-----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, NbP9xsexCgfKi7/4QzJeymnhyCg/hKFReBIy69cae/rUzIvB2lNoVNAm/e0fyoeS rCtlYRtA7Yf9UZVVVLFWMQ== 0000948830-98-000258.txt : 19980903 0000948830-98-000258.hdr.sgml : 19980903 ACCESSION NUMBER: 0000948830-98-000258 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980902 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: 98703187 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, 1998 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 $4,799. 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. As of July 31, 1998, the Issuer had 98,330,000 shares of its common stock outstanding. Transitional Small Business Disclosure Format: Yes [ ] No [X] 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 Warrants expired on December 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 $78,225 to Dunn ($40,725 was loaned during the year ended March 31, 1997, and $37,500 was loaned during the year ended March 31, 1998). 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 2 merger or acquisition would not be in the best interests of the Company at the time. 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. During August 1998, the Company signed a letter of intent with U.S. Trucking, Inc. for an acquisition, however, as of the date of filing this Form 10-KSB, no definitive agreement has been executed. A shareholder meeting has been called for September 4, 1998, for the purpose of approving a 1 for 160 reverse stock split and a name change to U.S. Trucking, Inc. contingent on the closing of the transaction with U.S. Trucking, Inc. 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 identification 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. 3 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 expertise 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. 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, 1998. 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 June 30, 1998, was 146. 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 contemplated by the Company's business plan. The Company is currently in a liquid position, and as of March 31, 1998, had working capital (consisting primarily of cash and cash equivalents) totaling $42,471. 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, 1997 and 1998. During fiscal 1998, 1997 and 1996, the Company advanced $37,500, $40,725 and $85,000, respectively, 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, during the year ended March 31, 1997, 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, 1998, 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-11 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. On July 13, 1998, the Company engaged Schumacher & Associates, Inc. as its independent accountants for the fiscal year ended March 31, 1998. Also on July 13, 1998, Hein & Associates was dismissed as the Company's independent accountants. In connection with the prior audit for the year ended March 31, 1997, and during the interim period from March 31, 1997 to July 31, 1998, there have been no disagreements with Hein & Associates on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. 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 57 President, Treasurer and Director J. Daniel Bell 53 Secretary and Director David C. Walters 52 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, 6 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. 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 Technologies, 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. 7 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, 1998:
SUMMARY COMPENSATION TABLE LONG-TERM COMPENSATION ---------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ----------------------------- ------------------ --------------- OTHER RE- ALL ANNUAL STRICTED OPTIONS/ OTHER NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP COMPEN- POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS SATION - ------------------ ---- ------ ----- ------ -------- -------- ------- ------- Joseph E. O'Connor, 1998 -0- -0- -0- -0- -0- -0- -0- President 1997 -0- -0- -0- -0- -0- -0- -0- 1996 -0- -0- -0- -0- -0- -0- -0-
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 compensation 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 July 28, 1998, 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 6,000,000 6.1% 2 Corporate Plaza, Suite 200 Newport Beach, CA 92660 8 David C. Walters 2,000,000 2.0% 221 Gregory Drive DeSoto, TX 75115 Ralph H. Grills, Jr. 6,500,000 6.6% No. 906 1888 South Jackson Denver, CO 80210 J. Daniel Bell 7,920,000 8.1% 2750 East Cedar Avenue Denver, CO 80209 Carylyn K. Bell 7,920,000 8.1% 2750 East Cedar Avenue Denver, CO 80209 All Directors and 15,920,000 16.2% Officers as a Group (3 Persons) ________________________ Includes 250,000 shares held directly by Mr. Bell; 7,320,000 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 owned directly by Ms. Bell; 350,000 shares held by Ms. Bell as custodian for a minor child; and 250,000 shares owned by J. Daniel Bell, Ms. Bell's husband, to which Ms. Bell may be deemed to have beneficial ownership.
