FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year ended: December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number: 0-21025
AURORA ACQUISITIONS, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-1189368
- --------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
1050 Seventeenth Street
Suite 1700
Denver, Colorado 80265
----------------------------------------
(Address of principal executive offices)
Issuer's telephone number (303) 292-3883
Securities registeredunder Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value
-----------------------------
(Title of class)
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 issuer 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/A or any amendment to
this Form 10-KSB/A. X
-----
State issuer's revenue for its most recent fiscal year: $-0-
The aggregate market value of the issuer's voting stock held as of December 31,
1997, by nonaffiliates of the issuer was $-0-.
As of March 31, 1998, issuer had 3,060,000 shares of its $.01 par value common
stock outstanding.
Transitional Small Business Disclosure Format. Yes No X
----- -----
<PAGE>
TABLE OF CONTENTS
PART I PAGE
- ------ ----
Item 1. Description of Business 1
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity
and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis
or Plan of Operation 9
Item 7. Financial Statements 14
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
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 20
Financial Statements F-1 to F-10
SIGNATURES
<PAGE>
PART I
Item 1 - Description of Business
- --------------------------------
Aurora Acquisitions, Inc. (the "Company") was incorporated as "Auburn
Enterprises, Inc." under the laws of the State of Colorado on February 10, 1992
and changed its name to Aurora Acquisitions, Inc. on July 21, 1992. The Company
was organized as a "blank check/blind pool" company, i.e., one formed for the
purpose of creating a vehicle to obtain capital to take advantage of existing
business opportunities that may have potential for profit, including, but not
limited to, selected mergers and acquisitions. The Company has been in the
developmental stage since inception and has no operations to date. Since its
organization, the Company has had no revenues from operations or assets other
than cash from sales of shares of its Common Stock. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The Board of Directors
of the Company has elected to commence implementation of the Company's principal
business purpose, described below under "Item 6. Management's Discussion and
Analysis or Plan of Operation."
The proceeds from the initial sales of shares in the Company aggregated
only $18,550, substantially all of which has been expended. As of December 31,
1997, the Company's assets consisted of only cash, in the amount of $114. Also
as of December 31, 1997, the Company had an accumulated deficit of $60,211 and a
shareholders' deficit of $11,061. See the Financial Statements and the notes
thereto, included herewith. The Company faces all of the risks inherent in a new
business and those risks specifically inherent in the type of business in which
the Company proposes to engage, namely, the investigation and acquisition of
business opportunities. In addition, the Company will be limited in its efforts
and ability to acquire one or more business opportunities because it has no
funds. Although the Company has no plans to raise additional capital prior to
the potential acquisition of a business opportunity, it is possible that
management may determine that it is necessary to do so. There can be no
assurance that the Company will be able to successfully raise any additional
funds. The potential business opportunities of the Company have not been
selected, and the Board of Directors will have complete discretion in
investigating and selecting such opportunities. Therefore, shareholders must
rely upon management of the Company to a greater extent than may be the case in
other investments.
Since the organization of the Company, its activities have been limited to
the sale of initial shares in connection with its organization and the
preparation and filing, in 1992, of a registration statement (the "1992
Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). The purpose of the preparation and filing of the 1992
Registration Statement was to register for issuance and sale 100,000 units of
securities (the "Units"), each Unit consisting of one share of Common Stock, one
Class A Warrant to purchase a share of Common Stock, one Class B Warrant to
purchase a share of Common Stock and the shares of Common Stock underlying the
Class A Warrants and Class B Warrants. The proposed offering pursuant to the
1992 Registration Statement was anticipated to be a "blank check" offering, in
that neither the Company's business nor the use of proceeds from the proposed
offering was specified. The 1992 Registration Statement was abandoned by the
Company in December 1993, and none of the Units were issued or sold.
Accordingly, the Company was not able to raise from the public the capital it
had proposed to raise in order to implement its business plan.
Mr. David Gregarek was one of the initial shareholders and investors in the
Company. After the Company abandoned its offering as noted in the preceding
paragraph and former management had failed to take steps to execute the original
business plan, Mr. Gregarek indicated to Mr. Jay Boisdrenghien that he was
willing to undertake to register the Company under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), to attempt to find an appropriate
candidate for a "reverse acquisition," to obtain counsel to represent the
Company and to assemble a management team for the Company. Mr. Boisdrenghien, a
founder, promoter and principal shareholder of the Company, agreed to appoint
Mr. Gregarek to the Board of Directors and to bring Mr. Gregarek's proposal
1
<PAGE>
before the other members of the Board of Directors for their consideration. Mr.
Gregarek asked Schlueter & Associates, P.C. to serve as counsel to the Company
and to assist with the Company's registration under the Exchange Act, and with a
reverse acquisition if a suitable candidate were found and if satisfactory terms
could be negotiated with such a candidate. The former Board of Directors issued
additional shares of stock to Mr. Gregarek, Mr. Michael Delaney and the wife of
the Company's counsel. These shares were issued in exchange for cash, which was
used by the Company to pay for completion of the necessary audits for
registration under the Exchange Act, fees and expenses of counsel and other
expenses of the Company. As a result of these issuances and the purchase of
shares of Common Stock from several of the original shareholders of the Company,
control of the Company changed. The security ownership of the principal
shareholders of the Company and its officers and directors is set forth in Item
11 of this Form 10-KSB.
Any business combination or transaction will likely result in the issuance
of a significant number of additional shares and substantial dilution to present
stockholders of the Company. The issuance of such additional shares may be
accomplished by the direct action of the Company's Board of Directors without
obtaining shareholder approval.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. In order to comply with these various limitations, management
does not intend to undertake any efforts to sell any additional securities of
the Company or cause a market to develop in the Company's securities until such
time as the Company has successfully implemented its business plan described
herein. Relevant thereto, each shareholder of the Company has executed and
delivered a "lock-up" letter agreement, affirming that they shall not sell their
respective shares of the Company's common stock until such time as the Company
has successfully consummated a merger or acquisition and the Company is no
longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in the Company's securities until a merger
or acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with the Company's legal counsel, Schlueter &
Associates, P.C., Denver, Colorado, which will not release these respective
certificates until such time as legal counsel has confirmed that a merger or
acquisition has been successfully consummated. However, while management
believes that the procedures established to preclude any sale of the Company's
securities prior to closing of a merger or acquisition will be sufficient, there
can be no assurances that the procedures established will unequivocally limit
any shareholders' ability to sell their respective securities before such
closing.
The Company's business is subject to numerous risk factors, including the
following:
No Operating History or Revenue and Minimal Assets. The Company has had no
operating history nor any revenues or earnings from operations. The Company has
no significant assets or financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a profitable business
opportunity. There is no assurance that the Company can identify such a business
opportunity and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance that
the Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.
