UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER
31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 0-27551
MARINE JET TECHNOLOGY CORP.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0450923
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
936A Beachland Boulevard, Suite 13, Vero Beach, FL 32963
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(Address of principal executive offices)
(772) 231-7544
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(Issuer's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, Par Value $0.001 Per Share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of 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]
Issuer's revenues for its most recent fiscal year: $0
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As of March 10, 2005, 28,122,570 shares of the registrant's Common Stock
were outstanding. The aggregate market value of the voting common equity held by
non-affiliates (based on the closing bid price of such stock as reported on
March 10, 2005 by the NASD Over-the-Counter Bulletin Board) was approximately
$477,125.
DOCUMENTS INCORPORATED BY REFERENCE:
None
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business.............................................. 1
Item 2. Description of Properties............................................ 8
Item 3. Legal Proceedings.................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.................. 8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............. 8
Item 6. Management's Discussion and Analysis or Plan of Operations........... 10
Item 7. Financial Statements................................................. 14
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure................................................ 14
Item 8A. Controls and Procedures.............................................. 14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................... 14
Item 10. Executive Compensation............................................... 16
Item 11. Security Ownership of Certain Beneficial Owners and Management....... 17
Item 12. Certain Relationships and Related Transactions....................... 18
Item 13. Exhibits and Reports on Form 8-K..................................... 19
Item 14. Principal Accountant Fees and Services............................... 20
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Summary and Recent Developments
Marine Jet Technology Corp. ("we", "us", "our", or the "Company") was
incorporated in the state of Nevada on February 9, 2000. Since our inception, we
have been focused on developing and marketing boat propulsion technology
developed by Jeff P. Jordan. On January 11, 2005, Mr. Jordan entered into a
Securities Purchase Agreement ("Purchase Agreement") with Keating Reverse Merger
Fund, L.L.C. ("KRM Fund"), under which KRM Fund agreed to purchase, and Mr.
Jordan agreed to sell, an aggregate of 15,306,500 shares of our common stock
owned by him for a purchase price of $440,000, or $0.029 per share.
On January 20, 2005, we entered into the Assumption Agreement with Mr.
Jordan and Intellijet Marine, Inc. ("Intellijet"), a Nevada corporation that we
established as a wholly-owned subsidiary. Under the Assumption Agreement, we
transferred all of our assets, except for 21,822,570 shares of common stock of
Intellijet and approximately $2,500 in cash, to Intellijet. Intellijet agreed to
assume all of our liabilities and obligations and to indemnify us for any loss
we incur with respect to the assumed liabilities. Mr. Jordan and Intellijet also
agreed to release us from any and all obligations and claims whatsoever.
On February 4, 2005, we completed the distribution of all 21,822,570 shares
of common stock of Intellijet owned by us pro rata to our stockholders of record
as of January 24, 2005. Pursuant to the distribution, each of our stockholders
received one share of common stock of Intellijet for each one share of our
common stock owned of by our stockholders on the record date. Intellijet is now
an independent company and will continue to operate our former business of
developing marine jet propulsion technology; supplying mechanical components
under the Quick JetTM brand name; and licensing boat manufacturers to produce
boats incorporating Intelllijet's systems.
Mr. Jordan completed the sale of his Marine Jet shares to KRM Fund on
February 9, 2005. Since the transfer of our marine propulsion assets and
business to Intellijet, we have no material assets, liabilities or ongoing
operations. Nevertheless, we believe that we may be able to recover some value
for our shareholders by the adoption and implementation of a plan to seek,
investigate and, if the results of the investigation warrant, effectuate a
business combination with a suitable privately-held company that has both
business history and operating assets. Our potential success will be primarily
dependent on the efforts and abilities of our new management team, who will have
virtually unlimited discretion in searching for, negotiating and entering into a
business combination transaction.
Pursuant to the terms of the Purchase Agreement and effective as of
February 9, 2005, Mr. Jordan resigned as our President, Treasurer and one of our
directors, Martha A. Jordan, the spouse of Mr. Jordan, resigned as our Secretary
and one of our directors, and Wilbur Sebree, resigned as one of our directors.
Kevin R. Keating was appointed our President, Treasurer, Secretary and sole
director. Concurrently, our principal executive office was moved to 936A
Beachland Boulevard, Suite 13, Vero Beach, Florida 32963.
Since our inception, we have not generated any significant revenues. We may
require additional financing to execute our plan to acquire an operating
company. The accompanying financial statements include a "going concern"
explanatory paragraph from our accountants.
Letter of Intent
On March 24, 2005, we entered into a Letter of Intent to acquire Antik
Denim, LLC, a California limited liability company ("Antik"). Antik designs,
develops, markets and distributes high fashion jeans and accessories with an Old
West flair under the brand name "Antik Denim". Antik's products include jeans,
jackets, belts, purses and t-shirts. Antik currently sells its products in the
United States, Canada, Japan and the European Union directly to department
stores and boutiques and through distribution arrangements in certain foreign
jurisdictions. Antik was established in September 2004, is headquartered in
Commerce, California, and maintains two showrooms in New York and Los Angeles.
1
Under the transactions contemplated under the Letter of Intent, we will
acquire all of the outstanding membership interests in Antik from Antik's
existing members ("Antik Members"). In the exchange, we will issue shares of our
common stock to Antik Members in such amount so that, immediately after giving
effect to the acquisition, the Antik Members will own in the aggregate 95.8% of
our issued and outstanding shares of common stock on a fully diluted basis. At
the close of the transaction, it is contemplated that a new board of directors
will be designated by the Antik Members and that the board will include one
member to be designated by KRM Fund, LLC, our current principal stockholder.
After the payment of certain transaction related fees (including the issuance of
our common stock to certain finders and advisors), our current stockholders are
expected to own approximately 3.8% of the issued and outstanding shares of our
common stock after completion of the transaction with Antik, on a fully diluted
basis.
The completion of the acquisition is subject to the negotiation and
execution of a definitive acquisition agreement, the delivery of financial
statements of Antik prepared in accordance with generally accepted accounting
principles in the United States of America, and the approval by our board and
stockholders of the acquisition, a corporate name change, an increase in our
authorized common stock and a reverse stock split to be mutually determined.
Subject to the satisfaction of the above conditions and other customary
conditions, the acquisition is presently expected to close in the second quarter
of 2005. However, there can be no assurances that the acquisition will be
completed.
History
Prior to our inception, Mr. Jordan was granted several patents in the
United States, the European Union, Australia and New Zealand. For more
information, please refer to the United States Patent and Trademark Office web
site at www.uspto.gov. These patents protect various elements of a marine
propulsion system that Mr. Jordan had developed with Robert J. Tomlinson. Also
prior to our formation, Mr. Jordan asked David L. Lyman, who owned and operated
a contract-manufacturing firm, to assist in the design of a prototype engine.
Mr. Lyman would assist in making the propulsion system suitable for mass
production using automated equipment. Mr. Lyman owned and operated IDA, Inc. and
has gone to Japan to accept awards as the top quality contract manufacturer for
Mitsubishi Heavy Industries. Through IDA, Inc., Mr. Lyman supplies automotive
parts machining services to Honeywell and others in the US.
On May 19, 2000, we entered into a Proprietary Rights Agreement with Mr.
Lyman, whereby we received any and all proprietary rights and future benefits
derived from Mr. Lyman's design, development and work on the prototype
propulsion system. Pursuant to this agreement, we issued 1,000,000 shares of our
common stock to Mr. Lyman. The value of Mr. Lyman's proprietary rights was
negotiated between and among Messrs. Lyman, Jordan and Tomlinson.
On May 19, 2000, we entered into a Technology License Agreement with
Messrs. Jordan and Tomlinson. In accordance with this agreement, Messrs. Jordan
and Tomlinson assigned the rights to three United States patents they owned as
individuals, as well as any improvements, reissues or extensions of those
patents in the United States or abroad. In exchange for this patent, we issued
an aggregate of 15,875,000 shares of our common stock, of which Mr. Jordan
received 14,287,500 common shares and Mr. Tomlinson received 1,587,500 shares of
common stock.
In August of 2001, we purchased assets from Mr. Jordan for cash. The assets
included a test boat, patterns for component castings and related equipment.
During 2002 and 2003, Mr. Jordan continued to develop the prototype system in
the test boat and developed various designs to improve the performance of the
prototype system. This lead to the development of the Variable Marine Jet
design, our second generation system, which was the subject of a PCT patent
filing in December 2003.
We developed a fully operational prototype propulsion system, now referred
to as the first generation system, which has served as a testbed for further
development. This system has been undergoing test, research and further
development by our management. Management has been working on the controls for
the system to improve the maneuverability and convenience. Although the
prototype has generally met management's expectation, we were unable to retain
either an independent firm or the instrumentation for management to accurately
measure the performance specifications of the prototype.
2
We intended to develop marine jet propulsion systems for sale and to
license the rights to manufacture such systems and/or boats incorporating such
technology under the name "Quick Jet." We sought to develop and market the Quick
Jet technology to produce a proprietary marine jet propulsion system that
offered the low-speed thrust and acceleration of a propeller drive, while
retaining the safety, convenience and maneuverability of a traditional jet
design.
We intended to market our water-jet system for commercial use under the
name "WorkJET." With more thrust at low boat speeds and larger load carrying
capacity than previous marine engine types, our management believed that the
WorkJET would operate efficiently both inshore and in heavy seas. It has the
shallow draft of a jet, yet the stability, sea-keeping and dynamic breaking of a
propeller in big swells. We believed that this market was ideal for our product
because jet propulsion systems are preferred in the fishing industry for their
shallow draft and ability to operate over nets.
Our goal was to sell the Quick Jet system in combination with available
marine motors to boat manufacturers, who would produce boats incorporating the
licensed technology.
Prior to our inception, Mr. Jordan was granted US Patent 5,658,176 in
August of 1997, US Patent 5,679,035 in October of 1997 and US Patent 5,683,276
in November of 1997. Patents corresponding to US Patent 5,658,176 have also been
granted in the EU, Australia and New Zealand and one is pending in Canada. These
patents cover methods of the following:
1. More efficiently recovering hydraulic power in the inlet duct of the
propulsion system,
2. Regulating the system flow for water pump efficiency and
3. Moving a higher mass flow rate of the water for greater thrust.
Due to the length and detail of the information contained in the patent
documentation, we refer readers to view these documents at the United States
Patent and Trademark Office's Internet site, which can be found at
www.uspto.gov. Similarly, the "Variable Marine Jet" PCT Patent Application can
be found at www.espacenet.com.
