SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest even reported): November 27, 2002 (October 31, 2002)
LUMMI DEVELOPMENT, INC.
| Delaware | 000-32201 | 95-4735254 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3480 Preston Ridge Road, Suite 500, Alpharetta, GA 30005
(770) 343-8196
EXPLANATORY NOTE
Lummi Development, Inc. (the “Registrant”) hereby amends Item 7 of its Current Report on Form 8-K as filed with the Commission on October 31, 2002 to include the financial statements and pro forma financial information set forth below, which was omitted from the previous filing pursuant to Items 7(a)(4) and 7(b)(2).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
| (a) | Financial Statements of Business Acquired. | ||||
| (1) | Audited Financial Statements of Signature Horizons, Inc. as of and for the year ended December 31, 2001, and unaudited Financial Statements of Signature Horizons, Inc. for the nine months ended September 30, 2002. | ||||
| (b) | Pro Forma Financial Information. | ||||
| (1) | Pro Forma Financial Information as of September 30, 2002. | ||||
| (c) | Exhibits. | ||||
| 2.1 | Plan and Agreement of Share Exchange, dated October 28, 2002, by and between Signature Horizons, Inc. and Lummi Development, Inc.* | |||||
| * | Filed with the Registrant’s Current Report on Form 8-K on October 31, 2002. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.
| Lummi Development, Inc. | ||||
| Dated: November 27, 2002 | By: | /s/ Peggy A. Evans | ||
| Peggy A. Evans Chief Operating Officer, Chief Financial Officer and Secretary | ||||
TABLE OF CONTENTS
| PAGE | ||||
| INDEPENDENT AUDITOR’S REPORT | F-1 | |||
| BALANCE SHEETS | F-3 | |||
| STATEMENTS OF OPERATIONS | F-4 | |||
| STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | F-5 | |||
| STATEMENTS OF CASH FLOWS | F-6 | |||
| NOTES TO FINANCIAL STATEMENTS | F-7 | |||
| PRO FORMA FINANCIAL INFORMATION | F-18 | |||
| PRO FORMA CONSOLIDATED BALANCE SHEETS | F-19 | |||
| PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS | F-20 | |||
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Stockholders
Signature Horizons, Inc.
Atlanta, Georgia
We have audited the accompanying balance sheet of Signature Horizons, Inc. (a Georgia corporation in the development stage) as of December 31, 2001, and the related statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the years in the two year period then ended, and for the period from November 16, 1999 (inception), through December 31, 2001. 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. The financial statements as of December 31, 2000, and for the period November 16, 1999 (inception) through December 31, 2000, were audited by other auditors whose report dated July 24, 2001, expressed an unqualified opinion on those statements. The financial statements for the period November 16, 1999 (inception) through December 31, 2000, include a net loss of $619,404. Our opinion on the statements of operations, stockholders’ equity, and cash flows for the period November 16, 1999 (inception) through December 31, 2001, insofar as it relates to amounts for prior periods through December 31, 2000, is based solely on the report of other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Signature Horizons, Inc. (a Georgia corporation in the development stage) as of December 31, 2001, and the results of its operations and comprehensive loss, and its cash flows for each of the years in the two year period then ended, and for the period from November 16, 1999 (inception) through December 31,2001, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is dependent on its ability to develop additional sources of capital, and to ultimately achieve profitable operations. The present financial condition of the Company raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Braverman & Company, P.C.
Prescott, Arizona
June 20, 2002
F-1
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Stockholders
We have audited the accompanying statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the year ended December 31, 2000, and for the period from November 16, 1999 (inception) to December 31, 2000. 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 audit in accordance with auditing standards generally accepted in the United States of America. 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 text 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 Oasis Group, Inc.’s operations and its cash flows for the year ended December 31, 2000, and for the period from November 16, 1999 (inception) to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
Powell & Booth, P.C.
F-2
SIGNATURE HORIZONS, INC.
