Western Illinois University
in Macomb, Illinois, a Masters Degree in 1968 from the University of Illinois in
Urbana, Illinois and a Certificate of Advanced Study in 1974 from the School of
Business Administration at the University of Northern Illinois, in DeKalb,
Illinois. Mr. Monroe has been retired since 1992.
Howard D. Talks. Mr. Talks was appointed a director of the Company in
December 1994. Mr. Talks has been involved in the real estate industry for the
past 19 years. Mr. Talks has developed and/or purchased commercial and
residential real estate properties in Florida. He has lectured at Dale Carnegie
seminars. Mr. Talks attended Queensboro Community College in New York. Mr. Talks
is a director of Celtic Investment, Inc., a publicly-held company which is
engaged in the factoring business.
B. Significant Employees. None.
C. Family Relationships. None.
D. Compliance with Section 16(a). The Company is not subject to
Section 16 of the Exchange Act.
E. Other: Involvement in Certain Legal Proceedings. There have been no
events under any bankruptcy act, no criminal proceedings and no judgments or
injunctions material to the evaluation of the ability and integrity of any
director or executive officer during the past five years.
21
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation for the
fiscal year ended September 30, 1996, 1995 and 1994 earned or awarded to the
Company's chief executive officer and other officers and directors whose total
annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h)) (i)
Other All
Name and Annual Restrict Option/ LTIP Other
Principal ($) ($) Compen- Stock SAR's Payouts Compensa-
Position Year Salary Bonus sation($) Awards($) (#) ($) tion($)
Douglas P. Morris 1996 $ -0- $ -0- $ -0- $ -0- -0- $25,000(1) $-0-
President 1995 $ -0- $ -0- $ -0- $ -0- -0- $ -0- $-0-
1994 $ -0- $ -0- $ -0- $ -0- -0- $ -0- $-0-
</TABLE>
(1) Mr. Morris was paid a fee of $25,000 as a management fee for services
rendered in 1996.
Subsequent to the time the Company completes an acquisition, it will enter
into new employment arrangements with the individuals who are then officers and
directors of the Company, the terms of which will be dictated by the nature of
the acquisition made. If the Millennium Acquisition is effected, it is
anticipated that the Company will pay its new president a salary of
approximately $250,000. Officers and directors are reimbursed for actual
out-of-pocket expenses incurred on behalf of the Company as approved by the
Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. Security Ownership of Certain Beneficial Owners. The following table
sets forth information regarding shares of the Company's common stock owned
beneficially as of December 21, 1996 by (i) each director of the Company, (ii)
all officers and directors as a group, and (iii) each person known by the
Company to beneficially own 5% or more of the outstanding shares of the
Company's common stock.
22
<PAGE>
Name Amount
and Address and Nature Percent
of Beneficial of Beneficial of Class
Owner Ownership
Douglas P. Morris (1)(2)(3) 224,574 19%
515 Red Cypress Road
Cary, IL 60013
President/Director
Thomas Richmond (1) (2)(4) 30,678 3%
27046 Mill Pond West
Capistrano Beach, CA 92624
Vice President/Director
James Monroe (1)(2)(4) 30,678 3%
1841 Schaeffer Road
Longrove, IL 60047
Secretary/Treasurer/Director
Howard Talks( 1)(2)(5) 224,574 19%
647 Island Drive
Palm Beach, FL 33480
All Officers and Directors 510,504 44%
as a Group (4 persons)
Total Shares Issued 1,160,458 100%
and Outstanding
Except as described below, all shares are held beneficially and of record
and each record stockholder has sole voting and investment power.
(1) These individuals are the officers and directors of the Company and may
be deemed "parents" or "promoters" of the Company as those terms are defined in
the Rules and Regulations promulgated under the Securities Act of 1933, as
amended.
(2) Does not include shares which may be issued to the company's officers
and directors upon the exercise of issued and outstanding options.
(3) These shares are owned of record by H&M Investment Capital, Inc. ("H &
M") an affiliate of Douglas P. Morris. H&M also owns warrants to purchase
120,000 shares of the Company's Common Stock which were issued as part of the
units sold in the Company's public offering. He also owns options to purchase
528,000 shares of the Company's Common Stock. Both the warrants and the options
are exercisable at $1.25 per share. If the Millennium Acquisition is effected,
the exercised price will be increased to $3.125 per share and the number of
shares issuable upon exercise of warrants and options will be reduced pursuant
to a reverse stock split. In addition, Mr. Morris has agreed to cancel one half
of the 528,000 options if the Millennium Acquisition is completed.