We exclusively license the rights to patents covering the operation and
design of a marine propulsion system. Steps taken by us to protect these
proprietary rights may not be adequate to prevent misappropriation of such
rights or third parties from independently developing a functionally equivalent
or superior technology. The US Patents expire as follows:
1. Patent 5,658,176 expires in December 2015,
2. Patent 5,679,035 expires in February 2016 and
3. Patent 5,683,276 expires in February 2016.
Any claims that are granted under the current "Variable Marine Jet" patent
application will expire in December of 2022.
We also filed a Trademark Application with the USPTO on the "Intellijet"
trade name to support the marketing of systems based on the Variable Marine Jet
technology. It was published for opposition in the Official Gazette on January
11, 2005.
In January 2005, we determined that we were unable to further pursue our
business plan of developing marine jet propulsion systems for sale and licensing
of the manufacturing rights without raising significant additional financing
needed for further patent filings, Variable Marine Jet prototype development,
marketing expenses, working capital and to fund the significant expense of
operating as a public company. We were unsuccessful in raising the requisite
capital to pursue our business to commercial viability for the following, among
other, reasons: (i) we had minimal assets and no operating capital and had
realized no revenue and substantial losses since our inception; (ii) the bid
price of our common stock on the Over-The-Counter Bulletin Board (the "OTC BB")
was approximately $0.04 per share; and (iii) it was impossible to raise the
sizable amount of funding required to further pursue our business at the $0.04
per share bid price of our common stock without selling a disproportionate
equity interest in us, thus unduly diluting the equity interests of our existing
stockholders.
3
On January 20, 2005, we entered into the Assumption Agreement with Mr.
Jordan and Intellijet, a wholly-owned subsidiary of ours. Under the Assumption
Agreement, we transferred all of our assets, except for 21,822,570 shares of
common stock of Intellijet and approximately $2,500 in cash, to Intellijet.
Intellijet agreed to assume all of our liabilities and obligations and to
indemnify us for any loss we incur with respect to the assumed liabilities. Mr.
Jordan and Intellijet also agreed to release us from any and all obligations and
claims whatsoever.
On February 4, 2005, we completed the distribution of all 21,822,570 shares
of common stock of Intellijet owned by us pro rata to our stockholders of record
as of January 24, 2005. Pursuant to the distribution, each of our stockholders
received one share of common stock of Intellijet for each one share of our
common stock owned of by our stockholders on the record date.
Intellijet is now an independent company and will continue to operate our
former business of developing marine jet propulsion technology; supplying
mechanical components under the Quick JetTM brand name; and licensing boat
manufacturers to produce boats incorporating Intelllijet's systems. We felt our
decision to enable Intellijet to pursue our business plan as a separate and
independent entity to the ultimate goal of commercial feasibility was in the
best interests of our stockholders for the following, among other, reasons: (i)
Intellijet would have the opportunity to raise capital to pursue its business
plan without the disadvantage of having the value of the stock sold being valued
at the price established or quoted on the OTC BB or another exchange or
quotation system; and (ii) management of Intellijet could pursue the business
plan without diverting time, effort and funds to compliance with SEC reporting
requirements and other obligations associated with being a pubic, reporting
company, including compliance with the requirements of the Sarbanes-Oxley Act of
2002.
We plan to pursue and negotiate a business combination with an operating
company. Ultimately, our continuation as a going concern is dependent upon the
establishment of profitable operations. Because the achievement of these plans
is dependent on future events, namely a business combination with an operating
company, there can be no assurance that future profitable operations will occur
as planned. We have entered into a Letter of Intent to acquire Antik as more
fully described above, although there is no assurance that this acquisition will
be completed.
Employees
Prior to February 2005, other than our officers, Mr. and Mrs. Jordan, we
had no employees. Mr. Jordan dedicated approximately 90% of his time to our
operations, while Mrs. Jordan committed approximately 80% of her time to our
operations.
Since the change of control of the Company, we do not have any employees.
Our sole officer and director, Kevin R. Keating, serves in such capacities
without salary or bonus. Upon accepting his position as an officer and director
in February 2005, we issued 1,000,000 shares of our common stock to Mr. Keating
as compensation for services rendered valued at $10,000.
In February 2005, we have entered into a contract with Vero Management, LLC
("Vero") for managerial and administrative services. Vero has not been engaged
to provide, and Vero does not render, legal, accounting, auditing, investment
banking or capital formation services. Vero is owned and managed by Mr. Keating.
We pay Vero $1,000 per month for services provided to us.
Risk Factors
Since the transfer of our marine propulsion system assets and business to
Intellijet, we have no material assets, liabilities or ongoing operations.
Nevertheless, we believe that we may be able to recover some value for our
shareholders by the adoption and implementation of a plan to seek, investigate
and, if the results of the investigation warrant, effectuate a business
combination with a suitable privately-held company that has both business
history and operating assets. Our potential success will be primarily dependent
on the efforts and abilities of our new management team, who will have virtually
unlimited discretion in searching for, negotiating and entering into a business
combination transaction.
4
Accordingly, an investment in our common stock involves investment risks
and the possibility of the loss of an investor's entire investment. A
prospective investor should evaluate all information about us and the risk
factors discussed below in relation to his financial circumstances before
investing in us.
1. No Current Operating Business. We currently have no relevant
operating business, revenues from operations or assets. Our business plan is to
seek a merger or business combination with an operating business. We face all of
the risks inherent in the investigation, acquisition, or involvement in a new
business opportunity. An investor's purchase of any of our securities must be
regarded as placing funds at a high risk in a new or "start-up" venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
2. No Assurance of Success or Profitability. There is no assurance that
we will acquire a suitable and favorable business opportunity in a reverse
merger transaction. In addition, even if we become involved in a business
opportunity, there is no assurance that the business we acquire will generate
revenues or profits, or that the value of our common stock will increase as a
result of the acquired business opportunity.
3. Possible Business - Not Identified and Highly Risky. Except as
otherwise discussed with respect to the Letter of Intent, we have not identified
and have no commitments to enter into or acquire a specific business opportunity
and therefore we can disclose the risks and hazards of a business or opportunity
that we acquire only in a general manner, and cannot disclose the risks and
hazards of any specific business or other opportunity that we may enter into. An
investor can expect a potential business opportunity to be quite risky. Our
acquisition of or participation in a business opportunity could result in a
total loss to our investors and stockholders if the target business is
unsuccessful. Further, any investment in us may continue to be highly illiquid.
4. Type of Business Acquired. Except as otherwise discussed with
respect to the Letter of Intent, the type of business that may be acquired is
not identified. Therefore, our investors and stockholders have to rely on our
management to determine which target business to pursue. There are no
controlling parameters of the business to be acquired. Thus, ultimately an
investment will depend on the target business and therefore investors in us will
be subject to all the risks that would be associated with that selected
business. Our management may have the right to approve and authorize a reverse
merger transaction with a target company without obtaining the vote of the
majority of our stockholders.
5. Impracticability of Exhaustive Investigation. We have limited funds
and lack full-time management which will likely make it impracticable to conduct
a complete and exhaustive investigation and analysis of a business opportunity
before we commit our limited capital and other resources to acquire a target
business. Management decisions, therefore, likely will be made without detailed
feasibility studies, independent analysis, market surveys, and the like which,
if we had more funds available to us, would be desirable. We will be
particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking to be acquired by us.
6. Lack of Diversification. Because of our limited financial resources,
it is unlikely that we will be able to diversify our acquisitions or operations.
The inability to diversify our activities into more than one area will subject
our investors and stockholders to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
investment. We only intend to acquire a single business opportunity and thus
your investment will lack diversification.
7. Possible Reliance upon Unaudited Financial Statements. We will
require audited financial statements from target companies that we propose to
acquire. No assurance can be given, however, that audited financials will be
available at the closing of the reverse merger transaction. In cases where
audited financials are unavailable, we will have to rely upon unaudited
information received from target companies' management that has not been
verified by outside auditors. We, at the time of acquisition, 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 the shell company acquires. Consequently, acquisition prospects
that do not have or are unable to obtain the required audited statements may not
be appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable. But, in cases where we have completed a reverse
merger transaction in reliance on unaudited financial statements and audited
statements cannot subsequently be obtained, the continued ability of the
post-transaction company to remain a reporting company and publicly trading will
be in jeopardy and may significantly reduce the value of your investment.
5
8. Investment Company Regulation. We do not intend to become classified
as an "investment company" under the Investment Company Act of 1940 (the
"Investment Act"). We believe that we will not become subject to regulation
under the Investment Act because (i) we will not be engaged in the business of
investing or trading in securities, and (ii) any acquisition undertaken will
result in the target company obtaining a majority interest in us. Should there
be a requirement to register as an investment company, it would cause
significant registration and compliance costs. Any violation of the Investment
Act will subject us to materially adverse consequences. Should the SEC find that
we are subject to the Investment Act, and order registration under the
Investment Act, we would resist such finding and take steps to avoid such
registration. Irrespective of whether the SEC or we were to prevail in such
dispute about whether or not we are an investment company, however, the damages
and delays would be costly.
9. Other Regulation. Any acquisition made by us may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Foreign companies may also be considered, and be subject to similar
business regulations as are applicable in the United States and also may be
subject to limitations on ownership by foreign persons and entities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit our other investment opportunities. We intend to
pursue potential business opportunities in foreign countries, including China,
and as such, such opportunities will be subject to foreign country laws and
regulations affecting foreign investment, business operations, currency
exchange, repatriation of profits, and taxation, which will increase the risk of
your investment.
10. Dependence upon Management. We will be heavily dependent upon the
skills, talents, and abilities of our management to implement our business plan.
Our management may devote limited time to our affairs, which may be inadequate
for our business, and may delay the acquisition of any business opportunity
considered. Furthermore, management has little experience in seeking,
investigating, and acquiring businesses and will depend upon its limited
business knowledge in making decisions regarding our acquisition of a business
opportunity. Because investors will not be able to evaluate the merits of
possible business acquisitions by us, they should critically assess the
information concerning the management.
11. Dependence upon Outside Advisors. To supplement the business
experience of management, we may be required to employ accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. Some of these
outside advisors may be our affiliates or their affiliated entities. The
selection of any such advisors will be made by our management without any input
from stockholders.