(A Development Stage Company)
BALANCE SHEETS
| September 30, | December 31, | |||||||||||
| 2002 | 2001 | |||||||||||
| (unaudited) | ||||||||||||
| ASSETS | ||||||||||||
| Current Assets | ||||||||||||
| Cash | $ | 1,172,833 | $ | 3,490 | ||||||||
| Accounts receivable | 7,500 | |||||||||||
| Available-for-sale securities | 142,500 | |||||||||||
| TOTAL CURRENT ASSETS | 1,180,333 | 145,990 | ||||||||||
| Other Assets | ||||||||||||
| Investment in undeveloped real estate | 12,537,498 | 29,804 | ||||||||||
| Deferred finance charges | 150,634 | |||||||||||
| Other assets | 2,800 | 6,915 | ||||||||||
| 12,690,932 | 36,719 | |||||||||||
| $ | 13,871,265 | $ | 182,709 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current Liabilities | ||||||||||||
| Notes payable | $ | 6,874,089 | $ | — | ||||||||
| Accounts payable | 168,560 | 125,802 | ||||||||||
| Payroll taxes payable | 473,424 | |||||||||||
| Related party advances | 30,317 | |||||||||||
| Accrued interest | 146,137 | |||||||||||
| TOTAL CURRENT LIABILITIES | 7,662,210 | 156,119 | ||||||||||
| Long-Term Debt | 3,000,000 | |||||||||||
| Commitments and Contingencies | — | — | ||||||||||
| Stockholders’ Equity | ||||||||||||
| Convertible preferred stock; no par value 25,000,000 shares authorized; none issued | — | |||||||||||
| Common stock, no par value; 800,000,000 shares authorized; 15,702,400 and 1,357,428 shares outstanding | 8,491,375 | 1,896,809 | ||||||||||
| Contributed capital | 350,888 | 350,888 | ||||||||||
| Accumulated other comprehensive (loss) | (224,500 | ) | ||||||||||
| (Deficit) accumulated during the development stage | (5,633,208 | ) | (1,996,607 | ) | ||||||||
| TOTAL STOCKHOLDERS’ EQUITY | 3,209,055 | 26,590 | ||||||||||
| $ | 13,871,265 | $ | 182,709 | |||||||||
The accompanying notes are an integral part of these financial statements
F-3
SIGNATURE HORIZONS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
| November 16, | |||||||||||||||||||||
| 1999 | |||||||||||||||||||||
| Year Ended | Nine Months Ended | (Inception) | |||||||||||||||||||
| December 31, | September 30, | through | |||||||||||||||||||
| September 30, | |||||||||||||||||||||
| 2001 | 2000 | 2002 | 2001 | 2002 | |||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||
| Revenues | $ | 2,453 | $ | — | $ | — | $ | 2,453 | $ | 2,453 | |||||||||||
| Costs and Expenses | |||||||||||||||||||||
| General and administrative expenses | 1,138,519 | 502,404 | 3,129,064 | 499,252 | 4,769,987 | ||||||||||||||||
| Loss on abandonment of preacquisition costs and advances | 243,212 | 243,212 | |||||||||||||||||||
| Unrecoverable advances to affiliate | 114,925 | 12,030 | 126,955 | ||||||||||||||||||
| Loan fees and interest | 278,506 | 278,506 | |||||||||||||||||||
| Realized loss on sale of securities to related party | 217,000 | 217,000 | |||||||||||||||||||
| 1,496,656 | 502,404 | 3,636,600 | (499,252 | ) | 5,635,660 | ||||||||||||||||
| Net Loss | (1,494,203 | ) | (502,404 | ) | (3,636,600 | ) | (496,799 | ) | (5,633,207 | ) | |||||||||||
| Other Comprehensive (loss) | |||||||||||||||||||||
| Unrealized holding gain (loss) on available-for-sale securities | (107,500 | ) | (117,000 | ) | 7,500 | (100,000 | ) | (217,000 | ) | ||||||||||||
| Sale of available-for-sale- securities in September 2002 | 217,000 | 217,000 | |||||||||||||||||||
| Comprehensive (loss) | $ | (1,601,703 | ) | $ | (619,404 | ) | $ | (3,412,100 | ) | $ | (596,799 | ) | $ | (5,633,207 | ) | ||||||
The accompanying notes are an integral part of these financial statements
F-4
SIGNATURE HORIZONS, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IS STOCKHOLDERS’ EQUITY
| (DEFICIT) | |||||||||||||||||||||||||||
| ACCUMULATED | ACCUMULATED | ||||||||||||||||||||||||||
| COMMON STOCK | OTHER | DURING THE | |||||||||||||||||||||||||
| CONTRIBUTED | COMPREHENSIVE | DEVELOPMENT | |||||||||||||||||||||||||
| SHARES | AMOUNT | CAPITAL | (LOSS) | STAGE | TOTAL | ||||||||||||||||||||||
| BALANCE, AT INCEPTION | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Issuance of stock July 15, 2000, for: | — | ||||||||||||||||||||||||||
| Cash @ $.1375 per share | 2,250,000 | 309,169 | 309,169 | ||||||||||||||||||||||||
| Acquisition of securities @ $.459 per share | 800,000 | 367,000 | 367,000 | ||||||||||||||||||||||||
| Services @ $1 per share | 26,000 | 26,000 | 26,000 | ||||||||||||||||||||||||
| Proceeds from sale of common stock, | — | ||||||||||||||||||||||||||
| September 30, 2000, @ $.80 per share | 150,000 | 120,000 | 120,000 | ||||||||||||||||||||||||
| Contributed services | 166,000 | 166,000 | |||||||||||||||||||||||||
| Net (loss) for the year | (117,000 | ) | (502,404 | ) | (619,404 | ) | |||||||||||||||||||||
| BALANCE, DECEMBER 31, 2000 | 3,226,000 | 822,169 | 166,000 | (117,000 | ) | (502,404 | ) | 368,765 | |||||||||||||||||||
