SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission file number 0-114873
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1384961
- ------------------------ --------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
c/o 10200 W. 44th Ave., #400, Wheat Ridge, CO 80033
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-422-8127
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common No Par Value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- ------
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
-----
State issuer's revenues for its most recent fiscal year. $0
<PAGE>
Transitional Small Business Disclosure Format:
______ Yes ___X____ No
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1999: $.02 per share
Number of outstanding shares of the registrant's no par value common stock, as
of December 31, 1999: 1,442,028.
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Business .................................. 1
Item 2. Properties ................................ 20
Item 3. Legal Proceedings.......................... 20
Item 4. Submission of Matters to a Vote of
Security Holders.......................... 20
PART II
Item 5. Market for Registrant's Common Stock and
Security Holder Matters .................. 20
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 21
Item 7. Financial Statements and Supplementary Data.. 22
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 22
PART III
Item 9. Directors and Executive Officers of the
Registrant................................. 23
Item 10. Executive Compensation...................... 25
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 26
Item 12. Certain Relationships and Related
Transactions............................... 27
PART IV
Item 13. Exhibits, Financial Statement Schedule
and Reports on Form 8-K.................... 28
Index...................................... 29
Signature Page .......................... 30
<PAGE>
PART I
Item 1. Description of Business.
------------------------
General
- -------
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
1
<PAGE>
in corporate finance matters to 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.
2
<PAGE>
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
3
<PAGE>
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.
4
<PAGE>
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."
5
<PAGE>
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.
6
<PAGE>
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."
7
<PAGE>
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
- -------------------
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
8
<PAGE>
the Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under 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
9
<PAGE>
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
- -------------------------------------------
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.
10
<PAGE>
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
- -----------
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.
11
<PAGE>
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
- ----------------------
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.
12
<PAGE>
Employees
- ---------
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
- ------------
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
13
<PAGE>
the Company may depend upon its ability to 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"
14
<PAGE>
practices involving high-pressure sales 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."
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.
15
<PAGE>
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.
16
<PAGE>
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.
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.
17
<PAGE>
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.
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.
18
<PAGE>
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 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 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.
19
<PAGE>
Item 2. Property
- ------------------------------
The Company does not have any formal offices at year end. Records are
maintained and mail received at 10200 W. 44th Ave., #400, Wheat Ridge, Colorado
80033. The company owns no real property.
Item 3. Legal Proceedings
- -----------------------------------
The Company is a party to no pending legal proceedings, nor is its property
subject to such proceedings, at year end 1999.
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------------
No matters were submitted during the fiscal year covered by this report to
a vote of security holders of the Company, through the solicitation of proxies
or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
- --------------------------------------------------------------------------------
As of the date of this report, management knows of no trading or quotation
of the Company's common stock. The range of high and low trade quotations for
each fiscal quarter since the last report, as reported by the National Quotation
Bureau Incorporated, was as follows
1999 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1998 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1997 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
* No quotations reported
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
As of December 31, 1999, there were 42 record holders of the Company's
common Stock.
The Company has not declared or paid any cash dividends on its common stock
and does not anticipate paying dividends for the foreseeable future.
20
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Changes in Financial Condition
- --------------------------------------------------------------------------------
No operations were conducted and no revenues were generated in the fiscal
year. The Company had no income in 1999. The Company at year end had no capital,
no cash, and no other assets. The Company at year end was totally illiquid and
needed cash infusions from shareholders to provide capital, or loans from any
sources.
Results of Operations for the year ended December 31, 1999, compared to
year ended December 31, 1998
- --------------------------------------------------------------------------------
The Company incurred expenses totalling $950 in 1999 compared to $950 in
1998. The Company had no operations or revenues in 1999 or 1998. The net loss
for 1999 and 1998 was ($950). The net loss per share was ($.01) in 1999 and
1998. A continuation of the trend of net losses should be expected to continue
in the future until some profitable operations are achieved, if ever any are
acquired or developed.
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.
21
<PAGE>
Item 7. Financial Statements and Supplementary Data
- -------------------------------------------------------------
Please refer to pages F-1 through F-10.
Item 8. Changes in and Disagreements on Accounting and Financial
Disclosure
- --------------------------------------------------------------------------------
Michael B. Johnson & Company, CPA's of Denver, Colorado were retained in
1996 as auditors for the Company for fiscal year 1995 and thereafter.
