-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bo5T94ensHY30JFNFcu5jZVCCbzCgNEdsOPDg5DamrNxQOAdwSBJJwHH9u/S+qr9 t2peFGtNfVVA6luiRRfE2w== 0000948830-97-000244.txt : 19971016 0000948830-97-000244.hdr.sgml : 19971016 ACCESSION NUMBER: 0000948830-97-000244 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19971015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN DANCER CORP CENTRAL INDEX KEY: 0000820408 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 680133692 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 033-16417-LA FILM NUMBER: 97695868 BUSINESS ADDRESS: STREET 1: 370 17TH ST STE 2300 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035725000 MAIL ADDRESS: STREET 1: 370 17TH STREET STREET 2: SUITE 2300 CITY: DENVER STATE: CO ZIP: 80202 10KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: March 31, 1997 Commission File No. 33-9640-LA NORTHERN DANCER CORPORATION --------------------------------------------- (Name of small business issuer in its charter) Colorado 68-0133692 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 370-17th Street, Suite 2300, Denver, Colorado 80202 ----------------------------------------------------------- (Address of principal executive offices, including zip code) (303) 572-5000 -------------------------- (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. 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 --- No -X- Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The Issuer's revenues for its most recent fiscal year were $14,394. To the best of management's knowledge, no purchases or sales of the issuer's voting stock have occurred, and no market price for such stock has been quoted, in the past 60 days. As a result, the issuer is unable to compute the aggregate market value of the voting stock held by non-affiliates by reference to the price at which the stock was sold, or to the average bid and asked prices of such stock, as of a specified date within the past 60 days. PART I ITEM 1. DESCRIPTION OF BUSINESS. GENERAL Northern Dancer Corporation (the "Company") is a development stage enterprise formed under the laws of the State of Colorado on January 16, 1987, to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. The Company may seek to acquire a controlling interest in such entities in contemplation of later completing an acquisition. The Company is not limited to any operation or geographic area in seeking out opportunities. Management has not identified any particular business or industry within which the Company will seek an acquisition or merger. The Company has not conducted, nor have others made available to it, market research supporting the viability of the Company's proposed operations. The Company sold 23,915,000 Units of no par value common stock ("Common Stock") at $.02 per Unit, for net proceeds of $478,300 in a public offering which closed on March 28, 1988. Each Unit consists of two shares of the Company's no par value common stock and one Class A Common Stock Purchase Warrant. Each Class A Warrant entitles the holder to purchase one share of common stock and one Class B Common Stock Purchase Warrant at a price of $.02. Each Class B Warrant entitles the holder to purchase one share of common stock and one Class C Common Stock Purchase Warrant at a price of $.04. Each Class C Common Stock Purchase Warrant entitles the holder to purchase one share of common stock at a price of $.06. During the year ended March 31, 1997, the expiration dates of the Class A, B and C warrants were extended to December 31, 1997. The Class A, B and C Warrants are detachable and may be separately traded. The Company has the right to call any or all of the Warrants with 30 days' notice at a price of $.0001. No warrants have been exercised as of March 31, 1997. During February, 1994, the Company entered into a 90 day option agreement with an unaffiliated company which held a five-year license agreement with the Republic of Madagascar to search for ships that have sunk within the Malagasy territorial waters. The Company incurred expenses of approximately $55,000 related to this project including the costs of conducting an underwater search of the area where a particular shipwreck was believed to be located, but the search was unsuccessful. Therefore, the Company did not exercise its option to acquire an interest in the Madagascar license and the project was terminated. During the fiscal year ended March 31, 1996 the Company loaned a total of $85,000 to Dunn International, Inc. ("Dunn") in anticipation of a possible merger with or acquisition of Dunn. Dunn was engaged in two lines of business: (1) the sale of software packages for petrochemical plants and refineries, and (2) providing maintenance and turnaround services for petrochemical plants and refineries. During August 1996 the Company agreed to convert the $85,000 of loans and $5,883 of accrued interest into 57,941 shares of Dunn's common stock which represented approximately 18% of Dunn's outstanding common stock