U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
Amendment No. 2
File No.:0114873
CIK: 0000927131
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1384961
State or other jurisdiction of IRS Employer ID Number
incorporation or organization
10200 W. 44th Ave., Suite #400, Wheat Ridge, CO 80033
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 422-8127
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
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TABLE OF CONTENTS
PART I
Page
Item 1. Business........................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................21
Item 3. Properties.....................................................22
Item 4. Security Ownership of Certain Beneficial Owners and Management.23
Item 5. Directors and Executive Officers of the Registrant.............23
Item 6. Executive Compensation.........................................28
Item 7. Certain Relationships and Related Transactions.................29
Item 8. Description of Securities......................................30
PART II
Item 1. Market for Registrant's Common Stock and Security
Holder Matters.................................................31
Item 2. Legal Proceedings..............................................31
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...........................................31
Item 4. Recent Sales of Unregistered Securities........................31
Item 5. Indemnification of Directors and Officers......................34
PART F/S
Financial Statements and Supplementary Data..................................F-1
Signature Page................................................................35
Exhibits, Financial Statement Schedule and Reports on Form 8-K................49
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PART I
Item 1. Description of Business.
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General
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The Company was incorporated under the laws of the State of Colorado on December
2, 1993, and is in the early developmental and promotional stages. To date the
Company's activities have been organizational ones, directed at developing its
business plan and raising its initial capital. From the period of 1994 through
1996, the company had minimal revenues from consulting services as to methods of
obtaining financing debt and equity for client businesses in the start-up stage.
It prepared a Registration Statement for a public offering under the Securities
Act of 1933 but never made it effective and it was withdrawn in 1995. The
company has ceased, in 1997, all consulting activities. The company has no
commercial operations as of date hereof. The company has no full-time employees
and owns no real estate.
The Company is a "shell" company and its only current business plan is
to seek, investigate, and, if warranted, acquire one or more properties or
businesses, and to pursue other related activities intended to enhance
shareholder value. The acquisition of a business opportunity may be made by
purchase, merger, exchange of stock, or otherwise, and may encompass assets or a
business entity, such as a corporation, joint venture, or partnership. The
Company has no capital, and it is unlikely that the Company will be able to take
advantage of more than one such business opportunity. The Company intends to
seek opportunities demonstrating the potential of long-term growth as opposed to
short-term earnings.
At the present time the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any agreement
or definitive understanding with any person concerning an acquisition. The
Company is filing Form 10-SB on a voluntary basis in order to become a 12(g)
registered company under the Securities Exchange Act of 1934. As a "reporting
company," the Company may be more attractive to a private acquisition target
because it may be listed to trade its shares on the OTCBB.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
in corporate finance matters to
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advise them of the Company's existence and to determine if any companies or
businesses they represent have an interest in considering a merger or
acquisition with the Company. No assurance can be given that the Company will be
successful in finding or acquiring a desirable business opportunity, given that
no funds that are available for acquisitions, or that any acquisition that
occurs will be on terms that are favorable to the Company or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity which
has an interest in being acquired by, or merging into the Company, is expected
to be an entity that desires to become a public company and establish a public
trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is very
likely to result in substantial gains to them relative to their purchase price
for such stock. In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of the Section 2(11) of
the Securities Act of 1933, as amended. The sale of a controlling interest by
certain principal shareholders of the Company could occur at a time when the
other shareholders of the Company remain subject to restrictions on the transfer
of their shares.
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Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officer and director, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Colorado law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
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2. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
- -----------------------------------------------------
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the company will derive from becoming a publicly held entity, and numerous other
factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is anticipated that
the historical operations of a specific business opportunity may not necessarily
be indicative of the potential for the future because of the possible need to
shift marketing approaches substantially, expand significantly, change product
emphasis, change or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
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It is emphasized that management of the Company may effect transactions having a
potentially adverse impact upon the Company's shareholders pursuant to the
authority and discretion of the Company's management to complete acquisitions
without submitting any proposal to the stockholders for their consideration.
Holders of the Company's securities should not anticipate that the Company
necessarily will furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target company or
its business. In some instances, however, the proposed participation in a
business opportunity may be submitted to the stockholders for their
consideration, either voluntarily by such directors to seek the stockholders'
advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, no policies
have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be paid.
However, because of the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition of
the business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company -
Regulation of Penny Stocks."
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4. Capital requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management prospects that
are scheduled for recruitment;
8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would qualify
for listing on NASDAQ, the current standards include the requirements that the
issuer of the securities that are sought to be listed have total assets of at
least $4,000,000 and total capital and surplus of at least $2,000,000. Many, and
perhaps most, of the business opportunities that might be potential candidates
for a combination with the Company would not satisfy the NASDAQ listing
criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
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The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may 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.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors - - Regulation
of Penny Stocks."
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Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing
whatsoever relating to any business opportunities.
Form of Acquisition
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It is impossible to predict the manner in which the Company may
participate in a business opportunity. Specific business opportunities will be
reviewed as well as the respective needs and desires of the Company and the
promoters of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure or
method deemed by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements, licenses,
joint ventures and other contractual arrangements. The Company may act directly
or indirectly through an interest in a partnership, corporation or other form of
organization. Implementing such structure may require the merger, consolidation
or reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other securities of
the Company. Although the terms of any such
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transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisition is a
so-called "tax free" reorganization under the Internal Revenue Code of 1986,
depends upon the issuance to the stockholders of the acquired company of a
controlling interest (i.e. 80% or more) of the common stock of the combined
entities immediately following the reorganization. If a transaction were
structured to take advantage of these provisions rather than other "tax free"
provisions provided under the Internal Revenue Code, the Company's current
stockholders would retain in the aggregate 20% or less of the total issued and
outstanding shares. This could result in substantial additional dilution in the
equity of those who were stockholders of the Company prior to such
reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
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the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Moreover, because many providers of goods and services
require compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate future time
may make it impossible to procure goods and services.
In all probability, upon completion of an acquisition or merger, there
will be a change in control through issuance of substantially more shares of
common stock. Further, in conjunction with an acquisition or merger, it is
likely that management may offer to sell a controlling interest at a price not
relative to or reflective of any value of the shares sold by management, and at
a price which could not be achieved by individual shareholders at the time.
Investment Company Act and Other Regulation
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The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, 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 to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
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Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") 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 which
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.
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, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its
Common Stock are expected to be "restricted securities" within the meaning of
the Securities Act of 1933, as amended (the "Act"). If the Company elects to
resell such securities, such sale cannot proceed unless a registration statement
has been declared effective by the Securities and Exchange Commission or an
exemption from registration is available. Section 4(1) of the Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company may be in an industry which is
regulated or licensed by federal, state or local authorities. Compliance with
such regulations can be expected to be a time-consuming and expensive process.