In connection with audits of two most recent fiscal years and any interim
period preceding resignation, no disagreements exist with any former accountant
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure, which disagreements if not resolved
to the satisfaction of the former accountant would have caused him to make
reference in connection with his report to the subject matter of the
disagreement(s).
The decision to change accountants was approved by the Board of Directors
as the registrant has no audit committee.
The principal accountants' reports on the financial statements for any of
the past two years contained no adverse opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope, or accounting principles except
for the "going concern" qualification.
22
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant and
Compliance with Section 16(a)
- --------------------------------------------------------------------------------
The directors and executive officers currently serving the Company are as
follows:
Name Position Held Tenure
- --------------------------------------------------------------------------------
Donald R. Schenkier President and Director Annual
Gregory Boyd Secretary, Treasurer
and Director Annual
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
DONALD R. SCHENKIER 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.
Schenkier received a bachelor's degree from Metropolitan State College of Denver
in 1972.
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.
23
<PAGE>
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
Certain of the officers and directors of the Company are directors and
principal shareholders in other blank check companies, and officers and
directors of the Company may in the future become shareholders, officers or
directors of other companies which may be formed for the purpose of engaging in
business activities similar to those conducted by the Company. Accordingly,
direct conflicts of interest may arise in the future with respect to such
individuals acting on behalf of the Company or other entities. Conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities contemplated
by the Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company and
the companies with which the officers and directors are affiliated both desire
to take advantage of an 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. All directors may still
individually take advantage of opportunities if the Company should decline to do
so. Except as set forth above, the Company has not adopted any other conflict of
interest policy with respect to such transactions.
The Company's Board of Directors has adopted a policy that the Company will
not seek a merger with, or acquisition of, any entity in which any officer or
director serves as an officer or director or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
24
<PAGE>
Item 10. Executive Compensation
- ---------------------------------------------
The Company accrued no compensation to the executive officers as a
group for services rendered to the Company in all capacities during the 1999
fiscal year. No one executive officer received, or has accrued for his benefit,
in excess of $60,000 for the year. No cash bonuses were or are to be paid to
such persons.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was
paid or distributed during the last fiscal year, or is proposed to be paid or
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
----------------------------------------
Annual Compensation Awards
- --------------------------------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Restricted Securities
Position ($) ($) Compensation Stock Award(s) Underlying
($) Options/
SARs (#)
-------------------------------------------------------------------------------
Donald R. Schenkier, 1997 0 0 0 0 0
President, 1998 0 0 0 0 0
Director 1999 0 0 0 0 0
- --------------------------------------------------------------------------------
Gregory E. Boyd, 1997 0 0 0 0 0
Secretary, 1998 0 0 0 0 0
Treasurer, Director 1999 0 0 0 0 0
- --------------------------------------------------------------------------------
Option/SAR Grants Table (none)
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
25
<PAGE>
Directors' Compensation for Last Fiscal Year
-----------------------
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
Donald R. Schenkier
B. Director
Gregory E. Boyd 0 0 0 0 0
Item 11. 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.
NUMBER OF SHARES OWNERSHIP
SHAREHOLDERS BENEFICIAL OWNERS PERCENTAGE
- --------------------------------------------------------------------------------
Donald R. Schenkier, President & Director 333,333 23%
555 W. Peakview Avenue
Littleton, CO 80120
333,334 23%
Gregory E. Boyd, Secretary, Treasurer and Director
13105 Monaco Parkway #A
Denver, CO 80222
342,334 23.7%
Te Huey Urich, Shareholder
83855 Cobblestone St.
Highlands Ranch, CO 80126
All directors and executive 666,667 46%
officers as a group (2 persons)
Each principal shareholder has sole investment power and sole voting power over
the shares.
26
<PAGE>
Item 12. Certain Relationships and Related Transactions
- ---------------------------------------------------------------
None for fiscal year 1999.