| Issuance of common stock for cash: | |||||||||||||||||||||||||||
| March 31,@ $.10 per share | 26,000 | 2,500 | 2,500 | ||||||||||||||||||||||||
| June 30,@ $.09 per share | 111,500 | 10,000 | 10,000 | ||||||||||||||||||||||||
| June 30,@ $.25 per share | 200,000 | 50,000 | 50,000 | ||||||||||||||||||||||||
| August 15,@ $.42 per share | 600,000 | 250,000 | 250,000 | ||||||||||||||||||||||||
| October 15,@ $.06 per share | 900,000 | 50,000 | 50,000 | ||||||||||||||||||||||||
| October 31,@ $.17 per share | 300,000 | 50,000 | 50,000 | ||||||||||||||||||||||||
| December 5, @ $.085 per share | 1,182,353 | 100,500 | 100,500 | ||||||||||||||||||||||||
| December 5, @ $.04 per share | 880,000 | 37,500 | 37,500 | ||||||||||||||||||||||||
| December 5, @ $.50 per share | 40,000 | 20,000 | 20,000 | ||||||||||||||||||||||||
| December 24,@ $.57 per share | 350,000 | 200,000 | 200,000 | ||||||||||||||||||||||||
| Issuance of common stock for services: | — | ||||||||||||||||||||||||||
| January 31, 2001,@ $.01 per share | 28,937,000 | 289,370 | 289,370 | ||||||||||||||||||||||||
| December 19,@ $.01 per share | 400,000 | 4,000 | 4,000 | ||||||||||||||||||||||||
| December 31,@ $.01 per share | 800,000 | 8,000 | 8,000 | ||||||||||||||||||||||||
| Preacquisition issuance of common stock: | — | ||||||||||||||||||||||||||
| December 31,@ $.001 per share | 2,770,000 | 2,770 | 2,770 | ||||||||||||||||||||||||
| Contributed services | 184,888 | 184,888 | |||||||||||||||||||||||||
| Net (loss) for the year | (107,500 | ) | (1,494,203 | ) | (1,601,703 | ) | |||||||||||||||||||||
| BALANCE, DECEMBER 31, 2001 | 40,722,853 | 1,896,809 | 350,888 | (224,500 | ) | (1,996,607 | ) | 26,590 | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||
| Issuance of shares for services on July 31, 2002 | — | ||||||||||||||||||||||||||
| at $.001 per share | 438,145,727 | 438,146 | 438,146 | ||||||||||||||||||||||||
| Issuance of shares for $2 per share: | |||||||||||||||||||||||||||
| August 15, 2002 | 60,000 | 120,000 | 120,000 | ||||||||||||||||||||||||
| August 31, 2002 | 12,500 | 25,000 | 25,000 | ||||||||||||||||||||||||
| September 30, 2002 | 178,750 | 357,500 | 357,500 | ||||||||||||||||||||||||
| Issuance of shares for undeveloped real estate: | — | ||||||||||||||||||||||||||
| at $1.20 per share: | — | ||||||||||||||||||||||||||
| July 3, 2002 | 991,665 | 1,190,000 | 1,190,000 | ||||||||||||||||||||||||
| September 23, 2002 | 4,352,500 | 5,223,000 | 5,223,000 | ||||||||||||||||||||||||
| Purchase and cancellation of outstanding shares of the Company on September 30, 2002: | — | ||||||||||||||||||||||||||
| 484,000 shares at $.30 per share for securities | (484,000 | ) | (150,000 | ) | (150,000 | ) | |||||||||||||||||||||
| 12,000,000 shares at $.05 per share for cash | (12,000,000 | ) | (600,000 | ) | (600,000 | ) | |||||||||||||||||||||
| Cancellation of shares originally issued at $ .01 for services in January 2001 | (908,000 | ) | (9,080 | ) | (9,080 | ) | |||||||||||||||||||||
| Reverse stock split, September 30, 2002, 1 for 30 | (455,369,595 | ) | — | ||||||||||||||||||||||||
| Net (loss) for the nine months | 224,500 | (3,636,600 | ) | (3,412,100 | ) | ||||||||||||||||||||||
| BALANCE, September 30, 2002 (unaudited) | 15,702,400 | $ | 8,491,375 | $ | 350,888 | $ | — | $ | (5,633,207 | ) | $ | 3,209,056 | |||||||||||||||
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
SIGNATURE HORIZONS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
| November 16, | ||||||||||||||||||||||||
| 1999 | ||||||||||||||||||||||||
| Year Ended | Nine Months Ended | (Inception) | ||||||||||||||||||||||
| December 31, | September 30, | through | ||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||
| 2001 | 2000 | 2002 | 2001 | 2002 | ||||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||||||||||
| Net (loss) from operations | $ | (1,494,203 | ) | $ | (502,404 | ) | $ | (3,636,600 | ) | $ | (496,799 | ) | $ | (5,633,207 | ) | |||||||||
| Adjustments to reconcile net (loss) to net cash used by operating activities: | ||||||||||||||||||||||||
| Issuance of common stock for services | 301,370 | 26,000 | 429,066 | 289,370 | 756,436 | |||||||||||||||||||
| Contributed capital | 184,888 | 166,000 | 350,888 | |||||||||||||||||||||
| Increase in accounts receivable | 7,500 | 7,500 | ||||||||||||||||||||||
| Increase in payroll taxes payable | 473,424 | 473,424 | ||||||||||||||||||||||
| Accrued liabilities | 146,137 | (2,453 | ) | 146,137 | ||||||||||||||||||||
| Increase in accounts payable | 125,802 | 42,758 | 168,560 | |||||||||||||||||||||
| Net Cash Flows (To) Operating Activities | (882,143 | ) | (310,404 | ) | (2,537,715 | ) | (209,882 | ) | (3,730,262 | ) | ||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||||||||||||
| Note receivable | 42,573 | (42,573 | ) | — | ||||||||||||||||||||