2
<PAGE>
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well financed
entities, including venture capital firms, are active in mergers and
acquisitions of companies which may be desirable target candidates for the
Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. Moreover, the Company will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction; No Standards
for Business Combination. The Company has no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with or
acquisition of, a private or public entity. There can be no assurance the
Company will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance the Company will be able to
negotiate a business combination on terms favorable to the Company. The Company
has not established a specific length of operating history or a specified level
of earnings, assets, net worth or other criteria which it will require a target
business opportunity to have achieved, and without which the Company would not
consider a business combination in any form with such business opportunity.
Accordingly, the Company may enter into a business combination with a business
opportunity having no significant operating history, losses, limited or no
potential for earnings, limited assets, negative net worth or other negative
characteristics.
Continued Management Control; Limited Time Availability. While seeking a
business combination, management anticipates devoting up to 20 hours per month
to the business of the Company. None of the Company's officers has entered into
a written employment agreement with the Company and none is expected to do so in
the foreseeable future. The Company has not obtained key man life insurance on
any of its officers or directors. Notwithstanding the combined limited
experience and time commitment of management, loss of the services of any of
these individuals would adversely affect development of the Company's business
and its likelihood of continuing operations. See Item 9, "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act."
Conflicts of Interest-General. Officers and directors of the Company may in
the future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
Reporting Requirements May Delay or Preclude Acquisition. Sections 13 and
l5(d) of the Exchange Act require companies subject thereto to provide certain
information about significant acquisitions, including certified financial
statements for the company acquired, covering one, two or three years, depending
on the relative size of the acquisition. The time and additional costs that may
be incurred by some target entities to prepare such statements may significantly
delay or essentially preclude consummation of an otherwise desirable acquisition
by the Company. Acquisition prospects that do not have or are unable to obtain
the required audited statements may not be appropriate for acquisition so long
as the reporting requirements of the Exchange Act are applicable.
3
<PAGE>
Lack of Market Research or Marketing Organization. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, the Company's activities
may be limited to those engaged in by business opportunities which the Company
merges with or acquires. The Company's inability to diversify its activities
into a number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
Regulation. Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940 insofar as the Company will not be
engaged in the business of investing or trading in securities. In the event the
Company engages in business combinations which result in the Company holding
passive investment interests in a number of entities, the Company could be
subject to regulation under the Investment Company Act of 1940. In such event,
the Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The Company has
obtained no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company to material
adverse consequences.
Probable Change in Control and Management. A business combination involving
the issuance of the Company's Common Stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's Common Stock held by them, or
resign as members of the Board of Directors of the Company. The resulting change
in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. Additional shares of
Common Stock may be issued by the Board of Directors without further action by
the Company's shareholders. The issuance of previously authorized and unissued
shares of Common Stock of the Company would result in a reduction in percentage
of shares owned by present and prospective shareholders of the Company and may
result in a change in control or management of the Company. Further, such
issuances could reduce the value of the outstanding Common Stock.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public trading
market for its shares. A business opportunity may attempt to avoid what it deems
to be adverse consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
be incurred in such an offering, loss of voting control to public shareholders
and the inability or unwillingness to comply with various federal and state laws
enacted for the protection of investors.
4
<PAGE>
Taxation. Federal and state tax consequences will, in all likelihood, be
minor considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A nonqualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential business
opportunity must provide audited financial statements for review, for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses associated with
preparing audited financial statements.
Possible Borrowings to Benefit Management, Promoters, or their Affiliates
or Associates. Although management of the Company has no present intention to do
so, the Company could borrow funds and use the proceeds therefrom to make
payments to the Company's promoters, management or their affiliates or
associates. Any such payments would constitute an additional benefit to such
persons that is not otherwise available to the other shareholders of the
Company.
The Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading or selling the securities of such business. However, the Company does
not intend to engage primarily in such activities. Specifically, the Company
intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore avoid application of the costly and restrictive
registration and other provisions of the Investment Act and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act provides the definition of an
"investment company," which includes an entity that engages or holds itself out
as being engaged primarily in the business of investing, reinvesting or trading
in securities, or that engages or proposes to engage in the business of
investing, reinvesting, owning, holding or trading "investment securities"
(defined as all securities other than government securities, securities of
majority-owned subsidiaries and certain other securities) the value of which
exceeds 40% of the value of its total assets (excluding government securities,
cash or cash items). The Company intends to implement its business plan in a
manner that will result in the availability of this exception from the
definition of "investment company." Consequently, the Company's participation in
a business or opportunity through the purchase and sale of investment securities
will be limited. In order to avoid classification as an investment company, the
Company will search for, analyze and acquire or participate in a business
opportunity by use of a method that does not involve the acquisition, ownership
or holding of investment securities.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, which regulation has the purported purpose of protecting
purchasers of investment company securities. Since the Company will not register
as an investment company, its shareholders will not be afforded these purported
protections.
5
<PAGE>
The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from application
of the Investment Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time consuming and costly, or even prohibitive, given the Company's
limited resources.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
Employees
The Company has no full time employees. The Company's officers have agreed
to allocate a portion of their time to the activities of the Company, without
compensation. These officers anticipate that the business plan of the Company
can be implemented by their devoting approximately 20 hours per month to the
business affairs of the Company and, consequently, conflicts of interest may
arise with respect to the limited time commitment by such officers. See Item 9,
"Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act."
Item 2 - Description of Property
- --------------------------------
The Company has no properties and at this time has no agreements to acquire
any properties. The Company intends to attempt to acquire assets or a business
in exchange for its securities which assets or business is determined to be
desirable.
Prior to January 1996, the Company operated from the offices of its former
president, A. Jay Boisdrenghien, on a rent free basis. From January 1996 until
June 1996, the Company's Secretary and Treasurer, Mr. David Gregarek, provided
the Company with office space in his home on a rent free basis. Commencing July
1, 1996, the Company began operating from the offices of its counsel, Schlueter
& Associates, P.C., at 1050 Seventeenth Street, Suite 1700, Denver, Colorado
80265. This space is provided to the Company on a rent free basis by Schlueter &
Associates, P.C., counsel to the Company, and it is anticipated that this
arrangement will remain until such time as the Company successfully consummates
a merger or acquisition. Management believes that this space will meet the
Company's needs for the foreseeable future.
Item 3 - Legal Proceedings
- --------------------------
The Company is not aware of any material pending litigation to which the
Company is or may be a party, nor is it aware of any pending or contemplated
proceedings against it by governmental authorities. The Company knows of no
legal proceedings pending or threatened, or judgments entered against, any
director or officer of the Company, or legal proceeding to which any director,
officer or security holder of the Company is a party adverse to, or has a
material interest adverse to, the Company.