Competition
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The Company expects to encounter substantial competition in its efforts
to locate attractive opportunities, primarily from business development
companies, venture capital partnerships and corporations, venture capital
affiliates of large industrial and financial companies, small investment
companies, and wealthy individuals. Many of these entities will have
significantly greater experience, resources and managerial capabilities than the
Company and will therefore be in a better position than the Company to obtain
access to attractive business opportunities. The Company also will possibly
experience competition from other public "blank check" companies, some of which
may have more funds available than does the Company.
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No Rights of Dissenting Shareholders
- ------------------------------------
The Company does not intend to provide Company shareholders with
complete disclosure documentation including audited financial statements,
concerning a possible target company prior to acquisition, because Colorado
Business Corporation Act vests authority in the Board of Directors to decide and
approve matters involving acquisitions within certain restrictions. Any
transaction would be structured as an acquisition, not a merger, with the
Registrant being the parent company and the acquiree being merged into a wholly
owned subsidiary. Therefore, a shareholder will have no right of dissent under
Colorado law.
No Target Candidates for Acquisition
- ------------------------------------
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
Administrative Offices
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The Company currently maintains a mailing address at
10200 W. 44th Avenue, Suite 400, Wheat Ridge, Colorado 80033 which is the office
address of its legal counsel, Michael A. Littman. The Company's telephone number
is (303) 422-8127. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate the need
for maintaining office facilities at any time in the foreseeable future. The
Company pays no rent or other fees for the use of this mailing address. Legal
counsel will not be involved in any day to day activities but will handle
securities related and corporate matters for the Company, so long as he is
engaged to do so.
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Employees
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The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. There is no current plan under which, remuneration may be paid to
or accrued for the benefit of, the Company's officers prior to, or in
conjunction with, the completion of a business acquisition for services actually
rendered, and the company has adopted a resolution and policy which precludes
payment of any compensation or finder's fees to officers or directors. See
"Executive Compensation" and under "Certain Relationships and Related
Transactions."
Risk Factors
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1. Conflicts of Interest. Certain conflicts of interest may exist between the
Company and its officers and directors. They have other business interests to
which they devote their attention, and may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
2. Need For Additional Financing. The Company has very limited funds, and such
funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to
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raise additional capital. The Company has not investigated the availability,
source, or terms that might govern the acquisition of additional capital and
will not do so until it determines a need for additional financing. If
additional capital is needed, there is no assurance that funds will be available
from any source or, if available, that they can be obtained on terms acceptable
to the Company. If not available, the Company's operations will be limited to
those that can be financed with its modest capital.
3. Regulation of Penny Stocks. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number
of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales
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tactics and unrealistic price projections by inexperienced sales persons; (iv)
excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and (v) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. The Company's management is aware of the abuses that
have occurred historically in the penny stock market. Although the Company does
not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being
established with respect to the Company's securities.
4.Lack of Operating History. The Company was formed in December, 1993 for the
purpose of registering a common stock offering under the 1933 Act and engaging
in consulting services for clients as to methods to obtain debt or equity
financing for start-up companies. Although some minimal revenues were achieved
in the period 1994 - 1996, such were not significant, the Company was not
profitable and the business effort was terminated. Due to the special risks
inherent in the investigation, acquisition, or involvement in a new business
opportunity, The Company must be regarded as a new or start-up venture with
all of the unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
5. No Assurance of Success or Profitability. There is no assurance that the
Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
Common Stock will be increased thereby.
6. Possible Business - Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity and therefore can disclose the risks and hazards of a business or
opportunity that it may enter into in only a general manner, and cannot disclose
the risks and hazards of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite risky.
The Company's acquisition of or participation in a business opportunity will
likely be highly illiquid and could result in a total loss to the Company and
its stockholders if the business or opportunity proves to be unsuccessful. See
Item 1 "Description of Business."
<PAGE>
7. Type of Business Acquired. The type of business to be acquired may be one
that desires to avoid effecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's limited capital, it is more
likely than not that any acquisition by the Company will involve other parties
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
8. Impracticability of Exhaustive Investigation. The Company's limited funds and
the lack of full-time management will likely make it impracticable to conduct a
complete and exhaustive investigation and analysis of a business opportunity
before the Company commits its capital or other resources thereto. Management
decisions, therefore, will likely be made without detailed feasibility studies,
independent analysis, market surveys and the like which, if the Company had more
funds available to it, would be desirable. The Company will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor, or others associated with the business opportunity seeking the
Company's participation. A significant portion of the Company's available funds
may be expended for investigative expenses and other expenses related to
preliminary aspects of completing an acquisition transaction, whether or not any
business opportunity investigated is eventually acquired.
9. Lack of Diversification. Because of the limited financial resources that the
Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
10. Reliance upon Financial Statements. The Company generally will require
audited financial statements from companies that it proposes to acquire. Given
cases where audited financials are not available, the Company will have to rely
upon interim period unaudited information received from target companies'
management that has not been verified by outside auditors. The lack of the
type of independent verification which audited financial statements would
provide, increases the risk that the Company, in evaluating an acquisition with
such a target company, will not have the benefit of full and accurate
information about the financial condition and recent interim operating history
of the target company. This risk increases the prospect that the acquisition
of such a company might prove to be an unfavorable one for the Company or the
holders of the Company's securities.
Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
will be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.
11. Other Regulation. An acquisition made by the Company may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
<PAGE>
12. Dependence upon Management; Limited Participation of Management. The Company
currently has only two individuals who are serving as its officers and directors
on a part time basis. The Company will be heavily dependent upon their skills,
talents, and abilities to implement its business plan, and may, from time to
time, find that the inability of the officers and directors to devote their full
time attention to the business of the Company results in a delay in progress
toward implementing its business plan. See "Management." Because investors will
not be able to evaluate the merits of possible business acquisitions by the
Company, they should critically assess the information concerning the Company's
officers and directors.
13. Lack of Continuity in Management. The Company does not have an employment
agreement with its officers and directors, and as a result, there is no
assurance they will continue to manage the Company in the future. In connection
with acquisition of a business opportunity, it is likely the current officers
and directors of the Company may resign subject to compliance with Section 14f
of the Securities Exchange Act of 1934. A decision to resign will be based upon
the identity of the business opportunity and the nature of the transaction, and
is likely to occur without the vote or consent of the stockholders of the
Company.
14. Indemnification of Officers and Directors. Colorado Revised Statutes provide
for the indemnification of its directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
15. Director's Liability Limited. Colorado Revised Statutes exclude personal
liability of its directors to the Company and its stockholders for monetary
damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action against
its directors than otherwise would be the case. This provision does not affect
the liability of any director under federal or applicable state securities laws.
<PAGE>
16. Dependence upon Outside Advisors. To supplement the business experience of
its officers and directors, the Company may be required to employ accountants,
technical experts, appraisers, attorneys, or other consultants or advisors. The
selection of any such advisors will be made by the Company's President without
any input from stockholders. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing fiduciary or other
obligation to the Company. In the event the President of the Company considers
it necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.