| Investment in undeveloped real estate | 57,051 | (91,000 | ) | (13,722 | ) | (15,137 | ) | (47,671 | ) | |||||||||||||||
| Deposits/Advances | (4,115 | ) | (4,115 | ) | ||||||||||||||||||||
| Net Cash Flows From (To) Investing Activities | 99,624 | (133,573 | ) | (17,837 | ) | (15,137 | ) | (51,786 | ) | |||||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||||||||||
| Proceeds from sale of common stock | 770,500 | 429,169 | 2,955,212 | 312,500 | 4,154,881 | |||||||||||||||||||
| Purchase of outstanding common shares | (600,000 | ) | (600,000 | ) | ||||||||||||||||||||
| Increase in notes payable | 1,400,000 | (15,000 | ) | 1,400,000 | ||||||||||||||||||||
| Increase (decrease) in related party loans | 15,317 | 15,000 | (30,317 | ) | — | |||||||||||||||||||
| Net Cash Flows From Financing Activities | 785,817 | 444,169 | 3,724,895 | 297,500 | 4,954,881 | |||||||||||||||||||
| NET INCREASE (DECREASE) IN CASH | 3,298 | 192 | 1,169,343 | 72,481 | 1,172,833 | |||||||||||||||||||
| CASH, BEGINNING OF PERIOD | 192 | — | 3,490 | 192 | — | |||||||||||||||||||
| CASH, END OF PERIOD | $ | 3,490 | $ | 192 | $ | 1,172,833 | $ | 72,673 | $ | 1,172,833 | ||||||||||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: | ||||||||||||||||||||||||
| Acquisition of available-for-sale securities for common stock | $ | 367,000 | $ | 367,000 | ||||||||||||||||||||
| Acquisition of undeveloped real estate for debt | $ | 8,474,089 | $ | 8,474,089 | ||||||||||||||||||||
| Unrealized holding gain (loss) on available-for-sale securities | $ | (107,500 | ) | $ | (117,000 | ) | $ | 7,500 | $ | (217,000 | ) | |||||||||||||
| Stock issued for real estate acquisitions | $ | 2,770 | $ | 3,960,288 | $ | 3,963,058 | ||||||||||||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||||||||||||||
| Interest paid during the period | $ | 132,368 | $ | 132,368 | ||||||||||||||||||||
The accompanying notes are an integral part of these financial statements
F-6
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Background
Signature Horizons, Inc. (the Company or Signature), f/k/a Oasis Group, Inc. and Oasis Communities, Inc. is a privately held Georgia corporation formed November 16, 1999, to develop residential and commercial real estate projects and acquire existing businesses. It has a fiscal year-end of December 31 and is a development stage company, as defined in SFAS No.7. Since inception the Company’s activities have been limited to investigating real estate and business acquisition opportunities. No significant revenues have been earned.
Substantial undeveloped real estate acquisitions have occurred since May 2002, resulting in the issuance of additional debt and securities as of September 30, 2002.
The accompanying financial statements give effect on September 30, 2002, to a reverse split of the Company’s common stock, 30 for 1, which was effectuated by the filing of an amendment to the Company’s Articles of Incorporation with the Georgia Secretary of State in October 2002. All shares referred to in these footnotes are based on the pre-split share amounts.
Use of Estimates and Assumptions
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 the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures about fair value of financial instruments, defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying values of the Company’s financial instruments, which include cash, and accounts payable, approximate fair values due to the short maturities of such instruments.
F-7
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
Income taxes are provided for using the liability method of accounting in accordance with the Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary difference between financial and tax reporting of which depreciation is the most significant. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to more likely than not be realized in future tax returns. Tax law and rate changes are reflected in income in the period such changes are enacted.
Income Taxes
Year 2000
For financial reporting purposes, the Company has sustained a loss since inception of approximately $502,000. For income tax purposes approximately $312,000 is considered start-up costs, and the balance, comprised of $166,000 of contributed capital and meals and entertainment of $24,000, constitutes a non-deductible permanent difference. Start-up costs are not deductible until the Company commences operations, at which time they are amortized over a 60-month period, or permanently capitalized if no election is timely made to amortize them.
The Company’s future utilization of the deferred tax benefit arising from the deferral of start-up costs of approximately $110,000 cannot be currently ascertained. Accordingly, a valuation allowance of approximately $110,000 was provided resulting in no recorded tax benefit as of December 31, 2000.
