UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(D) of The Securities Act of 1934
For the quarterly period ended: September 30, 2003
Commission file number: 000-49950
PRELUDE VENTURES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0232018
(State or other jurisdiction of (IRS Employee Identification No.)
Incorporation or organization)
1400 N. Gannon Drive 2nd Floor Hoffman Estates, IL 60194
(Address of principal executive offices)
(847) 310-9416
(Issuer's telephone number)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.001 par value 28,300,000
(Class) (Outstanding as of December 4, 2003)
PRELUDE VENTURES, INC.
FORM 10-QSB
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets....................................................F-2
Condensed Statements of Operations..........................................F-3
Condensed Statements of Cash Flows..........................................F-4
Condensed Statements of Stockholders' Equity................................F-5
Notes to Condensed Financial Information....................................F-6
Notes to Condensed Financial Information....................................F-7
Item 2 Management's Discussion and Analysis or Plan of Operation..........3
Item 3 Controls and Procedures............................................9
Part II OTHER INFORMATION
Item 1. Legal Proceedings...................................................10
Item 2. Changes in Securities...............................................10
Item 3. Defaults Upon Senior Securities.....................................10
Item 4. Submission Of Matters To A Vote Of Security Holders.................10
Item 5 Other Information..................................................10
Item 6 Exhibits and Reports on Form 8-K...................................10
Signatures..................................................................11
Certifications..............................................................12
2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PRELUDE VENTURES, INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
SEE ACCOMPANYING NOTES
PRELUDE VENTURES, INC.
(A Development Stage Company)
INTERIM BALANCE SHEETS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
(Unaudited) (Audited)
ASSETS September 30, December 31,
------
2003 2002
---- ----
Current
Cash $ 55 $ 24,397
Prepaid expenses - 400
--------------- ---------------
$ 55 $ 24,797
=============== ===============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 46,895 $ 7,263
Management fees and termination expense payable - Note 5 (b) 470,000 -
Loans payable - Note 4 32,442 10,000
--------------- ---------------
549,337 17,263
--------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $0.001 par value
10,000,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value
100,000,000 shares authorized
15,000,000 (December 31, 2002: 15,000,000) shares issued
and outstanding 15,000 15,000
Additional paid-in capital 85,000 85,000
Deficit accumulated during the development stage ( 649,282) ( 92,466)
--------------- ---------------
( 549,282) 7,534
--------------- ---------------
$ 55 $ 24,797
=============== ===============
SEE ACCOMPANYING NOTES
F-1
PRELUDE VENTURES, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS for
the three and nine month period ended September 30, 2003
and 2002
and for the period May 24, 2000 (Date of Incorporation) to September 30, 2003
(Stated in US Dollars)
(Unaudited)
May 24, 2000
(Date of Incor-
Three months ended Nine months ended poration) to
September 30, September 30, September 30,
2003 2002 2003 2002 2003
---- ---- ---- ---- ----
Expenses
Accounting and audit fees $ 16,477 $ 1,683 $ 42,507 $ 4,850 $ 60,161
Bank charges 51 27 126 156 599
Consulting fees 10,000 - 10,000 - 10,000
Filing fees - - - 4,652 7,185
Foreign exchange loss - 692 - 692 692
Legal fees - - 9,815 - 36,674
Management fees 61,890 8,000 136,890 14,000 159,390
Office and miscellaneous - - 231 460 891
Resource property costs - 1,000 - 5,108 12,688
Transfer agent fees 486 1,165 2,247 1,605 6,002
Termination expenses
- Note 5 (b) 355,000 - 355,000 - 355,000
-------------- -------------- -------------- -------------- -----------------
Net loss for the period $ ( 443,904) $ ( 12,567) $ ( 556,816) $ ( 31,523) $ ( 649,282)
============== ============== ============== ============== =================
Loss per share $ ( 0.03) $ ( 0.00) $ ( 0.04) $ ( 0.00)
============== ============== ============== ==============
Weighted average number of
shares outstanding 15,000,000 12,000,000 15,000,000 7,333,332
============== ============== ============== ==============
SEE ACCOMPANYING NOTES
F-2
PRELUDE VENTURES, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS for
the three and nine month period ended September 30, 2003
and 2002
and for the period May 24, 2000 (Date of Incorporation) to September 30, 2003
(Stated in US Dollars)
(Unaudited)
May 24, 2000
(Date of Incor-
Nine months ended poration) to
September 30, September 30,
2003 2002 2003
---- ---- ----
Cash Flows used in Operating Activities
Net loss for the period $ ( 556,816) $ ( 31,523) $ ( 649,282)
Changes in non-cash working capital balances
related to operations
Prepaid expenses 400 ( 700) -
Accounts payable and accrued liabilities 154,632 ( 11,066) 161,895
Management fees and termination expense payable 355,000 - 355,000
---------------- ---------------- ----------------
( 46,784) ( 43,289) ( 132,387)
---------------- ---------------- ----------------
Cash Flows from Financing Activities
Shares issued for cash - 75,000 100,000
Loan payable 22,442 ( 4,500) 32,442
---------------- ---------------- ----------------
22,442 70,500 132,442
---------------- ---------------- ----------------
Increase (decrease) in cash during the period ( 24,342) 27,211 55
Cash, beginning of the period 24,397 2,383 -
---------------- ---------------- ----------------
Cash, end of the period $ 55 $ 29,594 $ 55
================ ================ ================
Supplementary disclosure of cash flow information:
Cash paid for:
Interest $ - $ - $ -
================ ================ ================
Income taxes $ - $ - $ -
================ ================ ================
Non-cash Transactions - Note 6
SEE ACCOMPANYING NOTES
F-3
PRELUDE VENTURES, INC.