12. Conflicts of Interest. Our management has other business interests
to which they will devote primary attention. As a result, conflicts of interest
may arise that can be resolved only through the exercise by them of their
judgment as may be consistent with their fiduciary duties. Our management will
try to resolve conflicts to the best advantage of all concerned, but there may
be times when an acquisition opportunity is given to another entity to the
disadvantage of our stockholders and for which there will be no recourse. It is
also expected that we will engage Keating Securities, LLC, an affiliate of
Keating Investments, LLC, the managing member of our controlling stockholder, to
act as a financial advisor in connection with the reverse merger transaction for
which it may earn a cash and/or equity fee.
13. Need for Additional Financing. In all likelihood we will need
additional funds to take advantage of any available acquisition business
opportunity. Even if we were to obtain sufficient funds to acquire an interest
in a business opportunity, we may not have sufficient capital to fully exploit
the opportunity. Our ultimate success will depend upon our ability to raise
additional capital at the time of the acquisition and thereafter. When
additional capital may be needed, there can be no assurance that funds will be
available from any source or, if available, that they can be obtained on
acceptable terms.
6
14. Borrowing Transactions. There is a possibility that any acquisition
of a business opportunity by us will require borrowing against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This leverage could increase our exposure
to larger losses. There is no assurance that any business opportunity acquired
through borrowing and leverage will generate sufficient revenues to cover the
related debt and expenses.
15. No Foreseeable Dividends. We do not intend to pay any dividends. We
do not foresee making any cash distributions in the manner of a dividend or
otherwise.
16. Loss of Control by Present Management and Stockholders. It is
likely that any acquisition of an operating company will result in a change in
control of the then current directors, officers and the stockholders. Therefore,
our management prior to the acquisition will be changed to those of the target
company and its stockholders, who will then control the combined company. At
that time, our stockholders will be at investment risk for the decisions about
the business by persons that they may not know or have any ability to influence
through a board seat or by the voting mechanism of stockholders.
17. Dilutive Effects of Issuing Additional Common Stock. In any reverse
merger transaction, for tax reasons and management reasons, the owners of the
target company will be issued a large number of shares of common stock which
will dilute the ownership interest of our current stockholders. In addition, at
the time of the reverse merger, it will be likely that there will be additional
authorized but unissued shares that may be later issued by the then new
management for any purpose without the consent or vote of the stockholders. The
acquisition issuance and additional issuances that may occur will dilute the
interests of our stockholders after the reverse merger transaction.
18. Thinly-traded Public Market. Our securities will be very thinly
traded, and the price if traded may not reflect the value of the company.
Moreover, there may be a reverse split of the shares which may not reflect the
value of the company either. There can be no assurance that there will be an
active market for our shares either now or after we complete the reverse merger.
The market liquidity will be dependant on the perception of the operating
business and any steps that its management might take to bring the company to
the awareness of investors. There can be no assurance given that there will be
any awareness generated. Consequently investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the
business. If a more active market should develop, the price may be highly
volatile. Because there may be a low price for our securities, many brokerage
firms may not be willing to effect transactions in the securities. Even if an
investor finds a broker willing to effect a transaction in the securities, the
combination of brokerage commissions, transfer fees, 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.
19. Possible Rule 144 Sales. The majority of our shares currently
outstanding are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Act"). 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 exemption 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 a period of 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
non-affiliate after the restricted securities have been held by the owner for a
period of two years. Current stockholders who own 10% or more of our shares will
likely be deemed an affiliate until 90 days after a reverse merger is completed
with a target company. After such 90-day period, and assuming said shares have
been held for more than two years, these stockholders may be able to sell their
shares without volume restrictions. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
our shares, may have a depressive effect upon the price of our shares in any
market that may develop.
7
ITEM 2. DESCRIPTION OF PROPERTIES.
Prior to February 2005, our principal offices were located at 4805 158
Court NE, Redmond, WA 98052. We used the office space pursuant to an oral
agreement with Mr. Jordan, the Company's then President. This arrangement is
suitable given the limited nature of our operations. We used the space on a rent
free basis.
Since February 2005, we operated from the offices of Vero. We have a
management agreement with Vero under which Vero provides us with managerial and
administrative services in exchange for $1,000 per month.
We do not own any real or personal property nor do we have any plans to
acquire any real or personal property in the future. We do not own any
significant business operating assets. We do not maintain any policy of
insurance to insure any property or business operations.
ITEM 3. LEGAL PROCEEDINGS.
We are not aware of any pending or threatened legal proceedings in which
we are involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of our stockholders during the
fourth quarter of the fiscal year ended December 31, 2004.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded from time to time on the over-the-counter
market, and quotations may be found in NASD's Over-the-Counter Bulletin Board.
Our shares of common stock began trading on the Over-the-Counter Bulletin Board
on August 22, 2003. Shares of our common stock are traded under the symbol
"MJET". Our common stock trades only sporadically and has experienced in the
past, and is expected to experience in the future, significant price and volume
volatility. Our stock is currently available for trading on NASD's
Over-the-Counter Bulletin Board. Based on information available to us, the
quotations below reflect the high and low bid quotation for our stock on the
Over-the-Counter Bulletin Board. The quotations reflect inter-dealer prices and
do not include retail mark-ups, mark-downs or commissions. The prices do not
necessarily reflect actual transactions.
2004 High Low
---- ---- ---
First Quarter $0.12 $0.07
Second Quarter $0.11 $0.07
Third Quarter $0.29 $0.08
Fourth Quarter $0.08 $0.04
8
2003 High Low
---- ---- ---
First Quarter n/a n/a
Second Quarter n/a n/a
Third Quarter $0.00 $0.00
Fourth Quarter $0.12 $0.07
As of March 10, 2005, we had 28,122,570 shares of our common stock
outstanding. There were 86 holders of record of our common stock at March 10,
2005. Our transfer agent is Pacific Stock Transfer Company, Las Vegas, Nevada.
We have neither paid nor declared cash distributions or dividends, and we
do not intend to pay cash dividends on our common stock in the foreseeable
future. We currently intend to retain all earnings, if and when generated, to
finance our operations. The declaration of cash dividends in the future will be
determined by the board of directors based upon our earnings, financial
condition, capital requirements and other relevant factors.
Recent Sales of Unregistered Securities
On December 16, 2003, the Company issued 50,000 shares of its common stock
for cash in the amount of $10,000.
On July 9, 2004, the Company issued 1,000,000 shares of its common stock to
a consultant for services rendered to the Company with a fair value of $100,000.
On July 27, 2004, the Company issued 40,000 shares of its common stock to a
consultant for services rendered to the Company with a fair value of $10,800.
On February 17, 2005, the Company issued 5,000,000 shares of its common
stock to KRM Fund at a purchase price of $0.01 per share, for an aggregate
purchase price of $50,000. The funds will provide working capital to the Company
for operating expenses.
On February 17, 2005, the Company also issued 1,000,000 shares of its
common stock to Kevin R. Keating, the sole officer and director of the Company,
for services rendered to the Company with a fair value of $10,000, or $0.01 per
share.
On February 17, 2005, the Company also issued 300,000 shares of its common
stock to a financial consulting firm for consulting services rendered to the
Company with a fair value of $3,000, or $0.01 per share.
The Company has agreed to grant "piggyback" registration rights to KRM
Fund, Kevin R. Keating and the financial consulting firm with respect to the
above shares.
In connection with the above stock issuances, the Company did not pay any
underwriting discounts or commissions. None of the sales of securities described
or referred to above was registered under the Securities Act of 1933, as amended
(the "Securities Act"). Each of the purchasers fell into one or more of the
categories that follow: an existing shareholder of the Company, a creditor of
the Company, a current or former officer or director of the Company, a service
provider to the Company, or an accredited investor with whom the Company or an
affiliate of the Company had a prior business relationship. As a result, no
general solicitation or advertising was used in connection with the sales. In
making the sales without registration under the Securities Act, the Company
relied upon one or more of the exemptions from registration including, but
limited to, those contained in Sections 4(2) of the Securities Act, and in
Regulation D promulgated under the Securities Act.
9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The following discussion may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such statements are intended to be
covered by the safe harbors created by such provisions. These statements include
the plans and objectives of management for future growth of the Company,
including plans and objectives related to the consummation of acquisitions and
future private and public issuances of the Company's equity and debt securities.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-KSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
The words "we," "us" and "our" refer to the Company. The words or phrases
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar expressions
are intended to identify "forward-looking statements." Actual results could
differ materially from those projected in the forward looking statements as a
result of a number of risks and uncertainties, including but not limited to: (a)
limited amount of resources devoted to achieving our business plan; (b) our
failure to implement our business plan within the time period we originally
planned to accomplish; (c) because we are seeking to merge with an operating
business which has not yet been identified, you will be unable to determine
whether we will ever become profitable; and (d) other risks that are discussed
in this Form 10-KSB or included in our previous filings with the Securities and
Exchange Commission.
Plan of Operations
General Business Plan
Our plan of operation is to seek a target company with which to merge or to
complete a business combination. In any transaction, we will be the surviving
entity, and our stockholders will retain a percentage ownership interest in the
post-transaction company. The amount of the retained equity ownership by our
stockholders will be negotiated by our management and the target company. We may
also be required to pay cash and/or equity fees to third parties that advise us
in connection with the merger or business combination, commonly refereed to as a
reverse merger. These third party advisors may include certain affiliates of
ours and their affiliated entities.
Typically in connection with the reverse merger transaction involving us
and the target company, there will be a capital funding event for the target
business on a combined basis either at the time of the reverse merger or shortly
thereafter. This may be a private placement by either us or the target company,
if the funding event is contingent on the closing of the reverse merger. If the
funding event is after the reverse merger, it will likely be a public offering
or private placement of our securities. It will often be the case that the
liquidity opportunity for our existing stockholders will be tied to the ability
of the old and new investors of the target enterprise to have liquidity in the
market for their financial investment. Therefore, our stockholders may have to
continue to hold their investment or may face competition in being able to sell
their shares in the post-transaction business in the public market, which may
depress the price for such a volume of securities.
We will not restrict our search to any specific business, industry or
geographic location, and we may participate in a business venture of virtually
any kind or nature. This discussion of our plan for acquiring an operating
business is purposefully general, and it is not meant to be restrictive of the
virtually unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we will be able to participate in only one
potential business venture because of our nominal assets and limited financial
resources.