F-8
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Year 2001
A net loss of $1,494,203 was sustained during 2001, of which approximately $185,000 was non-deductible contributed compensation of management, and non-deductible meals and entertainment expenses of approximately $20,000, resulting in a timing difference of approximately $1,290,000 for the year. The majority of the expenses for 2001 are start-up expenses as described above. The deferred income tax benefit relating to this amount was approximately $450,000, however, due to the uncertainty of the future utilization of this amount, a valuation allowance of $450,000 was provided for the year, resulting in no deferred tax benefit for 2001.
Year 2002
During May 2002, the Company acquired undeveloped real estate for which start-up costs incurred from inception through that date, deferred for income tax purposes, will commence amortization over a 5 year period. Expenses incurred after May 2002 will be deductible for income tax purposes. As of September 30, 2002 no tax benefit is recorded, as it is more likely than not that management cannot determine that such benefit can be utilized at the present time.
The Company has not reported to federal or state taxing authorities the required information to evidence approximately $327,000 of services for 2001 or 2000, as a result of the issuance of over 30 million shares of restricted common stock of the Company to related parties and others. Accordingly, until such time as the information is reported, or the parties to whom they were issued recognize the appropriate income, the Company may be unable to treat the value of shares issued for services as a deduction for income tax purposes. During September 2002, the Company recorded the required payroll tax liability for all of management’s compensation paid as of that date. The Company may be subject to penalties for failure to timely file and report such information.
F-9
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Preacquisition Costs
The principal activities of the Company presently involve search for and assessment of potential acquisitions of real estate projects and active businesses. Costs directly identifiable with specific probable acquisitions are capitalized. All internal preacquisition costs are expensed.
Basis of Presentation and Management’s Actions to Overcome Operating and Liquidity Problems
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. It has suffered substantial losses since inception, The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and ultimately achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Management’s plan is to raise additional debt or equity financing, to acquire profitable businesses, and to develop or acquire real estate projects intended to produce sufficient cash flows and profitable operations to sustain the existence of the Company.
NOTE 2 – RELATED PARTY TRANSACTIONS AND OBLIGATIONS
Available For Sale Securities
On July 15, 2000, the president/chief executive officer/chairman of the board/director exchanged 500,000 shares of common stock in a OTC Bulletin Board listed company he owned, UCAP Incorporated f/k/a Lahaina Acquisitions, Inc., for 800,000 shares of restricted common stock of the Company. Although the value of the acquired shares was $734,000 ($1.47 per share) on the date of the exchange per the last quoted market price on the date of exchange, the value assigned by the Company to those securities was $367,000, due to the current restriction on tradability by the Company of the securities.
F-10
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 2 – RELATED PARTY TRANSACTIONS AND OBLIGATIONS (continued)
The value of the UCAP shares at December 31, 2001 was $142,500, based on 50% of the quoted value at that date ($.29 per share). This investment was valued at $150,000 as of September 30, 2002 and exchanged at that date for 484,000 pre-split restricted common shares held by the Company’s president. Accordingly, the accumulated realized loss of $217,000 as of September 30, 2002, was reclassified from a separate equity account, accumulated other comprehensive loss, to a realized loss of $217,000 in the accompanying statement of operations.
Advances to Rainwire Partners, Inc.
In December 2001, the Company entered into a stock exchange transaction with Rainwire Partners, Inc. (a Delaware public company in the development stage). If the transaction would have been completed, the Company would have become a wholly owned subsidiary of Rainwire Partners, Inc., but the accounting acquirer for accounting purposes. A Registration Statement on Form S-4 was filed with the Securities and Exchange Commission during 2002 to enable the shareholders of both companies the opportunity to approve the transaction. Advances totaling approximately $115,000 were made to Rainwire Partners, Inc. as of December 31, 2001, which have been expensed due to questionable realization. There are persons having significant common stock interests in both companies. For the nine months ended September 30, 2002, additional advances made of approximately $12,000 were also expensed.
During September 2002 the aforementioned S-4 was withdrawn, and the share exchange terminated.
Related Party Advances
A shareholder of the Company paid various general and administrative expenses totaling $32,995 and advanced $25,000 towards the deposit on real estate as of December 31, 2001, on behalf of the Company. The $30,317 balance of unpaid advances as of December 31, 2001, are unsecured and do not bear interest. These advances were paid in 2002.
F-11
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 2 — RELATED PARTY TRANSACTIONS AND OBLIGATIONS (continued)
Services Provided For Common Stock
As of December 31, 2001 and 2000 the Company had issued a total of 30,137,000 and 26,000 shares of common stock of the Company valued at $.01 and $1.00 per share, respectively, to officers, members of the Board of Directors, shareholders of the Company, and others, as follows:
| Shares issued | Value | ||||||||
| Marketing services | 4,024,000 | $ | 40,240 | ||||||
| Advertising | 100,000 | 1,000 | |||||||
| Aviation consulting | 250,000 | 2,500 | |||||||
| E-commerce consulting | 3,000,000 | 30,000 | |||||||
| Legal consulting | 40,000 | 400 | |||||||
| Real estate consulting | 6,348.500 | 89,225 | |||||||
| Officers’ compensation | 9,800,000 | 98,000 | |||||||
| Administrative consulting | 102,500 | 1,025 | |||||||
| Human resources consulting | 915,000 | 9,150 | |||||||
| Design and planning | 1,950,000 | 19,500 | |||||||
| Board of Directors | 400,000 | 4,000 | |||||||
| Mortgage consulting | 3,233,000 | 32,330 | |||||||
| Totals | 30,163,000 | $ | 327,370 | ||||||
During the nine months ended September 30, 2002, the Company issued an additional 438,145,727 shares at $.001 per share for services rendered by most of the existing shareholders who had assisted the Company’s development.