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. 9 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 $78,225 to Dunn ($40,725 was loaned during the year ended March 31, 1997 and $37,500 was loaned during the year ended March 31, 1998). 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. 10 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) A Report on Form 8-K was filed on July 13, 1998, reporting under Item 4 a change in the Company's certified public accountants from Hein & Associates to Schumacher & Associates, Inc. 11 INDEX TO FINANCIAL STATEMENTS NORTHERN DANCER CORPORATION (A development stage company) FINANCIAL STATEMENTS WITH REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS MARCH 31, 1998 AND 1997 Page Reports of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . F-2 - F-3 Financial Statements: Balance Sheet . . . . . . . . . . . . . . . . . F-4 Statements of Operations. . . . . . . . . . . . F-5 Statement of Changes in Stockholders' Equity. . F-6 Statements of Cash Flows. . . . . . . . . . . . F-8 Notes to Financial Statements . . . . . . . . . F-9 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Northern Dancer Corporation Denver, CO 80202 We have audited the accompanying balance sheet of Northern Dancer Corporation (a development stage company) as of March 31, 1998, and the related statements of operations, stockholders' equity and cash flows for the year ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides 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 Corporation (a development stage company) as of March 31, 1998, and the results of its operations, changes in its stockholders' equity and its cash flows for the year ended March 31, 1998, in conformity with generally accepted accounting principles. The financial statements of Norther Dancer Corporation (a development stage company) for the period from January 16, 1987 to March 31, 1997 were audited by other auditors, whose reports expressed unqualified opinions on those statements. We have audited the combination of these prior statements into the period from January 16, 1987 to March 31, 1998. In our opinion, such financial statements have been properly combined. /s/ Schumacher & Associates, Inc. Schumacher & Associates, Inc. Certified Public Accountants 12835 E. Arapahoe Road Tower II, Suite 110 Englewood, Colorado 80112 July 21, 1998 F-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Northern Dancer Corporation Denver, CO 80202 We have audited the accompanying statements of operations, stockholders' equity and cash flows of Northern Dancer Corporation (a development stage company) for the year ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements, referred to above, present fairly, in all material respects, the results of operations, changes in its stockholders' equity and its cash flows of Northern Dancer Corporation (a development stage company) for the year ended March 31, 1997 in conformity with generally accepted accounting principles. Hein + Associates llp Denver, Colorado July 15, 1997 F-3 NORTHERN DANCER CORPORATION (A development stage company) BALANCE SHEET MARCH 31, 1998 ASSETS Current Assets: Cash $ 46,872 --------- Total Current Assets 46,872 Office equipment, net of accumulated depreciation of $983 652 --------- TOTAL ASSETS $ 47,524 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities - Accounts payable $ 4,401 --------- Total Current Liabilities 4,401 --------- TOTAL LIABILITIES 4,401 ========= Commitments and Contingencies (Notes 4 and 5) 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 (355,286) --------- TOTAL STOCKHOLDERS' EQUITY 43,123 --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,524 ========= The accompanying notes are an integral part of the financial statements. F-4 NORTHERN DANCER CORPORATION (A development stage company) STATEMENTS OF OPERATIONS Cumulative from January For the Years 16, 1987 Ended March 31, (Inception) ----------------------- to March 1998 1997 31, 1998 ---------- ---------- ---------- REVENUE: Interest income $ 4,799 $ 4,394 $ 117,695 Interest income, related party - - 28,566 Bad debt recovery, related party - 10,000 10,000 ---------- ---------- ---------- 4,799 14,394 156,261 ---------- ---------- ---------- EXPENSES: General and administrative 13,085 9,106 242,762 Consulting and administrative, related parties 2,500 - 93,600 Bad debt expense, related party 37,500 40,831 175,185 ---------- ---------- ---------- 53,085 49,937 511,547 ---------- ---------- ---------- NET LOSS $ (48,286) $ (35,437) $ (355,286) ========== ========== ========== NET LOSS PER COMMON SHARE $ nil $ nil $ nil ========== ========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 98,330,000 98,330,000 98,330,000 ========== ========== ========== The accompanying notes are an integral part of the financial statements. F-5 NORTHERN DANCER CORPORATION (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) FROM JANUARY 16, 1987 (INCEPTION) THROUGH MARCH 31, 1998 Deficit Accumulated Common Stock During the --------------------- Development Shares Amount Stage Total ---------- -------- ----------- -------- Balance at January 16, 1987 (Inception) - $ - $ - $ - Common stock issued 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 for the period ended March 31, 1997 - - (5,495) (5,495) ---------- -------- ---------- -------- Balance at March 31, 1987 44,500,000 7,863 (5,495) 2,368 Common stock issued 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 for the year ended March 31, 1998 - - (23,314) (23,314) ---------- -------- ---------- -------- Balance at March 31, 1988 98,330,000 398,409 (28,809) 369,600 Net loss for the year ended March 31, 1989 - - (28,079) (28,079) ---------- -------- ---------- -------- Balance at March 31, 1989 98,330,000 398,409 (56,888) 341,521 Net loss for the year ended March 31, 1990 - - (23,603) (23,603) ---------- -------- ---------- -------- Balance at March 31, 1990 98,330,000 398,409 (80,491) 317,918 Net income for the year ended March 31, 1991 - - 13,954 13,954 ---------- -------- ---------- -------- Balance at March 31, 1991 98,330,000 398,409 (66,537) 331,872 F-6 NORTHERN DANCER CORPORATION (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) FROM JANUARY 16, 1987 (INCEPTION) THROUGH MARCH 31, 1998 (CONTINUED) Deficit Accumulated Common Stock During the --------------------- Development Shares Amount Stage Total ---------- -------- ----------- -------- Net loss for the year ended March 31, 1992 - - (5,742) (5,742) ---------- -------- ---------- -------- Balance at March 31, 1992 98,330,000 398,409 (72,279) 326,130 Net loss for the year ended March 31, 1993 - - (13,775) (13,775) ---------- -------- ---------- -------- Balance at March 31, 1993 98,330,000 398,409 (86,054) 312,355 Net loss for the year ended March 31, 1994 - - (189,975) (189,975) ---------- -------- ---------- -------- Balance at March 31, 1994 98,330,000 398,409 (276,029) 122,380 Net income for the year ended March 31, 1995 - - 91,483 91,483 ---------- -------- ---------- -------- Balance at March 31, 1995 98,330,000 398,409 (184,546) 213,863 Net loss for the year] ended March 31, 1996 - - (87,017) (87,017) ---------- -------- ---------- -------- Balance at March 31, 1996 98,330,000 398,409 (271,563) 126,846 Net loss for the year ended March 31, 1997 - - (35,437) (35,437) ---------- -------- ---------- -------- Balance at March 31, 1997 98,330,000 398,409 (307,000) 91,409 Net loss for the year ended March 31, 1998 - - (48,286) (48,286) ---------- -------- ---------- -------- Balance at March 31, 1998 98,330,000 $398,409 $ (355,286) $ 43,123 ========== ======== ========== ======== The accompanying notes are an integral part of the financial statements. F-7 NORTHERN DANCER CORPORATION (A development stage company) STATEMENTS OF CASH FLOWS Cumulative From January 16, 1987 Ended March 31, (Inception) --------------------- to March 31, 1998 1997 1998 --------- --------- ----------- Cash Flows from Operating Activities: Net loss $(48,286) $(35,437) $(355,286) Adjustments to reconcile net loss to net cash from operating activities: Depreciation 328 328 984 Increase (decrease) in accounts payable (3,025) 5,297 4,401 Bad debt expense 37,500 30,725 154,932 Other 775 - - -------- -------- --------- Net Cash (Used in) Operating Activities (12,708) 913 (194,969) -------- -------- --------- Cash Flows from Investing Activities: Issuance of notes receivable, related party (37,500) (40,725) (399,375) Issuance of notes receivable, other - - (125,000) Proceeds from collection of notes receivable, related party - - 234,441 Proceeds from collections of notes receivable, other - 10,000 135,000 Purchase of office equipment - - (1,634) -------- -------- --------- Net Cash (Used in) Investing Activities (37,500) (30,725) (156,568) -------- -------- --------- Cash Flows from Financing Activities: Issuance of common stock and warrants, net of offering costs - - 398,409 -------- -------- --------- Net Cash Provided by Financing Activities - - 398,409 -------- -------- --------- Increase (Decrease) in Cash (50,208) (29,812) 46,872 