6
<PAGE>
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted by the Company to a vote of the Company's
shareholders through the substitution of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5 - Market For Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities and management does not intend to initiate any such
discussions until such time as the Company has consummated a merger or
acquisition. There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
Market Price
The Company's Common Stock is not quoted at the present time.
Effective August 11, 1993, the Securities and Exchange Commission (the
"Commission") adopted Rule 15g-9, which established the definition of a "penny
stock," for purposes relevant to the Company, as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and (ii) that the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The NASDAQ Stock Market, which administers NASDAQ, has recently made
changes in the criteria for NASDAQ eligibility. In order to be included in
NASDAQ's SmallCap Market, a company must satisfy the requirements described
below. A company must meet one or more of the following three requirements: (i)
net tangible assets of $4 million ($2 million for continued inclusion); (ii)
have a market capitalization of $50 million ($35 million for continued
inclusion); or (iii) have net income (in the latest fiscal year or two of the
last three fiscal years) of $750,000 ($500,000 for continued inclusion). In
addition, a company must also satisfy the following requirements: (i) 1 million
shares in the public float (500,000 for continued inclusion); (ii) $5 million of
market value of the public float ($1 million for continued inclusion); (iii) a
minimum bid price of $4 ($1 for continued inclusion); (iv) three market makers
(two for continued inclusion); (v) 300 (round lot) shareholders; (vi) an
operating history of one year or market capitalization of $50 million; and (vii)
certain corporate governance standards.
7
<PAGE>
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities to be
traded without the aforesaid limitations. However, there can be no assurance
that, upon a successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Company's securities on a national
exchange. In such event, trading, if any, in the Company's securities may then
continue in the non-NASDAQ over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.
Holders
There are thirteen holders of the Company's Common Stock. All of the issued
and outstanding shares of the Company's Common Stock were issued in accordance
with the exemption from registration afforded by Section 4(2) of the Securities
Act.
As of the date of filing this report, 1,060,000 of the issued and
outstanding shares of the Company's Common Stock were eligible for sale under
Rule 144 promulgated under the Securities Act of 1933 (the "Securities Act"),
subject to certain limitations included in said Rule. However, the holders of
all of those shares have executed "lock-up" letter agreements, affirming that
they will not sell those shares prior to such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
classified as a "blank check" company. In general, under Rule 144, a person (or
persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three month period a
number of shares which does not exceed the greater of one percent of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company.
Dividends
The Company has not paid any dividends to date, and has no plans to do so
in the immediate future.
Recent Sales of Unregistered Securities
On March 27, 1998, the Company issued 1,000,000 shares of its $.01 par
value Common Stock to Mr. Henry F. Schlueter, the Company's legal counsel, as
payment in full of an outstanding indebtedness in the amount of $10,000 for
prior legal services rendered to the Company. On that same date, the Company
issued 1,000,000 shares of its $.01 par value Common Stock to Mr. David J.
Gregarek, the Secretary, Treasurer and a director of the Company, for consulting
services previously rendered to the Company. On January 6, 1996, the Company
issued and sold 500,000 shares of its $.01 par value Common Stock to Mr. David
J. Gregarek for a consideration of $5,000 in cash. On January 6, 1996, the
Company also issued and sold 250,000 shares of its $.01 par value Common Stock
to Ms. Sandra Schlueter, the wife of the Company's legal counsel, Henry F.
Schlueter, for a consideration of $2,500 in cash and 10,000 shares of its $.01
par value Common Stock to Mr. Michael J. Delaney, the President and a director
8
<PAGE>
of the Company, for a consideration of $100 in cash. On December 31, 1995, the
Company issued and sold 150,000 shares of its $.01 par value Common Stock to A.
Jay Boisdrenghien, a former director and officer of the Company, for $1,500 in
cash. No underwriter, broker or dealer, in its capacity as such, was involved in
any of the above sales of these unregistered securities, and no underwriting
discounts, commissions or brokerage fees were paid with respect to such
transactions.
The Company considers that the above transactions are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, (the "Securities Act") pursuant to the exemptions under Sections 4(2)
and 3(b) of the Securities Act as sales of securities not involving a public
offering. Management of the Company has represented that the persons who
purchased the securities in the foregoing transactions were either officers,
directors or organizers of the Company or persons who possessed material
information concerning the Company and were in a position to obtain from the
Company information necessary to verify such information. All such persons were
offered the opportunity to obtain information from the Company in order to
evaluate the merits and risks of the proposed investment. In addition, all such
persons were informed that they were obtaining "restricted securities" as
defined in Rule 144 under the Securities Act, that such shares cannot be
transferred without appropriate registration or exemption therefrom, that they
must bear the economic risk of the investment for an indefinite period of time
and that the Company would restrict the transfer of the securities in accordance
with such restrictions. In addition, each certificate representing shares
purchased in the above transactions bears the standard restrictive legend.
Item 6 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
Plan of Operation
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates has engaged in any
preliminary contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the Company and
such other company as of the date of this report.
If required to do so under relevant law, management of the Company will
seek shareholder approval of a proposed merger or acquisition via a proxy
statement. However, such approval would be assured where management supports
such a business transaction because management presently controls sufficient
shares of the Company to effectuate a positive vote on the proposed transaction.
Further, a proposed transaction may be structured so that shareholder approval
is not required, and such a transaction may be effectuated by the Board of
Directors without shareholder approval. Any disclosure which may be provided to
shareholders would include complete information regarding the potential business
opportunity and the structure of the proposed business combination as well as
audited financial statements of the target entity; however, there is no
assurance that such audited financial statements would be available. The Board
of Directors does intend to obtain certain assurances of value of the target
entity's assets prior to consummating such a transaction, with further
assurances that an audited statement would be provided within 60 days after
closing of such a transaction. Closing documents relative thereto will include
representations that the value of the assets conveyed to or otherwise
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable. Further, the Company
will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
The Company has no full time employees. The Company's officers have agreed
to allocate a portion of their time to the activities of the Company, without
compensation. These officers anticipate that the business plan of the Company
can be implemented by their devoting approximately 20 hours per month to the
business affairs of the Company and, consequently, conflicts of interest may
arise with respect to the limited time commitment by such officers. See Item 9,
"Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act - Resumes and Blank Check Experience."
9
<PAGE>
Two of the Company's officers and directors have been or are currently
involved with other "blank check" companies. See Item 9, "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act - Resumes and Blank Check Experience." The Company's officers and
directors may, in the future, become involved with other companies who have a
business purpose similar to that of the Company. As a result, additional
potential conflicts of interest may arise in the future. If such a conflict does
arise and an officer or director of the Company is presented with business
opportunities under circumstances where there may be a doubt as to whether the
opportunity should belong to the Company or another "blank check" company they
are affiliated with, they will disclose the opportunity to all such companies.