(A Development Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY) for the period May 24, 2000 (Date of
Incorporation) to September 30, 2003
(Stated in US Dollars)
(Unaudited)
Deficit
Accumulated
Additional During the
Common Shares Paid-in Share Development
-------------------------------
Number Par Value Capital Subscriptions Stage Total
------ --------- ------- ------------- ----- -----
Capital stock subscribed
pursuant to an offering
memorandum, for cash - at $0.004 6,000,000 $ 6,000 $ 19,000 $ - $ - $ 25,000
Net loss for the period - - - - ( 7,301) ( 7,301)
----------- --------------- --------------- --------------- ------------- -----------
Balance, March 31, 2001 6,000,000 6,000 19,000 - ( 7,301) 17,699
Stock subscriptions received - - - 31,000 - 31,000
Net loss for the year - - - - ( 50,409) ( 50,409)
----------- --------------- --------------- --------------- ------------- -----------
Balance, March 31, 2002 6,000,000 6,000 19,000 31,000 ( 57,710) ( 1,710)
Stock subscriptions received - - - 44,000 - 44,000
Shares issued pursuant to an
initial public offering - at $0.008 9,000,000 9,000 66,000 ( 75,000) - -
Net loss for the period - - - - ( 34,756) ( 34,756)
----------- --------------- --------------- --------------- ------------- -----------
Balance, December 31, 2002 15,000,000 15,000 85,000 - ( 92,466) 7,534
Net loss for the period - - - - ( 556,816) ( 556,816)
----------- --------------- --------------- --------------- ------------- -----------
Balance, September 30, 2003 15,000,000 $ 15,000 $ 85,000 $ - $ ( 649,282) $ ( 549,282)
=========== =============== =============== =============== ============= ===========
SEE ACCOMPANYING NOTES
F-4
PRELUDE VENTURES, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 1 Interim Reporting
While the information presented in the accompanying interim nine
months financial statements is unaudited, it includes all
adjustments which are, in the opinion of management, necessary to
present fairly the financial position, results of operations and
cash flows for the interim periods presented. All adjustments are
of a normal recurring nature. It is suggested that these interim
financial statements be read in conjunction with the company's
December 31, 2002 financial statements which are contained on Form
10KSB - Annual Report to Shareholders.
Note 2 Continuance of Operations
The financial statements have been prepared using generally
accepted accounting principles in the United States of America
applicable for a going concern which assumes that the Company will
realize its assets and discharge its liabilities in the ordinary
course of business. At September 30, 2003, the Company has a
working capital deficiency of $549,282 and has accumulated losses
of $649,282 since its inception. Its ability to continue as a
going concern is dependent upon the ability of the Company to
obtain the necessary financing to meet its obligations and pay its
liabilities arising from normal business operations when they come
due. The Company is currently pursuing new debt and equity
financing in conjunction with the proposed acquisition (Note 7).
Additionally, approximately $400,000 was raised in a private
placement whose proceeds were used for working capital needs as
well as a down payment toward the purchase of an option on one of
the proposed acquisitions.