17. Leveraged Transactions. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
18. Competition. The search for potentially profitable business opportunities is
intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
19. No Foreseeable Dividends. The Company has not paid dividends on its
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
20. Loss of Control by Present Management and Stockholders. The Company may
consider an acquisition in which the Company would issue as consideration for
the business opportunity to be acquired an amount of the Company's authorized
but unissued Common Stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result of such an
acquisition would be that the acquired
<PAGE>
company's stockholders and management would control the Company, and the
Company's management could be replaced by persons unknown at this time. Such a
merger would result in a greatly reduced percentage of ownership of the Company
by its current shareholders. In addition, the Company's major shareholders could
sell control blocks of stock at a premium price to the acquired company's
stockholders.
21. No Public Market Exists. There is no public market for the Company's common
stock, and no assurance can be given that a market will develop or that a
shareholder ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
22. Rule 144 Sales. All of the outstanding shares of Common Stock held by
present officers, directors, and stockholders are "restricted securities" within
the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years. Nonaffiliate shareholders holding 425,362 common shares of
the Company have held their shares for two years and under Rule 144(K) are
eligible to have freely tradable shares. A sale under Rule 144 or under any
other exemption from the Act, if available, or pursuant to subsequent
registration of shares of Common Stock of present stockholders, may have a
depressive effect upon the price of the Common Stock
<PAGE>
in any market that may develop. Of the total, 1,016,667 shares become available
for resale (subject to volume limitations for affiliates) under Rule 144, ninety
(90) days after the Company registers its common stock under Section 12(g) with
the Securities and Exchange Commission, all of which will be subject to
applicable volume restrictions under the Rule.
23. Blue Sky Considerations. Because the securities registered hereunder have
not been registered for resale under the blue sky laws of any state, the holders
of such shares and persons who desire to purchase them in any trading market
that might develop in the future, should be aware that there may be significant
state blue-sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Some jurisdictions may
not under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
24. Blue Sky Restrictions. Many states have enacted statutes or rules which
restrict or prohibit the sale or resale of securities of "blank check" companies
to residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "blank
check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.
At the date of this registration statement, the Company has no intention
of offering further shares in a private offering to anyone. Further, the policy
of the Board of Directors is that any future offering of shares will only be
made after an acquisition has been made and can be disclosed in appropriate 8-K
filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties which
would be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR
PLAN OF OPERATIONS.
-------------------
Liquidity and Capital Resources
- -------------------------------
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no capital resources or
stockholder's equity. The Company has no current assets in the form of cash and
no total assets but has current liabilities totaling $62,786.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its lack of liquidity and capital
resources will impair the consummation of a business combination or whether it
will incur further operating losses through any business entity which the
Company may eventually acquire.
During the period from December 21, 1993 (inception) through December 31, 1998
the Company has engaged in no significant operations other than organizational
activities, acquisition of capital and preparation for registration of its
securities under the Securities Act of 1933, as amended and a limited venture
into offering consulting services to clients seeking debt or equity financing
for start-up ventures. Minimal revenues were received by the Company during this
period, totaling $5,000 in 1997 and $ 0 in 1998. The company has incurred
operating expenses since inception of $131,343 and total revenues of only
$8,000. The net loss on operations is ($123,343) through December 31, 1998. Such
losses will continue unless revenues and business can be acquired by the
company. There is no assurance that revenues or profitability will ever be
achieved by the company.
Results of Operations year ended December 31, 1998 compared to 1997
- -------------------------------------------------------------------
The Company had no revenues in 1997 or 1998. The Company incurred $950 in
expenses in 1998 as compared to $8,493 in expenses in 1997.
The net operating loss in 1998 was ($950) as compared to ($3,493) in 1997.
The losses in 1998 were as a result of accrued interest of $700.00 and
miscellaneous expenses. In 1997 the company incurred an interest accrual of
$700.00, office expenses of $3,214.00, professional fees of $1,500.00 and
consulting fees of $2,200.00. The net loss per share each year was less than
($.01) per share.
<PAGE>
Results of Operations - quarter ended March 31, 1999 compared to same period in
- --------------------------------------------------------------------------------
1998.
- -----
The Company had no income or expenses in the quarter ended March 31, 1999
or 1998 and no operating income or loss.
For the current fiscal year, the Company anticipates incurring a loss as
a result of legal and accounting expenses, expenses associated with registration
under the Securities Exchange Act of 1934, and expenses associated with locating
and evaluating acquisition candidates. The Company anticipates that until a
business combination is completed with an acquisition candidate, it will not
generate revenues other than interest income, and may continue to operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.
Need for Additional Financing
- -----------------------------
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
complete a business combination. Once a business combination is completed, the
Company's needs for additional financing are likely to increase substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be inadequate
to meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
<PAGE>
Year 2000 Issues
- ----------------
Year 2000 problems result primarily from the inability of some computer
software to property store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
material affected by Year 2000 problems.
The Company relies on non-IT systems that may suffer from Year 2000
problems, including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil field
operators, and utilities. In light of the Company's substantially reduced
operations, the Company does not believe that such non-IT systems or third-party
Year 2000 problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the Company.
Item 3. Description of Property.
------------------------
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
10200 W. 44th Avenue, Suite 400, Wheat Ridge, Colorado 80033, which is the
office address of its legal counsel, Michael A. Littman. The Company pays no
rent for the use of this mailing address. The Company does not believe that it
will need to maintain an office at any time in the foreseeable future in order
to carry out its plan of operations described herein.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
-----------
The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and beneficially
by executive officers, directors and persons who hold 5.0% or more of the
outstanding Common Stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
<PAGE>
NUMBER OF SHARES OWNERSHIP
SHAREHOLDERS BENEFICIAL OWNERS PERCENTAGE
- --------------------------------------------------------------------------------
Donald R. Schenkier, President & Director 333333 23%
555 W. Peakview Avenue
Littleton, CO 80120
333334 23%
Gregory E. Boyd, Secretary, Treasurer and Director
13105 Monaco Parkway #A
Denver, CO 80222
342334 23.7%
Te Huey Urich, Shareholder
83855 Cobblestone St.
Highlands Ranch, CO 80126
All directors and executive 666667 46%
officers as a group (2 persons)
Each principal shareholder has sole investment power and sole voting power over
the shares.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
-------------------------------------------------------------
The directors and executive officers currently serving the Company are
as follows:
Name Position Held Tenure
- -------------------------------------------------------------------------------
Donald R. Schenkeir President and Director Annual
Gregory Boyd Secretary, Treasurer
and Director Annual
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of
<PAGE>
the board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between the
directors and officers of the Company and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month. As
---------------------------------
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
Biographical Information
Gregory E. Boyd has served as the President, Treasurer, and a Director
---------------
of the Company since its inception and he is currently Secretary Treasurer. He
has been the secretary and a director of Sole Track Group International, Inc., a
Denver, Colorado, since September 1994. He has also been a director of Sole
Track, Inc., Denver, Colorado since October 1990, and from 1993 to March 1994,
he was involved as a consultant with Colorado Clearwater Company, Denver,
Colorado.