If a situation arises in which more than one company desires to merge with or
acquire that target company and the principals of the proposed target company
have no preference as to which company will merge with or acquire such target
company, then the Board of Directors has agreed that said opportunity should be
available to each such company in the order in which such companies registered
or became current in the filing of annual reports under the Exchange Act
subsequent to January 1, 1997. See Item 9, "Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
- - Conflicts of Interest."
The Articles of Incorporation of the Company provide that the Company shall
possess and may indemnify officers and/or directors of the Company for
liabilities, which can include liabilities arising under the securities laws.
Therefore, assets of the Company could be used or attached to satisfy any
liabilities subject to such indemnification.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. See the Financial
Statements included herewith. This lack of diversification should be considered
a substantial risk to shareholders of the Company because it will not permit the
Company to offset potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all shareholders and other factors.
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.
10
<PAGE>
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with acquisition of a business opportunity, including the costs of
preparing Form 8-K's, 10-QSB's or 10-KSB's, agreements and related reports and
documents. The Exchange Act specifically requires that any merger or acquisition
candidate comply with all applicable reporting requirements, which include
providing audited financial statements to be included within the numerous
filings relevant to complying with the Exchange Act. Nevertheless, the officers
and directors of the Company have not conducted market research and are not
aware of statistical data which would support the perceived benefits of a merger
or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition or acceptance of products, services or trades;
name identification; and other relevant factors. Officers and directors of the
Company expect to meet personally with management and key personnel of the
business opportunity as part of their investigation. To the extent possible, the
Company intends to utilize written reports and personal investigation to
evaluate the above factors. The Company will not acquire or merge with any
company for which audited financial statements cannot be obtained within a
reasonable period of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated that
any outside consultants or advisors will be utilized by the Company to
effectuate its business purposes described herein. However, if the Company does
retain such an outside consultant or advisor, any cash fee earned by such party
will need to be paid by the prospective merger/acquisition candidate, as the
Company has no cash assets with which to pay such obligation. With respect to
legal matters, each of the officers and directors has engaged Mr. Schlueter to
represent them as counsel in the past, and management expects to continue to
engage Mr. Schlueter as counsel to the Company. There have been no contracts or
agreements with any outside consultants and none are anticipated in the future.
The Company will not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation or in essentially any stage of its corporate life.
It is impossible to predict at this time the status of any business in which the
Company may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded or may seek other
perceived advantages which the Company may offer. However, the Company does not
intend to obtain funds in one or more private placements, any public offerings
or off-shore offerings under Regulation S adopted under the Securities Act to
finance the operation of any acquired business opportunity until such time as
the Company has successfully consummated such a merger or acquisition.
11
<PAGE>
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has no
capital with which to pay these anticipated expenses, present management of the
Company (i.e., Messrs. David Gregarek and Michael Delaney) and the Company's
counsel, Henry F. Schlueter, and his wife (collectively the "Lending Parties")
have advised that they will pay certain costs and expenses of the Company from
their personal funds as interest free loans. There has been no specific
agreement upon a dollar cap of any such loans by the Lending Parties. Further,
the Lending Parties recognize that the only opportunity to have these loans
repaid will be from a prospective merger or acquisition candidate. The Lending
Parties have agreed among themselves that the repayment of any loans made on
behalf of the Company will not impede, or be made conditional in any manner on,
consummation of a proposed transaction. If the prospective merger or acquisition
candidate has insufficient capital with which to repay any such loans or
advances, or does not want to use its capital to repay any such loans or
advances, the Lending Parties may be required to convert such loans or advances
into stock. The Lending Parties may under such circumstances agree to convert
any such advances or loans into stock in whole or in part rather than being
repaid by the acquisition candidate. Further, the Lending Parties may desire to
convert such advances or loans into stock even if the prospective merger or
acquisition candidate is willing to repay such loans or advances, in which case
the equity ownership of other shareholders would be diluted.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. It is management's present intention to make
all reasonable efforts to afford all shareholders of the Company the opportunity
to sell their shares upon similar terms and conditions of sale as are negotiated
by the officers and directors of the Company for the sale of their own shares.
Any and all such sales will only be made in compliance with the securities laws
of the United States and any applicable state securities laws.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has successfully consummated a merger or acquisition and the Company is no
longer considered a shell company. Until such time as this occurs, the Company
will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (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 would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
12
<PAGE>
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 references 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 the
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 merger or acquisition, negotiation with target company
management is expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's then shareholders. If required to do so under relevant law, management
of the Company will seek shareholder approval of a proposed merger or
acquisition via a proxy statement. However, such approval would be assured where
management supports such a business transaction because management presently
controls sufficient shares of the Company to effectuate a positive vote on the
proposed transaction. Further, a prospective transaction may be structured so
that shareholder approval is not required, and such a transaction may be
effectuated by the Board of Directors without shareholder approval.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants, will set forth remedies
on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the Exchange Act.
Included in these requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included in
its annual report on Form 10-K (or 10-KSB, as applicable). If such audited
financial statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the candidate to be acquired in the closing
documents, the closing documents will provide that the proposed transaction will
be voidable, at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse the Company for all costs associated with
the proposed transaction.
13
<PAGE>
Item 7 - Financial Statements
- -----------------------------
The audited financial statements of the Company, and related notes thereto,
as of December 31, 1997, and for the years ended December 31, 1996 and 1997,
accompanied by the independent auditors' report, are included herewith at pages
F-1 to F-10.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
- --------------------
On February 15, 1995, the Company engaged the accounting firm of Cordovano
and Company, P.C., Denver, Colorado, as its principal independent accountant to
audit the Company's financial statements in connection with the preparation and
filing of a registration statement on Form 10-SB. Effective March 27, 1998, the
Company dismissed Cordovano and Company, P.C. as its principal independent
accountant. The Company's financial statements for the fiscal year ended
December 31, 1996 were prepared assuming that the Company will continue as a
going concern. During the Company's last two fiscal years, there were not any
disagreements with Cordovano and Company, P.C. on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
On March 27, 1998, the Company engaged James E. Scheifley & Associates,
P.C., Denver, Colorado, as its new principal independent accountant to audit the
Company's financial statements. Neither the Company nor anyone on its behalf has
consulted James E. Scheifley & Associates, P.C. regarding the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements.
The change in accountants disclosed herein was approved by the Board of
Directors of the Company.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
- --------------------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Officers, Directors, Promoters and Parents
The officers and directors of the Company are as follows:
Tenure as Officer
Name Age Position(s) or Director
---- --- ----------- -----------
Michael J. Delaney 41 President January 6, 1996
and a Director to Present
David J. Gregarek 43 Secretary, Treasurer January 6, 1996
and a Director Present
Derrin R. Smith, Ph.D. 43 Director January 6, 1996
to Present
Messrs. Delaney, Gregarek, Smith and the Company's legal counsel, Henry F.