10
We may seek a business opportunity with entities which have recently
commenced operations, or that desire to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex and
risky. Due to general economic conditions, rapid technological advances being
made in some industries and shortages of available capital, we believe that
there are numerous potential targets with either sound business ideas or
operations seeking the benefits of a shell company that has complied with the
federal reporting requirements for public companies and is publicly trading.
Such benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all stockholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We have, and will continue to have, limited
capital with which to provide the owners of business opportunities with any
significant cash or other assets. We will, however, be able to offer owners of
target candidates the opportunity to acquire a controlling ownership interest in
an issuer who has complied with the reporting requirements under federal
securities laws without incurring the cost and time required to conduct an
initial public offering.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, our management who will likely engage outside advisors to
assist us in this analysis. Some of these outside advisors may be affiliates of
ours or their affiliated entities. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our officers and directors, or by our
advisors. In analyzing prospective business opportunities, we will consider such
matters as (i) available technical, financial and managerial resources; (ii)
working capital and other financial requirements; (iii) history of operations,
if any and prospects for the future; (iv) nature of present and expected
competition; (v) quality, experience and depth of management services; (vi)
potential for further research, development or exploration; (vii) specific risk
factors not now foreseeable but that may be anticipated to impact the proposed
activities of the company; (viii) potential for growth or expansion; (ix)
potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business opportunity, we
or our advisors expect to meet personally with or interview management and key
personnel.
We may also have to compensate certain advisors, finders and investment
banking firms for services rendered in connection with the identification of
target operating companies and the negotiation and completion of the
transaction. Due to our limited resources, it is expect that all or a portion of
this compensation will be in the form of our common stock or from cash provided
by the target company or the funding event. Additional issuance of our common
stock will have a further dilutive effect on the percentage of shares held our
stockholders. Keating Securities, LLC, an affiliate of Keating Investments, LLC,
the managing member of our controlling stockholder, will also act as a financial
advisor in connection with the reverse merger transaction and will be paid a
cash and/or equity fee upon the successful closing of the reverse merger.
We will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
Acquisition Opportunities
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another company or entity. We may also acquire stock or
assets of an existing business. Our management may have the right to approve and
authorize a reverse merger transaction with a target company without obtaining
the vote of the majority of our stockholders. Further, upon consummation of a
reverse merger transaction, it is probable that our present management and
stockholders will no longer be in control of us. In addition, our management, as
part of the terms of the reverse merger transaction, may resign and may be
replaced by new directors without a vote of our stockholders. Any and all sales
of shares of our common stock may only be made in compliance with the securities
laws of the United States and any applicable state.
11
It is anticipated that certain securities issued by us in connection with
the reverse merger would be issued in reliance upon exemptions from registration
under application federal and state securities laws. In some circumstances, as a
negotiated element of the reverse merger transaction, we will be asked to agree
to register all or a part of such securities immediately after the transaction
is consummated or at specified times thereafter. In such a case, we will attempt
to negotiate the registration of some or all of our current outstanding shares
which are restricted, but there is no guarantee that this will be accomplished
or, if accomplished, that the registration rights will be identical. If such
registration occurs, it will be undertaken by the surviving entity after it has
successfully consummated a reverse merger and is no longer considered an
inactive company. The issuance of substantial additional securities by us in
connection with the reverse merger and their potential sale into any trading
market which may develop in our securities may have a depressive effect on the
value of our securities in the future. There is no assurance that such a trading
market will develop.
While the actual terms of a reverse merger transaction cannot be predicted,
it is expected that the parties to any business transaction will find it
desirable to avoid the creation of a taxable event and thereby structure the
business transaction in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to obtain
tax-free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80 percent or more of the voting stock of the surviving
entity. In such event, the equity interest retained by our current stockholders
would be less than 20 percent of the issued and outstanding shares of the
surviving entity. This would result in significant dilution in the equity
interests of our stockholders.
In addition to the tax considerations discussed above, it is likely that in
any reverse merger, and depending upon, among other things, the target company's
assets and liabilities, the equity interests of our stockholders after the
transaction will be a small percentage of the post-transaction company. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with significant assets and expectations of growth.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. Although the terms of the
acquisition agreements cannot be predicted, generally such agreements will (i)
require specific representations and warranties by all of the parties; (ii)
specify certain events of default and remedies therefor; (iii) detail the terms
of closing and the conditions which must be satisfied by each of the parties
prior to and after closing; (iv) outline the manner of bearing costs, including
costs associated with our attorneys and accountants; (v) set forth
indemnification provisions; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which cannot
provide independent audited financial statements within a reasonable period of
time after closing of the proposed transaction. Included in these requirements
is the affirmative duty to file independent audited financial statements as part
of a Current Report on Form 8-K, required to be filed with the SEC upon
consummation of a merger or acquisition, as well as audited financial statements
included in an Annual Report on Form 10-K (or Form 10-KSB, as applicable). If
such audited financial statements are not available at closing, or within time
parameters necessary to insure compliance with the reporting requirements under
federal securities laws, or if the audited financial statements provided do not
conform to the representations made by the business to be acquired, we will
attempt to negotiate a provision in the definitive closing documents to void the
transaction. However, there is no guarantee that we will be successful in
including such a provision and, in such case, the continued ability of the
post-transaction company to remain a reporting company and publicly trading may
be in jeopardy.
Competition
We are an insignificant participant among the firms which engage in the
reverse merger of shell companies into an operating business. There are many
established venture capital and financial concerns that have significantly
greater financial and personnel resources and technical expertise than we have.
In view of our limited financial resources and limited management availability,
we will continue to be at a significant competitive disadvantage compared to our
competitors. As a result, we may not be able to find suitable target companies
with which to complete a reverse merger transaction.
12
Results of Operations
Year ended December 31, 2004 as compared with December 31, 2003
The Company generated net loss of ($159,394) for the year ended December
31, 2004, as compared with a net loss of ($41,566) for the year ended December
31, 2003. This increase in net loss is primarily comprised of an increase in
general and administrative expenses of $115,980. Income tax expense was not
recorded for 2004 due to the effects of cumulative net operating loss
carryforwards which are available to offset taxable income.
Liquidity and Capital Resources
A summary of the Company's operating, investing and financing activities is
as follows:
2004 2003
Cash flows from:
Operating activities ($38,448) ($31,016)
Investing activities - -
Financing activities 29,551 24,568
At December 31, 2004, the Company had current assets, in the form of cash,
totaling $869, and current liabilities, in the form of notes payables, totaling
$44,754. The Company has no long term debt. During 2004, the Company received
approximately $30,000 from the issuance of short-term notes from a third party
investor to fund its working capital requirements. Management considers it
possible that additional funds may need to be raised, either through loans or
via private placements of common stock, to sustain the Company's liquidity in
the near term.
Going Concern
The Company has sustained recurring operating losses, currently has no
source of operating revenue, and has only limited working capital with which to
pursue its business plan, which contemplates the completion of a business
combination with an operating company. The amount of capital required to sustain
operations until the successful completion of a business combination is subject
to future events and uncertainties. It may be necessary for the Company to
secure additional working capital through loans or sales of common stock, and
there can be no assurance that such funding will be available in the future.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Deferred Taxes
We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. Management regularly reviews the Company's deferred tax assets for
recoverability and establishes a valuation allowance based on historical taxable
income, projected future taxable income, and the expected timing of the
reversals of existing temporary differences. As of December 31, 2004, the
Company has established a valuation allowance equal to the net deferred tax
asset, since management is unable to determine that the Company will generate
sufficient future taxable income to allow it to realize the deferred tax asset.
13
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this item are filed herewith following
the signature page to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 10, 2005, we engaged De Joya & Company as our independent
certified public accountants in place of Chavez and Koch CPA's. Prior to the
board's decision to engage De Joya & Company, we did not consult De Joya &
Company with respect to the application of accounting principles to a specific
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, or any other matters reportable
events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-B.
The Report of Chavez and Koch CPA's on our financial statements for the
period from February 9, 2000 (date of inception) to December 31, 2003 contained
no adverse opinion or disclaimer of opinion and was not qualified of modified as
to uncertainty, audit scope of accounting principles. The opinion did contain a
paragraph raising substantial doubt about our ability to continue as a going
concern because of our operating loss and working capital deficiency. Through
the present date, there has been no disagreement between us and Chavez and Koch
CPA's on any matter if accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of Chavez and Koch CPA's, would have caused such firm to
make reference to the subject matter thereof in its report on our financial
statements for such period.
There were no disagreements with De Joya & Company, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
De Joya & Company's satisfaction, would have caused it to make reference to the
subject matter of the disagreement(s) in connection with its report.
ITEM 8A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company
conducted an evaluation, under the supervision and with the participation of the
Chief Executive Officer and Chief Financial Officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
1934 Act. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. There was no change in the
Company's internal control over financial reporting during the Company's most
recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Effective as of February 9, 2005, in connection with a change of control of
the Company, Jeff P. Jordan resigned as our President, Treasurer and one of our
directors, Martha A. Jordan, the spouse of Mr. Jordan, resigned as our Secretary
and one of our directors, and Wilbur Sebree, resigned as one of our directors.
Kevin R. Keating was appointed our President, Treasurer, Secretary and sole
director. Concurrently, our principal executive office was moved to 936A
Beachland Boulevard, Suite 13, Vero Beach, Florida 32963.
14
The following table sets forth the names, positions and ages of our
executive officers and directors. All of our directors serve until the next
annual meeting of stockholders or until their successors are elected and
qualify. Officers are elected by the board of directors and their terms of
office are, except to the extent governed by employment contract, at the
discretion of the board of directors. There is no family relationship between
any director, executive officer or person nominated or chosen by the Company to
become a director or executive officer.
Name Age Position Term
----------------------------- ----------- -------------------------------------- -------------------
Kevin R. Keating (1) 65 President, Treasurer, Secretary and 1 Year
Director
(1) Mr. Keating became President, Secretary, Treasurer, and a director
effective February 9, 2005.
Mr. Keating, sole Director, President, Secretary and Treasurer of the
Company, is an investment executive and for the past nine years has been the
Branch Manager of the Vero Beach, Florida, office of Brookstreet Securities
Corporation. Brookstreet is a full-service, national network of independent
investment professionals. Mr. Keating services the investment needs of private
clients with special emphasis on equities. For more than 35 years, he has been
engaged in various aspects of the investment brokerage business. Mr. Keating
began his Wall Street career with the First Boston Company in New York in 1965.