PART IV
Item 13. Exhibits and Reports on Form 8-K
- ------------------------------------------------
The following documents are filed as part of this report:
1. Reports on Form 8-K:
None
2. Exhibits:
None
28
<PAGE>
INDEX
Form 10-K
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation *Incorporated by reference
to Registration Statement
10SB/12(g) #0-114873
3.2 Amendment to Articles of Incorporated by Reference
Incorporation to Registration Statement
10SB/12(g) #0-114873
3.2 Bylaws *Incorporated by reference
to Registration Statement
10SB/12(g) #0-114873
27.1 Financial Data Schedule EX-27.1
29
<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: April 13, 2000
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
-----------------------------------------
by: /s/ Donald Schenkier
------------------------
Donald Schenkier
President
/s/ Gregory E. Boyd
--------------------
Gregory E. Boyd
Secretary Treasurer and Director
Directors:
/s/Donald Schenkier
-------------------
Donald Schenkier
/s/Gregory E. Boyd
------------------
Gregory E. Boyd
30
<PAGE>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 & 1998
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. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax:(303) 796-0137
Colorado Society of C.P.A.s
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Rocky Mountain Financial Enterprises, Inc.
Denver, Colorado
We have audited the accompanying balance sheets of Rocky Mountain Financial
Enterprises, Inc. (A Development Stage Company) as of December 31, 1999 and
1998, and the related statements of operations, cash flows, and changes in
stockholders' equity for the period December 2, 1993 (inception), through
December 31, 1999, and the years ended December 31, 1999 and 1998. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rocky Mountain Financial
Enterprises, Inc. at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the period, December 2, 1993 (inception)
through December 31, 1999 and the fiscal years ended December 31, 1999 and 1998,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company is in the development stage, conditions exist
which raise substantial doubt about the Company's ability to continue as a going
concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. Since its inception, the Company has
lost $125,243 from operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Michael Johnson & Co., LLC
Denver, Colorado
April 3, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<S> <C> <C>
December 31, December 31,
1999 1998
--------------------- ---------------------
ASSETS:
CURRENT ASSETS:
Cash $0 $0
--------------------- ---------------------
Total Current Assets 0 0
===================== =====================
OTHER ASSETS:
Organizational Costs
Net of Amortization 0 0
--------------------- ---------------------
Total Other Assets 0 0
TOTAL ASSETS $0 $0
===================== =====================
LIABILITIES AND STOCKHOLDERS' DEFICIT:
CURRENT LIABILITIES:
Accrued Expenses $11,248 $10,298
Notes Payable 52,488 52,488
--------------------- ---------------------
TOTAL CURRENT LIABILITIES 63,736 62,786
--------------------- ---------------------
STOCKHOLDERS' EQUITY (DEFICIT):
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
shares authorized, none issued and outstanding 0 0
Deficit Accumulated During the Development Stage (125,243) (124,293)
--------------------- ---------------------
TOTAL STOCKHOLDERS' DEFICIT (63,736) (62,786)
--------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $0 $0
===================== =====================
The accompanying notes are an integral part of these financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<S> <C> <C> <C>
For the For the December 31, 1993
Year Ended Year Ended (Inception) thru
December 31, December 31, December 31,
1999 1998 1999
------------------- ------------------- --------------------
INCOME
Revenue, Consulting Fees $0.00 $0 $8,000
OPERATING EXPENSES: 0
Consulting Fees 0 0 73,955
Office Expense 250 50 8,980
Travel 0 0 4,989
Telephone Expense 0 0 2,559
Professional Fees 0 0 28,627
Rent 0 0 10,022
Interest Expense 700 700 3,111
Amortization Expense 0 200 1,000
------------------- ------------------- --------------------
Total Operating Expenses 950 950 133,243
------------------- ------------------- --------------------
NET (LOSS) ACCUMULATED
DURING THE DEVELOPMENT STAGE ($950) ($950) ($125,243)
=================== =================== ====================
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)
=================== =================== ====================
The accompanying notes are an integral part of these financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<S> <C> <C> <C>
For the For the December 2, 1993
Year Ended Year Ended (Inception) through