Schlueter, and his wife may be deemed to be "promoters" and "parents" of the
Company within the meaning of the Rules and Regulations promulgated under the
Securities Act.
14
<PAGE>
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected annually by the Board
of Directors and hold office until their successors are duly elected and
qualified. Each of the Company's officers and directors is employed and devotes
only such time as is available to the business of the Company. Further, there
are no family relationships between any director or executive officer and any
other director or executive officer.
Management is not aware of any person, other than the officers and/or
directors of the Company and its legal counsel, Henry F. Schlueter, whose
activities will be material to the affairs of the Company.
Resumes and Blank Check Experience
Michael J. Delaney has served as President and a director of the Company
since January 6, 1996. Since 1980, Mr. Delaney has been the owner and president
of MD Sales, a sales representative and consulting firm for various companies in
product development, sales and marketing. Mr. Delaney will devote only such time
as is available to the business of the Company. Since December 1997, Mr. Delaney
has been a controlling shareholder and sole officer and director of Boulder
Capital Opportunities II, Inc., a blank check company which is an Exchange Act
reporting company. Mr. Delaney also has served on the Boards of Directors of the
following blank check companies:
Maui Capital Corporation ("Maui") conducted its initial public offering in
May 1989 and raised gross proceeds of $250,000 through the sale of 50,000,000
units at $0.005 per unit, with each unit consisting of one share of common stock
and one warrant to purchase common stock. Mr. Delaney served as Vice President
and a director of Maui from May 1990 until his resignation in September 1995
when Maui, through a wholly owned subsidiary, merged with Charter Communications
International, Inc. In January 1996, Maui acquired 90% of the stock of Phoenix
DataNet, Inc. ("PDN"). In March 1996, Maui merged with Phoenix Data Systems,
Inc. ("Phoenix"), the former parent of PDN, and in conjunction with that merger,
Maui acquired the remaining 10% of the stock of PDN. In May 1996, Maui changed
its name to Charter Communications International, Inc. ("Charter") which
currently trades on the Nasdaq Bulletin Board under the symbol CHTD.
Parkway Capital Corporation ("Parkway") conducted its initial public
offering in February 1988 and raised gross proceeds of $200,000 through the sale
of 20,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and two warrants to purchase common stock. Mr. Delaney served as
secretary/treasurer and a director of Parkway for a very brief period in 1994.
In October 1994, Parkway was merged into QCS Corporation, which currently trades
on the Nasdaq Bulletin Board under the symbol QCSC.
David J. Gregarek has served as Secretary, Treasurer and a director of the
Company since January 6, 1996. Mr. Gregarek is President and a director of
Centennial Bankshares, an Exchange Act reporting company. Mr. Gregarek only
devotes such time as is available to the business of the Company. Mr. Gregarek
also has served on the Boards of Directors of the following blank check
companies:
Bellview Capital Corporation ("Bellview") conducted its initial public
offering in August 1986 and raised gross proceeds of $150,000 through the sale
of 15,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and one warrant to purchase common stock. On February 27, 1987,
Bellview acquired the assets of Associated Ancillary Service, Inc., and changed
its name to Medical Ancillary Services, Inc. Mr. Gregarek served as a director
of Medical Ancillary Services, Inc. until his resignation in August 1987.
Medical Ancillary Services, Inc. is not an Exchange Act reporting company.
15
<PAGE>
Clearview Capital Corporation ("Clearview") conducted its initial public
offering in June 1987 and raised gross proceeds of $200,000 through the sale of
20,000,000 units at $0.01 per unit, with each unit consisting of one share of
common stock and two warrants to purchase common stock. Effective January 19,
1988, Clearview merged with Arriba Fajita, Inc., the operator of four
restaurants in Austin, Texas, and changed its name to Arriba Fajita Holdings,
Inc. Mr. Gregarek resigned from the Board of Directors of Arriba Fajita
Holdings, Inc. in June 1988. Arriba Fajita Holdings, Inc. is not an Exchange Act
reporting company.
Ferrari Capital, Ltd. ("Ferrari") conducted its initial public offering in
1987 or early 1988 and raised gross proceeds of $125,000 through the sale of
12,500,000 units at $0.01 per unit, each unit consisting of one share of common
stock and one warrant to purchase common stock. Mr. Gregarek resigned from the
Board of Directors of Ferrari in 1989. Ferrari has been administratively
dissolved by the Colorado Secretary of State.
Parkway Capital Corporation ("Parkway") is described above in the resume of
Michael J. Delaney. Mr. Gregarek served as President and a director of Parkway
from inception until March 1994 when Mr. Gregarek sold 19,160,000 shares of
Parkway for a price of $0.001 per share, or $19,491, thereby effecting a change
in control of Parkway, and resigned from its Board of Directors.
Maui Capital Corporation ("Maui") is described above in the resume of
Michael J. Delaney. Mr. Gregarek served as President and a director of Maui from
inception until September 1995 when Maui, through a wholly owned subsidiary,
merged with Charter Communications International, Inc. and Mr. Gregarek resigned
from its Board of Directors.
JNS Marketing, Inc. ("JNS") conducted its initial public offering in July
1984 and raised gross proceeds of $283,320 through the sale of 283,320 units at
$1.00 per unit, with each unit consisting of one share of common stock and two
warrants to purchase common stock. From inception through the fiscal year ended
September 30, 1988, JNS was engaged in the business of searching for and
obtaining, on a buyout basis or a right to market basis, products to be sold to
the general public primarily through the television media. Since 1989, JNS has
not engaged in any business or had any revenues, and its sole activity has been
to seek to acquire assets of or an interest in a company or venture actively
engaged in a business generating revenues or having immediate prospects of
generating revenues. JNS is an Exchange Act reporting company.
Derrin R. Smith Ph.D. has served as a director of the Company since January
6, 1996. Dr. Smith has over 17 years of experience developing and directing
strategic high technology programs and enterprises. This background includes
domestic and international (Asia, South America and Middle East) activities for
both government and the private sector. For the last four years, Dr. Smith has
operated his own private company, DRS Sciences, Inc., which is engaged primarily
in providing consulting services in the design and development of computer
software and the integration of such software with the hardware platforms
utilized by his clients. Prior to commencing active operations of his own
company, Dr. Smith was employed by M.I.T.R.E. Corporation in various capacities.
Dr. Smith is currently providing consulting services to several companies. Dr.
Smith will devote only such time as is necessary to the business of the Company.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
16
<PAGE>
The officers and directors of the Company are now and may in the future
become shareholders, officers or directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. Accordingly, additional direct conflicts of interest
may arise in the future with respect to such individuals acting on behalf of the
Company or other entities. Moreover, additional conflicts of interest may arise
with respect to opportunities which come to the attention of such individuals in
the performance of their duties or otherwise. The Company does not currently
have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the Company's
proposed business operations. However, the Company's Articles of Incorporation
provide that all business opportunities within areas of interest determined from
time to time by the Board of Directors, as evidenced by resolutions appearing in
the Company's minutes, that come to the attention of any officer or director of
the Company must be promptly disclosed and made available to the Company. This
provision limits the fiduciary duties that the officers and directors might
otherwise have to offer a broad range of business opportunities to the Company.