From 1967 through 1974, he was employed by several institutional research
boutiques where he functioned as Vice President Institutional Equity Sales. From
1974 until 1982, Mr. Keating was the President and Chief Executive Officer of
Douglas Stewart, Inc., a New York Stock Exchange member firm. Since 1982, he has
been associated with a variety of firms as a registered representative servicing
the needs of individual investors. Mr. Keating is also the manager and sole
member of Vero Management, LLC, which has a management agreement with the
Company.
Audit Committee and Audit Committee Financial Expert
We have an audit committee and audit committee charter. Our audit committee
is comprised of all of our directors, which currently consists of Kevin R.
Keating. A copy of our audit committee charter is filed as an exhibit to our
Annual Report filed on Form 10-KSB for the year ended December 31, 2003. We are
not a "listed company" under SEC rules and are therefore not required to have an
audit committee comprised of independent directors. Our board of directors has
determined that its members do not include a person who is an "audit committee
financial expert" within the meaning of the rules and regulations of the SEC.
Our board of directors has determined that each of its members is able to read
and understand fundamental financial statements and has substantial business
experience that results in that member's financial sophistication. Accordingly,
the board of directors believes that each of its members have the sufficient
knowledge and experience necessary to fulfill the duties and obligations that an
audit committee would have.
Our audit committee is responsible for: (1) selection and oversight of our
independent accountant; (2) establishing procedures for the receipt, retention
and treatment of complaints regarding accounting, internal controls and auditing
matters; (3) establishing procedures for the confidential, anonymous submission
by our employees of concerns regarding accounting and auditing matters; (4)
engaging outside advisors; and, (5) funding for the outside auditory and any
outside advisors engagement by the audit committee.
Code of Ethics
We have adopted a corporate code of ethics. A copy of the code of ethics is
filed as an exhibit to our Annual Report filed on Form 10-KSB for the year ended
December 31, 2003. We believe our code of ethics is reasonably designed to deter
wrongdoing and promote honest and ethical conduct; provide full, fair, accurate,
timely and understandable disclosure in public reports; comply with applicable
laws; ensure prompt internal reporting of code violations; and provide
accountability for adherence to the code.
15
Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our
disclosure committee is comprise of all of our officers and directors, which
currently consists of Kevin R. Keating. The purpose of the committee is to
provide assistance to our senior officers in fulfilling their responsibilities
regarding the identification and disclosure of material information about us and
the accuracy, completeness and timeliness of our financial reports. A copy of
our disclosure committee charter is filed as an exhibit to our Annual Report
filed on Form 10-KSB for the year ended December 31, 2003.
Conflicts of Interest
Certain conflicts of interest existed at December 31, 2004 and may continue
to exist between the Company and its officers and directors due to the fact that
each has other business interests to which they devote their attention. Each
officer and director may continue to do so notwithstanding the fact that
management time should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interests between the Company, its officers and directors or
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and conflicts of interest may
arise that can be resolved only through the exercise by management their best
judgment as may be consistent with their fiduciary duties. Our management will
try to resolve conflicts to the best advantage of all concerned, but there may
be times when an acquisition opportunity is given to another entity to the
disadvantage of our stockholders and for which there will be no recourse.
As a result of the change of control of the Company and its new plan of
operations to pursue a business combination with an operating company, it is
also expected that we will engage Keating Securities, LLC, an affiliate of
Keating Investments, LLC, the managing member of our controlling stcokholder, to
act as a financial advisor in connection with the reverse merger transaction for
which it may earn a cash and/or equity fee.
Board Meetings and Committees
Our directors and officers will not receive remuneration from the Company
unless approved by the Board of Directors or pursuant to an employment contract.
Directors may be paid their expenses, if any, of attendance at such meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated fixed compensation as director. No
such payment shall preclude any director from serving us in any other capacity
and receiving compensation therefor. No compensation has been paid to our
directors. The Board of Directors may designate from among its members an
executive committee and one or more other committees. No such committees have
been appointed.
Section 16(a) Beneficial Ownership Reporting
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that directors, executive officers and persons who own more than 10% of the
outstanding common stock of certain reporting companies file initial reports of
ownership and reports of changes in ownership in such common stock with the
Securities and Exchange Commission ("SEC"). Officers, directors and stockholders
who own more than 10% of the outstanding common stock of certain reporting
companies are required by the SEC to furnish such companies with copies of all
Section 16(a) reports they file. The Company is not required to comply with
Section 16(a). Accordingly, stock ownership information contained in this report
is based on what is known to the Company.
ITEM 10. EXECUTIVE COMPENSATION
The following Executive Compensation Chart highlights the compensation for our
executive officers. No other executive officers received salary and bonus in
excess of $100,000 for the prior three fiscal years.
16
Long Term Compensation
--------------------------------------
Awards Payouts
Annual Compensation
------------------------------ ---------------------------------------- -------------------------- ----------- -----------------
Securities
Name Other Restricted Underlying
and Annual Stock Options/ LTIP All Other
Principal Bonus Compensation Award(s) SARs (#) (2) Payouts Compensation
Position Year Salary ($) ($) ($) ($) ($) ($)
---------------------- ------- ------------ --------- ----------------- ------------ ------------- ----------- -----------------
Kevin R. Keating 2004 N/A N/A N/A N/A N/A N/A N/A
(Pres., Secr., and
Treas.) (1)
---------------------- ------- ------------ --------- ----------------- ------------ ------------- ----------- -----------------
Jeff P. Jordan 2004 $0 $0 $0 N/A N/A N/A N/A
(President and
Treasurer) (2) 2003 $0 $0 $0 N/A N/A N/A N/A
2002 $0 $0 $0 N/A N/A N/A N/A
---------------------- ------- ------------ --------- ----------------- ------------ ------------- ----------- -----------------
Martha A. Jordan 2004 $0 $0 $0 N/A N/A N/A N/A
(Secretary) (2)
2003 $0 $0 $0 N/A N/A N/A N/A
2002 $0 $0 $0 N/A N/A N/A N/A
---------------------- ------- ------------ --------- ----------------- ------------ ------------- ----------- -----------------
(1) Mr. Keating became President, Secretary, Treasurer, and a director
effective February 9, 2005. On February 17, 2005, the Company issued
Mr. Keating 1,000,000 shares of its common stock in consideration for
services rendered by him, valued at $10,000.
(2) Effective as of February 9, 2005, in connection with a change of
control of the Company, Jeff P. Jordan resigned as our President,
Treasurer and one of our directors, Martha A. Jordan, the spouse of
Mr. Jordan, resigned as our Secretary and one of our directors, and
Wilbur Sebree, resigned as one of our directors.
There were no option grants to any executive officers during the fiscal
year ended December 31, 2004, and no options were exercised by any executive
officer during the fiscal year ended December 31, 2004.
We did not pay any compensation to any director in 2002, 2003 and 2004.
We terminated our non-qualified stock option plan effective February 4,
2005 and, in connection this termination, we filed a post-effective amendment to
withdraw from registration any remaining shares under our current
S-8registration statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have set forth in the following table certain information regarding our
common stock beneficially owned on March 15, 2005 for (i) each shareholder we
know to be the beneficial owner of 5% or more of our outstanding common stock,
(ii) each of our executive officers and directors, and (iii) all executive
officers and directors as a group. In general, a person is deemed to be a
"beneficial owner" of a security if that person has or shares the power to vote
or direct the voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which the person has the right to acquire beneficial
ownership within 60 days. To the best of our knowledge, all persons named have
sole voting and investment power with respect to such shares, except as
otherwise noted. There are not any pending or anticipated arrangements that may
cause a change in control of the Company. At March 15, 2005, 28,122,570 shares
of our common stock were outstanding.
17
------------------------------------------ ------------------------------------ --------------------------------------
Name Number of Shares Beneficially Owned Percent of Shares
------------------------------------------ ------------------------------------ --------------------------------------
Kevin R. Keating 1,000,000 (1) 3.6%
936A Beachland Boulevard, Suite 13
Vero Beach, Florida 32963
------------------------------------------ ------------------------------------ --------------------------------------
Keating Reverse Merger Fund, LLC 20,306,500 (2) 72.2%
5251 DTC Parkway, Suite 1090
Greenwood Village, Colorado 80111
------------------------------------------ ------------------------------------ --------------------------------------
All Executive Officers and Directors as 1,000,000 3.6%
a group (1 person)
------------------------------------------ ------------------------------------ --------------------------------------
(1) On February 17, 2005, we issued 1,000,000 shares of our common stock
to Kevin R. Keating, our sole officer and director, for services
rendered to the Company with a fair value of $10,000. Kevin R. Keating
is not affiliated with and has no equity interest in Keating Reverse
Merger Fund, LLC and disclaims any beneficial interest in the shares
of the Company's Common Stock owned by Keating Reverse Merger Fund,
LLC.
(2) On February 9, 2005, Mr. Jordan sold 15,306,500 shares of our common
stock owned by him to Keating Reverse Merger Fund, LLC for a purchase
price of $440,000. On February 17, 2005, we issued 5,000,000 shares of
our common stock to Keating Reverse Merger Fund, LLC for an aggregate
purchase price of $50,000. Keating Reverse Merger Fund, LLC is not
owned by or affiliated with Kevin R. Keating and disclaims any
beneficial interest in the shares of our Common Stock owned by Kevin
R. Keating.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 20, 2005, we entered into the Assumption Agreement with Mr.
Jordan and Intellijet Marine, Inc. ("Intellijet"), a Nevada corporation that we
established as a wholly-owned subsidiary. Under the Assumption Agreement, we
transferred all of our assets, except for 21,822,570 shares of common stock of
Intellijet and approximately $2,500 in cash, to Intellijet. Intellijet agreed to
assume all of our liabilities and obligations and to indemnify us for any loss
we incur with respect to the assumed liabilities. Mr. Jordan and Intellijet also
agreed to release us from any and all obligations and claims whatsoever. Shares
of Intellijet was subsequently distributed to our stockholders and Intellijet
operates as an independent company.
On February 9, 2005, Mr. Jordan sold 15,306,500 shares of our common stock
owned by him to KRM Fund for a purchase price of $440,000.