December 31, December 31, December 31,
1999 1998 1999
--------------------- --------------------- -------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) ($950) ($950) ($125,243)
Changes in assets and liabilities:
Increase (Decrease) in Accrued Expenses 950 950 11,248
--------------------- --------------------- -------------------------
Net Cash Used in Operating Activities 0 0 (113,995)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of Common Stock 0 0 61,507
Funds from Notes Payable 0 0 52,488
--------------------- --------------------- -------------------------
Net Cash Provided By Financing Activites 0 0 113,995
INCREASE (DECREASE) IN CASH 0 0 0
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 0 0 0
--------------------- --------------------- -------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $0 $0 $0
===================== ===================== =========================
Supplemental Cash Flow Information:
Interest paid $0 $0 $0
--------------------- --------------------- -------------------------
Taxes paid $0 $0 $0
--------------------- --------------------- -------------------------
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock During the
------------------------------------------------ Development
Price per share Shares Amount Stage Totals
----------------------- ------------------ ---------------- -------------------- --------------
Balance - December 3, 1993 0 $0 $0 $0
Stock issued for services - December 3, 1993 0.001 52,000 52 0 52
------------------ ---------------- -------------------- -------------
Balance - December 31, 1993 52,000 52 0 52
------------------ ---------------- -------------------- -------------
Stock issued for services - March 31, 1994 0.001 948,000 948 0 948
Stock issued for cash - June 16, 1994 0.25 28,000 7,000 0 7,000
Stock issued for cash - July 14, 1994 0.25 800 200 0 200
Stock issued for cash - July 15, 1994 0.25 4,000 1,000 0 1,000
Stock Issued for cash - July 25, 1994 0.25 2,000 500 0 500
Stock Issued for cash - July 31, 1994 0.25 2,200 550 0 550
Stock Issued for cash - August 1, 1994 0.25 400 100 0 100
Stock Issued for cash - August 9, 1994 0.25 20,000 5,000 0 5,000
Stock Issued for cash - September 13, 1994 0.25 12,000 3,000 0 3,000
Stock Issued for services - September 15, 1994 0.25 10,000 2,500 0 2,500
Stock Issued for services - September 21, 1994 0.25 100,000 25,000 0 25,000
Stock Issued for cash - September 23, 1994 0.25 160 40 0 40
Stock Issued for cash - September 25, 1994 0.25 200 50 0 50
Stock Issued for cash - September 26, 1994 0.25 268 67 0 67
Stock Issued for cash - October 6, 1994 0.25 4,000 1,000 0 1,000
Net loss for year 0 0 (76,381) (76,381)
------------------ ---------------- -------------------- -------------
Balance - December 31, 1994 1,184,028 47,007 (76,381) (29,374)
------------------ ---------------- -------------------- -------------
Net loss for year 0 0 (8,820 (8,820)
----------------- ---------------- -------------------- -------------
Balance - December 31, 1995 1,184,028 47,007 (85,201) (38,194)
------------------ ---------------- -------------------- -------------
Stock issued for cash - February 15, 1996 0.25 8,000 2,000 0 2,000
Stock issued for cash - October 26, 1996 0.05 250,000 12,500 0 12,500
Net loss for year 0 0 (34,649) (34,649)
------------------ ---------------- -------------------- -------------
Balance - December 31, 1996 1,442,028 61,507 (119,850) (58,343)
------------------ ---------------- -------------------- -------------
Net loss for year 0 0 (3,493) (3,493)
------------------ ---------------- -------------------- -------------
Balance - December 31, 1997 1,442,028 61,507 (123,343) (61,836)
------------------ ---------------- -------------------- -------------
Net loss for year 0 0 (950) (950)
------------------ ---------------- -------------------- -------------
Balance - December 31, 1998 1,442,028 61,507 (124,293) (62,786)
------------------ ---------------- -------------------- -------------
Net loss for year 0 0 (950) (950)
------------------ ---------------- -------------------- -------------
Balance - December 31, 1999 1,442,028 $61,507 ($125,243) ($63,736)
================== ================ ==================== =============
The accompanying notes are an integral part of these financial statements.
F-6
</TABLE>
<PAGE>
Rocky Mountain Financial Enterprises, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1999 & 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION - NATURE OF OPERATIONS
Rocky Mountain Financial Enterprises, Inc. (the Company) 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 cash as may be required, and ultimately to
attain successful operations. The financial statements do not include
any adjustments that might result from this outcome of this
uncertainty.