as of March 31, 1997. Since the conversion of the $85,000, the Company has loaned an additional $60,725 to Dunn ($40,725 was loaned before March 31, 1997 and $20,000 was loaned after March 31, 1997.) These additional loans were made in an attempt to protect the Company's investment in Dunn. The Company has never completed a merger or acquisition with Dunn because after completing its due diligence, management was of the opinion that a merger or acquisition would not be in the best interests of the Company at the time. The Company reevaluates this decision periodically. -2- Dunn is approximately 50% owned by a principal stockholder of the Company and her husband who is the Chairman of the Board and CEO of Dunn. See ITEM 12 below. The Company is presently searching for merger or acquisition candidates, as described below. The Company believes it has insufficient capital with which to finance cash acquisitions of other business entities. Accordingly, the Company will be incapable of acquiring the assets or business of other entities except in those instances where the Company exchanges its Common Shares with those held by the target company and/or the target Company's shareholders. Another possibility, although less likely, is that the Company may give its Common Shares to a target in exchange for the target's assets. Management expects that an exchange of the Company's Common Shares in a merger or acquisition, if ever, would require the Company to issue a substantial number of its Common Shares. Accordingly, the percentage of Common Shares held by the Company's then-shareholders would be reduced as a result of the increased number of Common Shares issued and outstanding following any such merger or acquisition. The Company expects to continue concentrating primarily on the identifica- tion and evaluation of prospective merger or acquisition "target" entities including private companies, partnerships or sole proprietorships. The Company does not intend to act as a general or limited partner in connection with partnerships it may merge with or acquire. Management has not identified any particular area of interest within which the Company will concentrate its efforts. Management contemplates that the Company will continue to seek to merge with or acquire a target company with either assets or earnings, or both, and that preliminary evaluations undertaken by the Company will assist in identifying possible target companies. The Company has not established a specific level of earnings or assets below which the Company would not consider a merger or acquisition with a target company. Moreover, management may identify a target company which is generating losses which it will seek to acquire or merge with the Company. The merger with or acquisition of a target company which is generating losses or which has negative shareholders' equity may have a material adverse affect on the price of the Company's Common Shares. There is no assurance, if the Company acquires a target company with assets or earnings, or both, that the price of the Company's Common Shares will increase. Management anticipates that it should not be necessary to raise additional funds within the next 12 months to meet expenditures required for operations. However, if after 12 months the Company has not generated and successfully concluded a merger or acquisition, the Company may have to seek additional financing in order to continue operations. COMPETITION The Company is and will remain an insignificant participant among the firms which engage in mergers with and acquisitions of privately-financed entities. There are many established venture capital and financial concerns which have significantly greater financial and personnel resources and technical exper- tise than the Company. In view of the Company's combined limited financial resources and limited management availability, the Company will continue to be at a significant competitive disadvantage compared to the Company's competitors. -3- EMPLOYEES The Company currently has no employees. While all of the Company's Officers and Directors have prior experience in the operation and management of various businesses, none of the Company's Officers or Directors has any prior significant experience in the valuation of businesses or in the structuring of mergers and acquisitions. ITEM 2. DESCRIPTION OF PROPERTY. The Company maintains its offices in space provided by a company in which a principal shareholder of the Company is an officer and director. Since May 1993, the Company has not been charged rent for such office space. The Company's address is 370-17th Street, Suite 2300, Denver, Colorado 80202 and its telephone number is (303) 572-5000. ITEM 3. LEGAL PROCEEDINGS. There are no pending legal proceedings, and the Company is not aware of any threatened legal proceedings to which the Company is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders of the Company during the last quarter of the fiscal year ended March 31, 1997. -4- PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) MARKET INFORMATION. The Company's Shares and Units have been traded on the over-the- counter market. However, since May 1989, no quotations have been reported by the National Quotation Bureau, Inc. ("NQB"). Presently, no established public trading market exists for the Company's securities. (b) HOLDERS. The number of record holders of the Company's no par value common stock at August 31, 1997 was 147. This does not include shareholders who hold stock in their accounts at broker/dealers. (c) DIVIDENDS. No dividends have been declared or paid by the Company since inception and none is contemplated at any time in the foreseeable future. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. The Company has generated no revenue other than interest income since inception. Management anticipates the Company will earn only interest income until following the conclusion of a merger or acquisition, if any, as contem- plated by the Company's business plan. The Company is currently in a liquid position, and as of March 31, 1997, had working capital (consisting primarily of cash and cash equivalents) totalling $90,431. The Company anticipates operational costs will be limited until such time as significant evaluation work is undertaken regarding prospective mergers or acquisitions. General and administrative expenses have remained relatively consistent between the years ended March 31, 1996 and 1997. During fiscal 1997 and 1996, the Company advanced $40,725 and $85,000 to Dunn. (See ITEMS 1 and 12.) The notes bear interest from 6% to 8.5%, however, no interest income has been recorded as a result of the uncertainty of collection. Also, due to the uncertainty of collection, all notes were written off as uncollectible during the year the advance was made. During fiscal 1997 a $10,000 principal payment was made on these fully reserved notes and accordingly, the Company recorded a $10,000 bad debt recovery. Additionally the Company converted $85,000 of these notes and $5,883 of unrecorded interest income into 57,941 shares of common stock of Dunn. No value has been recorded for this investment in Dunn. As of March 31, 1997, the Company had no material commitments for capital expenditures. ITEM 7. FINANCIAL STATEMENTS. The Independent Auditors' Report appears at page F-1, and the Financial Statements and Notes to Financial Statements appear at pages F-2 through F-8 hereof. -5- ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no disagreements between the Company and its independent accountants on any matter of accounting principles or practices or financial statement disclosure since the Company's inception. -6- PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The Directors and Executive Officers of the Company are as follows: Name Age Position - ------------------ --- --------------------------------- Joseph E. O'Connor 56 President, Treasurer and Director J. Daniel Bell 52 Secretary and Director David C. Walters 51 Director BUSINESS EXPERIENCE AND BIOGRAPHICAL INFORMATION The following is a brief account of the education and business experience during at least the past five years of the Directors, Executive Officers and key employees, indicating the principal occupation and employment during that period, and the name and principal business of the organization in which such occupation and employment were carried out. JOSEPH E. O'CONNOR - PRESIDENT, TREASURER AND DIRECTOR. Mr. O'Connor has served as President, Treasurer and a Director of the Company since January 16, 1987. From 1990 to the present, he has served as owner of Princeton Communications Group, a marketing and consulting firm specializing in assisting public corporations and private businesses in evaluating, analyzing, structuring and developing domestic and international telecommunications services and networks. From 1982 to 1990, he served as President, owner, and sole employee of Euro-Pacific Group, Inc. ("EPG"), a Corona Del Mar, California company, whose primary business is to provide financial marketing and investment services to corporate retirement plans and to investment advisors. From 1976 to 1983, he served as Vice President and then President of Winrich, Kase & O'Connor, Inc. ("WKO"), Newport Beach, California, a registered investment advisor that provided investment counsel services to corporate retirement plans, endowment funds and individuals. During the period from 1980 to 1982, Mr. O'Connor also served on the Board of Directors of Cavendish Guaranty Trust, Ltd., merchant Bankers, London, England. From 1973 to 1976, he served as the Director of Business Development and as a portfolio manager for Provident Investment Counsel, Pasadena, California, a registered investment advisor. After completing active duty in the military in 1967, Mr. O'Connor was employed as an account executive with Hayden Stone, Inc., Los Angeles, California, a securities broker/dealer, until 1969, and as account executive and principal shareholder