In connection with the completion of the transactions under Assumption
Agreement and the Purchase Agreement, Mr. Jordan received full payment on the
remaining principal balance under certain notes issued to him by the Company.
On February 17, 2005, we entered into a contract with Vero for managerial
and administrative services. Vero has not been engaged to provide, and Vero does
not render, legal, accounting, auditing, investment banking or capital formation
services. Kevin R. Keating is the manager of Vero. The term of the contract is
for one year. In consideration of the services provided, Vero will be paid
$1,000 for each month in which services are rendered.
On February 17, 2005, we issued 1,000,000 shares of our common stock to
Kevin R. Keating, our sole officer and director, for services rendered to the
Company with a fair value of $10,000.
18
On February 17, 2005, we issued 5,000,000 shares of our common stock to KRM
Fund for an aggregate purchase price of $50,000.
Kevin R. Keating, is the father of the principal member of Keating
Investments, LLC. Keating Investments, LLC is the managing member of KRM Fund,
which is the majority stockholder of the Company. Keating Investments, LLC is
also the managing member and 90% owner of Keating Securities, LLC, a registered
broker-dealer. Kevin R. Keating is not affiliated with and has no equity
interest in Keating Investments, LLC, KRM Fund or Keating Securities, LLC and
disclaims any beneficial interest in the shares of the Company's Common Stock
owned by KRM Fund. Similarly, Keating Investments, LLC, KRM Fund and Keating
Securities, LLC disclaim any beneficial interest in the shares of the Company's
Common Stock currently owned by Kevin R. Keating.
The Company has engaged Keating Securities, LLC to act as a financial
advisor in connection with the reverse merger transaction for which it may earn
a cash and/or equity fee.
Other than the above transactions or otherwise set forth in this report we
have not entered into any material transactions with any director, executive
officer, and nominee for director, beneficial owner of five percent or more of
our common stock, or family members of such persons. We are not a subsidiary of
any company.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are included as part of this report:
Exhibit # Name and/or Identification of Exhibit
2. Plan of acquisition, reorganization, arrangement, liquidation, or
succession [1]
(a) Marine Jet Technology License Agreement
(b) Amendment to Marine Jet Technology License Agreement of May 22,
2000
(c) Second Amendment to Marine Jet Technology License Agreement of May
22, 2000
(d) Proprietary Rights Agreement
3. Articles of Incorporation & By-laws [1]
(a) Articles of Incorporation of the Company filed February 9, 2000
(b) Amendment to the Articles of Incorporation filed December 5, 2000
(c) Amendment to the Articles of Incorporation filed January 5, 2001
(d) By-laws of the Company adopted February 12, 2000
10. Material Contracts
Office lease agreement. [1]
Assumption Agreement dated effective as of January 20, 2005, among
Marine Jet Technology Corp., [5]
Intellijet Marine, Inc., and Jeff P. Jordan.
19
14.1 Code of Ethics [4]
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 *
32.1 Certification of Chief Executive Officer and Chief Financial
Officer of the Company, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. *
99.1 Audit Committee Charter [4]
99.2 Disclosure Committee Charter [4]
[1] Previously filed with the SEC on October 31, 2001 and again on
May 1, 2002, as an exhibit to the Company's Form 10-SB.
[2] Previously filed with the SEC on September 13, 2002, as an
exhibit to the Company's amended Form 10-SB.
[3] Previously filed with the SEC on April 4, 2003, as an exhibit to
the Company's amended Form 8-K/A.
[4] Previously filed with the SEC on March 30, 2004, as an exhibit to
the Company's Form 10-KSB. [5] Previously filed with the SEC on
February 10, 2005, as an exhibit to the Company's Form 8-K.
* Filed as an exhibit to this report.
(b) Reports on Form 8-K.
On October 25, 2004, the Company filed a Current Report on Form 8-K
announcing the resignation of Marilyn J. Holt as a director.
On February 10, 2005, the Company filed a Current Report on Form 8-K
announcing the execution of the Assumption Agreement and the closing of the
transactions resulting in a change of control of the Company.
On February 16, 2005, the Company filed a Current Report on Form 8-K
announcing the change of its certifying accountants as described more fully
in Item 8 of this report.
On February 22, 2005, the Company filed a Current Report on Form 8-K
announcing the issuance of and sale of certain unregistered securities as
described more fully in Item 5 of this report.
On March 28, 2005, the Company filed a Current Report on Form 8-K
announcing the execution of a Letter of Intent to acquire Antik Denim, LLC
as described more fully in Item 1 of this report
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's Form 10-KSB (17 CFR 249.308a) or 10-QSB (17 CFR
249.308b) or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years was
$18,354 for the fiscal year ended December 31, 2003 and $14,788 for the fiscal
year ended December 31, 2004.
20
(2) AUDIT-RELATED FEES
There were no fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit or review of the Company's financial
statements.
(3) TAX FEES
There were $750 and $0 billed in each of the fiscal years ended December
31, 2003 and 2004, respectively, for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
(4) ALL OTHER FEES
There were no other fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported above.
RE-APPROVAL POLICIES AND PROCEDURES
Before the accountant is engaged by the issuer to render audit or non-audit
services, the engagement is approved by the Company's the board of directors
acting as the audit committee.
21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MARINE JET TECHNOLOGY CORP.
Date: March 31, 2005 By: /s/ Kevin R. Keating
------------------------------------
Kevin R. Keating
President and Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on March 31, 2005.
Signatures Title
---------- -----
/s/ Kevin R. Keating President (Principal Executive Officer),
-------------------- Treasurer, Secretary (Principal
Financial and Accounting
Officer) and Director
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Reports of Independent Registered Public Accounting Firm........................................F-1 to F-2
Balance Sheets - As of December 31, 2004 and 2003......................................................F-3
Statements of Operations - For the Years Ended December 31, 2004 and 2003,
and for the Period from February 9, 2000 (Date of Inception) to December 31, 2004................F-4
Statement of Stockholders' Equity - For the Period from February 9, 2000 (Date of
Inception) to December 31, 2004 ..........................................................F-5 to F-6
Statements of Cash Flows - For the Years Ended December 31, 2004 and 2003,
and for the Period from February 9, 2000 (Date of Inception) to December 31, 2004................F-7
Notes to Financial Statements..................................................................F-8 to F-17
De Joya & Company
Certified Public Accountants & Consultants
2425 W. Horizon Ridge Parkway
Henderson, Nevada 89052
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Marine Jet Technology, Corp.
(A Development Stage Company)
Torrance, California
We have audited the accompanying balance sheet of Marine Jet Technology, Corp..
(A Development Stage Company) as of December 31, 2004, and the related statement
of operations, stockholders' equity, and cash flows for the year ended December
31, 2004 and from Inception through December 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Marine Jet Technology, Corp. (A
Development Stage Company) as of December 31, 2004, and the results of its
operations and cash flows for the year ended December 31, 2004 and from
Inception through December 31, 2004 in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered losses from operations, all of
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ De Joya & Company
De Joya & Company
March 17, 2005
Henderson, Nevada
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Marine Jet Technology Corp:
We have audited the accompanying balance sheets of Marine Jet Technology Corp.
(a Development Stage Company) (a Nevada corporation) as of December 31, 2003 and
2002 and the statements of operations and accumulated deficit and cash flows for
the years then ended and from February 9, 2000 (date of inception) to December
31, 2003 and the statement of changes in stockholders' equity from February 9,
2000 (date of inception) to December 31, 2003. These financial statements are
the responsibility of Marine Jet Technology Corp.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. 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 Marine Jet Technology Corp. as
of December 31, 2003 and 2002 and the result of its operations, accumulated
deficit, other comprehensive income, its cash flows and changes in stockholders'
equity for the years ended December 31, 2003 and 2002 and from February 9, 2000
(Date of inception) to December 31, 2003, in conformity with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As disclosed in Note 8 to these financial
statements, the Company has had limited operations and has not established a
long-term source of revenue. This raises substantial doubt about its ability to
continue as a going concern. Management's plan in regards to this issue is also
described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
February 4, 2004 /s/ Chavez & Koch, CPA's
Henderson, Nevada Chavez & Koch, CPA's
F-2
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
BALANCE SHEETS
AS OF DECEMBER 31, 2004
-----------------------------
12/31/2004 12/31/2003
--------- ---------
ASSETS
CURRENT ASSETS:
Cash $ 869 $ 9,766
--------- ---------
Total current assets 869 9,766
--------- ---------
ASSETS HELD FOR SALE 48,186 58,332
--------- ---------
TOTAL ASSETS $ 49,055 $ 68,098
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE $ 44,754 $ 15,203
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 45,000,000 shares authorized 21,822,570 and
20,782,570 shares issued and outstanding as of 12/31/04 and 12/31/03,
respectively 21,823 20,783
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
as of 12/31/04 and 12/31/03, respectively -- --
Additional paid-in capital 287,355 177,595
Accumulated deficit during development stage (304,877) (145,483)
--------- ---------
Total stockholders' equity 4,301 52,895
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 49,055 $ 68,098
========= =========
See accompanying notes to financial statements.
F-3
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2004 & 2003
AND FROM INCEPTION TO DECEMBER 31, 2004
Years ended Inception to
---------------------------------- ------------
12/31/2004 12/31/2003 12/31/2004
------------ ------------ ------------
REVENUES: $ -- $ -- $ --
------------ ------------ ------------
EXPENSES:
General and administrative expenses 147,198 31,218 269,144
Depreciation expense 6,098 6,098 20,329
Amortization expense 4,047 4,047 18,410
------------ ------------ ------------
TOTAL EXPENSES 157,343 41,363 307,883
------------ ------------ ------------
OPERATING LOSS (157,343) (41,363) (307,883)
------------ ------------ ------------
Other income (expense):
Interest expense (2,051) (203) (2,844)
Gain on forgiveness of debt -- -- 5,850
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (2,051) (203) 3,006
------------ ------------ ------------
NET LOSS (159,394) (41,566) (304,877)
------------ ------------ ------------
Accumulated deficit, beginning of period (145,483) (103,917) --
------------ ------------ ------------
Accumulated deficit, end of period $ (304,877) $ (145,483) $ (304,877)
============ ============ ============
Weighted average number
of shares outstanding 21,277,871 20,734,625 19,752,725
============ ============ ============
Net loss per basic shares $ (0.01) $ (0.00) $ (0.02)
============ ============ ============
Net loss per diluted shares $ (0.00) $ (0.00) $ (0.01)
============ ============ ============
See accompanying notes to financial statements.