Donald R. Schenkeir has been a director of the company since June 1994
--------------------
and President since 1996. He has been the treasurer and a director of Sole Track
Group International, Inc. since September 1994. He was a director of Sole Track
Inc. from July 1992 to October 1992 and has been a director since April 1994.
From November 1975 to April 1994, he was the lead person in the
machine/welding/sheet metal/carpenter shops working on the design and
fabrication of prototype scientific equipment for the Marathon Oil Company
research center for Denver, Colorado from 1969 to October 1975 as the plant
manager for operation engaged in manufacturing interior decorating items. Mr.
Schenkeir received a bachelor's degree from Metropolitan State College of Denver
in 1972.
Management will devote minimal time to the operations of the Company,
and any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors receives 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 filing this report,
the Company has no funds available to pay officers or directors. Further, none
of the officers or directors is accruing any compensation pursuant to any
agreement with the Company. No retirement, pension, profit sharing, stock option
or insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
<PAGE>
The company has adoopted a resolution and policy whereby no officer ,
director, or principal shareholder will receive any additional stock or cash
compensation for their services to the company, relating to an acquisition or
business combination.
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 filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management nor any principal shareholder, of the Company will receive any
finders fee, either directly or indirectly, as a result of their respective
efforts to implement the Company's business plan outlined herein.
The Company has adopted a policy that its affiliates, principal
shareholders, and management shall not be issued further common shares of the
Company, as finders fees or other compensation.
<PAGE>
Previous "Blank Check" Offerings
- --------------------------------
Management of the Company has not been involved in any prior public
"blank check" offerings. Management has no "blank check" offerings contemplated
or in registration for any other company. Management may however, be involved
with other companies in the future which seek mergers or acquisitions.
Indemnification of Officers and Directors
- -----------------------------------------
As permitted by Colorado Revised Statutes, the Company may indemnify its
directors and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in any such
action, they are adjudged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
Exclusion of Liability
- ----------------------
The Colorado Business Corporation Act excludes personal liability for
its directors for monetary damages based upon any violation of their fiduciary
duties as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of the Colorado
Business Corporation Act, or any transaction from which a director receives an
improper personal benefit. This exclusion of liability does not limit any right
which a director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
Conflicts of Interest
- ---------------------
The officers and directors of the Company will not devote more than a portion
of their time to the affairs of the Company. There will be occasions when the
time requirements of the Company's business conflict with the demands of their
other business and investment activities. Such conflicts may require that the
Company attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
<PAGE>
Conflicts of Interest - General. Certain of the officers and directors of the
Company may be directors and/or principal shareholders of other companies and,
therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, 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. In addition, if the Company and other companies with
which the Company's officers and directors are affiliated both desire to take
advantage of a potential business opportunity, 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.
The Company's officers and directors may actively negotiate or otherwise
consent to the purchase of a portion of their common stock as a condition to, or
in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
officers and directors which is made as a condition to, or in connection with, a
proposed merger or acquisition transaction. The fact that a substantial premium
may be paid to the Company's officers and directors to acquire their shares
creates a potential conflict of interest for them in satisfying their fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to them, they would be legally required to make
the decision based upon the best interests of the Company and the Company's
other shareholders, rather than their own personal pecuniary benefit.
<PAGE>
Item 6. Executive Compensation.
-----------------------
SUMMARY COMPENSATION TABLE OF EXECUTIVES
----------------------------------------
Annual Compensation Awards
- --------------------------------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Restricted Securities
Position ($) ($) Compensation Stock Award(s) Underlying
($) Options/
SARs (#)
-------------------------------------------------------------------------------
Donald Schenkier, 1996 0 0 0 0 0
President, 1997 0 0 0 0 0
Director
- --------------------------------------------------------------------------------
1998 0 0 0 0 0
- --------------------------------------------------------------------------------
================================================================================
Gregory Boyd, 1996 0 0 0 0 0
Secretary, 1997 0 0 0 0 0
Treasurer
Director
- --------------------------------------------------------------------------------
1998 0 0 0 0 0
- --------------------------------------------------------------------------------
Directors' Compensation
-----------------------
Name Annual Meeting Consulting Number Number of
Retainer Fees Fees/Other of Securities
Fee ($) ($) Fees ($) Shares Underlying
(#) Options
SARs(#)
A. Director 0 0 0 0 0
Gregory Boyd
B. Director
Donald Schenkeir 0 0 0 0 0
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
<PAGE>
No officer or director has received any other remuneration in the two
year period prior to the filing of this registration statement. There is no
current plan in existence, to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and completing
a merger or acquisition transaction, and the Board has adopted a policy to
preclude such payments. See "Certain Relationships and Related Transactions."
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
Item 7. Certain Relationships and Related Transactions.
----------------------------------------------
Prior to the date of this amendement to the Registration Statement,
September 2, 1999 the Company issued to its founders, officers, and directors,
and to other shareholders, a total of 1,442,028 shares of Common Stock for a
total of $2,057.00 in cash, and $41,000.00 in services. Certificates evidencing
the Common Stocks issued by the Company to these persons have all been stamped
with a restrictive legend, and are subject to stop transfer orders by the
Company. For additional information concerning restrictions that are imposed
upon the securities held by current stockholders, and the responsibilities of
such stockholders to comply with federal securities laws in the disposition of
such Common Stock, see "Risk Factors - Rule 144 Sales."
a. At the inception of the Company, December 2, 1993, and on March 31,
1994, the Company issued 26,000 and 474,000 shares of its Common Stock each to
Mark S. Urich and Gregory E. Boyd for services rendered in organizing the
Company. The shares were valued at $.001 per share. Mr. Urich subsequently
conveyed all but 1,000 of these shares to his wife. Mrs. Urich and Mr. Boyd
later transferred 166,667 and 166,666 shares respectively to Donald R.
Schenkeir, a director of the Company.
The transfer of the shares to Mrs. Urich from Mr. Urich was a transfer
exempt from registration pursuant to Section 4(1) of the Securities Act of 1933.
Ms. Urich is the wife of Mr. Urich.
The transfer of the shares to Mr. Schenkeir occurred in early 1994, as an
inducement for Mr. Schenkeir to become a director of the Company. The Company,
Mr. Urich and Mr. Boyd relied on Section 4(1) of the Securities Act of 1933 as
an exemption from registration in making the transfer of shares to Mr.
Schenkeir.
b. In March 1994, Mark S. Urich, an officer, director, and principal
shareholder of the Company, loaned the Company a total of $79,000. The Company
had anticipated participating in a business opportunity in March 1994. The
transaction never took place and the Company then repaid Mr. Urich.
c. In August 1994, the Company advanced $2,340 to Sole Track Group
International, Inc., a company of which Messrs. Boyd, Urich, and Schenkeir are
officers, directors, and principal shareholders. Sole Track Group International,
Inc. still owes this advance to the Company as of Sept. 2, 1999.