Note 3 Significant Accounting Policy
Development Stage
The Company is no longer classified as a pre-exploration stage
company since it has abandoned its mining lease. The Company is
now a development stage company as defined in Statement of
Financial Accounting Standards No. 7 in respect to its
acquisitions (Note 7 (b)).
Note 4 Loans Payable
The loans payable are unsecured, non-interest bearing and due on
demand.
F-5
PRELUDE VENTURES, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 5 Commitments - Note 7
-----------
a) Mining Lease
By a lease letter agreement effective March 9, 2001 and
amended March 4, 2002 and September 4, 2002, the Company was
granted the exclusive right to explore, develop and mine the
Medicine Project property located in Elko County of the State
of Nevada. The term of the lease was for 20 years, with
automatic extensions so long as the conditions of the lease
are met. During the nine months ended September 30, 2003,
management of the Company terminated the mining lease. As the
Company terminated the lease, it is required to pay all
federal and state mining claim maintenance fees for the
current year. The Company is required to perform reclamation
work on the property as required by federal state and local
law for disturbances resulting from the Company's activities
on the property. In the opinion of management, there will be
no continuing liability.
b) Termination
At September 30, 2003, the Company agreed to issue 200,000
common shares to its former President for the settlement of
management fees payable ($105,000), advances to the Company
($10,000) and termination expense ($355,000). The shares have
been valued at $2.35 per share.
Note 6 Non-cash Transactions
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the cash flow
statement.
The Company has recorded a termination expense in respect to the
termination of its former President and has agreed to issue
200,000 common shares at $2.35 per share to satisfy the total
liability which includes the termination expense, unpaid
management fees and unpaid advances to the Company.
F-6
PRELUDE VENTURES, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 7 Subsequent Events - Note 7
-----------------
a) Business Acquisition Cancelled
On April 1, 2003, the Company entered into an agreement to
acquire 100% of the issued and outstanding shares of Pascal
Energy, Inc., a Canadian corporation, by the issuance of
5,000,000 common shares, restricted under Rule 144 of the
Securities and Exchange Act and at a later date, issue
5,000,000 common shares, restricted under Rule 144 of
Securities and Exchange Act, subject to the Company paying not
less than $1,000,000 accumulated dividends to its shareholders
of record. Pascal Energy, Inc.'s business is to provide
servicing for the oil and gas industry.
The Company has determined that the transaction cannot be
completed due to the inability to complete a comprehensive due
diligence. The shares of common stock previously transferred
in anticipation of the completion of the transaction are to be
returned to the treasury of the Company and cancelled.
b) New Acquisitions
On October 9, 2003, the Company entered into a Stock Purchase
Agreement ("Alliance Agreement") with Alliance Petroleum
Products Company ("Alliance") an Illinois Corporation and a
Rider to the Alliance Agreement ("Rider"). Alliance is in the
business of blending and bottling motor oil and anti-freeze.
Under the Alliance Agreement, the Company issued 5,000,000
shares of common stock for 100% of the issued and outstanding
shares of the common stock of Alliance (757,864 common
shares). An additional 5,000,000 shares of common stock of the
Company shall be issued to Worldlink International Network,
Inc. upon 24 months from the date hereof. Under the terms of
the Rider, the Company is required to provide funding of at
least $3,500,000 to refinance and to pay Harris Bank, a
secured creditor of Alliance. The shareholders of Alliance
have the option to have the 757,864 issued and outstanding
shares of common stock of Alliance returned and the Alliance
Agreement rescinded if they choose, if the Company does not
arrange the funding within 150 days from the date of the
execution of the Alliance Agreement.
In addition, on October 9, 2003, the Company entered into an
agreement to acquire an option for $500,000 to purchase the
assets and certain liabilities of Tri-State Stores, Inc. an
Illinois corporation ("Tri-State"), GMG Partners LLC, an
Illinois Limited Liability Company ("GMG") and SASCO
Springfield Auto Supply Company, a Delaware Corporation
("SASCO") (Tristate, GMG and SASCO are collectively referred
to herein as "TSG"). Upon exercise of the options, the Company
must pay $3,000,000 and assume certain liabilities, not
exceeding $700,000. TSG is involved in the automotive after
market.
F-7
PRELUDE VENTURES, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 7 Subsequent Events - (cont'd)
b) New Acquisitions - (cont'd)
In addition, on October 9, 2003, the Company entered into an
agreement with the shareholders of Motor Parts Warehouse, Inc.