with Fredrick Gregory & Co., Inc., Los Angeles, California, a securities broker/dealer, until 1973. Mr. O'Connor received a M.B.A. degree in Finance in 1965 and a B.S. degree in Business in 1963, both from the University of Southern California. J. DANIEL BELL - SECRETARY AND DIRECTOR. Mr. Bell has served as a Director of the Company since August 16, 1996 and as Secretary of the Company since September 18, 1996. For the last 10 years Mr. Bell has served as Chairman of the Board and Chief Executive Officer of Industrial Services Technologies, Inc. ("IST"), a holding company built on five buyouts of middle market companies. These five companies are Piping Engineering Co. Inc., Chem-Fab, Inc., International Catalyst, Inc. and IST Mechanical Corp. Mr. Bell also serves as Chairman of the Board and Chief Executive Officer of Dunn International, Inc. -7- DAVID C. WALTERS - DIRECTOR. Mr. Walters has been a Director of the Company since March, 1989. He has been self-employed as a CPA since 1986. Mr. Walters has also served as President and a Director of Man O'War, Inc., a publicly-held company, since its inception on December 31, 1986. On October 4, 1988, Man O'War, Inc., a "blind pool" company, acquired 100% of Reduction Tech- nologies, Inc., a Texas corporation engaged in the business of offering chemically based waste treatment services. From November, 1985 until January, 1986, he served as President and Director of Atlantic Express, Inc., a publicly held company formed as a "blind pool" for the purpose of acquiring and consulting a business opportunity. In January, 1987, Atlantic Express, Inc. completed a business combination with NTR, Inc., a New York based company engaged in the transportation business, at which time Mr. Walters resigned as an officer but continued to serve as a director until 1988. From August, 1982 to April, 1986, he was Controller of Star CATV Investment Corp., a cable TV headquarters for 140 systems in Waxahachie, Texas. From 1980 to 1982, he served as Vice President and Treasurer of American/Chaparral, Inc., an oil and gas leasing and drilling company. He owned and operated Walters Rentals, a company which engaged in real estate management and residential loan origination and commercial loan brokering. He has served as Vice President and Treasurer of Security Bankshares, Inc., a bank holding company, from 1975 to 1976; he was Controller of First National Bank in Colorado Springs, Colorado, from 1972 to 1974; and Auditor for Fidelity Services Corporation, a bank holding company, from 1967 to 1972. Mr. Walters graduated from Lamar University with a BBA degree in Accounting in 1967. He became a Certified Public Accountant in 1984. No family relationships exist between any of the Officers or Directors. The Company has no audit, compensation or nominating committees. All Directors of the Company will hold office until the next annual meeting of the shareholders and until their successors have been elected and qualified. The Officers of the Company are elected by the Board of Directors at the first meeting after each annual meeting of the Company's shareholders, and hold office until their death, or until they shall resign or have been removed from office. The date of the next annual meeting of the Company will be determined by the Company's Board of Directors in accordance with Colorado law. ITEM 10. EXECUTIVE COMPENSATION. The following table sets forth information regarding the executive compensation for the Company's President. No executive officer received compensation in excess of $100,000 for the fiscal year ended March 31, 1997: Summary Compensation Table
Long Term Compensation Annual Compensation Awards Payouts Other All Annual Restricted Options/ Other Name and Principal Compen- Stock SARs LTIP Compen- Position Year Salary Bonus sation Award(s) (Number) Payouts sation Joseph E. O'Connor, 1997 _____ -0- -0- -0- -0- -0- -0- President 1996 -0- -0- -0- -0- -0- -0- -0- 1995 $4,500* -0- -0- -0- -0- -0- -0- _____________________ -8- * Represents consulting fees paid to Mr. O'Connor for services provided to the Company in connection with the review of an acquisition candidate.
None of the Company's Officers and Directors currently receives a salary from the Company. However, the Company has paid its President and others for consulting services provided to the Company. The Company does not anticipate in the near future entering into employment agreements with any of its Officers or Directors. Although Directors do not receive compen- sation for their services as Directors as such, Directors may be reimbursed for expenses incurred in attending Board meetings. No Officer of the Company receives any additional compensation for his services as a Director. The Company has no retirement, pension, profit-sharing or insurance or medical reimbursement plans covering its Officers and Directors. As of the date of this Report, no options have been granted under this Plan. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of September 15, 1997, the stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock, each Director individually and all Directors and Officers of the Company as a group:
Name and Address Amount and Nature of Percent of Beneficial Owner Beneficial Ownership of Class - ------------------------ -------------------- -------- Joseph E. O'Connor 9,000,000 8.9% 2 Corporate Plaza, Suite 200 Newport Beach, CA 92660 David C. Walters 3,000,000 3.0% 221 Gregory Drive DeSoto, TX 75115 Ralph H. Grills, Jr. 9,500,000 9.4% No. 906 1888 South Jackson Denver, CO 80210 J. Daniel Bell 12,670,000 12.3% 2750 East Cedar Avenue Denver, CO 80209 Carylyn K. Bell 12,670,000 12.3% 2750 East Cedar Avenue Denver, CO 80209 All Directors and 15,750,000 14.9% Officers as a Group (2 Persons) -9- ________________________ Includes 6,000,000 shares owned directly by Mr. O'Connor and Class A Warrants to purchase 3,000,000 shares at an exercise price of $.02 per share. Includes 2,000,000 shares and Class A Warrants to purchase 1,000,000 shares at an exercise price of $.02 per share owned of record by Walters Planning Group, to which Mr. Walters has beneficial ownership due to his position as sole proprietor. Includes 6,500,000 shares owned directly by Mr. Grills and Class A Warrants to purchase 3,000,000 shares at an exercise price of $.02 per share. Includes 250,000 shares and Class A Warrants to purchase 2,250,000 shares held directly by Mr. Bell; 7,320,000 shares and Class A Warrants to purchase 2,500,000 shares held by Carylyn Bell, the wife of Mr. Bell; and 350,000 shares held by Ms. Bell as custodian for a minor child. Includes 7,320,000 shares and Class A Warrants to purchase 2,500,000 shares at an exercise price of $.02 per share owned directly by Ms. Bell; 350,000 shares held by Ms. Bell as custodian for a minor child; and 250,000 shares and Class A Warrants to purchase 2,250,000 Shares at an exercise price of $.02 per share, owned by J. Daniel Bell, Ms. Bell's husband, to which Ms. Bell may be deemed to have beneficial ownership. Each Class A Warrant entitles the holder to purchase one share of Common Stock and one Class B Warrant at $.02. Each Class B Warrant entitles the holder to purchase one share of Common Stock and one Class C Warrant at $.04. Each Class C Warrant entitles the holder to purchase one share of Common Stock at $.06. All of the Class A, Class B and Class C Common Stock purchase Warrants are exercisable until December 31, 1997.
CHANGE IN CONTROL There are no known agreements, the operation of which may at a subsequent date result in a change in control of the Company. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. It is possible that the Company's Officers and Directors will sell part of their shares of the Company's Common Stock pursuant to the successful completion of a potential acquisition of a business opportunity. However, this is dependent upon arm's-length negotiations between the Company's Officers and Directors and management of the potential merger entity. There currently is no agreement or understanding of any kind whereby Officers and Directors of the Company will dispose of part or all of their shares of the Common Stock of the Company pursuant to an acquisition of a business opportunity. During the fiscal year ended March 31, 1996 the Company loaned a total of $85,000 to Dunn International, Inc. ("Dunn") in anticipation of a possible merger with or acquisition of Dunn. Dunn was engaged in two lines of business: (1) the sale of software packages for petrochemical plants and refineries, and (2) providing maintenance and turnaround services for petrochemical plants and refineries. During August 1996 the Company agreed to convert the $85,000 of loans and $5,883 of accrued interest into 57,941 shares of Dunn's common stock which represented approximately 18% of Dunn's outstanding common stock as of March 31, 1997. -10- Since the conversion of the $85,000, the Company has loaned an additional $60,725 to Dunn ($40,725 was loaned before March 31, 1997 and $20,000 was loaned after March 31, 1997.) These additional loans were made in an attempt to protect the Company's investment in Dunn. The Company has never completed a merger or acquisition with Dunn because after completing its due diligence, management was of the opinion that a merger or acquisition would not be in the best interests of the Company at the time. The Company reevaluates this decision periodically. Dunn is approximately 50% owned by Carylyn Bell, a principal stockholder of the Company and her husband, J. Daniel Bell, a director and Secretary of the Company, who is the Chairman of the Board and CEO of Dunn. The Company's Board of Directors believes that the terms of the above transactions were on terms no less favorable to the Company than if the transactions were with unaffiliated parties. PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit Number Description Location - ------ ------------------------- ------------------------------------------ 3 Articles of Incorporation