The accompanying financial statements have given effect to the increase in authorization to 800,000,000 shares of common stock and the issuance of approximately 438,000,000 additional shares to the majority of existing shareholders, including management, who rendered additional services to the Company as of September 30, 2002. These shares were valued at $.001 or approximately $438,000, of which management’s portion amounted to approximately $188,000.
F-12
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 3 – COMMITMENTS
The Company agreed to acquire all of the outstanding stock of Landmark Mortgage Corporation, a Louisiana corporation (Landmark) and Statewide Mortgage and Investments Inc., a Florida corporation (Statewide) for 1,370,000 shares of Oasis common stock and $50,000 as of December 31, 2001, pursuant to a binding agreement entered into on December 14, 2001, subject to certain conditions precedent including receipt of acceptable audited financial statements of Landmark and Statewide and the review of due diligence.
During 2002, the letter of intent expired, however, the Company is still pursing this potential acquisition.
NOTE 4 – AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are recorded at fair value in investments on the balance sheet, with the change in fair value during the period excluded from results of operations, and recorded net of tax as a separate component of equity (accumulated other comprehensive income). The following summarizes the information relating to available-for-sale securities as of December 31, 2001:
| Market value at December 31, 2001 | $ | 142,500 | ||
| Assigned value at date of acquisition | 367,000 | |||
| Unrealized holding loss from inception | $ | 224,500 | ||
The Company utilizes the specific identification method of computing realized gains and losses from the sales of its available-for-sale securities. Realized losses from the sale of securities are shown in the other income section of the income statement, and proceeds from the sale of securities are shown in the statement of cash flows. As of September 30, 2002 this account balance was brought to a total loss of $217,000 at which time the securities, valued at $150,000 were sold to a related party in exchange for 484,000 outstanding common shares of the company held by its president.
F-13
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 5 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following is a summary of the activity from inception in accumulated other comprehensive income (loss):
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ||||||
| Balance, at inception | $ | 0 | ||||
| OTHER COMPREHENSIVE (LOSS), unrealized holding loss on available-for-sale securities during 2000 | (117,000 | ) | ||||
| During 2001 | (107,500 | ) | ||||
| During 2002 | 7,500 | |||||
| ACCUMULATED OTHER COMPREHENSIVE (LOSS) | (217,000 | ) | ||||
| Ending balance, September 30, 2002 | (217,500 | ) | ||||
NOTE 6 – CONTRIBUTED CAPITAL
Management of the Company has contributed a significant portion of its services, principally compensation, to the Company during the years 2001 and 2000 of approximately $185,000 and $166,000, respectively, based on the estimated fair value for time actually spent by them, and other overhead, which would have been otherwise paid or incurred by the Company.
NOTE 7- COMMON STOCK
The Company does not use the services of an independent transfer agent to control the issuance and transfer of its common stock. The shares of common stock outstanding at the beginning and end of 2001,and through September 30, 2002, as presented on the statement of stockholders’ equity, are those shares authorized for issuance by the Board of Directors. Accordingly, the financial statements presented and disclosures made herein give effect to outstanding shares as if issued.
NOTE 8 – SUBSEQUENT EVENTS
Subsequent Losses
The Company incurred significant losses subsequent to December 31, 2001.
F-14
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 8 – SUBSEQUENT EVENTS (continued)
Real Estate Transactions
Subsequent to December 31, 2001, the Company (or its president and/or its chief financial officer, using their personally owned Signature shares as consideration to purchase undeveloped real estate with the intention of assigning the properties either to the Company, or to LLC’s to be principally owned by the Company, in exchange for convertible preferred stock of the Company) acquired, and entered into a number of agreements to acquire, undeveloped real estate in several states, requiring the issuance of a substantial number of additional shares of restricted common stock of the Company, in addition to the payment of cash and the issuance or assumption of debt.
The following is a summary of these commitments at the present time: (The information for September 30, 2002 is unaudited
| Consideration to be paid: | ||||||
| 6,435,835 shares of common stock @ $1.20 per share | $ | 7,723,002 | ||||
| 850,000 shares of common stock @ $2.00 per share | 1,700,000 | |||||
| Cash | 11,850,000 | |||||
| Debt | 28,025,002 | |||||
| Total purchase price | $ | 49,298,004 | ||||
Borrowings By the Company
The Company borrowed a total of approximately $10,000,000 during the first nine months of 2002, principally to acquire various parcels of real estate. Of this total, $300,000 was past due as of September 30, 2002, and the balance is due as shown below. Included in the obligations due in 2003 and 2007 are notes totaling $4,609,831 which are collateralized by real estate included as investments in undeveloped real estate. The balance of the obligations are unsecured. Interest rates range from 4% to 12% on the collateralized obligations and from 8% to 15% on the unsecured obligations.