("MPW"), of St. Louis, Missouri to acquire the rights to an
option to purchase 100% of the outstanding shares of MPW ("MPW
Option"). As consideration for the rights to this option, the
Company must issue 5,000,000 shares of common stock. Upon
exercise of the MPW Option, the Company must issue 5,000,000
shares of common stock to the shareholders of MPW and
$2,200,000. This MPW option cannot be exercised until after
the refinancing of the TSG debt of approximately $3,000,000.
MPW is also an auto parts distributor.
In connection with these agreements, the Company entered into
several service agreements (Note 7(c)).
The agreements above are subject to shareholder approval. Upon
execution of these agreements, Alliance, TSG and MPW have
become related to the Company through appointments of members
of their boards of directors to the Company's board of
directors.
c) The Company entered into the following service agreements:
- A professional services agreement dated October 9,
2003 with Alpha Advisors, LLC for a term of one year
and renewable for an additional year. The fee for
these services is the issuance of 1,000,000 shares of
common stock of the Company upon execution of the
agreements (issued), $25,000 due at signing of the
Tri-state Stores and Alliance Petroleum, Inc.
agreements and $6,000 payable on the first of each
month thereafter. In addition, a finder's fee of 10%
of any new financing shall be paid on funds being
committed. Upon execution of this agreement, a
director of Alpha Advisors, LLC was appointed to the
board of directors of the Company.
- A consulting services agreement dated October 9, 2003
with National Securities Corporation, Inc. for a term
of six months renewable on a monthly basis. The fee
for this service is the issuance of 1,000,000 shares
of common stock of the Company (issued).
F-8
PRELUDE VENTURES, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 7 Subsequent Events - (cont'd)
c) The Company entered into the following agreements: - (cont'd)
- A consulting services agreement dated October 9, 2003
with New Century Consultants, Inc. for a term of six
months renewable on a monthly basis. The fee for this
service is the issuance of 1,000,000 shares of common
stock of the Company (issued). New Century
Consultants, Inc. will become a related party to the
Company as it has agreed to purchase a significant
portion of the Company's issued and outstanding
shares.
- A consulting agreement dated October 10, 2003 with
Commonwealth Partners NY, LLC for a term of three
years. The fee for this service is the issue of
200,000 free trading shares and 300,000 restricted
shares (issued) of common stock of the Company.
F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update forward
looking statements.
OVERVIEW
History And Organization
Prelude Ventures, Inc. (the "Company") was incorporated under the laws of the
state of Nevada on May 24, 2000. We have not commenced business operations and
we are considered an exploration stage enterprise. To date, our activities have
been limited to organizational matters, obtaining a mining engineer's report and
The preparation and filing of the registration statement of which this
prospectus is a part of. In connection with the organization of our company, the
founding shareholder of our company contributed an aggregate of $25,000 cash in
exchange for 1,000,000 shares of common stock (pre-roll forward 6:1). We have no
significant assets, and we are totally dependent upon the successful completion
of this offering and receipt of the proceeds there from, of which there is no
assurance, for the ability to commence our proposed business operations.
Proposed Business
On April 1, 2003, Prelude Ventures, Inc. entered into an agreement to acquire an
aggregate of 10,000,000 shares of common stock, being all of the issued and
outstanding shares of Pascal Energy Inc. from that company and its shareholders.
Prelude has agreed to issue and or exchange following shares: 5,000,000 common
voting shares, restricted under rule 144 of the Securities Act of 1933, and in
such form as requested by the sellers; and at a later date, issue 5,000,000
Common voting shares, restricted under rule 144 of the Securities Act of 1933,
and in such form as requested by the sellers, subject to Prelude paying not less
than $1,000,000 accumulated dividend to its shareholders of record. As of
November 30, 2003, no shares have been issued and the transaction has been
cancelled
3
PLAN OF OPERATION
We are a start-up, developmental stage company and have not yet started our
business operations or generated or realized any revenues from our business
operations.
Our auditors have issued a going concern opinion for the year ended December 31,
2002. This means that our auditors believed there was substantial doubt that we
can continue as an on-going business unless we obtain additional capital to pay
our bills.
Results of Operations
From Inception to May 24, 2000
We initially acquired our first interest in lode mining claims. These claims
were abandoned during the three months ended March 31, 2003.
During the second quarter, ended June 30, 2003 our operations focused upon the
investigation and acquisition of Pascal Energy Inc. Subsequent to that, in the
Third Quarter, ended September 30, 2003, we abandoned our focus on Energy and
investigated an entered transaction with Alliance Petroleum Products Company and
Tri-State Stores, Inc., and related companies, companies who products are in the
manufacture and distribution of auto parts and lubricants
Subsequent Events.