Cash, Beginning of Year 97,080 126,892 - -------- -------- --------- Cash, End of Year $ 46,872 $ 97,080 $ 46,872 ======== ======== ========= Interest Paid $ - $ - $ - ======== ======== ========= Income Taxes Paid $ - $ - $ - ======== ======== ========= The accompanying notes are an integral part of the financial statements. F-8 NORTHERN DANCER CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1998 and 1987 (1) Summary of Accounting Policies This summary of significant accounting policies of Northern Dancer Corporation (a development stage company) (Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. (a) Organization and Principles of Consolidation The Company was incorporated under the laws of Colorado on January 16, 1987. The Company is an inactive entity other than it is looking for a business combination candidate. The Company has selected the last day of March as its year end. (b) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. (c) Net Loss Per Common Share The net loss per common share is determined using the weighted- average number of shares issued and outstanding the period. (d) Office Equipment Depreciation is provided on a straight-line basis over the estimated useful life of the office equipment. (e) 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 if assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. F-9 (f) Impairment of Long-Lived Assets During the year ended March 31, 1997, the Company adopted Financial Accounting Standards Board Statement No. 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 carrying 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 financial statements. (g) Stock-Based Compensation 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. (2) Income Taxes As of March 31, 1998, there are no current or deferred income taxes payable. As of March 31, 1998, the Company has total deferred tax assets of approximately $106,000 principally due to operating loss carryovers and the valuation allowance on related party investments. However, because of the uncertainty of potential realization of these tax assets, the Company has provided a valuation allowance for the entire $106,000. Thus, no tax assets have been recorded in the financial statements as of March 31, 1998. The Company has available at March 31, 1998, unused operating loss carryovers of approximately $355,000 which may be applied against future taxable income, expiring in various years through 2012. Change of control of the Company could reduce or eliminate the ability to utilize the net operation loss carryover. (3) Related Party Transactions During the years ended March 31, 1998 and 1997, the Company advanced $37,500 and $40,725, respectively, 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 advances were made. During the year ended March 31, 1997 a $10,000 principle payment was made on the previously written 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, 1998. No value has been recorded for this investment in the entity. 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. F-10 (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, at which time they expired. The Class A, B, and C warrants were detachable and separately tradeable. The Company had the right to call any or all of the warrants with 30-days notice at a price of $.0001. No warrants were exercised. 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. (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, 1998, 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 $ 50,000 Net operating loss carryforward 80,000 Less valuation allowance (130,000) -------- Net deferred tax asset $ - ======== The Company has a net operating loss carryforward for federal tax reporting purposes of approximately $138,000. The tax net operating loss carryforward expires in 2003 through 2012. F-11 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: September 2, 1998 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 2, 1998 Joseph E. O'Connor (Principal Financial and Accounting Officer) and Director /s/ J. Daniel Bell Director September 2, 1998 J. Daniel Bell /s/ David C. Walters Director September 2, 1998 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-4 and F-5 of the Company's Form 10-KSB for the fiscal year ended March 31, 1998, and is qualified in its entirety by reference to such financial statements. YEAR MAR-31-1998 MAR-31-1998 46,872 0 0 0 0 46,872 652 0 47,524 4,401 0 0 0 398,409 (355,286) 47,524 0 4,799 0 0 53,085 0 0 0 0 0 0 0 0 (48,286) 0 0
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