If the Board of Directors rejects any opportunity presented to it, any officer
or director may then avail himself of that opportunity. These provisions of the
Articles of Incorporation do not apply to limit the right of any officer or
director to continue an activity or type of business existing prior to the time
of delineation of an area of interest.
The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities contemplated
by the Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, the Board of Directors has agreed
that said opportunity should be available to each such company in the order in
which such companies registered or became current in the filing of annual
reports under the Exchange Act subsequent to January 1, 1997. All directors may
still individually take advantage of opportunities if the Company should decline
to do so. Except as set forth above, the Company has not adopted any other
conflict of interest policy with respect to such transactions.
The Company's Board of Directors has adopted a policy that the Company will
not seek a merger with, or acquisition of, any entity in which management serve
as officers or directors or in which they or their family members own or hold a
controlling ownership interest. Although the Board of Directors could elect to
change this policy, the Board of Directors has no present intention to do so.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
Compliance with Section 16(a) of the Exchange Act
Messrs. Gregarek, Delaney and Smith and Mrs. Henry Schloeter, the holder of
more than 10% of the Company's outstanding shares of Common Stock as of December
31, 1996, failed to timely file Forms 3 and Forms 5 with the Securities and
Exchange Commission with respect to the fiscal year ended December 31, 1996 to
report their holdings as of the date of the Company's registration under the
Exchange Act.
Item 10 - Executive Compensation
- --------------------------------
None of the Company's officers and/or directors receive any compensation
for their respective services rendered to the Company, nor have they received
such compensation in the past. They all have agreed to act without compensation
until authorized by the Board of Directors, which is not expected to occur until
the Company has generated revenues from operations after consummation of a
merger or acquisition. As of the date of this report, the Company has no funds
available to pay directors. Further, none of the directors are accruing any
compensation pursuant to any agreement with the Company.
17
<PAGE>
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted Common Stock issued by the Company as part of
the terms of the proposed transaction or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of this report, but is expected to be comparable to
consideration normally paid in like transactions. No member of management of the
Company will receive any finder's fee, either directly or indirectly, as a
result of their respective efforts to implement the Company's business plan
outlined herein.
Except as described below under Item 12, "Certain Relationships and Related
Transactions," the Company paid no cash or non-cash compensation to any officer
or director during the fiscal years ended December 31, 1995, 1996 or 1997.
The Company has no retirement, pension, profit sharing, stock option or
insurance or medical reimbursement plans or programs covering its officers and
directors, and does not contemplate implementing any such plans at this time.
No advances have been made or are contemplated by the Company to any of its
officers or directors.
Item 11. - Security Ownership of Certain Beneficial Owners and Management
- -------------------------------------------------------------------------
The following table sets forth information as of March 31, 1998 with
respect to the ownership of the Company's Common Stock by all officers and
directors, individually, all officers and directors as a group and all
beneficial owners of more than 5% of the Company's Common Stock. Except as
otherwise indicated, the following shareholders have sole voting and investment
power with respect to the shares.
Percent
Name and address Number of of
of owner shares Class
-------- ------ -----
David J. Gregarek 1,570,208 51.3%
71 Spyglass Drive
Littleton, Colorado 80123
Derrin Smith 60,000 2.0%
3746 East Easter Circle S.
Littleton, Colorado 80122
Michael J. Delaney 10,000 0.3%
P.O. Box 890261
Temecula, CA 92589
Henry F. Schlueter(1) 1,280,208 41.8%
6711 S. Clayton Way
Littleton, CO 80122
All officers and directors 1,640,208 53.6%
as a group (three persons)
18
<PAGE>
- -----------------------
(1) Includes 280,208 shares held of record by Mr. Schlueter's wife, Sandra
Schlueter. Mr. Schlueter may be deemed to be the beneficial owner of these
shares.
There are no outstanding options, warrants or rights to purchase securities
from the Company, and the balance of the Company's shares are held by nine
persons.
Item 12 - Certain Relationships and Related Transactions
- --------------------------------------------------------
On March 27, 1998, the Company issued 1,000,000 shares of its $.01 par
value Common Stock to Mr. Henry F. Schlueter, the Company's legal counsel, as
payment in full of an outstanding indebtedness in the amount of $10,000 for
prior legal services rendered to the Company. On that same date, the Company
issued 1,000,000 shares of its $.01 par value Common Stock to Mr. David J.
Gregarek, the Secretary, Treasurer and a director of the Company, for consulting
services rendered to the Company. On January 6, 1996, the Company issued and
sold 510,000 shares of its $.01 par value Common Stock to two officers and
directors of the Company in exchange for $5,100. In addition, the Company issued
250,000 shares of its $.01 par value Common Stock to the wife of the Company's
legal counsel in exchange for $2,500 in cash. During the six months ended June
30, 1996, the Company paid A. Jay Boisdrenghien, the Company's former president,
$3,000 for consulting services rendered to the Company. In addition, the Company
paid the law firm of Schlueter & Associates, P.C. a retainer of $2,000. During
the period ended December 31, 1995, the Company's former president, A. Jay
Boisdrenghien, paid an expense for the Company totaling $1,500 in consideration
for the issuance of 150,000 shares of its $.01 par value Common Stock. See Item
5, "Market For Common Equity and Related Stockholder Matters - Recent Sales of
Unregistered Securities." During 1996, a principal shareholder of the Company
paid an expense of the Company in the amount of $1,500, which has been reflected
as a contribution to capital in the Company's financial statements.
From March 1992 until January 1993, the Company had a lease arrangement
with its former president, A. Jay Boisdrenghien, providing for the rental of a
portion of his business office as a temporary office for the Company, for
$300.00 per month. During the year ended December 31, 1993, the president
forgave $2,417 due to him by the Company for rental payments and other related
expenses. The Company has no outstanding obligations under this lease. This
lease cannot be considered the result of arms' length negotiations. However,
management of the Company believes that the rent for its office and facilities
was no higher than that which the Company would have been required to pay to
unaffiliated parties for comparable facilities in the same locale. The Company
is currently receiving office space and clerical services on a rent-free basis
from its counsel, Schlueter & Associates, P.C. The Company does not anticipate
changing this arrangement until the Company is able to conclude a merger or
acquisition
During 1992, the Company paid $5,000 to a shareholder as compensation for
services provided in organizational and fund-raising activities.
Except as otherwise disclosed herein, there have been no related party
transactions, or any other transactions or relationships required to be
disclosed pursuant to Item 404 of Regulation S-B.