On October 3, 2003, We entered into the transactions set forth on the Current
report on form 8-K, filed on November 6, 2003, with Alliance Petroleum Products
Company ("Alliance") and Tri-State Stores Inc ("Tri-State"), GMG Partners LLC,
("GMG") and SASCO Springfield Auto Supply Company, ("SASCO") (Tri-State, GMG and
SASCO are collectively referred to herein as "TSG"),
Effective October 9, 2003, we have cancelled the proposed transaction with
Pascal Energy Inc.
Plan of Operations
Effective October 10, 2003, the Control of the Registrant was changed to the
current management.
Liquidity and Capital Resources
Since inception, we have used our common stock to raise money for our property
acquisition, for corporate expenses and to repay outstanding indebtedness. Net
cash provided by financing activities from inception on May 24, 2000 to
September 30, 2003 was $132,442 consisting of $100,000 from the private
placement of stock and approximately $32,000 of loan proceeds received from our
president and sole director.
Prelude's plan of operations for the next twelve months is to complete the
transactions with Alliance and TSG. Including acquisition of additional
businesses and internal expansion.
4
As of the date of this filing, we have yet to generate any revenues from our
business operations and we had sustained cumulative operating losses of $556,816
since inception. In order to fund these needs, the Company's founder paid
$25,000 in cash in exchange for 1,000,000 shares of common stock. We have also
issued 1,500,000 shares of stock pursuant to our Form SB-2 registration
statement. This money was utilized for organizational and start-up costs and as
operating capital. An additional $75,000 was raised through the issue of common
shares last year.
The Company recognizes a need for additional capital that will be sought through
the sale of additional equity by way of a Private Placement. Funds generated
will be used to fund working capital requirements as well as expansion and
acquisitions. As of November 30, 2003 approximately $400,000 has been raised in
this offering
Management fees increased to approximately $60,000 for the quarter and legal and
accounting fees were $16,000. These fees increased in connection with the
acquisition purchase investigation that resulted in the signing of the agreement
noted in the 8-K dated April 15, 2003. We had incurred a termination expense as
a result of stock to be issued to the former president to settle his previous
management contract
As at September 30, 2003 the Company had insufficient funds to continue
operations. Funds have been provided by Directors and Private Placement
Shareholders which if not continued could result in the Company curtail
operations. We are also seeking additional debt and equity institutional sources
of financing.
Should the Company be unsuccessful in its attempts to raise capital it may have
to abandon its attempt to complete the October 9, 2003 transactions.
RISK FACTORS
Much of the information included in this registration statement includes or is
based upon estimates, projections or other "forward looking statements". Such
forward looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
Our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
Looking statements".
Our common shares are considered speculative during our search for a new
business opportunity. Prospective investors should consider carefully the risk
factors set out below.
5
Governmental Regulation
To the best of our knowledge, we are not currently subject to direct federal,
state or local regulation in the United States, other than regulations
applicable to businesses generally.
Key Personnel
All of our present officers or directors are key to our continuing operations,
we rely upon the continued service and performance of these officers and
directors, and our future success depends on the retention of these people,
whose knowledge of our business and whose technical expertise would be difficult
to replace. At this time, none of our officers or directors is bound by
employment agreements, and as a result, any of them could leave with little or
no prior notice.
If we are unable to hire and retain technical, sales and marketing and
operational personnel, any business we acquire could be materially adversely
affected. It is likely that we will have to hire a significant number of
additional personnel in the future if we identify and complete the acquisition
of a business opportunity, or if we enter into a business combination.
Competition for qualified individuals is likely to be intense, and we may not be
able to attract, assimilate, or retain additional highly qualified personnel in
the future. The failure to attract, integrate, motivate and retain these
employees could harm our business.
Limited Operating History; Need for Additional Capital
There is no historical financial information about our company upon which to
base an evaluation of our performance. We are an exploration stage company and
have not generated any revenues from operations. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent
in the establishment of a new business enterprise, including limited capital
resources, and possible cost overruns due to price and cost increases in
services. To become profitable and competitive, we conduct research and
exploration of our properties. We are seeking equity financing to provide for
the capital required to implement our research and exploration phases.
We have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Equity financing could result in
additional dilution to existing shareholders.