<PAGE>
d. In August 1994, the Company borrowed $17,870 from Sole Track, Inc. a
company of which Messrs, Boyd and Schenkeir were officers, directors and
principal shareholders. In October 1994, a partial repayment of $382 was made.
As of February 28, 1995, $17,488 was owed. This obligation is non-interest
bearing and unsecured, and is still unpaid as if as of September 2, 1999.
e. On September 15, 1994 the Company issued 10,000 shares of its Common
Stock to Dwayne DeSilvia in consideration of certain referrals and introductions
Mr. DeSilvia made for the benefit of the company. For financial accounting
purposes, the shares were valued at $.25 per share since shares were sold for
cash at approximately the same time.
f. On September 21, 1994, G. Paul Music, a business controlled by
Gregory P. Bassett, an existing shareholder of the Company, loaned $10,000 to
the Company. The promissory note evidencing the loan accrues interest at the
rate of 7% per annum, is unsecured, and was due May 31, 1995. In consideration
for making this loan, the Company issued 100,000 shares of its Common Stock to
G. Paul Music. For financial accounting purposes, the shares were valued at $.25
per share, since shares were sold for cash at approximately the same time. While
the shares are valued at $25,000 for financial accounting purposes, such shares
do not have that value to G. Paul Music because they are not marketable.
Accordingly, the $10,000 loan from G. Paul Music was not discharged when the
Company gave G. Paul Music 100,000 shares of its Common Stock in consideration
for the loan. The loan is still uppaid as of September 2, 1999.
No officer, director, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate for consulting services to
assist management in evaluating a prospective business opportunity would be paid
in stock or in cash. Any such issuance of stock would be made on an ad hoc
basis. Accordingly, the Company is unable to predict whether or in what amount
such a stock issuance might be made.
There is no current plan in existence, the company will adopt a plan to pay
or accrue compensation to its officers and directors for services related to
seeking business opportunities and completing a merger or acquisition
transaction. The Board of Directors has adopted a resolution to establish a
policy which precludes officers or directors from compensation for services
related to seeking business opportunity and completing a merger or acquisition
transaction for the Company. Under the Resolution and policy, no cash, stock,
bonus, or option compensation or awards will be offered or approved by the
Company in conjunction with change of control, or a business combination of any
type. There will be no finder's fees of any type, cash, stock, bonus, or options
paid to any officer or director or principal shareholders as part of or related
to or resulting from an acquistion transaction.
<PAGE>
The Company maintains a mailing address at the office of its legal
counsel, Michael A. Littman, but otherwise does not maintain an office. As a
result, it pays no rent and incurs no expenses for maintenance of an office and
does not anticipate paying rent or incurring office expenses in the future. It
is likely that the Company will establish and maintain an office after
completion of a business combination.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Repayment of the outstanding debts of the company will undoubtedly be a
criteria which will be required to be satisfied by any target company. This of
course will require cash to be provided for such repayment of debts. The cash
would have to be provided either by the target company, or by a private
placement to new investors concurrent with the target company transaction. The
requirement of cash availability to pay old debt can be, and often is, a factor
which discourages, impairs, or precludes the Company from either negotiations
with a target company, or completion of a transction with a target company.
There are currently no plans, proposals, arrangements , or understandings
with respect to the sale or issuance of additional securities by the company
prior to the location of an acquisition or merger candidate. The Board has
adopted a resolution and policy whereby no additional issuances of share will be
made until an arrangement or contract has been made with a target company.
Item 8. Description of Securities.
-------------------------
Common Stock
- ------------
The Company's Articles of Incorporation authorize the issuance of
20,000,000 shares of Common Stock $.001 par value. Each record holder of Common
Stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of Common Stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of Common Stock are, and all unissued shares when offered and
sold will be, duly
<PAGE>
authorized, validly issued, fully paid, and nonassessable. To the extent that
additional shares of the Company's Common Stock are issued, the relative
interests of then existing stockholders may be diluted.
Preferred Stock
- ---------------
The company's Articles of Incorporation authorize the issuance of
5,000,000 shares of preferred stock. The Board of Directors of the Company is
authorized to issue the preferred stock from time to time in classes and series
and is further authorized to established such classes and series, to fix and
determine the variations in the relative rights and preferences as between
series, to fix voting rights, if any, for each class or series, and to allow for
the conversion of preferred stock into Common Stock. No Preferred Stock has
been issued by the Company. Preferred stock may be utilized in making
acquisitions.
Shareholders
- ------------
Each shareholder has sole investment power and sole voting power over
the shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon. Under Colorado laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
Transfer Agent
- --------------
The Company has engaged Mountain Share Transfer, Inc., 1625 Abilene Dr.,
Broomfield, CO 80020 as its transfer agent.
Reports to Stockholders
- -----------------------
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. The Company intends to
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934 for so long as it is subject to those requirements, and to file
unaudited quarterly reports and annual reports with audited financial statements
as required by the Securities Exchange Act of 1934.
<PAGE>
PART II
-------
Item 1. Market Price and Dividends on the Registrant's Common Equity and Other
Shareholder Matters
--------------------
No public trading market exists for the Company's securities and all of
its outstanding securities are restricted securities as defined in Rule 144.
There were thirty (30) holders of record of the Company's common stock on May
31, 1999. No dividends have been paid to date and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable future.
Item 2. Legal Proceedings
-----------------
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of record
or beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
any litigation.
Item 3. Changes in and Disagreements with Accountants.
----------------------------------------------
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
----------------------------------------
Since December 2, 1993 (the date of the Company's formation), the Company
has sold its Common Stock to the persons listed in the table below in
transactions summarized as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS DATE OF NUMBER OF PRICE
- ---------------- PURCHASE CONSIDERATION SHARES ISSUED PER SHARE
-------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Gregory E. Boyd Dec.,1993 services 26,000 $.001