19
<PAGE>
Item 13 - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits.
The following exhibit is being filed as a part of this Annual Report.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K with respect to the fourth
quarter of the fiscal year ended December 31, 1997.
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Aurora Acquisitions, Inc.
We have audited the accompanying balance sheet of Aurora Acquisitions, Inc. (a
development stage company) as of December 31, 1997, and the related statements
of operations, stockholders' equity, and cash flows for the year then ended.
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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Aurora Acquisitions, Inc. (a
development stage company) as of December 31, 1997 and the results of its
operations, and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from operations
which raise substantial doubts about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
April 14, 1998
F-1
<PAGE>
Aurora Acquisitions, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1997
ASSETS
------
1997
--------
Current assets:
Cash $ 114
--------
Total current assets 114
Organization costs, net of $1,000 amortization --
--------
$ 114
========
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Accounts payable $ 3,255
Accrued expenses 7,920
--------
11,175
Commitments and contingencies, Note 7
Stockholders' deficit
Preferred stock,$1.00 par value
100,000 shares authorized --
Common stock, $.01 par value,
10,000,000 shares authorized,
1,060,000 shares issued and outstanding 10,600
Additional paid-in capital 18,550
Common stock subscriptions 20,000
(Deficit) accumulated during
development stage (60,211)
--------
(11,061)
--------
$ 114
========
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Aurora Acquisitions, Inc.
(A Development Stage Company)
Statement of Operations
For the Years Ended December 31, 1997 and 1996
And for the Period From Inception (February 10, 1992) to December 31, 1997
Period From
Inception To
December 31, December 31, December 31,
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Operating expenses $ 17 $ 7,627 $ 20,768
Operating expenses - related party 27,248 3,000 35,248
------------ ------------ ------------
Net loss from operations (27,265) (10,627) (56,016)
Other income and (expense):
Interest expense -- -- (1,846)
Costs of failed stock offering -- -- (13,139)
------------ ------------ ------------
Net loss before income taxes (27,265) (10,627) (71,001)
Provision for income taxes -- -- 3,670
------------ ------------ ------------
Net loss before extraordinary item (27,265) (10,627) (67,331)
Extraordinary item:
Gain from extinguishment of
debt net of income
taxes of $3,670 -- -- 7,120
------------ ------------ ------------
Net (loss) $ (27,265) $ (10,627) $ (60,211)
============ ============ ============
Per share information:
Basic (loss) per common share $ (0.03) $ (0.01) $ (0.06)
============ ============ ============
Weighted average shares outstanding 1,060,000 1,060,000 1,060,000
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
Aurora Acquisitions, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Deficit
For the Years Ended December 31, 1997 and 1996
And for the Period From Inception (February 10, 1992) to December 31, 1997
(Amounts shown for periods prior to December 31, 1994 are unaudited)
Deficit
Accumulated
Common Stock Additional Common During
-------------------- Paid-in Stock Development
ACTIVITY Shares Amount Capital Subscriptions Stage Total
------ ------ ------- ------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Shares issued to officers
and directors
for cash at inception,
$.10 per share 104,064 $ 1,041 $ -- $ -- $ -- $ 1,041
Shares issued for cash
February 14, 1992, $.38
per share 45,936 459 17,050 -- -- 17,509
Net (loss) for the period
February 10, 1992
to December 31, 1992 -- -- -- -- (22,759) (22,759)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1992 150,000 1,500 17,050 -- (22,759) (4,209)
Net (loss) for the year -- -- -- -- (1,704) (1,704)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1993 150,000 1,500 17,050 -- (24,463) (5,913)
Net income for the year -- -- -- -- 3,432 3,432
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1994 150,000 1,500 17,050 -- (21,031) (2,481)
Shares issued to officer
and director
for cash December 31,
1995, $.10 per share 150,000 1,500 -- -- -- 1,500
Net (loss) for the year -- -- -- -- (1,288) (1,288)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1995 300,000 3,000 17,050 -- (22,319) (2,269)
Shares issued to officer
and director
for cash January 6, 1996,
$.10 per share 760,000 7,600 -- -- -- 7,600
Capital contribution,
July 1, 1996 -- -- 1,500 -- -- 1,500
Net (loss) for the year -- -- -- -- (10,627) (10,627)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1996 1,060,000 10,600 18,550 -- (32,946) (3,796)
Debt conversion,
September 30, 1997 -- -- -- 20,000 -- 20,000
Net (loss) for the year -- -- -- -- (27,265) (27,265)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1997 1,060,000 $ 10,600 $ 18,550 $ 20,000 $ (60,211) $ (11,061)
========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Aurora Acquisitions, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Years Ended December 31, 1997 and 1996
And for the Period From Inception (February 10, 1992) to December 31, 1997
Period From
Inception To
December 31, December 31, December 31,
1997 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(27,265) $(10,627) $(60,211)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Services provided for stock subscriptions 20,000 -- 20,000
Amortization 17 200 1,000
Changes in assets and liabilities:
Increase (decrease) in accounts
payable and accrued expenses 7,248 1,427 11,175
-------- -------- --------
Total adjustments 27,265 1,627 32,175
Net cash (used in)
operating activities -- (9,000) (28,036)
Cash flows from investing activities:
Orginization costs incurred -- -- (1,000)
-------- -------- --------
Net cash (used in) investing activities -- -- (1,000)
Cash flows from financing activities:
Proceeds from sale of common stock -- 7,600 27,650
Capital contribution -- 1,500 1,500
-------- -------- --------
Net cash (used in) investing activities -- 9,100 29,150
Increase (decrease) in cash -- 100 114
Cash and cash equivalents,
beginning of period 114 14 --
-------- -------- --------
Cash and cash equivalents,
end of period $ 114 $ 114 $ 114
======== ======== ========
See accompanying notes to financial statements.
</TABLE>
F-5
<PAGE>
AURORA ACQUISITIONS INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997
Note 1. Organization and Summary of Significant Accounting Policies
Aurora Acquisitions, Inc.(the Company) was incorporated in Colorado on February
10, 1992, for the purpose of obtaining capital to take advantage of business
opportunities which have potential for profit. The Company is currently a
development stage enterprise as defined in Statement No. 7 of the Financial
Accounting Standards Board. Since inception, the Company has been engaged
primarily in organizational and fund raising activities.
Summary of Significant Accounting Policies
Cash Equivalents
For financial accounting purposes and the statement of cash flows, equivalents
include all highly liquid debt instruments with original maturities of three
months or less.
Organization Costs
Organization costs have been capitalized and are being amortized over five years
using the straight-line method beginning in February 1992.
Net Income (loss) Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the
existing computational guidelines under Accounting Principles Board ("APB")
Opinion No. 15, "Earnings Per Share."