F-15
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 8 – SUBSEQUENT EVENTS (continued)
Borrowings By the Company
The following are the principal payments due each year for the 5 years ending December 31,:
| Year | ||||
| 2002 (as of September 30) | $ | 300,000 | ||
| 2003 | 6,574,088 | |||
| 2004 | ||||
| 2005 | ||||
| 2006 | ||||
| 2007 | 3,000,000 | |||
| Total | $ | 9,874,088 | ||
Increase in Authorized Shares
In 2002, the shareholders of the Company approved an increase in its authorized common stock from 50 million to 800 million shares, and authorized the Company to issue 25 million preferred shares with no par value.
Stock Exchange Transaction
As of September 30, 2002 the Company was negotiating with the management of Lummi Development, Inc. (Lummi), a Nevada corporation to exchange all of the common stock of the Company for newly issued shares of Lummi to effect a recapitalization of the Company. The Company will be considered the accounting acquirer. If and when completed, the Company will become the legal subsidiary of Lummi, however, for accounting purposes, the financial statements as of the date of the stock exchange transaction will be those of the Company, at historical cost, consolidated with Lummi using fair value for any of Lummi’s assets and liabilities then in existence. The Company will be required
F-16
Signature Horizons, Inc.
(a Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(The information for September 30, 2002 is unaudited)
NOTE 8 – SUBSEQUENT EVENTS (continued)
Stock Exchange Transaction
to file a Form 8-K/A with the Securities and Exchange Commission within 75 days of the completion of the stock exchange with Lummi to include the accompanying historical and pro forma financial information.
As reported on Lummi’s current report on Form 8-K filed on October 31, 2002, pursuant to a Plan and Agreement of Share Exchange (the “Agreement”), dated October 28, 2002, Lummi has acquired, subject to dissenters’ rights as provided in the Georgia Business Corporation Code, all of the issued and outstanding shares of common stock, no par value, of Signature, in exchange for newly-issued shares of common stock, $0.0001 par value, of Lummi (the “Acquisition Shares”). As of the date of this Report, Lummi has agreed to issue 15,972,400 Acquisition Shares to the stockholders of Signature in exchange for the 15,972,400 issued and outstanding shares of common stock of Signature held by them. As a result of the Agreement and the transactions in connection therewith (the “Share Exchange”), (i) the shareholders of Signature will beneficially own approximately 64% of the outstanding shares of common stock of the Company and the shareholders of Lummi will beneficially own approximately 36% of the outstanding shares of the Company, and (ii) Signature will now become a wholly-owned subsidiary of Lummi, through which Lummi will henceforth operate its business such that Lummi’s business will now become the business of Signature.
F-17
PRO FORMA FINANCIAL INFORMATION
Assuming the share exchange is completed, Lummi Development, Inc. will be the legal parent of Signature Horizons, Inc. For accounting purposes, Signature Horizons, Inc. will be the acquirer and its financial information will be reported from the effective date of the share exchange forward. Accordingly, the operations of Lummi will no longer be reported and all historical financial information and results of operations will be that of the Signature Horizons, Inc.
Signature Horizons, Inc., a development stage, Georgia corporation was formed in November 1999, however, it had no financial transactions during that year. The pro forma operations information included herein for the combined companies is for the nine months ended September 30, 2002, and the pro forma combined balance sheets are presented as of September 30, 2002. The pro forma loss per share for that period was $.14.
For the year ended December 31, 2001, the pro forma combined results of operations of the two companies would have reflected a combined loss of approximately $1,606,000 as a result of the approximate $4,000 loss of Lummi and the approximate $1,602,000 loss of Signature. The net loss per share would have been $.06.
The following is the pro forma balance sheet and statement of operations had the two companies been combined as of September 30, 2002 and for the nine months then ended.
F-18
SIGNATURE HORIZONS, INC.