Incorporated by reference to and Bylaws Exhibit No. 3 to the Registrant's Registration Statement (No. 33-9640-LA) on Form S-18 (b) No Reports on Form 8-K were filed during the last quarter of the period covered by this Report. -11- INDEX TO FINANCIAL STATEMENTS NORTHERN DANCER CORPORATION (A development stage company) Page Independent Auditor's Report F-1 Balance Sheet F-2 Statements of Operations F-3 Statement of Changes in Stockholders' Equity F-4 Statements of Cash Flows F-6 Notes to Financial Statements F-7 -12- INDEPENDENT AUDITOR'S REPORT Board of Directors Northern Dancer Corporation Denver, Colorado We have audited the accompanying balance sheet of Northern Dancer Corporation (a development stage company) as of March 31, 1997, and the related statements of operations, stockholders' equity and cash flows for the years ended March 31, 1997 and 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial 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 Northern Dancer Corpora- tion as of March 31, 1997, and the results of its operations and its cash flows for the years ended March 31, 1997 and 1996, in conformity with generally accepted accounting principles. The financial statements of Northern Dancer Corporation for the period from January 16, 1987 to March 31, 1990 were audited by other auditors, whose report dated February 8, 1991, expressed an unqualified opinion on those statements. We have audited the combination in the accompanying statements of operations, stockholders' equity and cash flows of the period from January 16, 1987 (inception) to March 31, 1990 into the period from January 16, 1987 to March 31, 1997. In our opinion, such financial statements have been properly combined. /s/ Hein + Associates llp Hein + Associates llp Denver, Colorado July 15, 1997 F-1 NORTHERN DANCER CORPORATION (A development stage company) BALANCE SHEET MARCH 31, 1997 ASSETS Current Assets: Cash and cash equivalents $ 97,080 Other current assets 777 Total current assets 97,857 Note Receivable and Investment in Related Party, net of $30,725 allowance for doubtful accounts and $85,000 valuation allowance - Office Equipment, net of $656 accumulated depreciation 978 Total Assets $ 98,835 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities - Accounts payable $ 7,426 Stockholders' Equity: Preferred stock, no par value; 10,000,000 shares authorized, none issued or outstanding - Common stock, no par value; 1,500,000,000 shares authorized; 98,330,000 shares issued and outstanding 398,409 Deficit accumulated during the development stage (307,000) Total stockholders' equity 91,409 Total Liabilities and Stockholders' Equity $ 98,835 See accompanying notes to these financial statements. F-2 NORTHERN DANCER CORPORATION (A development stage company) STATEMENTS OF OPERATIONS Cumulative from January For the Years 16, 1987 Ended March 31, (Inception) ----------------------- to March 1997 1996 31, 1997 ---------- ---------- --------- REVENUE: Interest income $ 4,394 $ 5,995 $ 112,896 Interest income, related party - - 28,566 Bad debt recovery, related party 10,000 - 10,000 14,394 5,995 151,462 EXPENSES: General and administrative 9,106 8,012 229,677 Consulting and administrative, related parties - - 91,100 Bad debt expense, related party 40,725 85,000 137,685 49,831 93,012 458,462 NET LOSS $ (35,437) $ (87,017) $(307,000) NET LOSS PER COMMON SHARE $ * $ * WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 98,330,000 98,330,000 ____________________ * Less than $.001 per share. See accompanying notes to these financial statements. F-3 NORTHERN DANCER CORPORATION (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM JANUARY 16, 1987 (INCEPTION) TO MARCH 31, 1997 Deficit Accumulated Common Stock During the --------------------- Development Shares Amount Stage Total ---------- -------- ----------- -------- BALANCE, January 16, 1987 - $ - $ - $ - (inception) Issuance of common stock for cash: At $.0001 per share 20,500,000 2,050 - 2,050 At $.0002 per share 3,750,000 750 - 750 At $.00025 per share 20,250,000 5,063 - 5,063 Net loss - - (5,495) (5,495) BALANCES, March 31, 1987 44,500,000 7,863 (5,495) 2,368 Issuance of common stock for cash at $.00025 per share 6,000,000 1,500 - 1,500 Net proceeds from the sale of common stock for cash received under public offering of units at $.02 per unit 47,830,000 389,046 - 389,046 Net loss - - (23,314) (23,314) BALANCES, March 31, 1988 98,330,000 398,409 (28,809) 369,600 Net loss - - (28,079) (28,079) BALANCES, March 31, 1989 98,330,000 398,409 (56,888) 341,521 Net loss - - (23,603) (23,603) BALANCES, March 31, 1990 98,330,000 398,409 (80,491) 317,918 Net income - - 13,954 13,954 BALANCES, March 31, 1991 98,330,000 398,409 (66,537) 331,872 Net loss - - (5,742) (5,742) BALANCES, March 31, 1992 98,330,000 398,409 (72,279) 326,130 Net loss - - (13,775) (13,775) (Continued) F-4 NORTHERN DANCER CORPORATION (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM JANUARY 16, 1987 (INCEPTION) TO MARCH 31, 1997 (Continued) Deficit