13105 Monaco Parkway, #A
Denver, CO 80222
Mark Urich Dec.,1993 services 26,000 $.001
8385 S. Cobblestone St.
Highlands Ranch, CO 80216
<PAGE>
Libby Dewey June 14, $2,000 cash 8,000 $.25
15861 E. 35th Avenue 1994
Aurora, CO 80011
Greg Bassett June 15, $5,000 cash 20,000 .25
17538 E. Caspian Place 1994
Aurora, CO 80013
Leo W. & July 13, $ 200 cash 800 .25
Yvonne B. Schenkeir 1994
2984 S. Ingalls Way
Denver, CO 80227-3830
Roger and Mary Nilsen July 14, $1,000 cash 4,000 .25
306 W. Peakview Avenue 1994
Littleton, CO 80120
Todd Dewey July 15, $ 200 cash 800 .25
15861 E. 35th Avenue 1994
Aurora, CO 80011
Martin J. Flaum July 6, $ 200 cash 800 .25
10023 Irving Street 1994
Westminster, CO 80030-6755
Dr. F.H. Carey July 18, $ 200 cash 800 .25
9888 E. Vassar Drive L-305 1994
Denver, CO 80231
John Deon July 19, $ 100 cash 400 .25
2235 S. Nile Court 1994
Aurora, CO 80014
Laurie J. Peckham July 26, $ 50 cash 200 .25
3082 S. Fairplay Street 1994
Aurora, CO 80014
John B. Collins, Jr. July 28, $ 100 cash 400 .25
P.O. Box 260432 1994
Highlands Ranch, CO 80126
Lue E.C. Collins July 28, $ 100 cash 400 .25
10755 Longs Way 1994
Parker, CO 80134
<PAGE>
Ebony Janae Hollins July 29, $ 100 cash 400 .25
11980 E. Jewell Avenue 1994
Aurora, CO 80012
Eddie F. Scott Aug. 9, $5,000 cash 20,000 .25
18723 E. Brown Place 1994
Aurora, CO 80013
Mark S. Urich Sept.15, $ 250 cash 1,000 .25
6312 S.Fiddler's Green Cir 1994
Suite 200N
Englewood, CO 80111
Te Huey Urich Sept.13, $2,500 cash 10,000 .25
6312 S.Fiddler's Green Cir. 1994
Suite 200N
Englewood, CO 80111
Hsu Chu Tzng Sept.13, $ 500 cash 2,000 .25
Fourth Floor 1994
No. 39, Lane 51,
Hsin Tung Street
Taipei, Taiwan R.O.C.
Leah Kristine Dow Sept.23, $ 15 cash 60 .25
2575 S. Syracuse Way, 1994
B-104
Denver, CO 80231
Kandi Gardner Sept.23, $ 25 cash 100 .25
13881 W. 68th Way 1994
Arvada, CO 80004
Joseph P. Seaman Sept.25, $ 25 cash 100 .25
810 Stonemountain Dr. 1994
#208
Windsor, CO 80550
Douglas F. Richardson Sept.25, $ 25 cash 100 .25
P.O. Box 44 1994
Johnstown, CO 80534
Steven Ciciora Sept.26, $ 17 cash 68 .25
18312 E. Harvard Place 1994
Aurora, CO 80013
<PAGE>
Walter Ciciora Sept.26, $ 25 cash 100 .25
1010 S. Zeno Way 1994
Aurora, CO 80017
Christopher F. Carter Sept.26, $ 25 cash 100 .25
6053 S. Lamar Drive 1994
Littleton, CO 80123
Nien-Tzu Tan Oct.6, $1,000 cash 4,000 .25
4392 S. Ceylon Way 1994
Aurora, CO 80015
Gregory E. Boyd Mar. 31, $ 474 474,000 (.001)
13105 Monaco Parkway, #A 1994 services*
Denver, CO 80222
Mark Urich Mar. 31, $ 474 474,000 (.001)
8385 S. Cobblestone St. 1994 services*
Highlands Ranch, CO 80216
G. Paul Music Oct.10, $2,500 100,000 .025
4401 S. Tamarac Pkwy, 1994 services**
B-101
Denver, CO 80237
Dwayne DeSilvia Sept.15, $2,500 100,000 .025
1010 S. Zeno Way 1994 services**
Aurora, CO 80017
Ebony Janae Hollins July 29, $ 100 cash 400 .25
11980 E. Jewell Avenue 1994
Aurora, CO 80012
Paul A. and July 22, $2,000 cash 8,000 .25
Vicki L. LeRoue 1996
31353 N. Bermuda Dunes Dr.
Evergreen, CO
Steven L. Earley Oct. 26, $ 250 250,000 .001
7204 S. Houston Waring Cir. 1996 services**
Littleton, CO
</TABLE>
*Consideration in the way of services consisted of pre-incorporation consulting
services rendered to the Registrant related to investigating and developing the
Registrant's proposed business plan and capital structure and completing the
organization and incorporation of the Registrant.
<PAGE>
**Consideration consisted of consulting services rendered to the Registrant
related to the Registrant's business plan and capital structure.
Each of the sales listed above was made for cash or services as listed. All of
the listed sales were made in reliance upon the exemption from registration
offered by Section 4(2) of the Securities Act of 1933, as amended. Based upon
Subscription Agreements completed by each of the subscribers, the Company had
reasonable grounds to believe immediately prior to making an offer to the
private investors, and did in fact believe, when such subscriptions were
accepted, that such purchasers (1) were purchasing for investment and not with a
view to distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters, and no sales
commissions were paid.
All of the investors were sophisticated and were known by principals in the
company to have business investment experience. The company provided a personal
interview with a principal in the company for each investor who explained the
business plan, and provided copies of any documents requested by an investor.
Each subscriber executed a subscription agreement in which the subsriber
acknowledged a) an understanding of the investment risks, b) an understanding of
the nature of the securities as being unregistered, and restricted from transfer
c) an ability to hear economic risk of loss and illiquidity, and d) an
investment intent and not a purchase for redistribution .
Item 5. Indemnification of Directors and Officers
-----------------------------------------
The Colorado Revised Statutes provide that the Company may indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the officer or director acted in
good faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an officer or director,
absent a finding of negligence or misconduct in the performance of duty.
<PAGE>
SIGNATURES:
-----------
Pursuant to the requirements of Section 12 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.
DATED: ____________________
ROCKY MOUNTAIN FINANCIAL ENTERPRISES,INC.
-----------------------------------------
by: /s/ Donald Schenkeir
------------------------
Donald Schenkeir
President
/s/ Gregory E. Boyd
--------------------
Gregory E. Boyd
Secretary Treasurer and Director
Directors:
/s/Donald Schenkeir
-------------------
Donald Schenkeir
Director
/s/Gregory E. Boyd
------------------
Gregory E. Boyd
Director
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998 & 1997
Cover Page F-1
Auditors Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6 - 7
Notes to Financial Statements F-8 - 9
Interim Financial Statements
-----------------------------
(unaudited)
Cover Page F-10
Balance Sheet F-11
Statement of Operations F-12
Statement of Cash Flows F-13
Notes to Financial Statements F-14-15
<PAGE>
INDEX TO EXHIBITS
SK#
3.1 Articles of Incorporation *
3.2 Amendments to Articles of Incorporation *
3.3 Bylaws *
*Previously Filed
<PAGE>
FINANCIAL STATEMENTS
(A Development Stage Company)
ROCKY MOUNTAIN FINANCIAL ENTERPRISES
F-1
<PAGE>
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson C.P.A.
Member: A.I.C.P.A. Telephone: (303) 796-0099
Colorado Society of C.P.A.s Fax: (303) 796-0137
Board of Directors
Rocky Mountain Financial Enterprises, Inc.