(4) Mr. Monroe and Mr. Richmond each own options to purchase 88,000 shares
of the Company's Common Stock at $1.25 per share. These options shares will be
reduced and the exercise price increased as the result of the reverse split as
part of the Millennium Acquisition. In addition, Mr. Monroe and Mr. Richmond
have agreed to cancel one half of the 88,000 options if the Millennium
Acquisition is completed.
(5) Mr. Talks and his wife, Carol Hall owned 172,574 of these shares as
joint tenants with rights of survivorship. The remaining 52,000 shares are owned
by Carol Hall. Mr. Talks and Carol Hall also own, as joint tenants with rights
of survivorship, options to purchase 528,000 shares of the Company's Common
Stock at $1.25 per share. If
23
<PAGE>
the Millennium Acquisition is completed, the number of shares which may be
purchased under the option and the exercised price thereof, will be reduced as a
result of the proposed reverse split. In addition, Mr. Talks has agreed to
cancel one half of the 528,000 options if the Millennium Acquisition is
completed.
B. Security Ownership of Management. See Item 11(a) above.
C. Changes in Control. The Company has entered into a Letter of Intent to
acquire Millennium. If the Millennium Acquisition is effected, of which there
can be no assurance, the all but one of the Company's current directors will
resign, the current management of Millennium will be appointed as management of
the Company, and the shareholders of Millennium will be issued shares of the
Company's common stock in exchange for their shares of Millennium common stock.
The number of shares of the Company's common stock to be issued to the
shareholders of Millennium will result in the Millennium Shareholders becoming
the controlling shareholders of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Issuance of Securities to Founders
The Company's directors were the founders of the Company and in connection
with the initial capitalization of the Company were issued the following
securities:
Purchase
Name Shares Price
Kenneth M. Rudolph 153,394 $5,000
Thomas Richmond 153,394 $5,000
James Monroe 153,395 $5,000
In addition to the shares of stock issued to the founders of the Company,
the Company granted each of its founders an option to purchase 440,000 shares of
the Company's common stock at a price of $1.25 per share.
Management Sale of Securities
On or about September 5, 1994, Kenneth M. Rudolph, James Monroe and Thomas
Richmond, all of whom are officers and directors of the Company, sold a majority
of their shares of the Company's common stock and options to Prime Ventures Ltd,
a Florida general partnership. The number of shares and options sold by each
were as follows:
Shares Options Shares Options
Seller Sold Sold Retained Retained
Kenneth M. Rudolph 122,716 352,000 30,679 88,000
James Monroe 122,716 352,000 30,678 88,000
Thomas Richmond 122,716 352,000 30,678 88,000
The purchase price paid to each of Mr. Rudolph, Mr. Monroe and Mr. Richmond
by Prime Ventures, Ltd. was $10,000. Prime Ventures, Ltd. subsequently assigned
these shares and options
24
<PAGE>
to H&M Capital Investments, Inc., an affiliate of Douglas P. Morris, and to
Howard Talks and Carol Hall, as joint tenants with rights of survivorship, who
were the partners of Prime Ventures. (See "Item 11- Security Ownership of
Certain Beneficial Owners and Management.")
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits.
3.1. Certificate of Incorporation - incorporated by reference to
Exhibit 3.1 to Registration Statement on Form S-18 (SEC File No.
33-45838-C).
3.2. Bylaws - incorporated by reference to Exhibit 3.2 to Registration
Statement on Form S-18 (SEC File No. 33-45838-C).
B. On September 19, 1996, the Company filed a Form 8-K to announce the
execution of a Letter Intent with Millennium Memory, Inc. relating to the
possible acquisition of Millennium by the Company.
25
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATED: December 26, 1995 BEACON CAPITAL INVESTMENT, INC.
By /s/ Douglas P. Morris
Douglas P. Morris
Principal Executive Officer
Principal Financial Officer
In accordance with the Securities Exchange Act, this report has been signed
by the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Douglas P. Morris President December 26, 1996
Douglas P. Morris and Director
/s/ Thomas Richmond Vice President December 26, 1996
Thomas Richmond and Director
/s/ James Monroe Secretary/Treasurer December 26, 1996
James Monroe Director
/s/ Howard D. Talks Director December 26, 1995
Howard D. Talks
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEACON
CAPITAL INVESTMENT, INC.'S SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000884321
<NAME> BEACON CAPITAL INVESTMENTS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1996
<PERIOD-END> OCT-01-1995
<CASH> 533,210
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 533,210
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 533,210
<CURRENT-LIABILITIES> 1,211
<BONDS> 0
0
0
<COMMON> 1160
<OTHER-SE> 530,839
<TOTAL-LIABILITY-AND-EQUITY> 533,210
<SALES> 0
<TOTAL-REVENUES> 12,158
<CGS> 0
<TOTAL-COSTS> 40,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,729
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,729)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (28,729)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