(a Development Stage Company)
PRO FORMA CONSOLIDATED BALANCE SHEETS
September 30, 2002
| (unaudited) | |||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||
| PRO FORMA ADJUSTMENTS | |||||||||||||||||||||||||||||||
| LUMMI | SIGNATURE | PRO FORMA | |||||||||||||||||||||||||||||
| CURRENT ASSETS | |||||||||||||||||||||||||||||||
| Cash | $ | 11 | $ | 1,172,833 | $ | 1,172,844 | |||||||||||||||||||||||||
| Accounts receivable | 7,500 | 7,500 | |||||||||||||||||||||||||||||
| TOTAL CURRENT ASSETS | 11 | 1,180,333 | 1,180,344 | ||||||||||||||||||||||||||||
| OTHER ASSETS | |||||||||||||||||||||||||||||||
| Investment in undeveloped real estate | 12,537,498 | ||||||||||||||||||||||||||||||
| Deferred finance charges | 150,634 | 150,634 | |||||||||||||||||||||||||||||
| Other assets | 2,800 | 2,800 | |||||||||||||||||||||||||||||
| 12,690,932 | |||||||||||||||||||||||||||||||
| $ | 11 | $ | 13,871,265 | $ | 13,871,276 | ||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||
| CURRENT LIABILITIES | |||||||||||||||||||||||||||||||
| Notes payable | $ | — | $ | 6,874,088 | 6,874,088 | ||||||||||||||||||||||||||
| Accounts payable | 168,560 | 168,560 | |||||||||||||||||||||||||||||
| Payroll taxes payable | 473,424 | 473,424 | |||||||||||||||||||||||||||||
| Accrued interest | 146,137 | 146,137 | |||||||||||||||||||||||||||||
| TOTAL CURRENT LIABILITIES | — | 7,662,209 | 7,662,209 | ||||||||||||||||||||||||||||
| LONG-TERM DEBT | 3,000,000 | 3,000,000 | |||||||||||||||||||||||||||||
| Common stock | 526 | 8,491,375 | (a | 8,489,424 | 2,477 | ||||||||||||||||||||||||||
| Paid-in capital | 27,411 | (b | 27,926 | (a | 8,489,424 | 8,488,909 | |||||||||||||||||||||||||
| Contributed capital | 350,888 | 350,888 | |||||||||||||||||||||||||||||
| (Deficit) accumulated since inception | (27,926 | ) | (5,633,207 | ) | (b | 27,926 | (5,633,207 | ) | |||||||||||||||||||||||
| 11 | 3,209,056 | 8,517,350 | 8,517,350 | 3,209,067 | |||||||||||||||||||||||||||
| $ | 11 | $ | 13,871,265 | $ | 8,517,350 | $ | 8,517,350 | $ | 13,871,276 | ||||||||||||||||||||||
PRO FORMA ADJUSTMENTS AS OF SEPTEMBER 30, 2002
| a- to adjust to par value of common stock outstanding after merger per calculation below. | ||
| b- elimination of Lummi’s deficit against paid-in capital as a result of the stock exchange transaction. |
| Common Stock | |||||||||
| Calculation of common stock outstanding-pro forma | Shares | Par Value | |||||||
| Shares outstanding of Lummi Development, Inc. at September 30, 2002 | 5,254,370 | $ | 526 | ||||||
| Net additional shares to be issued to the date of the stock exchange | 3,807,630 | 381 | |||||||
| Issuance of common stock by Lummi to acquire Signature | 15,702,400 | 1,570 | |||||||
| Cancelation of outstanding shares prior to merger | |||||||||
| Shares outstanding after merger | 24,764,400 | $ | 2,477 | ||||||
F-19
SIGNATURE HORIZONS, INC.
(a Development Stage Company)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AND COMPREHENSIVE LOSS
NINE MONTHS ENDED SEPTEMBER 30, 2002
| Pro Forma November 16, | |||||||||||||||||||||||
| 1999 | |||||||||||||||||||||||
| (Inception) | |||||||||||||||||||||||
| LUMMI | through | ||||||||||||||||||||||
| DEVELOPMENT | SIGNATURE | PRO | September 30, | ||||||||||||||||||||
| INC. | HORIZONS, INC. | PRO FORMA ADJUSTMENTS | FORMA | 2002 | |||||||||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | 2,453 | |||||||||||||||
| Costs and Expenses | |||||||||||||||||||||||
| General and administrative expenses | 3,030 | 3,129,064 | 3,132,094 | 4,797,914 | |||||||||||||||||||
| Loss on abandonment of preacquisition costs and advances | 243,212 | ||||||||||||||||||||||
| Unrecoverable advances to affiliate | — | 12,030 | 12,030 | 126,955 | |||||||||||||||||||
| Loan fees and interest | — | 278,506 | 278,506 | 278,506 | |||||||||||||||||||
| Realized loss on sale of securities to related party | 217,000 | 217,000 | 217,000 | ||||||||||||||||||||
| Total Costs and Expenses | 3,030 | 3,419,600 | — | 3,422,630 | 5,663,587 | ||||||||||||||||||
| Net Loss | (3,030 | ) | (3,419,600 | ) | — | (3,422,630 | ) | (5,661,134 | ) | ||||||||||||||
| Other Comprehensive (loss) | |||||||||||||||||||||||
| Unrealized holding gain (loss) on available-for-sale securities | — | 7,500 | — | 7,500 | (217,000 | ) | |||||||||||||||||
| Sale of available-for-sale- securities in September 2002 | 217,000 | 217,000 | 217,000 | ||||||||||||||||||||
| Comprehensive (loss) | $ | (3,030 | ) | $ | (3,195,100 | ) | $ | — | $ | (3,198,130 | ) | $ | (5,661,134 | ) | |||||||||
| Net Loss per common share | $ | (0.14 | ) | ||||||||||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 24,764,400 | ||||||||||||||||||||||
F-20