Independent Auditors' Report
----------------------------
We have audited the accompanying balance sheet of Rocky Mountain financial
Enterprises, Inc. (A Development Stage Company) as of December 31, 1998 and
December 31, 1997, and the related statements of operations, cash flows, and
changes in stockholders' equity for the period December 2, 1993 (inception),
through December 31, 1998, and the fiscal years ended December 31, 1998 and
1997. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern, As shown in the financial statements,
the company incurred a net loss of $124,293 since inception. These factors
indicate that the company may be unable to continue in existence. The financial
statements do not include any adjustments relating to the amounts and
classification of liabilities that might be necessary in the event the company
cannot Continue in existence.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rocky Mountain Financial
Enterprises, Inc. at December 31, 1998 and December 31, 1997, and the results of
its operations and its cash flows for the period December 2, 1993 (inception),
through December 31, 1998, and the fiscal years ended December 31, 1998 and
1997, in conformity with generally accepted accounting principles.
/s/ Michael Johnson & Co., LLC
- ------------------------------
Michael Johnson & Co., LLC
Denver, Colorado
May 6, 1999
F-2
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheet
DECEMBER DECEMBER
31, 1997 31, 1998
ASSETS
CURRENT ASSETS:
Cash $ 50 $ 0
Total Current Assets $ 50 -
OTHER ASSETS:
Organizational Costs
Net of Amortization $ 200 -
Total Other Assets $ 200 -
TOTAL ASSETS $ 250 $ 0
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accrued Expenses $ 9,598 $ 10,298
Notes Payable 52,488 52,488
------ ------
Total Current Liabilities 62,086 62,786
Stockholders' Equity.
Common Stock, no par value, 20,000,000
authorized, 1,442,028 issued and
outstanding 61,507 61,507
Preferred Stock, no par value
5,000,000 authorized, none issued and
outstanding - -
Deficit Accumulated During
the Development Stage (123,343) (124,293)
Total Stockholders' Equity (61,836) (62,786)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 250 $ 0
The Accompanying Notes Are An Integral Part of These Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Statement of Operations
For the For the 2-Dec-93
Year Ended Year Ended (Inception) through
31 -Dec-98 31 -Dec-97 31 -Dec-98
<S> <C> <C> <C>
Revenue, Consulting Fees $ - $ 5,000 $ 8,000
Operating Expenses
Consulting Fees - 2,200 73,955
Office Expense 50 3,214 8,730
Travel - - 4,989
Telephone Expense - 679 2,559
Professional Fees - 1,500 28,627
Rent - - 10,022
Interest Expense 700 700 2,411
Amortization Expense 200 200 1,000
Total Operating Expense 950 (8,493) 132,293
Net (Loss) Accumulated
During the Development Stage $ (950) (3,493) $ (1242931)
Weighted Average Number of
Shares Outstanding 1,442,028 1,442,028 1,442,028
Net Loss Per Common Share (0.01) (0.01) (0.09)
</TABLE>
The Accompanying Notes Are an Integral Part of These Financial Statements.
F-4
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
For the For the 2-Dec-93
Year Ended Year Ended (Inception)
31-Dec-98 31-Dec-97 through
31-Dec-98
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net (Loss) $ (950) $ (3,493) $ (124,293)
Increase (Decrease) in Acrrued Expense 700 1,818 10,298
Increase in Organization Costs - - (1,000)
Amortization Expense 200 200 1,000
Net Cash Flows used for Operations (50) (1,457) (113,995)
Cash Flows from
Financing Activities:
Sale of Stock - - 61,507
Notes Payable - - 52,488
Net Cash Provided by Financing
Activities - - 113,995
Increase (Decrease) in Cash (50) (1,475) -
Cash and Cash Equivalents,
Beginning of Year 50 1,525 -
Cash and Cash Equivalents,
End of Year $ - $ 50 $ -
Supplemental Schedule of Non-Cash
Investing and Financing Activity:
The officers of the Company were issued
Stock for services.
These services were valued at $1,000
and included in Organizational Costs. $ - $ - $ 1,000
Consulting Fee Services for Stock - - 41,000
Interest Paid - - -
Taxes Paid - - -
</TABLE>
The Accompanying Notes Are an Integral Part of These Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
Per Share Number of Common Accumulated
Date Consideration Shares Shares Stock Deficit Totals
<S> <C> <C> <C> <C> <C> <C>
12/03/93 Services 0.001 52,000 $ 52 $ 52
Balance at
12/31/93 52,000 $ 52 $ - $52
03/31/94 Services 0.001 948,000 948 - 948
06/16/94 Cash 0.25 28,000 7,000 - 7,000
07/14/94 Cash 0.25 800 200 - 200
07/15/94 Cash 0.25 4,000 1,000 - 1,000
07/25/94 Cash 0.25 2,000 500 - 500
07/31/94 Cash 0.25 2,200 550 - 550
08/01/94 Cash 0.25 400 100 - 100
08/09/94 Cash 0.25 20,000 5,000 - 5,000
09/13/94 Cash 0.25 12,000 3,000 - 3,000
09/15/94 Services 0.25 10,000 2,500 - 2,500
09/21/94 Services 0.25 100,000 25,000 - 25,000
09/23/94 Cash 0.25 160 40 - 40
09/25/94 Cash 0.25 200 50 - 50
09/26/94 Cash 0.25 268 67 - 67
10/06/94 Cash 0.25 4,000 1,000 - 1,000
Deficit
Accumulated
12/31/94 - - (76,381) (76,381)
Balance at
12/31/94 1,184,028 47,007 $ (76,381) 29,374
Deficit
Accumulated
12/31/95 - - (8,820) (8,820)
Balance at
12/31/95 1,184,028 47,007 $ (85,201) $(38,194)
02/15/96 Cash 0.25 8,000 2,000 - 2,000
10/26/96 Services 0.05 250,000 12,500 - 12,500
Deficit
Accumulated
12/31/96 - - (34,649) (34,649)
Balance at
12/31/96 1,442,028 61,507 (119,850) (58,343)
Deficit
Accumulated
12/31/97 - - (3,493) (3,493)
F-6
<PAGE>
<S> <C> <C> <C> <C> <C> <C>
Balance at
12/31/97 1,442,028 61,507 (123,343) (61,836)
Deficit
Accumulated
12/31/98 - - (950) (950)
Balance at
12/31/98 1,442,028 61,507 (124,293) (62,786)
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
F-7
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1998 and 1997
Note A- Summary of Significant Accounting Policies:
A Summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. Development Stage Company.
--------------------------
Rocky Mountain Financial Enterprises, Inc. was incorporated December 2, 1993
under the laws of the State of Colorado for the purpose of engaging in the
transactions of all lawful business. The Company is presently engaged in
providing consulting services as to methods of obtaining financing. Activity to
date has been primarily organization of the Company. Although the company has
commenced its principal business operations, the revenues therefrom are not
significant enough to warrant a reclassification from the status of a company in
the development stage.
The accompanying financial statements have been prepared on the going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The company's continuation as a
going concern is dependent on its ability to generate sufficient cash flows to
meet its obligations on a timely basis, to raise additional as may be required,
and ultimately to attain successful operations. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
2. Basis of Accounting
-------------------
The financial statements are presented on the accrual basis of accounting.
The Corporation's fiscal year end is December 31.