Accumulated Common Stock During the --------------------- Development Shares Amount Stage Total ---------- -------- ----------- -------- BALANCES, March 31, 1993 98,330,000 398,409 (86,054) 312,355 Net loss - - (189,975) (189,975) BALANCES, March 31, 1994 98,330,000 398,409 (276,029) 122,380 Net income - - 91,483 91,483 BALANCES, March 31, 1995 98,330,000 398,409 (184,546) 213,863 Net loss - - (87,017) (87,017) BALANCES, March 31, 1996 98,330,000 398,409 (271,563) 126,846 Net loss - - (35,437) (35,437) BALANCES, March 31, 1997 98,330,000 $398,409 $(307,000) $ 91,409 See accompanying notes to these financial statements. F-5 NORTHERN DANCER CORPORATION (A development stage company) STATEMENTS OF CASH FLOWS Cumulative From January 16, 1987 Ended March 31, (Inception) ------------------- to March 31, 1997 1996 1997 --------- ------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(35,437) $(87,017) $(307,000) Adjustments to reconcile net loss to net cash from operating activities: Depreciation expense 328 328 656 Bad debt expense (recovery) 30,725 85,000 127,685 Changes in operating assets and liabilities: (Increase) decrease in: Accrued interest receivable - - (10,251) Other current assets - - (777) Increase (decrease) in - Accounts payable 5,297 (2,383) 7,426 Net cash provided by (used in) operating activities 913 (4,072) (182,261) CASH FLOWS FROM INVESTING ACTIVITIES: Issuance of notes receivable, related party (40,725) (85,000) (361,875) Issuance of notes receivable, other - - (125,000) Proceeds from collection of notes receivable, related parties - - 234,441 Proceeds from collections of notes receivable 10,000 - 135,000 Purchase of office equipment - - (1,634) Net cash (used in) investing activities (30,725) (85,000) (119,068) CASH FLOWS FROM FINANCING ACTIVITY- Issuance of common stock and warrants for cash, net of offering costs - - 398,409 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (29,812) (89,072) 97,080 CASH AND CASH EQUIVALENTS, beginning 126,892 215,964 - CASH AND CASH EQUIVALENTS, ending $ 97,080 $126,892 $ 97,080 See accompanying notes to these financial statements. F-6 NORTHERN DANCER CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS 1. Nature of Operations: Northern Dancer Corporation (a development stage company) (the Company) was incorporated under the laws of the State of Colorado on January 16, 1987. The Company's activities to date have been limited to organizational efforts and obtaining additional financing. The Company was formed to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. The Company may seek to acquire a controlling interest in such entities in contemplation of later completing an acquisition. The Company is not limited to any geographic area in seeking out opportunities, nor has a specific earning or asset level requirement been established. Management has not identified any particular business, industry or area of interest within which the Company will seek an acquisition or merger. However, the Company does not intend to act as a general or limited partner in connection with partnerships it may attempt to merge with or acquire. The Company has not conducted, nor have others made available to it, market research supporting the viability of the Company's proposed operations. Although a number of companies have been evaluated for possible mergers or acquisitions, the Company has not entered into any agreements concerning a potential merger or acquisition. 2. Significant Accounting Principles: Net Loss per Common Share - The net loss per share of common stock is determined using the weighted-average number of shares issued and outstanding during the period. Common stock warrants were not included in the computation because they are antidilutive. Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Property and Equipment - Depreciation and amortization is provided on the straight-line method over the estimated useful lives (5 years). The cost of normal maintenance and repairs is charged to operating expenses as incurred. Income Taxes - The Company has adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Use of Estimates - The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. F-7 Impairment of Long-Lived Assets - During the year ended March 31, 1997, the Company adopted Financial Accounting Standards Board Statement 121 (FAS 121). In the event that facts and circumstances indicate that the cost of assets or other assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carry- ing amount to determine if a write-down to market value or discounted cash flow value is required. Adoption of FAS 121 had no effect on the March 31, 1997 financial statements. Stock-Based Compensation - During the year ended March 31, 1997, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation. The Company has not issued any stock options, grants or other forms of stock compensation and therefore the adoption of SFAS did not have any impact on the Company's financial statements. 