F-4
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO DECEMBER 31, 2004
Additional Accumulated Total
Common Paid-in Deficit During Stockholders'
Shares Stock Capital Dev. Stage Equity
---------- ---------- ---------- ---------- ----------
Issued for cash
February 11, 2000 105,000 $ 105 $ -- $ -- $ 105
Issued for cash
February 12, 2000 3,125,000 3,125 -- -- 3,125
Issued for cash
May 18, 2000 100,000 100 -- -- 100
Issued for proprietary rights agreement
May 19, 2000 1,000,000 1,000 -- -- 1,000
Issued for patents
May 19, 2000 15,875,000 15,875 33,906 -- 49,781
Expense paid for by an officer & director
December 31, 2000 -- -- 4,790 -- 4,790
Net income (loss)
December 31, 2000 -- -- -- (18,718) (18,718)
---------- ---------- ---------- ---------- ----------
Balance December 31, 2000 20,205,000 20,205 38,696 (18,718) 40,183
---------- ---------- ---------- ---------- ----------
504 Offering
July 31, 2001 527,570 528 104,986 -- 105,514
Expenses paid for by an officer & director
September 30, 2001 -- -- 11,575 -- 11,575
Expenses paid for by an officer & director
December 31, 2001 -- -- 3,179 -- 3,179
Net income (loss)
December 31, 2001 -- -- -- (49,650) (49,650)
---------- ---------- ---------- ---------- ----------
Balance December 2001 20,732,570 20,733 158,436 (68,368) 110,801
---------- ---------- ---------- ---------- ----------
Expenses paid for by an officer & director
December 31, 2002 -- -- 9,844 -- 9,844
Net income (loss)
December 31, 2002 -- -- -- (35,549) (35,549)
---------- ---------- ---------- ---------- ----------
Balance December 31, 2002 20,732,570 20,733 168,280 (103,917) 85,096
---------- ---------- ---------- ---------- ----------
See accompanying notes to financial statements.
F-5
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO DECEMBER 31, 2004
Additional Accumulated Total
Common Paid-in Deficit During Stockholders'
Shares Stock Capital Dev. Stage Equity
---------- ---------- ---------- ---------- ----------
Expense reimbursement to an officer
& director
March 31, 2003 -- -- (635) -- (635)
Issued for cash
December 16, 2003 50,000 50 9,950 -- 10,000
Net income (loss)
December 31, 2003 -- -- -- (41,566) (41,566)
---------- ---------- ---------- ---------- ----------
Balance December 31, 2003 20,782,570 20,783 177,595 (145,483) 52,895
---------- ---------- ---------- ---------- ----------
Issued for services
July 9, 2004 1,000,000 1,000 99,000 -- 100,000
Issued for services
July 27, 2004 40,000 40 10,760 -- 10,800
Net income (loss)
December 31, 2004 -- -- -- (159,394) (159,394)
---------- ---------- ---------- ---------- ----------
Balance December 31, 2004 21,822,570 $ 21,823 $ 287,355 $ (304,877) $ 4,301
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
F-6
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 & 2003
AND FROM INCEPTION TO DECEMBER 31, 2004
Twelve months ended
-------------------------- Inception to
12/31/2004 12/31/2003 12/31/2004
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(159,394) $ (41,566) $(304,877)
Adjustments to reconcile net loss with net cash
used in operating activites:
Depreciation and amortization 10,146 10,145 38,742
Stock issued for services 110,800 110,800
(Increase) decrease in prepaid expenses -- 405 --
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (38,448) (31,016) (155,335)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets -- -- (30,689)
Purchase of licensing agreement, patents -- -- (5,458)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES -- -- (36,147)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable-shareholder (1,523) 15,203 13,680
Notes payable 31,074 -- 31,074
Proceeds from issuance of capital stock -- 9,365 118,843
Capital contributions through expenses pd. by officer -- -- 28,754
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,551 24,568 192,351
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (8,897) (6,448) 869
CASH, BEGINNING OF PERIOD 9,766 16,214 --
--------- --------- ---------
CASH, END OF PERIOD $ 869 $ 9,766 $ 869
========= ========= =========
Supplemental disclosures:
Interest paid $ -- $ -- $ 590
========= ========= =========
Taxes paid $ -- $ -- $ --
========= ========= =========
See accompanying notes to financial statements.
F-7
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 1 - ORGANIZATION AND BACKGROUND
Marine Jet Technology, Corp. was incorporated in the State of Nevada on February
9, 2000. The company was formed to develop and market a boat propulsion
technology developed by the President of the Company. The Company currently has
minimal operations and in accordance with SFAS #7, the Company is considered a
development stage company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The financial statements of Marine Jet Technology, Corp. have been prepared on
the accrual basis. Revenues are recognized when earned and expenses are
recognized in the period incurred. The fiscal year end is December 31.
Cash and cash equivalents
The Company considers short-term investments with an original maturity of three
months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents, and
accounts and notes payable, are carried at cost which approximates their fair
value because of the short-term nature of these financial instruments.
Fixed assets
Fixed assets are recorded at cost. Ordinary maintenance and repairs are charged
to expense as incurred and costs that materially increase the life of the assets
are capitalized. Depreciation is recorded using the straight-line method over
the estimated useful life of the assets, which are as follows:
Office equipment 7 years
Equipment and machinery 5 years
Depreciation for the periods ended December 31, 2004, and December 31, 2003 was
$6,098 and $6,098, respectively.
F-8
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Share Calculations
Basic earnings per common share ("EPS") are computed by dividing income
available to common stockholders by the weighed-average number of common shares
outstanding for the period. The weighed-average number of common shares
outstanding for computing basic EPS was 21,277,871 and 20,734,625 for the
periods ended December 31, 2004 and 2003, respectively. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. As of December 31,
2004 and 2003, the Company had no outstanding securities that could have a
dilutive effect on the outstanding common stock.
Amortized Intangible assets
Intangible Assets are recorded at their historical cost. Amortization is
recorded using the straight-line method over the estimated useful life of the
assets, which are as follows:
Proprietary rights agreement 14 years
Patents 13-14 years
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Income taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS #109) "Accounting for Income Taxes" ("SFAS No. 109"),
which require the use of the liability method. SFAS No. 109 provides that
deferred tax assets and liabilities are recorded based on the differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes, referred to as temporary differences. Deferred tax
assets and liabilities at the end of each period are determined using the
currently enacted tax rates applied to taxable income in periods in which the
deferred tax assets and liabilities are expected to be settled or realized.
Currently there are no federal income taxes due.
F-9
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company is in the process of developing and implementing accrual based
revenue recognition policies.
Advertising Costs
Advertising costs are charged to operations when incurred. No advertising costs
have been incurred as of November 30, 2004.
Selling, General and Administrative Expenses
Selling, general and administrative costs are charged to operations when
incurred. Selling, general and administrative costs were $147,198 and $31,218
for the years ended December 31, 2004 and 2003, respectively.
2004 2003
-------- --------
Advertising $ -- $ --
Bank charges 182 100
Legal fees 11,971 12,409
Licenses and permits 464 185
Miscellaneous expense 500 405
Professional fees 134,081 18,119
-------- --------
$147,198 $ 31,218
======== ========
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements
In June 2002, the FASB issued Financial Accounting Standards Statement No. 146
"Accounting for Costs Associated with Exit or Disposal Activities". The
Statement addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3 and is effective for exit or disposal activities initiated after December
31, 2002. The Company does not expect SFAS 146 to have material impact on its
financial statements.
In December 2002, the FASB issued Financial Accounting Standards Statement No.
148 "Accounting for Stock-Based Compensation - Transition and Disclosure". The
Statement provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation.
The provisions of SFAS 148 are effective for fiscal years ending after December
15, 2002. The Company does not expect SFAS 148 to have material impact on its
financial statements.
In April 2003, the FASB issued Financial Accounting Standards Statement No. 149
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities."
The Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. The provisions of SFAS 149 are effective for contracts
entered into or modified after June 30, 2003. The Company does not expect SFAS
149 to have material impact on its financial statements.
In May 2003, the FASB issued Financial Accounting Standards Statement No. 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." The Statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances).
The provisions of SFAS 150 are effective for financial instruments entered into
or modified after May 31, 2003. The Company does not expect SFAS 150 to have
material impact on its financial statements.
F-10
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 3 - ASSETS HELD FOR SALE AND ASSOCIATED LIABILITIES
As discussed in Note 10, the Company entered into an Assumption Agreement with
its principal stockholder whereby all assets (except for cash) and liabilities
were transferred to a newly formed subsidiary, Intellijet Marine, Inc., which
subsidiary was subsequently spun-off to the shareholders of the Company. Since
the Company has not commenced operations and has been considered a development
stage company since inception, the spin-off of Intellijet Marine, Inc. has been
considered as a sale of assets rather than discontinued operations. Accordingly,
the Company has classified all assets and liabilities associated with the
spin-off as assets held for sale and liabilities associated with assets held for
sale as of December 31, 2004 and 2003 in the accompanying balance sheets. The
following is a composition of the assets held for sale and liabilities
associated with assets held for sale as of December 31, 2004 and 2003:
2004 2003
-------- --------
ASSETS
Fixed assets:
Office equipment $ 689 $ 689
Equipment and machinery 30,000 30,000
Accumulated depreciation (20,331) (14,232)
-------- --------
Total fixed assets, net 10,358 16,547
Other assets:
Proprietary rights agreement 1,000 1,000
Patents 55,238 55,238
Accumulated amortization (18,410) (14,363)
-------- --------
Total other assets 37,828 41,875
-------- --------
Total assets $ 48,186 $ 58,332
======== ========
LIABILITIES
Current liabilities:
Notes payable $ 31,074 $ --
Notes payable - shareholder 13,680 15,203
-------- --------
Total current liabilities 44,754 15,203
-------- --------
Total liabilities $ 44,754 $ 15,203
======== ========
F-11
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 4 - STOCKHOLDER'S EQUITY
On February 11, 2000, the Company issued 105,000 of its $0.001 par value common
stock to an officer and director of the Company for cash in the amount of $105.
Of the total amount received, $105 is considered common stock and $0 is
considered additional paid-in capital.