Organizational costs are being amortized over a 60-month period.
Cash Equivalents:
- ----------------
For purposes of the statement of cash flows, the Corporation considers all cash
and other highly liquid investments with initial maturities of three months or
less to be cash equivalents.
Estimates:
- ----------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Net Loss Per Share:
- -------------------
Net loss per share is based on the weighted average number of common shares and
common share equivalents outstanding during the period.
F-8
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1998 & 1997
3. Stockholders' Equity
---------------------
Of the 20,000,000 shares of no par value common stock authorized, 1,000,000
shares were issued to the officers of the Corporation for services rendered.
These services were valued at $ 1,000 and are included in the organizational
costs.
4. Notes Payable
-------------
Notes Payable consists of the following:
Notes Payable to G. Paul Music Ltd., 7% annual rate,
note started September 19, 1994 and matured
May 31, 1995. $10,000
Notes Payable to Sole Track, Inc.,
Non-interest bearing and uncollateralized. 17,488
Notes Payable to Steven L. Earley for $25,000
for consideration of making the loan Mr. Earley
was given 250,000 shares. This Note is a non-interest
bearing demand note. 25,000
Total Notes Payable $52,488
- ------------------- -------
5. Related Party Transaction
--------------------------
The officers and directors of this company are also officers and directors of
other companies. The chairman of the board loaned the Company funds utilizing
non-interest-bearing demand notes.
6. Officers and Directors Compensation
-----------------------------------
On June 1, 1994, die Board of Directors authorized that the Company will
compensate each of its two Officers $2,000 per month and one director $500 per
month for then- services to the company. The chairman stated that the
compensation referred to above has been canceled and the officers and directors
will not be paid the above mentioned remuneration.
F-9
<PAGE>
INTERIM FINANCIAL
STATEMENTS FOR PERIOD
ENDED MARCH 31, 1999
(Unaudited)
F-10
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTREPERISES, INC.
(A Development Stage Company)
BALANCE SHEET
(unaudited)
March 31, December 31,
1999 1998
----- ----
Current Assets:
Cash and cash equivalents $0 $0
Total current assets $0 $0
------------------------------------------
TOTAL ASSETS $0 $0
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,298 $ 10,298
Accounts payable, related parties $ 52,488 $ 52,488
------------------------------------------
Total current liabilities $ 62,786 $ 62,786
------------------------------------------
Stockholder's equity:
Common stock, No Par Value $ 61,507 $ 61,507
Authorized 20,000,000 shares Issued
And outstanding 1,422,028 shares
Preferred stock, no par value,
500,000,000 shares authorized, no
shares outstanding
Retained Earnings (deficit) $(123,343) $(123,343)
------------------------------------------
Total Stockholders' equity $ (61,836) $ (61,836)
------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' $0 $0
==========================================
EQUITY
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTRPRISES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(unaudited)
Three Months Three Months
Ending March 31, Ending March 31,
1999 1998
----------------- ----------------
Revenue & interest $0 $0
Expenses, general $0 $0
and administrative
Provision for income - -
taxes
----------------- -----------------
Net income (loss) $0 $0
for period
Net income (loss) $(-) $(-)
per share
Weighted average 1,422,028 1,422,028
number of common
shares
The accompanying notes are an integral part of the financial. statements.
F-12
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(unaudited)
Three Months Three Months
Ending Ending
March 31, March 31,
1999 1998
------------ -----------
Cash flows from
operating activities:
Net income (loss) - $0
Adjustments to
reconcile net income
(loss) to net cash
provided (used) by
operating activities:
Amortization $0 $0
Rent $0 $0
Changes in:
Accounts payable $0 $0
Accounts payable - $0 $0
related parties
------------- ------------
Cash provided (used) by $0 $0
operating activities ============= =============
Cash at beginning of $0 $0
Period ============= =============
Cash at end of period $0 $0
============= =============
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Notes To Financial Statements
March 31, 1999
Unaudited
Note A- Summary of Significant Accounting Policies:
A Summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. Development Stage Company.
--------------------------
Rocky Mountain Financial Enterprises, Inc. was incorporated December 2, 1993
under the laws of the State of Colorado for the purpose of engaging in the
transactions of all lawful business. The Company is presently engaged in
providing consulting services as to methods of obtaining financing. Activity to
date has been primarily organization of the Company. Although the company has
commenced its principal business operations, the revenues therefrom are not
significant enough to warrant a reclassification from the status of a company in
the development stage.
The accompanying financial statements have been prepared on the going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The company's continuation as a
going concern is dependent on its ability to generate sufficient cash flows to
meet its obligations on a timely basis, to raise additional as may be required,
and ultimately to attain successful operations. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
2. Basis of Accounting
-------------------
The financial statements are presented on the accrual basis of accounting.
The Corporation's fiscal year end is December 31.
Organizational costs are being amortized over a 60-month period.
Cash Equivalents:
- ----------------
For purposes of the statement of cash flows, the Corporation considers all cash
and other highly liquid investments with initial maturities of three months or
less to be cash equivalents.
Estimates:
- ----------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Net Loss Per Share:
- -------------------
Net loss per share is based on the weighted average number of common shares and
common share equivalents outstanding during the period.
F-14
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A Development Stage Company)
Notes To Financial Statements
March 31, 1999
Unaudited
3. Stockholders' Equity
---------------------
Of the 20,000,000 shares of no par value common stock authorized, 1,000,000
shares were issued to the officers of the Corporation for services rendered.
These services were valued at $ 1,000 and are included in the organizational
costs.
4. Notes Payable
-------------
Notes Payable consists of the following:
Notes Payable to G. Paul Music Ltd., 7% annual rate,
note started September 19, 1994 and matured
May 31, 1995. $10,000
Notes Payable to Sole Track, Inc.,
Non-interest bearing and uncollateralized. 17,488
Notes Payable to Steven L. Earley for $25,000
for consideration of making the loan Mr. Earley
was given 250,000 shares. This Note is a non-interest
bearing demand note. 25,000
Total Notes Payable $52,488
- ------------------- -------
5. Related Party Transaction
--------------------------
The officers and directors of this company are also officers and directors of
other companies. The chairman of the board loaned the Company funds utilizing
non-interest-bearing demand notes.
6. Officers and Directors Compensation
-----------------------------------
On June 1, 1994, die Board of Directors authorized that the Company will
compensate each of its two Officers $2,000 per month and one director $500 per
month for then- services to the company. The chairman stated that the
compensation referred to above has been canceled and the officers and directors
will not be paid the above mentioned remuneration.
F-15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 0
<CURRENT-LIABILITIES> 62,786 62,786
<BONDS> 0 0
0 0
0 0
<COMMON> 61,507 61,507
<OTHER-SE> (1,242,293) (1,242,293)
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 700 0
<INCOME-PRETAX> (950) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (950) 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (950) 0
<EPS-BASIC> (.01) 0
<EPS-DILUTED> (.01) 0
</TABLE>