3. Related Party Transactions: During fiscal 1997 and 1996, the Company advanced $40,725 and $85,000 to an entity and its subsidiaries that are approximately 50% owned by a stockholder of the Company and her husband, who is a director/officer of the Company. The notes bear interest from 6% to 8.5%, however, no interest income has been recorded as a result of the uncertainty of collection. Also, due to the uncertainty of collection, all notes were written off as uncollectible during the year the advance was made. During fiscal 1997 a $10,000 principal payment was made on these fully reserved notes and accordingly, the Company recorded a $10,000 bad debt recovery. Additionally the Company converted $85,000 of these notes and $5,883 of unrecorded interest income into 57,941 shares of common stock of the entity, which represents approximately 18% of the entity's outstanding common stock as of March 31, 1997. No value has been recorded for this investment in the entity. Subsequent to March 31, 1997, the Company advanced an additional $20,000 to this related entity and one of its subsidiaries. The notes bear interest at 8.5%. The Company has retained a stock transfer agent of which a major stockholder is also a stockholder of the Company. Fees paid to the stock transfer agent were not significant. 4. Stockholders' Equity: On March 28, 1988, the Company completed a public offering for the sale of 23,915,000 units at a price of $.02 per unit, or gross proceeds of $478,300. Each unit consists of two shares of the Company's no par value common stock and one Class A Common Stock Purchase Warrant. Each Class A Warrant entitles the holder to purchase one share of common stock and one Class B Common Stock Purchase Warrant at a price of $.02. Each Class B Warrant entitles the holder to purchase one share of common stock and one Class C Common Stock Purchase Warrant at a price of $.04. Each Class C Common Stock Purchase Warrant entitles the holder to purchase one share of common stock at a price of $.06. During the year ended March 31, 1996, expiration dates of the Class A, B, and C warrants were extended to December 31, 1997. The Class A, B and C Warrants are detachable and may be separately traded. The Company has the right to call any or all of the Warrants with 30-days notice at a price of $.0001. No warrants have been exercised as of March 31, 1997. The Company has the authority to issue 10,000,000 shares of preferred stock, which may be issued in one or more series with the terms to be determined by the Company's Board of Directors. F-8 5. Incentive Stock Option Plan: During fiscal 1987, the Company adopted an Incentive Stock Option Plan (the Plan) under which options to purchase up to 10,000,000 shares of the Company's no par value common stock may be granted to employees of the Company. The Plan is administered by the Board of Directors, which is empowered to determine the terms and conditions of each option, subject to the limitation that the exercise price may not be less than the market value of the common stock on the date of the grant or 110% of market value in the case of options granted to an employee who owns 10% or more of the Company's outstanding common stock. In addition, no option can have a term in excess of ten years, or five years in the case of options granted to employees who own 10% or more of the Company's common stock. As of March 31, 1997, no options have been granted under the Plan. 6. Income Taxes: The components of deferred tax assets in the balance sheet, which are fully eliminated by a valuation allowance, are as follows: Investment valuation and doubtful receivable allowance $ 43,000 Net operating loss carryforward 70,300 Less valuation allowance (113,300) Net deferred tax asset $ -0- The Company has a net operating loss carryforward for federal tax reporting purposes of approximately $188,000. The tax net operating loss carryforward expires in 2003 through 2011. F-9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHERN DANCER CORPORATION Dated: October 15, 1997 By/s/ Joseph E. O'Connor Joseph E. O'Connor, President Pursuant to 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 the dates indicated. Signature Title Date - ---------------------- ------------------------ ------------------ /s/ Joseph E. O'Connor President and Treasurer September 15, 1997 Joseph E. O'Connor (Principal Financial and Accounting Officer) and Director /s/ J. Daniel Bell Director September 15, 1997 J. Daniel Bell /s/ David C. Walters Director September 15, 1997 David C. Walters EX-27 2
5 This schedule contains summary financial information extracted from the balance sheet and statements of operations found on pages F-3 and F-4 of the Company's Form 10-KSB for the fiscal year ended March 31, 1997, and is qualified in its entirety by reference to such financial statements. YEAR MAR-31-1997 MAR-31-1997 97,080 0 0 0 0 97,857 978 0 98,835 7,426 0 0 0 398,409 (307,000) 98,835 0 14,394 0 0 49,831 0 0 0 0 0 0 0 0 (35,437) 0 0
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