Lack of Market Research or Marketing Organization
We have not conducted or received results of market research indicating that
there is a demand for the acquisition of a business opportunity or business
combination as contemplated by our company. Even if there is demand for the
acquisition of a business opportunity or combination as contemplated, there is
no assurance we will successfully complete such an acquisition or combination.
6
Regulation
Although we will be subject to regulation under the Securities Exchange Act of
1934, management believes that we will not be subject to regulation under the
Investment Company Act of 1940, insofar as we will not be engaged in the
business of investing or trading in securities. In the event that we engage in
business combinations which result in us holding passive investment interests in
a number of entities, we could be subject to regulation under the Investment
Company Act of 1940, meaning that we would be required to register as an
Investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to the status of our company under the Investment
Company Act of 1940 and, consequently, any violation of such act would subject
us to material adverse consequences.
Uncertain Ability to Manage Growth
Our ability to achieve any planned growth upon the acquisition of a suitable
business opportunity or business combination will be dependent upon a number of
factors including, but not limited to, our ability to hire, train and assimilate
management and other employees and the adequacy of our financial resources. In
addition, there can be no assurance that we will be able to manage successfully
any business opportunity or business combination. Failure to manage anticipated
growth effectively and efficiently could have a materially adverse effect on our
business.
"Penny Stock" Rules May Restrict the Market for the Company's Shares
Our common shares are subject to rules promulgated by the Securities and
Exchange Commission relating to "penny stocks," which apply to companies whose
shares are not traded on a national stock exchange or on the NASDAQ system,
trade at less than $5.00 per share, or who do not meet certain other financial
requirements specified by the Securities and Exchange Commission. These rules
require brokers who sell "penny stocks" to persons other than established
customers and "accredited investors" to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in the such penny stocks. These
rules may discourage or restrict the ability of brokers to sell our common
shares and may affect the secondary market for our common shares. These rules
could also hamper our ability to raise funds in the primary market for our
common shares.
Possible Volatility of Share Prices
Our common shares are currently publicly traded on the Over-the-Counter Bulletin
Board service of the National Association of Securities Dealers, Inc. The
trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.
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In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a
diversion of management's attention and resources.
Indemnification of Directors, Officers and Others
Our by-laws contain provisions with respect to the indemnification of our
officers and directors against all expenses (including, without limitation,
attorneys' fees, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that the person is one of our officers or directors) incurred by an officer
or director in defending any such proceeding to the maximum extent permitted by
Nevada law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of our
company under Nevada law or otherwise, we have been advised the opinion of the
Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Anti-Takeover Provisions
We do not currently have a shareholder rights plan or any anti-takeover
provisions in our By-laws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.
Reports to Security Holders
Under the securities laws of Nevada, we are not required to deliver an annual
report to our shareholders but we intend to send an annual report to our
shareholders.
ITEM 3. CONTROLS AND PROCEDURES
The registrant's Principal executive officers and principal financial officer,
based on their evaluation of the registrant's disclosure controls and procedures
(as defined in Rules 13a-14 (c) of the Securities Exchange Act of 1934) as of
September 30, 2003 have concluded that the registrants' disclosure controls and
procedures are adequate and effective to ensure that material information
relating to the registrants and their consolidated subsidiaries is recorded,
processed , summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this quarterly
report has been prepared.
The registrants' principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants'
internal controls or in other factors that could significantly affect these
controls subsequent to September 30, 2003 the date of their most recent
evaluation of such controls, and that there was no significant deficiencies or
material weaknesses in the registrant's internal controls.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholders are an adverse party or have a
material interest adverse to us.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
31.1 Section 302 Certification
32.1 Section 906 Certification
------------
* Previously filed as an exhibit to the Company's Form 10-SB filed on June 26,
2001
(b) Reports on Form 8-K filed during the three months ended September 30, 2003.
A Current report on Form 8-K-A, under Item 2 Acquisition or Disposition of
Assets and Item 5 Other Events and Regulation FD Disclosure was filed on August
13, 2003
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A Current Report on Form 8-K under Item 1: Changes in Control, Item 5. Other
Events and Regulation FD Disclosure, Item 6. Resignations of Registrant's
Directors and Item 7, Financial Statements and Exhibits of Registrant were filed
on November 6, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November , 2003
Prelude Ventures, Inc.
/s/ Jesse Fuller
-----------------------------------
Jesse Fuller, President
/s/ George L. Riggs, III
-----------------------------------
George L. Riggs, III, Interim CFO
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