On February 12, 2000, the Company issued 3,125,000 shares of its $0.001 par
value common stock as founder's shares to the Company's officers and directors
for cash of $3,125. Of the total amount received, $3,125 is considered common
stock and $0 is considered additional paid-in capital.
On May 18, 2000, the Company issued 100,000 shares of its $0.001 par value
common stock to an officer and director of the Company for cash in the amount of
$100. Of the total amount received, $100 is considered common stock and $0 is
considered additional paid-in capital.
On May 19, 2000, the Company issued 1,000,000 shares of its $0.001 par value
common stock as consideration for a "Proprietary Rights Agreement" valued at
$1,000 (See Note 3). Of the total amount received, $1,000 is considered common
stock and $0 is considered additional paid-in capital.
On May 19, 2000, the Company issued 15,875,000 shares of its $0.001 par value
common stock as consideration for a "Patent Licensing Agreement" valued at
$55,238 (See Note 3). Of the total amount received, $15,875 is considered common
stock and $33,906 is considered additional paid-in capital.
During the period ended December 31, 2001, an officer, director and shareholder
of the Company paid for expenses on behalf of the Company totaling $4,790. Of
the total amount received, $0 is considered common stock and $4,790 is
considered additional paid-in capital.
On July 31, 2001, the Company closed its Rule 504 offering and issued 527,570
shares of its $0.001 par value common stock for cash in the amount of $105,514.
Of the total amount paid, $528 is considered common stock and $104,986 is
considered additional paid-in capital.
During the period ended September 30, 2001, an officer, director and shareholder
of the Company paid for expenses on behalf of the Company totaling $11,575. Of
the total amount received, $0 is considered common stock and $11,575 is
considered additional paid-in capital.
F-12
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 4 - STOCKHOLDER'S EQUITY (CONTINUED)
During the period ended December 31, 2001, an officer, director and shareholder
of the Company paid for expenses on behalf of the Company totaling $3,179. Of
the total amount received, $0 is considered common stock and $3,179 is
considered additional paid-in capital.
During the period ended December 31, 2002, an officer, director and shareholder
of the Company paid for expenses on behalf of the Company totaling $9,844. Of
the total amount received, $0 is considered common stock and $9,844 is
considered additional paid-in capital.
During the period ended March 31, 2003, an officer, director and shareholder of
the Company was reimbursed for an expenses previously paid on behalf of the
Company totaling $635. Of the total amount received, $0 is considered common
stock and $635 is considered additional paid-in capital.
On December 16, 2003, the Company issued 50,000 shares of its $0.001 par value
common stock for cash in the amount of $10,000. Of the total amount received,
$50 is considered common stock and $9,950 is considered additional paid-in
capital.
On July 9, 2004, the Company issued 1,000,000 shares of common stock to an
individual in exchange for consulting services valued at $100,000. The value of
the services is based on the fair market value of the Company's stock on the
date of issuance.
On July 27, 2004, the Company issued 40,000 shares of common stock to a
corporation in exchange for consulting services valued at $10,800. The value of
the services is based on the fair market value of the Company's stock on the
date of issuance.
For the periods ended December 31, 2004 and December 30, 2003, the Company had
21,822,570 and 20,782,570 shares of common stock issued and outstanding,
respectively.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of
common stock that are not disclosed on the balance sheets.
F-13
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company entered into a Patent License Agreement ("Agreement") with Jeff P.
Jordan and Robert J. Tomlinson ("Licensors"), officers and directors of the
Company, to issue rights to all of the marketing, proprietary, licensing, patent
and intellectual rights to US Patent #5,658,176, "Marine Jet propulsion System,
US Patent #5,679,035, "Marine Jet Propulsion Nozzle and Method", and US Patent
#5,683,276, "Marine Jet Propulsion Inlet Duct and Method", in exchange for
15,875,000 shares of the company's $0.001 par value common stock (See Note 4).
The Agreement grants to the Company exclusive rights to the use of the Patents
for all applications under 400hp.
The Company also entered into NonCompetition Agreements with the Licensors
whereby for a period of 5 years from the date of the agreement, Licensors will
not engage in or carry on, directly or indirectly, any business in competition
with the business of the Company relating to the Patents that are the subject of
the Patent License Agreement. No valuable consideration was given for the
NonCompetition Agreements.
The Company purchased equipment from an officer and director of the Company on
August 31, 2001 with cash in the amount of $30,000.
On June 13, 2003, the Company executed a 3-month Note Payable to a shareholder
in the amount of $10,000. Interest on the note has been accrued at an annual
rate of 6% according to the note agreement until the principal amount of the
note was repaid on August 11, 2004.
On August 12, 2003, the Company executed a 3-month Note Payable to a shareholder
in the amount of $5,000 that has not been paid on its maturity date. Although
the note holder has not called the note, the Company is in default on the note
agreement. Interest on the note has been accrued at an annual rate of 6%
according to the note agreement.
During the twelve months ended December 31, 2004, an individual who is an
officer, director, and shareholder of the Company advanced funds to the Company
and was subsequently repaid for portions of prior advances. The notes bear no
interest for three months and subsequently accrue interest at 6% per annum.
Name Balance as of 12/31/04
---- ----------------------
Jeff Jordan $13,680
During the twelve months ended December 31, 2004, the Company incurred interest
expense in the amount of $815 on related party loans.
F-14
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 7 - INCOME TAXES
As of December 31, 2004, the Company has a net operating loss carry forward of
approximately $304,877 for tax purposes, which will be available to offset
future taxable income. If not used, this carry forward will expire between the
years 2020 and 2024.
The deferred tax asset relating to the net operating loss carry forward of
approximately $102,152 has been fully reserved at December 31, 2004.
NOTE 8 - RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 2004 amounts to
conform with the December 31, 2003 financial statements presentation. These
reclassifications had no effect on net earnings. Other reclassifications have
been made to describe the accounts more appropriately.
NOTE 9 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which assumes the
realization of assets and liquidation of liabilities in the normal course of
business.
Since the Company has not commenced its planned principal operations, the
Company intends to raise sufficient capital needed to continue operating until
its planned principal operations commence.
The Company anticipates the ability to raise additional money through Private
Placement Memorandums. Additionally, the Company plans to curtail expenses so
that the current cash balance will allow the company to continue to operate.
Without realization of additional capital, it would be unlikely for the Company
to continue as a going concern.
The officers and directors are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
F-15
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 10 - SUBSEQUENT EVENTS
On January 11, 2005, the Company's principal stockholder entered into a
Securities Purchase Agreement ("Purchase Agreement") with Keating Reverse Merger
Fund, LLC ("KRM Fund"), under which KRM Fund agreed to purchase 15,306,500
shares of common stock for a purchase price of $440,000.
On January 20, 2005, the Company entered into the Assumption Agreement with
its principal stockholder and Intellijet Marine, Inc. ("Intellijet"), a Nevada
corporation that the Company established as a wholly-owned subsidiary. Under the
Assumption Agreement, the Company transferred all of its assets, except for
21,822,570 shares of common stock of Intellijet and approximately $2,500 in
cash, to Intellijet. Intellijet agreed to assume all of the Company's
liabilities and obligations and to indemnify the Company for any loss it
incurred with respect to the assumed liabilities. The principal stockholder and
Intellijet also agreed to release the Company from any and all obligations and
claims whatsoever.
On February 4, 2005, the Company completed the distribution of all
21,822,570 shares of common stock of Intellijet owned by it pro rata to the
Company's stockholders of record as of January 24, 2005. Pursuant to the
distribution, each of the Company's stockholders received one share of common
stock of Intellijet for each one share of the Company's common stock owned of by
them on the record date. Intellijet is now an independent company and will
continue to operate the Company's former business of developing marine jet
propulsion technology; supplying mechanical components under the Quick JetTM
brand name; and licensing boat manufacturers to produce boats incorporating
Intelllijet's systems.
The transactions under the Purchase Agreement were completed on February 9,
2005. Since the transfer of the Company's propulsion assets and business to
Intellijet, the Company has no material assets, liabilities or ongoing
operations. Nevertheless, the Company believes that it may be able to recover
some value for its shareholders by the adoption and implementation of a plan to
seek, investigate and, if the results of the investigation warrant, effectuate a
business combination with a suitable privately-held company that has both
business history and operating assets.
On February 17, 2005, the Company issued 5,000,000 shares of its common
stock to KRM Fund at a purchase price of $0.01 per share, for an aggregate
purchase price of $50,000. The funds will provide working capital to the Company
for operating expenses.
On February 17, 2005, the Company also issued 1,000,000 shares of its
common stock to Kevin R. Keating, the sole officer and director of the Company,
for services rendered to the Company with a fair value of $10,000, or $0.01 per
share.
F-16
MARINE JET TECHNOLOGY, CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004
NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
On February 17, 2005, the Company also issued 300,000 shares of its common
stock to a financial consulting firm for consulting services rendered to the
Company with a fair value of $3,000, or $0.01 per share.
On March 24, 2005, the Company entered into a Letter of Intent to acquire
Antik Denim, LLC, a California limited liability company ("Antik"). Antik is a
designer of highly-detailed antiquated and vintage denim and related apparel
with an Old West flair. Antik currently sells its products through showrooms
located in New York and Los Angeles as well as fine retail stores located in
Japan and the European Union. The Company was established in September 2004 and
is headquartered in Commerce, California.
Under the transactions contemplated under the Letter of Intent, the Company
will acquire all of the outstanding membership interests in Antik from Antik's
existing members ("Antik Members"). In the exchange, the Company will issue
shares of its common stock to Antik Members in such amount so that, immediately
after giving effect to the acquisition, the Antik Members will own in the
aggregate 95.8% of the Company's issued and outstanding shares of common stock
on a fully diluted basis. After the payment of certain transaction related fees
(including the issuance of the Company's common stock to certain finders and
advisors), the current stockholders of the Company are expected to own
approximately 3.8% of the issued and outstanding common stock after completion
of the transaction with Antik.
Completion of the acquisition is subject to the negotiation and execution
of a definitive acquisition agreement, the delivery of financial statements of
Antik prepared in accordance with generally accepted accounting principles in
the United States of America, and the approval by Antik's board and stockholders
of the acquisition, a corporate name change, an increase in the Company's
authorized common stock and a reverse stock split to be mutually determined.
There can be no assurances that these conditions will be satisfied or that the
acquisition will be completed.
F-17
Exhibit Index
Exhibit
Number Description of Exhibit
------ ----------------------
31 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer of the Company, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.