The statement is effective for financial statements issued for periods ending
after December 15, 1997. Among other changes, SFAS No. 128 eliminates the
presentation of primary earnings per share and replaces it with basic earnings
per share for which common stock equivalents are not considered in the
computation. It also revises the computation of diluted earnings per share. The
Company has adopted SFAS No. 128 and there is no material impact to the
Company's earnings per share, financial condition, or results of operations. The
Company's earnings per share have been restated for all periods presented to be
consistent with SFAS No. 128.
F-6
<PAGE>
The basic loss per share is computed by dividing the net loss for the period by
the weighted average number of common shares outstanding for the period. Common
stock equivalents are excluded from the computation as their effect would be
anti-dilutive. Loss per share is unchanged on a diluted basis.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements.
Deferred tax amounts are determined by using the tax rates expected to be in
effect when the taxes will actually be paid or refunds received, as provided
under currently enacted law. Valuation allowance are established when necessary
to reduce the deferred tax assets to the amounts expected to be realized. Income
tax expense or benefits is the tax payable or refundable, respectively, for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Recent Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all
items that are to be recognized under accounting standards as components of
comprehensive income to be reported in the financial statements. The statement
is effective for all periods beginning after December 15, 1997 and
reclassification of financial statements for earlier periods will be required
for comparative purposes. To date, the Company has not engaged in transactions
which would result in any significant difference between its reported net loss
and comprehensive net loss as defined in the statement.
NOTE 2: Related Party Transactions
The Company utilized office space on a rent-free basis form its president until
January 1996. From January 1996 until June 1996 the Company's
Secretary/Treasurer provided the Company office space in his home on a rent-free
basis. Since July 1, 1996, the Company's counsel has provided the Company with
office space on a rent-free basis. It is not anticipated that this arrangement
will change until the Company successfully concludes a merger or acquisition.
F-7
<PAGE>
During the year ended December 31, 1996, a principal shareholder paid an expense
for the Company totaling $1,500.00. The $1,500.00 capital contribution is
reflected in the accompanying financial statements as additional paid-in
capital.
During 1996, the Company paid $3,000 to a shareholder for consulting services.
The $3,000 is included in the accompanying financial statements under general
and administrative expenses, related party.
The Company's Board of Directors passed a resolution on March 9, 1992, in which
the Company would lease office space and clerical services from the President of
the Company at a cost of $300 per month from February 1992 through January 1993.
During the year ended December 31, 1993, the president forgave $2,417 due to him
by the Company for rental payments and other related expenses. This arrangement
terminated in January 1996. The Company is currently receiving office space and
clerical services on a rent-free basis form its counsel. The Company does not
anticipate changing this arrangement until the Company is able to conclude a
merger or acquisition.
During 1992, the Company paid $5,000 to a shareholder as compensation for
services provided in organizational and fund raising activities. The $5,000 is
included in the accompanying financial statements under general and
administrative expenses, related party.
During 1997, the Company incurred an aggregate of $17,246 for legal services
provided by a principal shareholder and $10,000 for consulting services provided
by its secretary/treasurer. The balances due these individuals at December 31,
1997 amounted to $17,246 and $10,000, respectively. Subsequent to December 31,
1997, these individuals agreed to convert $10,000 each of their debt due from
the Company to common stock at $.01 per share. The Company has reclassified the
indebtedness converted as subscriptions to common stock at December 31, 1997.
Note 3: Income taxes:
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classifications of the assets and liabilities to which they
relate.
F-8
<PAGE>
Deferred taxes arising from temporary differences that are not related to an
asset or liability are classified as current or non-current depending on the
periods in which the temporary differences are expected to reverse. The deferred
tax asset related to the operating loss carryforward has been fully reserved.
The Company has not provided current or deferred income taxes for the period
presented due to a loss from operations.
The Company currently has a net operating loss carryforward aggregating
approximately $60,000 which will expire in years through 2012. The tax benefit
of the loss, estimated to be approximately $20,000, has been fully reserved as
its realization in future periods is not assured.
Note 4: Shareholders' Deficit
Preferred Stock
The Company is authorized to issue 100,00 shares of $1.00 par value preferred
stock. Preferred stock shareholders receive no cumulative voting or preemptive
rights. No preferred stock had been issued at December 31, 1997.
Common Stock
The Company is authorized to issue 10,000,000 shares of $0.01 par value common
stock. Common stock shareholders receive one vote for each outstanding share but
receive no cumulative voting or preemptive rights.
Note 5: Forgiveness of Debt
In addition to the $2,417 forgiven by the president (see Note 3), during the
year ended December 31, 1993, $3,165 was forgiven for legal expenses by the
attorneys for the Company. Certain payment to the attorneys by the Company was
contingent on the success of the Company's public stock offering.
During the year ended December 31, 1994, the former accountants of the Company
signed a note agreeing to accept $2,500 as full payment for their services. The
note reduced the amount owed by the Company by $5,208, $3,362 for accounting
services and $1,846 in accrued interest on the debt. The $5,208 is included in
the accompanying financial statements as gain on forgiveness of debt.
F-9
<PAGE>
Note 6: Change of Control
If the Company is successful in its efforts to merge with or acquire an existing
privately held company, the majority of the controls of the Company may rest
with the former shareholders of the merged or acquired company. Therefore,
significant changes may be made to the present slate of officers and directors
of the Company.
Note 7: Basis of Presentation
As of December 31, 1997, the Company had continuing losses from operations and a
deficit in working capital. Management is evaluating a plan to raise working
capital and search for and consummate a merger with or acquisition of, a private
company. There is no assurance that a suitable candidate will be found.
Various shareholders inject cash into the Company, as needed, to pay for
operating expenses. Management plans to continue this arrangement until such
time as a merger or acquisition, if ever, is consummated.
F-10
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AURORA ACQUISITIONS, INC.
Date: June 8, 1998 By: /s/ Michael J. Delaney
----------------------- --------------------------------------
Michael J. Delaney, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: June 8, 1998 By: /s/ Michael J. Delaney
------------------------ --------------------------------------
Michael J. Delaney, President
Date: June 8, 1998 By: /s/ David J. Gregarek
------------------------ --------------------------------------
David J. Gregarek, Secretary,
Treasurer, and a Director
Date: June 8, 1998 By: /s/ Derrin R. Smith
------------------------ --------------------------------------
Derrin R. Smith, Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing Page No.
- ---------- -------------------------------- --------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 114
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 114
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114
<CURRENT-LIABILITIES> 11,175
<BONDS> 0
0
0
<COMMON> 10,600
<OTHER-SE> (21,661)
<TOTAL-LIABILITY-AND-EQUITY> 114
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 27,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (27,265)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,265)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,265)
<EPS-PRIMARY> .003
<EPS-DILUTED> 0
</TABLE>