On or about March 29, 1990, the Company filed a registration statement
on Form S-18 with the Securities and exchange commission, wherein the
company attempted to register 20,000 Units, each Unit consisting of 100
shares of the Company's Common Stock and 100 Class A, Class B, and
Class C Common Stock Purchase Warrants. The company prior to
effectiveness subsequently voluntarily abandoned this registration
statement. Other than filing of the aforesaid registration statements,
the only activities undertaken by the Company since its inception has
been the issuing of 4,500,000 shares of the Company's Common Stock to
its original shareholders, which stock was issued in exchange for
aggregate cash consideration of $13,500. Each shareholder of the
Company has executed and delivered a "lock-up" letter agreement,
affirming that they shall not sell their respective shares of the
Company's Common Stock until such time as the Company has successfully
consummated a merger or acquisition has been consummated. Also, each
shareholder has agreed to place their respective stock certificates
with the Company's legal counsel who will not release these respective
certificates until such time as legal counsel has confirmed that a
merger or acquisition has been successfully consummated.
BASIS OF PRESENTATION: DEVELOPMENT STAGE COMPANY
The Company has not earned significant revenue from planned principal
operations. Accordingly, the Company's activities have been accounted
for as those of a "Development Stage Enterprise" as set forth in
Financial Accounting Standards Board Statement No. 7 ("SFAS 7"). Among
the disclosures required by SFAS 7 are that the Company's financial
statements be identified as those of a development stage company, and
that the statements of operations, stockholders' equity (deficit) and
cash flows disclose activity since the date of the Company's inception.
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
The Company's fiscal year end is December 31.
F-7
<PAGE>
Rocky Mountain Financial Enterprises, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1999 & 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED):
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.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considered all
cash and other highly liquid investments with initial maturities of
three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The cost of ordinary
maintenance and repairs is charged to operations while renewals and
replacements are capitalized. Depreciation is computed on the
straight-line method over the following estimated useful lives:
Manufacturing Equipment 5 years
Furniture & Equipment 5 years
REVENUE RECOGNITION
Product Sales are sales of on-line products and specialty items.
Revenue is recognized at the time of sale. Accounts Receivable are
written off when deemed uncollectable.
NOTE 2 - RELATED PARTY TRANSACTIONS:
SHORT TERM BORROWING FROM SHAREHOLDERS
Shareholders of the Company provided services and advanced cash to the
Company for operations. Certain of these transactions resulted in notes
being issued that are still outstanding at December 31, 1999.
NOTE 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 were
included in the organizational costs.
F-8
<PAGE>
<TABLE>
<CAPTION>
Rocky Mountain Financial Enterprises, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1999 & 1998
<S> <C>
NOTE 4 - NOTES PAYABLE:
Notes Payable consists of the following:
Notes Payable to G. Paul Music Ltd., 7% annual rate, note stated
September 19, 1994 and matured May 31, 1995: $10,000
Notes Payable to Sole Track, Inc.,
Non-interest bearing and uncollateralized. Due on Demand 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
=======
</TABLE>
NOTE 5 - INCOME TAXES:
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards Number 109 ("SFAS 109"), "Accounting for
Income Taxes", which requires a change from the deferred method to the
asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing
assets and liabilities.
The Company has deferred income tax assets that have been fully
reserved as follows:
Deferred tax assets
Net operating loss carryforwards $ 125,243
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS (125,243)
--------
NET DEFERRED TAX ASSETS $ -
========
At December 31, 1999, the Company had net operating loss carryforwards
of approximately $46,258 for federal income tax purposes. These
carryforwards, if not utilized to offset taxable income will expire at
the end of the indicated years:
2008 - $76,381 2009 - $8,820
2010 - $34,649 2011 - $3,493
2012 - $950 2013 - $950
F-9
<PAGE>
Rocky Mountain Financial Enterprises, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1999 & 1998
NOTE 6 GOING CONCERN:
The Company is a development state company, and as such is dependent
upon its ability to raise capital through private and public funding.
In view of these matters, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to meet its financial requirements, and the success
of its future operations. Management believes that actions presently
being taken to revise the Company's operating and financial
requirements provide the opportunity for the Company to continue as a
going concern.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 63,736
<BONDS> 0
0
0
<COMMON> 61,507
<OTHER-SE> (125,243)
<TOTAL-LIABILITY-AND-EQUITY> (63,736)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (950)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (950)
<INCOME-TAX> 0
<INCOME-CONTINUING> (950)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (950)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
